The Rating Outlook is revised to Stable.
Bond payments are secured by a pledge of gross revenues and a first mortgage lien.
KEY RATING DRIVERS
STRONG FINANCIAL PROFILE: The upgrade to 'A-' is attributed to Twin Lakes' good liquidity position, consistently solid debt service coverage, and strong profitability and cash flow.
MODERATING DEBT BURDEN: Twin Lakes' debt burden has moderated over the last four fiscal years as evidenced by a decreased debt-to-net available of 3.1x in fiscal 2016 (ended
GOOD DEMAND FOR SERVICES: Twin Lakes' favorable reputation has allowed it to maintain solid independent living unit (ILU) occupancy of over 90% over the last four fiscal years, despite operating in a competitive service area with four other Type-C communities. ILU occupancy was a solid 91% in fiscal 2016, assisted living unit (ALU) and skilled nursing facility (SNF) occupancies were 83% and 87, respectively.
UPCOMING CAPITAL PROJECTS: Twin Lakes is in the process of constructing 22 new garden homes on its campus. Construction is expected to be completed in April of 2017 and has been on time and on budget. Longer-term plans also include the construction of a replacement SNF on the current campus.
STABILITY AT THE CURRENT RATING LEVEL: Fitch expects Lutheran retirement Communities of
Twin Lakes operates a Type-C continuing care retirement community (CCRC) in
STRONG FINANCIAL PROFILE
Twin Lakes' operating profitability has been very stable over the last four years, with operating ratio averaging a very strong 89.5%, well ahead of the 'A' median of 94.9%. Net operating margin adjusted has also averaged a strong 27.5% over the time period, ahead of the 23.6% 'A' category median. Fitch believes that Twin Lakes' operating profile is more consistent with a higher rating category.
Maximum annual debt service (MADS) coverage has been very consistent over the last four years, and was a solid 2.5x in fiscal 2016. In addition, revenue-only coverage has averaged 1.2x over the same period, equal to the 'A' median.
MODERATING DEBT BURDEN
Twin Lakes' debt-to-net available of 3.1x and adjusted debt/to capitalization of 25.5x in fiscal 2016 have both moderated from 4.0x and 33x, respectively, in fiscal 2013, and were well ahead of Fitch's 'A' medians of 4.3x and 47.4x. The decrease in leverage is attributed to the rapid amortization of Twin Lakes' debt (approximately
UPCOMING CAPITAL PROJECTS
Twin Lakes started construction of 22 new garden homes in
Longer-term plans also include the construction of a replacement SNF on the current campus. Twin Lakes' debt service payments fall by approximately 50% after 2019 and management is anticipating tying the construction, and anticipated debt issuance, to that time-frame. Initial projections expect a total cost of
Twin Lakes' outstanding series 2009 floating-rate bonds are directly held by BB&T Corporation ('A+/F1'/Outlook Stable) through
Twin Lakes covenants to provide audits within 120 days of each fiscal year's end, quarterly statements within 45 days of quarter's end (including occupancy statistics), annual budgets and management letters within 120 days of fiscal year's end, and any material events. Fitch views the disclosure requirements imposed by the
Additional information is available at 'www.fitchratings.com'.
Not-for-Profit Continuing Care Retirement Communities Rating Criteria (pub.
Revenue-Supported Rating Criteria (pub.
Dodd-Frank Rating Information Disclosure Form
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Source: Fitch Ratings