OREANDA-NEWS. Fitch Affirms Piper Shores (ME) at 'A-'; Outlook Stable Chicago Fitch Ratings has affirmed Maine Life Care Retirement Community, Inc (DBA Piper Shores) implied general revenue obligation at 'A-'.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by a security interest in all gross receipts and equipment of Piper Shores, and a mortgage lien on its facility.

KEY RATING DRIVERS

MANAGEABLE DEBT BURDEN: Despite adding approximately $10 million in long-term debt in 2015 to help finance a $13 million, 30-unit assisted living expansion, Piper's debt burden remains manageable for the rating category. Debt to net available was 4.3x through the five month interim period ended May 30, 2016, down from 6.3x at fiscal 2015. Further, Piper covered maximum annual debt service (MADS) at 2.6x through the five month interim.

CONSISTENT BALANCE SHEET STRENGTH: Despite the additional debt in 2015, Piper's balance sheet strength remains consistent with the rating. At May 31, 2015 Piper had 822 days of cash on hand and cash to debt of 92.4% versus Fitch's 'A' category medians of 681 DCOH and 125.% cash to debt.

CONSISTENT OCCUPANCY STRENGTH: Piper has consistently maintained over 91% campus-wide occupancy since 2007, evidencing strong demand for its services and providing a steady level of net entrance and monthly fee revenue. As a result, Piper has averaged 22.4% net operating margin-adjusted since 2012, and 33.8% generated through May 31, 2016 equated to 2.6x coverage of MADS.

FAVORABLE MARKET POSITION: Piper's position as the only non-profit lifecare CCRC in the state of Maine provides it with steady demand for services and its entrance and monthly fee levels compare favorably to area housing values and economic levels. The strong market position and good liquidity partially offset credit concerns around Piper's relatively small revenue base and single-site operating platform.

RATING SENSITIVITIES

PROJECT EXECUTION: Fitch expects Maine Life Care Retirement Community (dba Piper Shores, Piper) to successfully construct its assisted living unit expansion on time and within budget through mid-2017, with no material impact to liquidity or debt service coverage. Unexpected deterioration in balance sheet or coverage could pressure the rating.

STEADY OPERATING RESULTS: Over the longer term, Fitch expects Piper to maintain consistent operating cash flow and coverage, via steady occupancy and expense management.

CREDIT PROFILE

Piper Shores is located on 138 acres of ocean-front property in Scarborough, Maine. Scarborough is a coastal resort community, approximately seven miles south of Portland. As the state's only type-A lifecare retirement community, its 40 cottages, 160 independent living apartments, 20 assisted living units, and 40 skilled nursing beds enjoy consistently solid occupancy. Total revenues were $16.7 million in 2015 (year ended December 31).

CAPITAL PLANS

Piper is executing on its campus expansion plan, adding 30 assisted living units (including 14 memory support units) which are slated to open in summer 2017. This $13 million project was financed in part by the series 2015 debt, which added $10 million in funds available for the project. Piper will contribute the remaining $3 million for the project out of equity.

Overall, Fitch believes the project will provide needed dementia units to support existing demand, while increasing Piper's debt service requirement by approximately $300K. The rating reflects Fitch's assumption that Piper can execute without material balance sheet deterioration, via steady operating cash flow and net entrance fee receipts.

HEALTHY OCCUPANCY

Piper maintains solid occupancy, evidenced by 96% independent, 95% assisted, and 91% skilled occupancy as of May 31, 2016. Demand is further evidenced by a 106-member independent living waiting list of 10% depositors. Piper's position as the only non-profit lifecare CCRC in the state is expected to continue supporting healthy demand going forward.

DEBT PROFILE

Piper has a total $34.3 million in long term debt, which is privately placed with Key Bank. The debt is fixed rate, and has a 15-year fully amortizing term in 2030. Debt service is level, with MADS measured at $2.9 million.

DISCLOSURE

No provision for public disclosure as debt is privately placed. Disclosure to Fitch has been timely and thorough.