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Great Credit

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  • | 10:00 a.m. July 11, 2014
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You'll find an unusual document posted on the bulletin board of the clubhouse at Moorings Park in Naples.

It's the retirement community's audited financial statements, usually a document reserved for top executives' and the board of directors' eyes only. These documents are certainly almost never posted in such a public place.

But Moorings Park has the right to be proud of its sterling financial condition. Its debt has earned it the highest rating of any senior-living community in the country by Standard & Poor's: A+ with a positive outlook.

In fact, only one other senior-living community in Florida comes close to Moorings Park's debt rating: Shell Point Retirement Community in Fort Myers, which earned a BB+ rating with a positive outlook from S&P. You'd have to travel to Pennsylvania to find a senior-living community with the closest rating, Concordia Lutheran Ministries with an A+ rating and a stable outlook.

Another rating agency, Fitch Ratings, also has rated Moorings Park an A+ credit, the highest among all continuing care retirement communities it rates, says Michael Burger, director of public finance for health care, education and nonprofit institutions at Fitch.

Moorings Park is a nonprofit organization classified as a continuing-care retirement community. In return for a large one-time sum and monthly fees, Moorings Park promises to care for older people throughout their remaining days and provide skilled nursing care if they need it. Residents don't own real estate; when they die or leave, a new resident will move in.

To fund future growth, communities such as Moorings Park sell bonds to investors, and a top credit rating gives institutional investors comfort that the company can repay the debt. In addition, a high credit rating usually means they don't have to pay as high an interest rate as lower-rated communities.

“In general, our consideration of a higher rating is predicated on the fact that they have been conservative historically,” says Ken Rodgers, director of corporate and government ratings at Standard & Poor's.

Glance at the Moorings Park's 2013 financial statements and you'll be struck by the organization's strong balance sheet, a result of careful growth. Although it had $93.5 million in long-term debt at year-end, it had $164.6 million in cash and investments. For added safety, Moorings Park's bonds are backed by letters of credit from J.P. Morgan.

Moorings Park's income statement reflects the operating strength of the organization, too. Revenues in 2013 totaled $67.6 million and it posted net income of $8.2 million.

“We've always done measured, incremental growth,” says Dan Lavender, 49, the CEO of Moorings Park since 2009. The community added buildings in small increments only when it was sure about demand. A plan to buy land in 2009 was scratched when the recession deepened.

But with a waiting list of 300 people today, Moorings Park is embarking on a $140 million expansion at nearby Grey Oaks, an upscale residential development. It has already sold the first two phases of the four-phase development before starting construction, which will include a $40 million assisted-living and memory care facility as part of a fourth phase. “There's incredible demand for our product,” says Lavender.

Credit earned
Moorings Park has managed to retain its strong credit rating even through the recession. Although S&P's and Fitch's top rating is AAA, Moorings Park's A+ is about as high a rating as a non-governmental organization can get and indicates a strong capacity to make good on its financial commitments.

That's important because Moorings Park and other continuing care retirement communities promise residents care for life, even costly skilled nursing care should they need it. Like insurance, residents are betting that the service will be there when they need it and Moorings Park hires actuaries to help it price its services based on residents' longevity.

“Our occupancy went up during the downturn,” says Lavender. In 2007, Moorings Park was about 92% full. Today, it's closer to 98% with more than 700 residents living on the 83-acre campus. In fact, demand has been so strong in recent years that Moorings Park created a special way for people to move up the waiting list if they're already paying a fee and using some of the community's services.

Moorings Park has a top-tier clientele as executives who retired to Naples seek an upscale retirement community as they age. “They have really favorable service-area statistics,” says Fitch's Burger.
“Their occupancy is high and it helps drive that financial profile.”

Entrance fees at existing Moorings Park facilities range from $265,572 for a one-bedroom apartment to nearly $2.5 million for a two-bedroom apartment. For those who prefer an entrance fee that's 90% refundable, they range from $469,531 for a one-bedroom apartment to $4.3 million for a two-bedroom apartment. Monthly fees range from $3,210 to $7,063.

As you might expect, these kinds of prices demand top-notch service, and Moorings Park delivers. In a survey of residents conducted recently by Holleran, an independent research firm, nearly 95% of respondents indicated they would recommend Moorings Park to a friend or relative and 92% said they would select Moorings Park again.

“They pay equal attention to the basics of running a senior living organization so that the needs of their members are met,” says Rodgers. For example, he says, Moorings Park has instituted an electronic medical records system and a healthy aging initiative that should help it manage the costs of chronic illness.

“From my experience, personally it starts with the management team and the governance team,” echoes Burger.

Conservative expansion
With such high occupancy and demand, Moorings Park is embarking on the $140 million expansion at Grey Oaks, an upscale residential development in Naples. This is Moorings Park's first expansion off of its 83-acre campus.

But even with this expansion, Moorings Park has been careful to mitigate risk. It partnered with Halstatt, the developer of Grey Oaks that owns the 16-acre tract on which it plans to build 96 homes and a 64-unit assisted-living facility.

CC Devco, the Coral Gables-based company controlled by Miami developer Armando Codina, will build the units and assume the construction risk. Once the units are built and pre-sold, Moorings Park will use the entrance fees to buy the buildings from CC Devco and the land from Halstatt for the new development called Moorings Park at Grey Oaks.

Even as construction is starting, the first two phases of the project — 64 homes — have already been sold and so have 26 of the 32 homes in the third phase.

The entrance fee at Moorings Park at Grey Oaks costs from $1.5 million to nearly $3 million and monthly fees range from $6,180 to $10,290 (The entrance fees include a special feature that allows for a 90% refund, an extra cost built into the price of entry.)

Financing for the assisted-living facility in the fourth phase hasn't yet been finalized. “We probably will issue bonds for that,” says Lavender. Based on its credit rating, that should be an easy sell.

Executive Summary
Organization. Moorings Park Industry. Senior living Key. Conservative business practices pay off.


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