Fitch Ratings has affirmed the following bonds issued by the Maryland Health and Higher Education Facilities Authority on behalf of General German aged People's Home of Baltimore (Edenwald) at 'BBB':

--$49,030,000 revenue refunding bonds, series 2015.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by a pledge of Edenwald's gross revenues, a first mortgage lien and a debt service reserve fund.

KEY RATING DRIVERS

ROBUST LIQUIDITY POSITION: Edenwald's liquidity metrics of 566 days cash on hand (DCOH), 73.2% cash to debt, and 10.1x cushion ratio at July 31, 2016 (seven-month interim), were all above Fitch's 'BBB' category medians of 400 days, 60% and 7.3x, respectively. Liquidity continues to be supported by good independent living unit (ILU) occupancy and strong net entrance fee receipts.

STRONG CASH FLOW: Edenwald's net entrance fee receipts have averaged $6.8 million annually over the last four years. Net entrance fee receipts were exceptionally strong through July 31, 2016 at $6.1 million, which resulted in improved debt service coverage of 2.4x for the seven month interim period.

FAVORABLE MARKET AREA: Edenwald is located in Towson, MD, part of Baltimore County (rated 'AAA'/Stable Outlook). Edenwald's robust independent living unit (ILU) occupancy, averaging 92% over the last four years, is supported by a favorable market area characterized by solid real estate trends and a growing age and income-qualified population.

WEAK OPERATING PERFORMANCE: Edenwald's operating ratio of 124.3% in 2015 was unfavorable to Fitch's 'BBB' median of 96.1%. The outsized ratio is indicative of Edenwald's pricing and service model, focus on individualized resident care and limited direct-admit activity in its skilled nursing facility (SNF).

RATING SENSITIVITIES

STABILITY EXPECTED: Fitch expects General German Aged People's Home of Baltimore to produce strong net entrance fee receipts that support its liquidity position and adequate debt service coverage. Any significant deviation in cash flows that negatively affects coverage could pressure the rating.

CREDIT PROFILE

General German Aged Peoples Home of Baltimore owns and operates Edenwald, a Type-A, lifecare, continuing care retirement community (CCRC) located in Towson, MD, about 15 minutes outside of Baltimore. Edenwald currently consists of 281 ILUs, 56 assisted living units (ALUs) and 71 private SNF units. Edenwald opened on the current campus in 1985 and was renovated and expanded in 2006 with the addition of 60 luxury ILUs located in a connected building called the Terrace. Edenwald offers non-refundable, 50-month amortizing, 50% refundable, and fully refundable contract options. Edenwald had total revenues of $25.1 million in 2015.

ROBUST LIQUIDITY POSITION

Unrestricted cash and investments grew to $38.4 million at July 31, 2016, from $30.2 million at Dec. 31, 2012. Liquidity metrics of 566 DCOH, 73.2% cash to debt, and 10.1x cushion ratio were all above Fitch's 'BBB' category medians of 400 days, 60% and 7.3x, respectively. Fitch expects Edenwald to generate strong net entrance fee receipts that support unrestricted liquidity over the medium term.

STRONG CASH FLOW

Edenwald's net operating margin (NOM)-adjusted of 28% through the interim 2016 period was ahead of Fitch's median of 19.3%. NOM-adjusted was supported by exceptionally strong net entrance fee receipts of $6.1 million through July 31, 2016, representative of 20 move-ins. Management is expecting to have a total of 35-40 move-ins before year end.

Edenwald's cash flow has supported adequate debt service coverage, which has averaged 1.8x over the last four years, slightly below Fitch's 'BBB' median of 2.0x. Coverage improved to 2.4x through the seven-month interim period due to robust net entrance fee receipts.

STABLE OCCUPANCY

Edenwald's ILU occupancy averaged 92% over the last four years and was 88% through the interim period. Lower current year occupancy is attributed to higher resident turnover, as Edenwald's residents continue to age through the continuum of care. Edenwald's average age of resident is relatively high at 87 years, which is indicative of a possible wave of larger turnover over the medium term. In particular, original residents of Edenwald's Terrace apartments are beginning to turnover, which should allow Edenwald to benefit from higher entrance fee receipts over the medium to longer term. ILU occupancy has been supported by a solid real estate market and a growing age and income-qualified population in the primary marketing area.

Edenwald's strategy of individualized care and attentive service has been successful in keeping their resident's out of the health care center for longer, as indicated by an average SNF occupancy of 71.7%. Occupancy was somewhat increased at 79% through the interim due to the recently higher rate of turnover. Lower SNF occupancy is not a credit concern given Edenwald's Type-A resident agreements.

WEAK OPERATING PERFORMANCE

Edenwald had an average $2.7 million loss from operations over the last four audited years, resulting in a very high average operating ratio of 121.3%, which was significantly unfavorable compared to Fitch's 'BBB' median of 96.1%. The negative operating performance is attributed to Edenwald's pricing and service model and its focus on resident wellness and individualized care. Edenwald runs a fully staffed medical suite on its campus seven days a week and its average nursing per resident day hours of 4.2 is significantly above the state average.

Additionally, Edenwald does not currently accept many outside admits into its ALUs or SNF and does not participate in the Medicare program. While Fitch recognizes the strategic value of high quality, individualized care and focus on community residents, it notes that Edenwald's lack of access to incremental revenues from the ALUs and SNF hamper its operating performance and may cap the rating over the medium term.

DEBT PROFILE

The 2015 fixed-rate bonds are the only debt outstanding. Edenwald does not have any swaps.

DISCLOSURE

Edenwald covenants to disclose certain financial and operating information, including audited financial statements and occupancy data, within 150 days after the end of each fiscal year. Disclosure is provided on the Municipal Securities Rulemaking Board's EMMA website.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria

Not-for-Profit Continuing Care Retirement Communities Rating Criteria (pub. 04 Aug 2015)

https://www.fitchratings.com/site/re/868824

Revenue-Supported Rating Criteria (pub. 16 Jun 2014)

https://www.fitchratings.com/site/re/750012

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https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010886

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Fitch RatingsPrimary AnalystDmitry FeofilaktovAssociate Director+1-212-908-0345Fitch Ratings, Inc.33 Whitehall StreetNew York, NY 10004orSecondary AnalystPaul RizzoDirector+1-212-612-7875orCommittee ChairpersonJames LeBuhnSenior Director+1-312-368-2059orMedia Relations:Elizabeth Fogerty, +1 212-908-0526elizabeth.fogerty@fitchratings.com