S&P: Shalimar, FL 2015A-1, 2015A-2 Multifamily Housing Revenue Bond Rating Lowered To 'A-' On Weak Finances, Poor Operations

S&P Global Ratings lowered its rating on the town of Shalimar, Fla.'s series 2015A-1 and 2015A-2 multifamily housing revenue bonds, issued for Emerald Coast Housing II Inc. (ECH II), one notch to 'A-' from 'A'. The outlook is negative.

The rating action reflects S&P Global Ratings' opinion of the project's weak fiscal 2017 financial performance, poor operating performance, poor loss-coverage assessment, and relatively high loan-to-value ratio.

The negative outlook reflects S&P Global Ratings' opinion of the project's low occupancy rate and the potential negative effect of low rental revenue during the two-year outlook period on debt service coverage.

"If occupancy were to continue to decline or if debt service coverage were to decrease to levels we consider low compared with similarly rated peers, we could lower the rating further," said S&P Global Ratings credit analyst John Mante. "If financial performance were to exceed current projections, with net operating income returning to 2016 levels, we could revise the outlook to stable with the potential to raise the rating."

The town issued the bonds for the borrower, ECH II-Captains Quarters LLC, to refinance and rehabilitate a pool of 16 multifamily rental-housing properties, totaling 355 affordable-rental-housing units, in Fort Walton Beach. The sole member of the borrower is ECH II, a Florida nonprofit corporation incorporated in 1992, which has a mission to provide affordable housing to residents of Okaloosa County. Progressive Management of America Inc., of Fort Walton Beach, will continue its role as the property manager.

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