Key Takeaways
- In the U.S. long-term care sector, ratings are largely stable, although industry and macroeconomic challenges remain key risks.
- Effective and strong management teams were a significant differentiating factor across rated issuers.
- Rating pressure, where present, primarily consisted of multiple factors, including inconsistent occupancy levels, operating losses, and weakening balance-sheet trends.
S&P Global Ratings' fiscal 2021 medians for U.S. continuing care retirement communities (CCRCs) revealed entities that performed relatively well despite mounting industry pressures, which is also evident by general rating and outlook stability. S&P Global Ratings rates the debt of 18 not-for-profit senior living obligors.
Generally, we offer the following observations:
- Operations: uneven performance across rating levels, with some credits experiencing more pressure;
- Adjusted maximum annual debt service (MADS) coverage: improved, but with increased reliance on nonoperating income;
- Key liquidity metrics: steady compared with prior-year levels, providing sufficient liquidity and financial flexibility;
- Occupancy: independent living unit (ILU) demand was relatively stable, while assisted living (ALU) and skilled nursing facility (SNF) units experienced increased volatility;
- Key industry factors: credit trends reflecting aging demographic, continued shift in care models, and growing workforce shortages;
- Rating actions: 14 affirmations and two downgrades; and
- Pension risk: only five entities have a defined-benefit pension plan with funding levels that range from over 100% to just under 60% of the total liability.
Composition Of Rated Organizations
Rated organizations in the senior living sector are split between medium-to-high investment-grade (A/AA) and low investment-grade or noninvestment-grade (BBB/BB) (see chart 1). In addition, most of the rated entities have a stable outlook, except for two that have negative outlooks (see table 1). Higher-rated issuers generally benefit from stronger enterprise profiles, including locations in service areas with favorable demographics and limited direct competition, exhibiting solid occupancy and demand characteristics, and have experienced and proven management teams that set clear long-term strategies and can adjust to adverse business conditions. The relative strength of the financial profile is often derived from the characteristics of the enterprise profile. Based on the relative strength of both the enterprise and financial profiles, the stable trend across rated entities continued, despite two downgrades (see table 2). However, many key operating and balance-sheet median results highlighted the underlying gap in credit quality between the two ratings levels, although in some cases, this gap widened as compared with the previous period (see table 3).
We continue to believe that effective and strong management teams among CCRC providers were one of the differentiating factors behind the generally resilient financial performance and rating stability in the past two years. Furthermore, while there are many factors that support the stability in organizations we rate, we recognize that the industry is facing increasing headwinds. Staffing shortages and general inflationary pressures around labor and supply costs are driving up expenses, furthering an inability to keep pace on the revenue side, while macroeconomic trends such as volatile investment markets, rising interest rates, and a potential slowdown in the housing market loom large, all of which can cause a ripple effect across the sector. In our view, these industry challenges, if they continue unabated, could cause rating pressure over the near term. We therefore continue to believe that effective and strong management teams are essential in helping to lead their organizations while implementing strategies to mitigate the increased risks.
Chart 1
Table 1
U.S. Not-For-Profit Senior-Living Sector Ratings And Outlooks* | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Obligor | State | Rating | Outlook | Primary Contract Type† | Last Rated** | |||||||
Army Retirement Residence Foundation | TX | BB+ | Negative | A | June 11, 2022 | |||||||
Carleton Willard Village | MA | A- | Stable | B | April 15, 2022 | |||||||
Carol Woods Retirement Comnty | NC | A+ | Stable | B | March 3, 2022 | |||||||
Concordia Lutheran Ministries | PA | AA- | Stable | C | Nov. 19, 2021 | |||||||
Cross Keys Village/The Brethren Home | PA | A- | Stable | C | Oct. 21, 2022 | |||||||
Eskaton Properties | CA | BBB- | Negative | C | Dec. 23, 2022 | |||||||
Foulkeways at Gwynedd | PA | BBB | Stable | A | June 6, 2022 | |||||||
Front Porch and Affiliates | CA | A- | Stable | Mostly Rental and A | Oct. 6, 2022 | |||||||
Kendal at Ithaca | NY | BBB+ | Stable | A | Dec. 16, 2021 | |||||||
Loomis Communities | MA | BBB | Stable | Life-care (5%); B (50%); C (45%) | Jan. 13, 2023 | |||||||
Masonic Villages of the Grand Lodge of PA | PA | A | Stable | Rental | Nov. 25, 2021 | |||||||
Moorings Park Institute | FL | A+ | Stable | A | Feb. 9, 2022 | |||||||
Noland Health Services | AL | A | Stable | Rental | Aug. 30, 2022 | |||||||
Otterbein Homes | OH | A | Stable | C | Nov. 4, 2021 | |||||||
Presbyterian Retirement Village of Rapid City (Westhills) | SD | A+ | Stable | A | Aug. 17, 2022 | |||||||
Shell Point | FL | BBB+ | Stable | A | Oct. 27, 2022 | |||||||
*Rating and outlook as of Jan. 31, 2023. †For definitions and explanations of the contract types, see our Senior-Living Criteria. **The "Last Rated" column indicates the most recently published rating release and report. Any subsequent credit events and related analysis will be captured in future rationales and media releases. |
Table 2
U.S. Not-For-Profit Senior-Living Sector Rating Actions* | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Obligor | State | To Outlook | From Outlook | To Rating | From Rating | |||||||
Downgrades | ||||||||||||
Army Retirement Residence Foundation | TX | Negative | Negative | BB+ | BBB- | |||||||
Eskaton Properties | CA | Negative | Negative | BBB- | BBB | |||||||
*Rating and outlook as of Jan. 31, 2023 |
Table 3
U.S. Not-for-Profit Senior-Living Medians by Rating Level--2021 Versus 2020 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
2021 | 2020 | |||||||||
AA/A* | BBB/BB** | AA/A* | BBB | |||||||
Sample size† | 11 | 7 | 14 | 7 | ||||||
Total operating revenues ($000) | 102,951 | 35,067 | 42,081 | 32,472 | ||||||
Operating margin (%) | -3.2 | -1.2 | -2.5 | (7) | ||||||
Excess margin (%) | 12.3 | 2.2 | 5.5 | -0.5 | ||||||
Operating ratio (%) | 98.8 | 93.9 | 90.7 | 97.3 | ||||||
MADS coverage (x) | 2.4 | 1.0 | 1.6 | 0.7 | ||||||
Adjusted MADS coverage*** (x) | 3.6 | 3.2 | 2.8 | 2.4 | ||||||
Debt burden (%) | 8.0 | 10.6 | 10.4 | 10.1 | ||||||
Deferred revenue | 57,679 | 51,821 | 54,695 | 52,343 | ||||||
Days' cash on hand | 1015.9 | 391.4 | 960.7 | 344.3 | ||||||
Long-term debt/capitalization (%) | 32.5 | 74.6 | 32.9 | 75.7 | ||||||
Adjusted long-term liabilities/capitalization** (%) | 22.1 | 42.5 | 25.1 | 46.4 | ||||||
Cushion ratio | 24.3 | 8.8 | 21.4 | 9.0 | ||||||
Unrestricted reserves/long-term debt (%) | 249.5 | 59.5 | 234.9 | 64.3 | ||||||
Average age net fixed assets (years) | 14.4 | 13.5 | 14.5 | 11.9 | ||||||
MADS--Maximum annual debt service. Ratings as of Jan. 31, 2023. †Includes two confidential ratings. *Includes one 'AA' and one 'AA-' credit. **Includes one 'BB+' credit. ***Includes net entrance fees and deposits. |
A Period Of Infrequent Rating Actions And Outlook Revisions
S&P Global Ratings rates the debt of 18 not-for-profit senior living obligors. Through the 14-month period between Nov. 30, 2021, and Jan. 31, 2023, which covers the span of rating actions since our last report, we affirmed 14 ratings and lowered two (see table 4).
Given that most ratings were affirmed, there remains minimal movement in the rating distribution (see chart 1). Of the two entities that we downgraded, there were notable similarities in the key credit factors influencing the lower ratings, including weak balance-sheet trends, operating losses, high debt burdens, and inconsistent occupancy rates. Notably, one downgrade was to Army Retirement Residence Foundation, which we lowered to 'BB+' and remains the only rating below investment-grade.
Historically, rated organizations in this sector demonstrated solid stability, and while we expect this to continue given that most maintain a stable outlook and the underlying long-term business model remains sound, we recognize that mounting industry pressures and evolving macroeconomic factors could have enough of an effect to disrupt sector stability (see charts 2 and 3). That said, we continue to believe that effective and strong management teams among CCRC providers were a significant differentiating factor behind the generally resilient financial performance and rating stability over the past few years and could very well be tested again.
Table 4
U.S. Not-for-Profit Senior-Living Overall Medians | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2021 | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||
Sample size* | 18 | 21 | 22 | 26 | 28 | 28 | ||||||||
Total operating revenues ($000) | 35,511 | 33,923 | 33,469 | 33,756 | 36,586 | 36,709 | ||||||||
Operating margin (%) | -2.9 | -3.8 | -0.9 | -0.5 | -0.6 | 2.0 | ||||||||
Excess margin (%) | 8.4 | 2.5 | 4.6 | 7.4 | 5.3 | 3.4 | ||||||||
Operating ratio (%) | 96.4 | 96.8 | 92.6 | 92.3 | 91.8 | 92.2 | ||||||||
MADS coverage (x) | 1.3 | 1.0 | 1.2 | 1.4 | 1.4 | 1.1 | ||||||||
Adjusted MADS coverage** (x) | 3.3 | 2.5 | 2.7 | 2.7 | 3.0 | 2.4 | ||||||||
Debt burden (%) | 8.1 | 10.4 | 9.8 | 9.7 | 9.7 | 10.3 | ||||||||
Deferred revenue | 51,821 | 52,343 | 51,638 | 52,990 | 48,648 | 42,092 | ||||||||
Days' cash on hand | 742.5 | 745.1 | 750.9 | 665.3 | 661.0 | 614.0 | ||||||||
Long-term debt/capitalization (%) | 44.8 | 49.3 | 50.3 | 55.2 | 53.9 | 55.6 | ||||||||
Adjusted long-term liabilities/capitalization** (%) | 26.1 | 26.3 | 26.9 | 30.7 | 33.3 | 34.9 | ||||||||
Cushion ratio | 17.3 | 17.6 | 17.1 | 15.6 | 14.5 | 13.3 | ||||||||
Unrestricted reserves/long-term debt (%) | 138.3 | 179.8 | 179.2 | 128.4 | 138.6 | 131.5 | ||||||||
Average age net fixed assets (years) | 13.8 | 13.8 | 13.1 | 12.8 | 13.2 | 12.3 | ||||||||
MADS--Maximum annual debt service. *Includes two confidential ratings. **Includes net entrance fees and deposits. |
Chart 2
Chart 3
Ratio analysis
Ratio analysis is an important tool in our assessment of the credit quality for not-for-profit senior living providers, though it is only one of several factors we consider when assigning our ratings. While ratios offer a snapshot of the financial position of our rated CCRCs and help in comparison of credits across rating categories, we consider demand, market position, demographic trends, contract types, competitive landscape, and management teams important and rounding out our analysis of an entity's overall credit profile. Since there is intertwining of the mission and operations among all members of an organization, the financial statements that we generally use for the medians and our analyses are for systemwide results, which include results for obligated and nonobligated group members. In addition, the smaller size of cohort may skew the numbers, so individual credit analysis remains critical (see table 5).
Table 5
U.S. Not-For-Profit Senior-Living Sector Ratings And Outlooks* | ||||||||
---|---|---|---|---|---|---|---|---|
Obligor/Rating/Comments | Primary Contract Type† | Last Rated** | Description | |||||
Army Retirement Residence Foundation, Texas (BB+/Negative) | A | June 11, 2022 | The downgrade reflects our opinion of ARC's incrementally weaker financial profile, characterized by material losses expected through fiscal 2022 and a thin balance sheet with little cushion. The financial profile also reflects our view of the ARC's income statement projections, showing a trend of gradually narrowing operating losses beginning in fiscal 2023 as the marketing efforts bear fruit and the increased occupancy levels, as well as increased entrance fees and monthly rates, lead to an improving financial performance trend. While our data table reflects pro forma maximum annual debt service (MADS) and MADS coverage below the master trust indenture (MTI) covenant level of 1.2x, we understand that current-year MADS will be used for the calculation, with a MADS of about $5.6 million resulting in coverage of about 1.52x through the nine months ended March 31, 2022, and which we expect will be at least sustained through the remainder of the year. We therefore do not expect ARC will violate its debt service coverage (DSC) covenant or any other financial covenants. The rating also reflects our expectation that ARC will maintain an enterprise profile that we consider acceptable, partially supported by the community's change in new resident eligibility requirements approved by the board of directors in May 2020. | |||||
Carleton Willard Village, Mass. (A-/Stable) | B | April 15, 2022 | The rating reflects the organization's improving unrestricted reserves, with growing levels of cash to debt. Carleton Willard Village (CWV) maintains a light debt load with moderate leverage, and the debt profile is further bolstered by a lack of contingent liabilities with no additional debt plans. In addition, CMV maintained a solid business position with growing services as 12 new independent living units (ILUs) were completed on the Arlington Campus. We expect these new units will be a credit strength for CWV. | |||||
Carol Woods Retirement Community, N.C. (A+/Stable) | B | March 3, 2022 | The rating reflects our view of Carol Woods Retirement Community (CWRC)'s key credit strengths, including its considerable unrestricted reserves, consistent cash flow, and MADS coverage, and excellent demand for independent and assisted living. Fiscal year-end interim results showed consistent operational performance, with CWRC generating a slight operating loss, which is in line with historical results. While CWRC historically remains dependent on nonoperating income to generate positive excess margins, it maintains exceedingly high, and growing, unrestricted reserves and liquidity, which is one of its main credit strengths. In addition, the rating also reflects Carol Woods' excellent demand, consistent cash flow, and declining leverage. Other credit factors include operating margins that have historically been negative, as CWRC remains dependent on its investment income to maintain bottom-line profitability. While investment income has remained positive the last few fiscal years, there have been years when excess income has been negatively affected due to down cycles in the investment markets, highlighting inherent risks associated with a strategy that accepts modest operating losses. However, we believe CWRC's credit strengths, including its robust unrestricted reserves, mitigate these risks. | |||||
Concordia Lutheran Ministries, Penn. (AA-/Stable) | C | Nov. 19, 2021 | The rating reflects Concordia Lutheran Ministries (CLM)'s financial profile, which remained sound throughout the pandemic and into the first quarter of fiscal 2023. This includes resilient operating margins and a robust balance sheet to help cushion the rating from near-term industry pressures, including labor and inflationary pressures. The reserves also continue to provide adequate coverage of the reasonably sized, but somewhat riskier, debt profile, consisting of all contingent variable-rate debt. The rating further reflects CLM's stable enterprise profile, highlighted by improving demand, with favorable regional diversification across three states with additional lines of business, including home care agencies. These additional service lines helped to provide cushion during occupancy shifts caused by the pandemic and there remains room for tremendous growth in the home care service line, but CLM is limited by available staffing shortages. The stability reflects a solid management team that continues to focus on growth and diversification opportunities, including the recent signing of a letter of intent (LOI) to acquire Bethlen Communities. This is expected to have a positive impact, in our view, given the most recent completed expansion project was opened in August 2022 and saw improvement to break-even well ahead of schedule. | |||||
Cross Keys Village/The Brethren Home, Penn. (A-/Stable) | C | Oct. 21, 2022 | The 'A-' ICR reflects our view of Cross Keys Village (CKV)'s balance-sheet stability, relative to fiscal 2020, that is comparable with that of similarly rated peers and continues to be a key credit strength, with strong liquidity and moderate debt leverage, providing cushion to absorb persistent operating stress. In addition, CKV maintains a strong business position, in our view, highlighted by limited nearby competition in the continuing care retirement community (CRCC) space, as well as sound regional demographics and low cost of living, supporting respectable occupancy rates and a solid demand profile for its ILUs and assisted living units (ALUs). Partly offsetting the above strengths, in our view, are CKV's persistently negative operating results, although we recognize the narrowing losses in fiscal 2022. We anticipate that the overall financial profile will remain stable in the near term. | |||||
Eskaton Properties, Calif. (BBB-/Negative) | C | Dec. 23, 2022 | Operating losses through the first nine months of fiscal 2022 are attributed to weaker occupancy at several facilities as well as higher-than-expected contract labor expenses due to the nationwide nursing shortage. Management is projecting an operating loss (for the obligated group only) of about $3.4 million at year-end fiscal 2022, and are budgeting an operating gain of about $13 million (for the obligated group only), or about $16 million on a consolidated basis, for fiscal 2023, which we believe will be dependent on increased occupancy and reduced reliance on contract labor. Investment losses contributed to an approximately 60-day decline in days' cash on hand. Eskaton will likely violate its coverage covenant and end the year with DSC at or below 1x, even though covenants are based on the obligated group only and operating performance is much stronger than consolidated operating performance. As such, management is closely monitoring DSC and will likely request a waiver of that covenant, which will need to be approved by bondholders. Given that Eskaton has historically met its coverage covenant and has a detailed turnaround plan in place--including plans to address its unprofitable skilled nursing business--management anticipates that the waiver will be approved. In the event that the waiver is not approved, the bonds would be accelerated. | |||||
Foulkeways at Gwynedd, Penn. BBB/Stable | A | June 6, 2022 | The rating reflects our view of Foulkeways' stable balance sheet and positive operating results in the last two fiscal years (ending Dec. 31), which is particularly notable given the challenges associated with the COVID-19 pandemic and a historical trend of below break-even operations. The team did not have to use agency nursing or any other temporary staffing during this period, which helped maintain positive operations. The rating further reflects overall demand for service, which remains high, evidenced by a healthy waitlist. | |||||
Front Porch and Affiliates, Calif. (A-/Stable) | Mostly Rental and A | Oct. 6, 2022 | The rating reflects our view of Front Porch's strengthened enterprise position following the acquisition of Covia, as the consolidation expanded Front Porch's footprint into desirable markets, increased scale, and should yield operational efficiencies. We also view Front Porch's strong demand and gradually improving occupancy across facilities favorably. Front Porch is now one of the largest not-for-profit senior living providers in the United States, with 16 senior living communities, three active adult communities, and 32 affordable housing communities, with total revenue of more than $370 million. | |||||
Kendal at Ithaca, N.Y. (BBB+/Stable) | A | Dec. 16, 2021 | The rating reflects Kendal at Ithaca's smaller revenue base, but with an overall financial profile that is supported by healthy demand, as reflected by stable ILU occupancy rates that approximate pre-pandemic levels near 87% and good occupancy levels at both assisted living and skilled nursing. Additionally, the rating reflects a good financial profile with sufficient adjusted DSC and a very solid balance sheet that is highlighted by abundant days' cash on hand (DCOH), which we view favorably, particularly when combined with a steady overall pro forma debt profile and limited sizeable capital plans. | |||||
Loomis Communities, Mass. (BBB/Stable) | Life-care (5%); B (50%); C (45%) | Jan. 13, 2023 | The rating and outlook reflect our view of Loomis' excellent unrestricted reserves that provide cushion for the rating and helped compensate for high leverage and Loomis' typical operating losses, although financial results during the pandemic have been more favorable. Loomis' enterprise profile, which is characterized by historically strong and consistent occupancy levels, as well as a stable service area, also support the rating. Although occupancy dipped in 2021 due to pandemic-related issues, trends year-to-date through the first nine months of fiscal 2022 ended Sept. 30 are positive, with occupancy exceeding 90% for each service line and above budget revenue growth helping to partially offset continued salary pressure, largely from the use of contract labor. | |||||
Masonic Villages of the Grand Lodge of PA, Penn. (A/Stable) | Rental | Nov. 25, 2021 | The rating reflects our view of Masonic Villages' favorable enterprise profile, excellent liquidity, and modest debt leverage. More specifically, Masonic Villages' favorable enterprise profile reflects our view of a strong business position, as is evident in high demand for ILUs and consistent high occupancy, as well as a large waitlist. Although occupancy has dipped during the past two fiscal years, it has remained above 90% for ILU and ALUs, and management expects occupancy to rebound to historical levels over the outlook period as it continues to address industrywide staffing shortages to meet demand. We will monitor occupancy and expect that Masonic Villages' balance sheet will remain intact over the next several years, as management reports that it is working to deleverage and has no further debt plans in the outlook period. The rating further reflects our view of Masonic Villages' heavy historical operating losses, which continued through fiscal 2021 and the nine-month interim period ended Sept. 30, 2022. In addition, Masonic Villages' mission is to serve its population of Masons regardless of their ability to pay, which increases its population of residents on Medicaid. Accordingly, it is in the unusual position of receiving supplemental funding from the State of Pennsylvania, but we see some risk in this given some dependence from the organization on Pennsylvania state Medicaid funding. | |||||
Moorings Park Institute, Fla. (A+/Stable) | A | Feb. 9, 2022 | The rating and stable outlook reflect our expectation that Moorings Park's demand profile will remain solid following the successful completion on initial phases of the new campus at Moorings Park at Grande Lake (MPGL or Grande Lake). We understand the project is progressing as planned, with sound fill-up rates that are in line with projections. Overall, Moorings Park benefits from a favorable location with a still healthy housing market and a management and governance team we view as capable and experienced. S&P Global Ratings will continue to monitor the timing of the construction and fill-up, and will assess the influence on the rating, if any, from potential variances in cash flow compared with forecast. While unexpected, any extended disruptions in cash flow or any additional new debt following the series 2022A issuance could result in rating pressure, in our opinion. The rating also reflects MPI's robust days' cash on hand, as well as its recent and projected financial profile, characterized by fiscal year 2020 and year-to-date results showing operating losses that are narrower than initially forecast. The series 2022A issuance supports ample pro forma liquidity and financial flexibility as measured by days' cash on hand and a modest, but still sufficient, pro forma debt profile for the rating, in our view. | |||||
Noland Health Services, Ala. (A/Stable) | Rental | Aug. 30, 2022 | The rating reflects our view of Noland Health Services (NHS)' historically solid, although lower, occupancy trends in all levels of care due to staffing pressures, as well as a very healthy balance sheet. The company also has light leverage, robust cash on hand, and very strong unrestricted cash to long-term debt. The rating further incorporates our view of NHS' strong management team and very limited competition in the long-term acute-care hospital (LTAC) business as a result of Alabama's certificate-of-need laws, which limit the number of licensed and available LTAC beds by region. We also consider NHS' expansion of its senior living division beneficial, as LTAC reimbursement can be more subject to reimbursement changes. Although these changes have led to operating volatility, we believe that NHS has the balance-sheet strength to sustain the depressed margins, albeit with recent losses, while the organization works to reposition itself in the market with a larger emphasis on senior living services, and more recently with the completion of the renovation of the Fairhope facility. | |||||
Otterbein Homes, Ohio (A/Stable) | C | Nov. 4, 2021 | The rating reflects our view of Otterbein's sustained operations through the COVID-19 pandemic, which we note were supported by the recognition of an additional $4.5 million in CARES Act grants in 2021. Interim operating margins are well above the break-even expectations in Otterbein's 2021 budget, but are reliant on recognized CARES Act funds; however, we believe that as volumes have started to return to more normal levels, Otterbein will achieve operations closer to historical levels. In addition, we believe the expectation to finish the year near the current margin, with around $4 million in operating income, is achievable given the interim results. We also anticipate that this improvement can be sustained as Otterbein integrates Granville into the system, given management's solid history of incorporating new entities into the organization. | |||||
Presbyterian Retirement Village of Rapid City (Westhills), S.D. (A+/Stable) | A | Aug. 17, 2022 | The rating reflects our view of Westhills' financial profile, underlined by very high days' cash on hand that helps offset Westhills' small revenue base (almost $25 million) and also provides financial flexibility despite recent operating volatility. The rating also reflects our view of Westhill's sound enterprise profile, characterized by robust demand and occupancy metrics above 90% across ALUs and ILUs. While there has been a decline in skilled nursing occupancy, this is similar to industry trends, and we expect that occupancy will slowly rebound in the coming years. | |||||
Shell Point, Fla. (BBB+/Stable) | A | Oct. 27, 2022 | The rating reflects our view of Shell Point's solid business position and robust demand for ILUs, supporting stable occupancy rates and historically fast fill-up of new projects. Shell Point's overall credit fundamentals, including the strengths of its enterprise profile, help support the credit, in our opinion. We believe the underlying business is sound and operating cash flow remains sufficient to support what we view as a still-respectable adjusted MADS coverage for the rating level. There continues to be some pressure on the financial profile, particularly as noncash expenses and increasing interest generally accepted accounting principles (GAAP) costs constrain operating performance. Further, the balance sheet remains limited, in our view. While we recognize a trend of improving days' cash on hand, which management projects as remaining above 500 days through the outlook period, we anticipate limited growth and possibly additional pressure to key liquidity and financial flexibility metrics as the expense base grows. Hurricane Ian resulted in significant damage to Shell Point's campus in Fort Myers, Fla., in the form of both wind damage and flooding, according to management. While it is too early to fully assess or quantify property damage, management reports no buildings were lost because of the storm and the community remains largely operational, with some residents temporarily relocated to other campus housing as necessary. We understand that Shell Point holds insurance policies for both types of casualties (wind and flooding) and that there may be some FEMA funds as well as insurance proceeds available for business interruption and lost revenue due to Hurricane Ian. | |||||
*Rating and outlook as of Jan. 31, 2023. †For definitions and explanations of the contract types, see our Senior-Living Criteria. **The "Last Rated" column indicates the most recently published rating release and report. Any subsequent credit events and related analysis will be captured in future rationales and media releases. |
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This report does not constitute a rating action.
Primary Credit Analysts: | Wendy A Taylor, Englewood + 1 (303) 721 4230; wendy.taylor@spglobal.com |
Stephen Infranco, New York + 1 (212) 438 2025; stephen.infranco@spglobal.com | |
Research Contributor: | Akul Patel, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
Additional Contact: | Elsa Berisha, New York; elsa.berisha@spglobal.com |
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