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Rating Action:

Moody's downgrades to B3 NCCD College Station Properties LLC - Texas A&M University Project Series 2015 A&B; outlook Negative

19 Jul 2018

New York, July 19, 2018 -- Moody's Investors Service downgrades to B3 from B1 the rating of New Hope Cultural Education Facilities Finance Corporation TX Student Housing Revenue Bonds (NCCD College Station Properties LLC - Texas A&M University Project) Series 2015 A&B; the outlook remains negative.

RATINGS RATIONALE

The B3 rating reflects weakened financial performance, a declining liquidity position and our expectation of a prolonged period of financial distress, with future bond payments relying on semiannual draws from the debt service reserve (DSR) to supplement net operating revenue. The initial $5,795,301 draw from the DSR towards the 7/1/18 payment represents 50% of principal and interest, leaving a balance of $18,108,924 in the reserve fund. This follows a previous bondholder notification dated May 30, 2018 that the borrower (NCCD College Station Properties LLC) and the trustee executed a Forbearance and Standstill Agreement to amend the Indenture to, among other things, change the flow of funds in favor of operating expenses over debt service. The Forbearance Agreement contemplated the execution and delivery of a number of documents by July 30, 2018, including a long term Forbearance Agreement. The execution and delivery of those documents did not take place. Consequently the Trustee has the right to terminate the existing Forbearance Agreement, declare an event of default and exercise remedies. To date it has not done so.

Our view on the rating also considers the meaningful improvement made in raising occupancy for Fall 2018 to nearly 96% from the 2017-18 level of 54%, although rent levels are up to 30% below initial projections, which will drive the weak financial performance of the project. The off campus location of the project (Park West) places it in direct competition with over 11,000 on campus beds that are either University owned or affiliated and we believe that it will be difficult for project management to raise rental rates to a level that can fully support existing debt service.

RATING OUTLOOK

The negative outlook reflects the likelihood of continued leasing difficulties at Park West, that bond payments will require regular draws on the DSR, as well as the possibility that rapid erosion in liquidity could trigger some sort of event of default in the near term. The negative outlook also incorporates the possibility of further rating action if a new agreement is not signed or if it weakens bondholder security.

FACTORS THAT COULD LEAD TO AN UPGRADE

- Sustained high occupancy matched by considerable rent increases resulting in substantial improvement in debt service coverage

- A meaningful level of University support in marketing the project that would help reduce operational expenses in capturing market share and drive high occupancy levels

FACTORS THAT COULD LEAD TO A DOWNGRADE

- Further revision to the bond documents allowing for restructuring of debt repayment

- Continued deterioration in financial condition or unforeseen operational challenges leading to a rapid depletion in liquidity

PROFILE

NCCD College Station Properties LLC is a single member limited liability company duly organized and existing under the laws of the State of Texas. National Campus and Community Development Corporation is the sole member of the Borrower. The Corporation is a non-profit corporation duly organized and existing under the laws of the State of Texas and is an exempt organization under 501(3) of the Internal Revenue Code of 1986, as amended. The Borrower was formed exclusively to own the project.

METHODOLOGY

The principal methodology used in this rating was Global Housing Projects published in June 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Pasqualina Grassano
Lead Analyst
Housing
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Florence Zeman
Additional Contact
Housing
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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