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evangelicalhomes.org

Stage

Loan | Alive

Total Raised

$3.5M

Last Raised

$3.5M | 2 yrs ago

About Evangelical Homes of Michigan

Evangelical Homes of Michigan offers assisted living and retirement communities throughout Southeastern Michigan.

Evangelical Homes of Michigan Headquarter Location

200 Brecon Drive

Saline, Michigan, 48176,

United States

734-429-1155

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Latest Evangelical Homes of Michigan News

Fitch Affirms Evangelical Homes of Michigan at 'BB+'; Outlook Stable

Nov 14, 2016

November 14, 2016 01:53 PM Eastern Standard Time CHICAGO--( BUSINESS WIRE )--Fitch Ratings has affirmed the 'BB+' rating on the following bonds issued on behalf of Evangelical Homes of Michigan (EHM): --$23,910,000 Michigan Strategic Fund series 2013; --$10,470,000 Economic Development Corporation of the City of Saline (MI) series 2013. SECURITY The bonds are secured by a pledge of unrestricted receivables of the Obligated Group, a mortgage on the revenue-generating property and structures on the three campuses, and two separate debt service reserve funds. KEY RATING DRIVERS MODEST LIQUIDITY: Liquidity metrics remain mixed relative to 'BB+' peers but are adequate for the rating category with a solid 5.2x cushion ratio and a light 35.8% cash to debt. CONSISTENT OPERATING PROFITABILITY: Operating profitability has been consistent since fiscal 2012 with operating ratio averaging 97.8% and net operating margin averaging 5.5%, respectively, and equal to 98.2% and 5% in fiscal 2016, comparing adequately with Fitch's below investment grade median of 5.7%. STRONG OCCUPANCY: Strong and consistent occupancy is a key credit strength. Independent living unit (ILU), assisted living unit (ALU), and skilled nursing facilities (SNF) occupancy has averaged 93%, 97%, and 93%, respectively, since fiscal 2012. LIGHT DEBT BURDEN: EHM's debt burden remains light with maximum annual debt service (MADS) equal to 4.6% of fiscal 2016 revenue. The light debt burden allowed for solid revenue-only MADS coverage of 1.3x in fiscal 2016. INCREASED CAPITAL SPENDING: Capital spending is expected to increase over the next four years. Projects include renovation of EHM's Sterling Heights rehabilitation facilities and construction of a new retirement community in Farmington Hills, MI. The Farmington Hills project will likely involve the issuance of new debt in 2018. HIGH EXPOSURE TO SKILLED NURSING: With over 70% of revenue generated from SNF services, Fitch believes EHM is more vulnerable to occupancy fluctuations and reimbursement changes than communities with higher proportions of ALUs and ILUs. RATING SENSITIVITIES SUSTAINED OPERATING PERFORMANCE: Fitch expects that occupancy levels and operating performance will be sustained, providing consistent cash flow and coverage metrics without materially impacting unrestricted liquidity. EXPECTED DEBT ISSUANCE: Fitch will assess the impact of the expected debt issuance in 2018 on EHM's overall credit profile as details become more certain. CREDIT PROFILE Headquartered in Farmington, MI, EHM operates two skilled nursing facilities, a rehabilitation center (the Redies Center) and a retirement community (Brecon Village). Additional operations include home care and home support, senior housing, hospice care and memory support services in southeastern Michigan. Primary operations are located in Saline, Sterling Heights, Ann Arbor and Farmington, MI. Effective August 29, 2016, EHM changed its name to EHM Senior Solutions to reflect its broadened scope of operations from primarily operating nursing homes in 2008 to its current operating platform. The obligated group accounted for 98.8% of consolidated revenue and 99.4% of consolidated total assets in fiscal 2016 (April 30 year-end). The figures cited are for the consolidated entity (except for the interim period, which is obligated group only). Total operating revenues equaled $54 million in fiscal 2016. CONSISTENT OPERATING PROFITABILITY Operating profitability has been generally consistent since fiscal 2012 with operating ratio and net operating margin averaging 97.8% and 5.5%, respectively, and equal to 98.2% and 5% in fiscal 2016. Profitability remained consistent in the three month interim period ending July 31, 2016 (the interim period) with a 96.6% operating ratio and 6.9% net operating margin. Fitch expects operating profitability to remain at levels consistent with historical performance. STRONG OCCUPANCY EHM's consistent operating profitability reflects its consistently strong occupancy levels. ILU, ALU (including memory care) and SNF occupancy averaged 93%, 97% and 93% since fiscal 2012, respectively and equaled 95%, 97% and 89% at July 31, 2016. Occupancy rates reflects EHM's solid reputation and the benefits derived from being the only rental community in its service area, which is beneficial given the service area's demographics. LIGHT DEBT BURDEN EHM's debt burden remains light with MADS equal to 4.6% of fiscal 2016 operating revenues. The light debt burden allowed for solid revenue-only MADS coverage of 1.3x in fiscal 2016 and 1.8x in the interim period, exceeding Fitch's below investment grade category median of 0.7x. EHM expects to incur additional debt to fund certain capital projects as described below. Fitch will assess the rating impact of the project on EHM's credit profile as plans become more certain. MODEST LIQUIDITY Unrestricted cash and investments decreased 7% year-over-year to $13.1 million at July 31, 2016. The decrease was primarily due to the acquisitions of a 31-acre property in Farmington Hills, MI, and the former hospital in which the Redies Center is located. Despite the decrease, liquidity metrics remain adequate for the rating category relative to debt with 35.8% cash to debt and 5.2x cushion ratio, exceeding Fitch's below investment grade medians of 34.9% and 4.4x, respectively. However, days cash on hand remains weak with 94 days compared to Fitch's below investment grade median of 256 days. In addition, liquidity would be lower if not for a $2.8 million draw on a line of credit at July 31, 2016, which funded a portion of the acquisition costs. Fitch will monitor the impact of increased capital spending plan on liquidity metrics. INCREASED CAPITAL SPENDING Capital spending is expected to increase over the next four years as EHM pursues certain strategic initiatives including the development of a new retirement community in Farmington Hills, MI. Capital spending averaged $2.1 million (94.6% of depreciation) between fiscal 2012 and fiscal 2016, but increased to $4.3 million (699% of depreciation) in the interim period. Total capital spending in fiscal 2017 is expected to exceed $5 million. The increased capital spending in fiscal 2017 reflects the renovation of EHM's Sterling Heights rehabilitation facility and acquisitions of the former hospital in which EHM's Redies Center is located and the 31 acre property in Farmington Hills, MI. The acquisition of the former hospital cost $1.2 million and will eliminating approximately $600,000 in annual lease expense while generating approximately $120,000 in annual lease revenue from existing tenants. The Sterling Heights rehabilitation project will increase the facility's number of private rooms and is expected to cost $1.8 million, which is expected to be funded by an equity contribution and philanthropy contributions. Additionally, EHM plans to build a new retirement community on the Farmington Hills property. The project is expected to begin in 2018 and cost $40 to $50 million, of which $25 to $30 million will be funded by an expected debt issuance in 2018. Fitch views the capital projects favorably as they should strengthen EHM's competitive position and diversify operations while increasing revenue and profitability. However, the projects, particularly the new retirement community, expose EHM to execution risk. Fitch will assess the impact of the increased capital spending on liquidity metrics and the expected new debt issuance on EHM's overall credit profile as details become more certain. HIGH EXPOSURE TO SKILLED NURSING Skilled nursing services account for approximately 75% of consolidated revenues. Fitch believes EHM's relatively high exposure to skilled nursing makes it inherently more vulnerable to Medicare and Medicaid reimbursement changes, and to relatively higher rates of attrition relative to communities with higher proportions of assisted and independent living units. DEBT PROFILE EHM had $36.7 million of total debt outstanding at July 31, 2016, including the series 2013 bonds and a term loan. The debt is 100% fixed rate and EHM is not counterparty to any swaps. MADS is level and equal to approximately $2.5 million. Additionally, EHM maintains a $2.8 million line of credit of which $2.8 million was drawn at July 31, 2016. DISCLOSURE EHM covenants to provide quarterly disclosure within 45 days of each fiscal quarter end and annual disclosure within 120 days of fiscal year-end. Disclosure is provided through the Municipal Securities Rulemaking Board's EMMA website. Additional information is available at ' www.fitchratings.com '. Applicable Criteria

  • Where is Evangelical Homes of Michigan's headquarters?

    Evangelical Homes of Michigan's headquarters is located at 200 Brecon Drive, Saline.

  • What is Evangelical Homes of Michigan's latest funding round?

    Evangelical Homes of Michigan's latest funding round is Loan.

  • How much did Evangelical Homes of Michigan raise?

    Evangelical Homes of Michigan raised a total of $3.5M.

  • Who are the investors of Evangelical Homes of Michigan?

    Investors of Evangelical Homes of Michigan include Paycheck Protection Program and Community Foundation for Southeast Michigan.

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