Fitch Affirms GMAC Comm'l Military Hsg Trust XVI, Joint Base Lewis-McChord Proj Ctfs
--Approximately $38.8 million series 2010A;
--Approximately $112 million series 2008A;
--Approximately $69.4 million series 2004A;
--Approximately $132.3 million series 2002A.
The Rating Outlook is Stable.
The certificates are special limited obligations of the issuer and are primarily secured by a first lien on all receipts from the operation of the privatized family housing project at Joint Base Lewis-McChord, located 40 miles south of Seattle and adjacent to Tacoma, WA.
KEY RATING DRIVERS
SUFFICIENT DEBT SERVICE COVERAGE: The debt service coverage ratios (DSCR) trailing 12 month (TTM) average is 1.88x at June 2016, 1.61x at December 2015 and 1.62x at December 2014. The coverage level is calculated on all outstanding parity debt and sufficient for the current rating level.
BASIC ALLOWANCE HOUSING (BAH) INCREASES: BAH is a strong and reliable source of revenue and has experienced cumulative increases from 2010 to 2016 at E-1 to E-5 ranks. Service members in these pay grades occupy more than 69% of the family housing.
STRONG OCCUPANCY: The project has maintained high occupancy rate of over 96.9% for the TTM July 2016. Occupancy of available units for 2015 averaged 96.2%.
DECREASED OCCUPANCY AND/OR INCREASED EXPENSES: If management is unable to maintain high occupancy levels or control operating expenses negative pressure could be put on the ratings.
BAH DECREASES: Future decreases in BAH could put negative pressure on the rating.
Pursuant to the 2005 Base Realignment and Closure Commission directive, Joint Base Lewis-McChord (JBLM) was formed on Feb. 1, 2010 and assumed full operational capacity on Oct. 1, 2010 by combining the former U. S. Army post, FT Lewis (activated 1917) with McChord Air Force Base (originally part of FT Lewis, but became separate in 1947). Installation management functions were centralized at FT Lewis. JBLM is located on 414,000 acres adjacent to the city of Tacoma, WA and 40 miles south of Seattle. The total population at JBLM is more than 145,000 including 40,000 Active, Guard and Reserve military personnel, 15,000 civilian personnel, 60,000 military family members and 30,000 retirees living within 50 miles of the installation. The major tenants at JBLM are U. S. Army I Corps, the 62nd Airlift Wing and Madigan Army Medical Center.
All new construction and renovations were completed in April 2016. Prior to Fitch's last review in 2014, the project was extended to include 30 historic homes and the retention of 109 units that had been scheduled to be demolished until December 2018. Lincoln and JBLM are awaiting final approval on the modification of the Ground Lease to include the 30 additional homes. The new out year plan uses the additional revenue from the aforementioned historic homes to make additional capital improvements to the housing stock. Upon completion of the revised development period, the project will be comprised of 4,994 housing units with 104 previously renovated units scheduled for demolition in 2033 for a total end state unit count of 4,790 after 2033.
DEBT SERVICE COVERAGE LEVELS
Debt service coverage ratios (DSCRs) for 2014 and 2015 were 1.62x and 1.61x respectively. The TTM average for the period ending June 2016 is 1.88x. These DSC levels are consistent with the current rating. The pro forma generated in September 2013 in response to the extension of the existing project projected a DSCR for 2014 of 1.51x; 1.55x for 2015, and 1.58x for 2016.
PROJECT OCCUPANCY LEVELS
The project has had a successful history of maintaining strong occupancy levels. Management has reported that it has been successful in maintaining occupancy rates over 95% in 2015 and 96% for the first half of 2016. There is currently a waiting list of 595 service members as August 2016.
2016 BAH rates for the JBLM area increased an average of 4.9% from 2015 levels. Since 2011, BAH has increased an average of 11.6%. 2016 BAH increased 12.6% for soldiers and airmen in paygrades E-1 through E-4 and 11.7% for those in paygrade E-5 over 2015 BAH rates. Together service members in paygrades E-1 through E-5 make up 69% of the tenants at JBLM.
Ft. Lewis has been a net beneficiary in the BRAC process. Its only loss of a large unit occurred in the early 1990s with the transfer of a brigade size unit to another installation, but that move was necessitated by the transfer of units at Ft. Lewis following the closure of Ft. Ord in California. In addition, the post gained all of McChord AFB's medical functions.
McCord AFB has also been on the net receiving end of BRAC commission recommendations. The most significant action affecting McChord AFB was the BRAC committee recommendations that were released in 2005. The commission recommended combining Ft. Lewis and McChord into a joint base, in which McChord would lose its separate medical facilities and base management function in the consolidation of the two installations. The merging of the two installations to a joint base was completed in 2010.
DEBT SERVICE RESERVES
The debt service reserve fund (DSRF) for the 2002A and 2004A certificates is satisfied with AMBAC surety bonds. Fitch does not assign any value to the AMBAC surety bonds. The 2008A and 2010A certificates have cash funded DSRFs at maximum annual debt service for the respective series of certificates.
The project is managed by Lincoln Military Housing (LHM) is an affiliate of Lincoln Property Company. Lincoln Property was founded in 1965 for the purpose of building and operating quality residential communities. As expanded outside of its original base in Texas, it expanded into other major areas of the United States. It currently develops and manages residential, retail, commercial, office, industrial and mixed use in 200 markets. Lincoln Military Housing replaced Equity Residential as project developer and manager in April 2016. LMH was formed in 2001 and currently manages 36,000 military housing units at 29 different military installations around the country.