Moodys.com
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Update:

"REVISED" MOODY'S AFFIRMS RATINGS ON THE ARMY HAWAII FAMILY HOUSING TRUST CERTIFICATES CLASS I, II & III; OUTLOOK FOR EACH TRANCHE IS STABLE

03 Jun 2011

APPROXIMATELY $1.6 BILLION IN DEBT AFFECTED

Housing
HI

Opinion

NEW YORK, Jun 3, 2011 -- Moody's has affirmed the ratings assigned to the $1.6 billion sale of Army Hawaii Family Housing Trust Certificates (Army Hawaii Family Housing LLC). The 2005 Series Class I, II and III have been affirmed at the ratings of A1, Baa1 and Baa3 respectively. The outlook on the bonds is stable.

The rating affirmation is based on the financial performance of the privatized military housing project financed with the bonds, the continuing importance and essentiality of the US Army Garrison Hawaii and the experience of the projects development team.

RATINGS RATIONALE

Credit Strengths:

* US Army Garrison Hawaii is a highly essential installation that is an important and strategic area for the Army thereby reducing the likelihood of either a base closure or downsizing.

* 68% of units will be new construction units which will be superior in terms of design and amenities in relation to the competition in the local real estate market.

* 66% of the units are geared to E1 to E6 personnel.

* Project was initially structured to maintain 90% occupancy during the initial development period and 95% at stabilization. As of 5/31/11 the project was 95% occupied maintaining well above the 90% occupancy threshold during IDP.

* Construction continues to be ahead of schedule, with 3,282 new homes online compared to the contract schedule of 2,975 new homes resulting in a positive variance of 307 new homes.

* Military families residing in this housing receive the Basic Allowance for Housing (BAH). The rents are set at the BAH levels, correlating with market rents.

* The legal documents enumerate the number of units that are expected to be on line at the end of each month during the initial development period. If the minimum number of expected units is not achieved in any month, liquidated damages are assessed on the developer - Actus Lend Lease. Currently, the minimum-units-online requirement is ahead of schedule.

* Actus Lend Lease as the developer and property manager is a strong participant with significant experience in military privatization efforts and real estate development in general.

Credit Challenges:

* An approximate 29% of bonds are variable rate (13% of the bonds are auction rate securities - Class III bonds).

* Diminished credit quality of the surety provider is a credit concern should unexpected declines in net operating income and shortfalls occur.

* Management is discussing a modified scope plan with the Army to address a projected shortfall in projected NOI.

DETAILED CREDIT DISCUSSION

STRUCTURE OF TRANSACTION AND SECURITY FOR THE BONDS

The borrower is Army Hawaii Family Housing LLC. The borrower is a for-profit limited liability company with two voting members, an affiliate of Actus Lend Lease (the Managing Member) and the United States of America represented by the Secretary of the United States Army. The developer, Actus Lend Lease, is a majority-owned subsidiary of the Lend Lease Corporation - an Australian-domiciled international group with three core businesses: Bovis Lend Lease, Integrated Property Development, and Real Estate Investment. Lend Lease Corporation has assets in excess of $7 billion and a senior unsecured rating of Baa2 ( on watch for possible downgrade). Actus has been involved in approximately 60 military housing projects composing more than 16,000 units with a value of more than $1.5 billion.

Pursuant to the Ground Lease, the Operating Agreement, and the Design/Build Agreement, the borrower has agreed to undertake the project as described above. The Class I, Class II, and Class III Certificates are being issued to finance the demolition, construction and renovation of the housing units. The Certificates will distribute payments from the underlying bonds that are secured by the trust estate that includes a pledge of the revenues and all other funds held under the indenture, the Lock-Box Agreement, and the mortgaged property. In addition, a Project Reinvestment Subaccount will be funded from a portion of surplus cash flow. The monies in this account are to be used for the long term recapitalization of the housing units (in addition to the traditional repair and replacement reserve) during the 50 year term of the ground lease. Although the monies in this Account are to be used for this purpose and are released from the lien of the indenture, it can be used to pay debt service if sufficient funds to pay debt service are not available.

This transaction has been structured with three tranches of debt - Class I, Class II, and Class III. The interests of the Class II and Class III certificate holders are subordinate in priority of payment to the interests of the Class I certificate holders. A failure to pay scheduled debt service on the Class II Certificates prior to final maturity date is not an event of default unless amounts sufficient for such payment are on deposit in the Class II debt service accounts as applicable.

VERY STRONG REAL ESTATE FUNDAMENTALS

Moody's believes that this financing has very strong real estate fundamentals including excellent location, strong demand by military families who receive the Basic Allowance for Housing (BAH), superior new construction product at the end of the initial development period, and a very tight surrounding real estate market with a dearth of rental product.

The seven military communities are all situated on the Island of Oahu from three to 22 miles from downtown Honolulu. Moody's believes that the location of these communities will serve to bolster demand for this housing. It is Moody's opinion, based on the market demand study, that there is very strong demand by the military for the housing in these communities. The Army reports that Hawaii's military population includes approximately 65,000 persons who are supported by the Army, including 16,000 active military personnel and 25,000 family members. The vast majority of military personnel are posted to the Island of Oahu.

Recent Developments

The project continues to perform well as indicated by strong occupancy (95% as of May 31, 2011) and June 30, 2010 audited financial statements. The project is relying on net operating income (NOI) from the housing units on line during the initial development period (IDP) of 10 years to generate funds to pay for a portion of the cost of completing the project. Moody's-adjusted audited financial statements ending June 30, 2010 exhibited strong coverage levels approximating 2.01/1.95/1.88 times for the Class I, II and III bonds, respectively. The Class II and III bonds are floating rate components of the bond deal and as such reflect significantly improved debt service coverage. The LIBOR indexed Class II and auction rate (ARS) Class III bonds benefit from the continued low interest rate environment and as such reflect debt service coverage ratios significantly exceeding proformas. This structure however, does bare inherit risk as the interest rate environment dictates performance and debt service coverage. Interest rate risk remains a key concern. While the Class II bonds are LIBOR indexed floaters, the Class III Bonds (ARS) are subject to a 17% maximum rate.

Management has presented a modified scope plan extending IDP to 2020, increasing the construction period to an approximate total of 15 years. Extending the IDP will enable management to contain surplus revenues thereby mitigating against any projected shortfalls. Construction for new units is currently ahead of schedule.

While BAH increases have been strong at initial issuance of the project (22% in 2005), recent years have been stagnant, gaining little or no increase in years 2008, 2009, 2010 and 2011 (-.01%, -2.39%, 3.27% and 1.27% respectively).

Outlook

The outlook is stable due to Moody's expectation that the strong financial performance of the project will continue due to solid credit fundamentals and excellent management.

WHAT COULD CHANGE THE RATING UP

- Continued improvement of financial performance while achievement of high occupancy levels for several reporting periods; and

- Cash funding of debt service reserve funds at the maximum annual debt service, replacement with an appropriate rated surety provider or an upgrade of the current surety bond provider while maintaining strong performance.

WHAT COULD CHANGE THE RATING DOWN

- Significant decline in BAH or occupancy levels that result in a decline in debt service coverage;

-Low debt service coverage upon completion of the IDP;

-Downsizing or closure of the army facilities; or

- Further downgrade of the surety provider.

PRINCIPAL METHODOLOGY

The principal methodology used in assigning the rating was "Global Housing Projects", published in July 2010.

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

Ferdinand S. Perrault
Analyst
Public Finance Group
Moody's Investors Service

David A. Parsons
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

"REVISED" MOODY'S AFFIRMS RATINGS ON THE ARMY HAWAII FAMILY HOUSING TRUST CERTIFICATES CLASS I, II & III; OUTLOOK FOR EACH TRANCHE IS STABLE
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. 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 or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​
Moodys.com