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Rating Update:

MOODY'S AFFIRMS THE Baa2 RATING ON GLOUCESTER COUNTY SENIOR HOUSING DEVELOPMENT CORPORATION, NJ, MORTAGE REVENUE REFUNDING BONDS (SECTION 8 ASSISTED - COLONIAL PARK) SERIES 1994A AND 1994B

08 Oct 2010

OUTLOOK REMAINS STABLE

Gloucester County Sr. Hsg Devel. Corp., NJ
Housing
NJ

Opinion

NEW YORK, Oct 8, 2010 -- Moody's Investors Service has affirmed the $1,405,000 of outstanding Gloucester County Senior Housing Development Corporation, NJ, Mortgage Revenue Bonds (Colonial Park) Series 1994A and 1994B at Baa2. The rating action is based upon the property's continued performance, pledged reserve accounts and relatively short time to maturity on September 15, 2011.

Colonial Park is a 199-unit, Section 8 assisted property located in Gloucester County, New Jersey, within the Philadelphia MSA. Colonial Park provides elderly tenants with affordable housing, and has historically been well occupied at around 98%. The Housing Authority of Gloucester County manages the daily operations of the property.

RECENT DEVELOPMENTS

On August 24, 2010 a fire on the fifth floor damaged one unit. As a result of the building's fire sprinkler system, there was significant water damage to the floors beneath and 58 residents (29% of the units) have been displaced. Insurance is reimbursing the property for lost rental revenue and the property manager is anticipating that most tenants should be moved back into Colonial Park by the end of the 2010.

Project performance from 2008 to 2009 declined to 1.10x from 1.19x despite a slight increase in rental income. The reason for the decline is attributed to lower investment income given the low interest rate environment for money market funds as well as significant expenses incurred to prepare the property for a refinancing plan scheduled for March 2011. Colonial Park was awarded a $1.88 million grant provided by the Federal Home Loan Bank of New York to conduct significant rehabilitation and is working with PSE&G and the New Jersey Housing and Mortgage Finance Agency to receive energy credits for the installation of solar panels. This rehabilitation will modernize Colonial Park which experienced a drop in its REAC score to 84c from 94b in 2006. The property currently has over $1,800,000 between the debt service reserve and reserve and replacement account both of which are pledged to bond holders and provides a 1.28x regardless of property performance. Management does not anticipate the use of the reserve and replacement funds as a result of fire damages.

CREDIT STRENGTHS:

* Pro-active property management that has secured a grant to rehabilitate the property and is efficiently managing the property through the recent fire

* Well funded reserves and a significant reserve and replacement account

CREDIT CHALLENGES:

* Oversized principal payment at maturity intended to be funded by the Debt Service Reserve Fund; reliance on the Debt Service Reserve Fund to make the final debt service payment reduces the security to bondholders that the reserve typically provides

* Significant non-operating interest income and its impact on debt service coverage levels; while any additional source of income is advantageous to bondholders, Moody's distinguishes between operating and non-operating sources of income when a decline in interest income may have an outsized effect on debt service coverage levels

Outlook

The outlook on the bonds has been affirmed at stable. The property continues to perform well despite despite a decline in debt service coverage and the bonds are scheduled to mature in less than a year.

WHAT COULD CHANGE THE RATING - UP

* Not applicable given the short time to maturity

WHAT COULD CHANGE THE RATING - DOWN

* Significant use of the reserve and replacement fund and/or excessive expenditures as a result of the recent fire

*Significant decline in occupancy as a result of the inability to maintain curb appeal and/or move residents back into the property in a timely manner

*Denial of reimbursement claims by the Insurance company

Key Statistics

Debt Outstanding: $1,405,000

Bond Maturity: 9/15/2011

REAC Score: 84c (04/19/2010)

Occupancy: 98% (August 2010)

Debt Service Reserve Fund balance: $867,910

LAST RATING ACTION & METHODOLOGY

The last rating action with respect to the Gloucester County Senior Housing Development Corporation, NJ, Mortgage Revenue Bonds (Colonial Park) Series 1994A and 1994B was on December 14, 2009 when the bonds were affirmed at Baa2.

The principal methodology used in rating Colonial Park was Global Housing Projects rating methodology published in July, 2010. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, and confidential and proprietary Moody's Investors Service's information.

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

Richard Kubanik
Analyst
Public Finance Group
Moody's Investors Service

Thomas Song
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 Baa2 RATING ON GLOUCESTER COUNTY SENIOR HOUSING DEVELOPMENT CORPORATION, NJ, MORTAGE REVENUE REFUNDING BONDS (SECTION 8 ASSISTED - COLONIAL PARK) SERIES 1994A AND 1994B
No Related Data.
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