OREANDA-NEWS. Fitch Ratings has affirmed the San Diego Unified Port District, CA's (the district) $36.3 million of outstanding revenue bonds at 'A+'. The Rating Outlook is Stable.

KEY RATING DRIVERS

The rating reflects strong financial performance at a secondary west coast port, with a majority of revenues from lease-supported real estate operations and a focus on serving medium-sized vessels in its maritime operations. The district benefits from very strong coverage levels, and no additional borrowing is expected for its modest capital plan. Underlying revenue streams are atypical for port enterprises with dependence on various real estate and parking related cash flows, and, therefore, higher metrics are needed to maintain the district's strong rating level. The low leverage profile of the district serves as a strong mitigant to potential future economic volatility. Fitch views Port of San Francisco (CA), rated 'A' Stable, as a suitable peer for the district, given the port's similar revenue streams and financial metrics.

Revenue Risk - Volume: Midrange

Mix of Maritime and Real Estate Assets: The district's assets include real estate holdings in prime tourism/business areas of the city and two niche marine terminals primarily focused on break bulk and automotive cargo services. The port's multi-cargo facility is optimized to handle the growing market for refrigerated and roll-on/roll-off cargo.

Revenue Risk - Price: Midrange

Diverse Sources of Revenue: Revenues are primarily derived from real estate and maritime activities, including tenant agreements with hotel and rental properties in addition to revenues derived from parking facilities, restaurants, yacht clubs and wharfage charges. A portion of revenues derived from tenant agreements are supported by long-term fixed and percentage based agreements, which accounted for approximately 65% of fiscal 2015 (year-end June 30) operating revenues. Given the primarily leisure component of revenues, the district experienced a considerable decline in revenues during the most recent recession, but has since rebounded and moderate growth is forecast.

Infrastructure Development and Renewal: Stronger

Limited Future Capital Needs: Capital needs in the near term are limited and are fully funded through grants, excess cash and capital reserves. Management indicates the district's capital plan will require future cash flows of approximately $23 million through fiscal 2018.

Debt Structure: Stronger

Sound Debt Structure: The district's debt is entirely fixed rate with stable annual debt service requirements. Legal provisions include a 1.25x rate covenant and additional bonds require 1.25x coverage of projected maximum annual debt service. A cash funded debt service reserve fund is maintained.

Strong Balance Sheet and Financial Flexibility: Net debt to cash flow available for debt service (CFADS) is effectively cash positive at -1.38x as a result of the district's strong cash position, which also contributes to the issuer's strong liquidity position (374 days cash on hand as of fiscal year-end 2015). The senior debt service coverage ratio (DSCR) is extremely strong at 9.35x, while the all-in DSCR is narrower, but still robust, at 4.47x.

Peer Analysis: Port of San Francisco (CA), rated 'A' Stable, serves as a comparable peer to the district in terms of rating level, business focus, and secondary port function. Like the Port of San Francisco, the district receives the majority of revenues from real estate operations. However, the district has a significantly smaller capital plan than its peer and no plans for additional debt.