Fitch’s 2008 outlook for the continuing care retirement community (CCRC) industry continues to be stable despite the weakening of the housing market and overall softening of the U.S. economy, according to Jim Mitchell, senior director, Fitch’s Public Finance Group. Although Fitch expects financial performance of CCRCs to decline in 2008, the downturn should be moderate and not materially affect credit quality.
“Fitch expects that demand for independent living units will remain strong, resulting in solid cash flows, sound debt service coverage, and good liquidity in 2008,” said Mitchell. “However, investment returns are likely to be down as a result of the softening U.S. economy, and those credits that are dependent on investment income to generate positive financial performance could be adversely affected.”
Fitch’s portfolio of rated CCRCs has performed well over the past several years, with operating performance and financial indicators improving, and these gains should provide a measure of cushion from the current economic instability. Nevertheless, Fitch expects that downgrades will exceed upgrades in 2008 due more to a suppression of favorable performance that may limit upward rating action.
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