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Rating Update:

MOODY'S AFFIRMS THE Ba3 RATING OF BILOXI HOUSING AUTHORITY, MS MULTI-FAMILY HOUSING REVENUE BONDS (BEAUVOIR MANOR APARTMENTS) SEREIS 2001 A AND B (SENIOR BONDS); OUTLOOK REMAINS NEGATIVE

31 Mar 2011

APPROXIMATELY $3.6 MILLION OF OUTSTANDING DEBT AFFECTED

Biloxi Housing Authority, MS
Housing
MS

Opinion

NEW YORK, Mar 31, 2011 -- Moody's Investors Service has affirmed the Ba3 rating of Biloxi Housing Authority, MS Multi-Family Housing Revenue Bonds (Beauvoir Manor Apartments) Series 2001 A and B (Senior Bonds), affecting approximately $3,620,000 of outstanding debt. The outlook on these bonds remains Negative.

RATING RATIONALE

The bonds are secured by revenues derived from operations of Beauvoir Manor Apartments, a 150-unit multi-family rental facility consisting of 19 two-story buildings, which was constructed in 1972 and substantially rehabilitated in 1986. Pledged revenues include payments received from a Housing Assistance Payment Contract (HAP) with the Department of Housing and Urban Development (HUD).

The rating affirmation reflects the recent financial performance of the property and the continued low Debt Service Coverage level on the bonds.

STRENGTHS:

-Rent levels continue to remain substantially less than the Fair Market Rent (FMR) levels of Harrison County, MS for each apartment type available at the property.

-Funds held for the benefit of bondholders and the property are adequately funded.

-The most recent HUD REAC score from 2009 was 80c for the property.

CHALLENGES:

-Unaudited Operating Statements from the fiscal year 2010 show that economic occupancy (defined as vacancy expense as a percentage of gross potential rent) was approximately 91.0%.

-Debt Service Coverage in 2009 remained low at 1.00x, verified by Audited FY2009 Financial Statements. Operating Statements from 2010 have been reviewed and show slight improvement in Debt Service Coverage levels since 2008 and 2009, primarily due to a decrease in property expenses.

-The small size of this project makes it vulnerable to sudden shocks.

DETAILED CREDIT DISCUSSION

RECENT DEVELOPMENTS

United Apartment Group, Inc. was hired in the second half of 2010 to manage Beauvoir Manor Apartments and help improve its financial performance. Currently, there are no plans for capital improvements in the next 3 years.

OCCUPANCY AND FINANCIAL INFORMATION

Management reported occupancy levels of 94% as of January 2011. Unaudited Operating Statements from the fiscal year 2010 show that economic occupancy (defined as vacancy expense as a percentage of gross potential rent) was approximately 91.0%, a decrease from 92.4% in 2009.

On average, the property's rent levels are about 40% below FMR. Moody's views this as a credit strength because the property is eligible for annual rental rate increases under current HUD regulations, as well as the possibility of petitioning HUD for a larger, one-time rate increase to bring the property rent levels back in line with FMRs. Petitioning HUD for such an increase is at the option of the property manager. According to information provided by management, rent increased in 2010 since 2009 by an average of 2.6% across bedroom types. According to 2009 audited financial statements and 2010 Operating Statements, Total Rental Income has continued to increase by an average of about 2.4% since 2007.

Fund balances provided by the Trustee show that the Debt Service Reserve Fund remains untapped and fully-funded, an important characteristic at this rating level. In addition, the reports show that the Replacement Reserve Fund has an ample amount available for capital expenses. Maintaining the property's physical condition is important to support occupancy levels and remain eligible for the Section 8 subsidy.

Outlook

The outlook on the bonds remains negative. As coverage ratios remain low, Moody's does not expect significant improvement to the project's financial position in the near term.

WHAT COULD CHANGE THE RATING UP:

- Several periods of substantial debt service coverage growth.

WHAT COULD CHANGE THE RATING DOWN:

- An increase in expenses or any reduction in revenue that leads to a further deterioration of the debt service coverage level.

- The use of Debt Service Reserve Fund moneys to pay debt service.

PRINCIPAL METHODOLOGY USED

The principal methodology used in this rating was "Global Housing Projects" published in July 2010.

REGULATORY DISCLOSURE

Information sources used to prepare the credit rating are the following: parties involved in the ratings.

Moody's Investors Service considers the quality of information available on the credit satisfactory for the purposes of maintaining a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Analysts

Brendan Weber
Analyst
Public Finance Group
Moody's Investors Service

Florence Zeman
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

MOODY'S AFFIRMS THE Ba3 RATING OF BILOXI HOUSING AUTHORITY, MS MULTI-FAMILY HOUSING REVENUE BONDS (BEAUVOIR MANOR APARTMENTS) SEREIS 2001 A AND B (SENIOR BONDS); OUTLOOK REMAINS NEGATIVE
No Related Data.
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