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Outlook Revised To Stable From Positive On Eight Affordable Housing Issues Due To Pandemic Uncertainty

NEW YORK (S&P Global Ratings) April 14, 2020--S&P Global Ratings revised the outlooks on 13 long-term ratings associated with eight affordable multifamily housing transactions to stable from positive.

The revised outlooks follow our updated assessment that U.S. unemployment could approach 20 million by May, due to government measures to mitigate the community spread of COVID-19.

We view uncertainty regarding the timing and duration of the spread of the virus throughout the country as a health and safety social risk under our environmental, social, and governance factors.

The outlook revisions also follow our updated overall view of all U.S. public finance sectors (see "All U.S. Public Finance Sector Outlooks Are Now Negative" published April 1, 2020). In our view, affordable rental properties generally will face potential financial stress as a result of the economic fallout, with revenue declines due to eviction moratoriums, an uptick in operating expenses, and extended vacancies that could squeeze debt service coverage ratios. More specific to these ratings, we believe elevated costs related to COVID-19 mitigation and response efforts have the potential to mute financial performance.

The table below lists all issues included in this rating action. For these transactions, the revised outlooks reflect our view that operations are consistent with current rating levels, which range from 'BB+' to 'A+', despite the challenges presented by COVID-19. Six of the eight transactions are supported by military housing properties totaling over 16,600 units, located on various military bases throughout the country. They benefit from strong demand, good asset quality, and rental revenues through federal basic allowance for housing (BAH) payments. BAH is a federally appropriated component of service members' basic pay and has a long history of appropriation by the U.S. Congress, which should support stable revenues even during this period of economic volatility. Similarly, one property benefits from federal support through a project based Section 8 contract which covers 71% of the units--65% of it project-based and 6% tenant-based--providing a stable source of revenues to support debt service payments. The remaining transaction does not have revenue support from the federal government but demonstrates other financial strengths, including strong debt service coverage, very low loan-to-value ratio, and strong occupancy.

Stable outlooks on specific ratings may be returned to positive on a case-by-case basis in the near-to-medium term should evidence, data, and analysis support the revision. We will continue to monitor and evaluate the effects of this fluid and fast-moving situation. Potential rating action could be either broad based or credit specific. We will continue to collect data and have conversations with management teams to properly evaluate information as it becomes available. Therefore, while the outlook period is for one year, further review and rating actions on the issues will occur as timely as possible throughout the outlook period based on market conditions and credit-specific information.

Outlook Revised On Eight Affordable Multifamily Housing Issues
Issue State (borrower) Current rating To From
GMH Military Housing - Navy Northeast Family Housing 2nd Tier PA BBB Stable Positive
HP Communities, LLC 2nd Tier CO A+ Stable Positive
HP Communities, LLC 3rd Tier CO A Stable Positive
Knox Hills LLC - Fort Knox Housing 1st Tier KY BBB+ Stable Positive
Knox Hills LLC - Fort Knox Housing 2nd Tier KY BBB Stable Positive
Los Angeles Hsg Auth - 2009A Pooled Indenture 1st Tier CA A Stable Positive
Midwest Fam Hsg, LLC 1st Tier IL A+ Stable Positive
Midwest Fam Hsg, LLC 2nd Tier IL A Stable Positive
Midwest Fam Hsg, LLC 3rd Tier IL BBB Stable Positive
Midwest Fam Hsg, LLC 4th Tier IL BB+ Stable Positive
Orange Cnty Hsg Fin Auth - 1998C Green Gables Indenture 1st Tier FL A- Stable Positive
Pacific Beacon, LLC - Naval Base San Diego Unaccompanied Housing 3rd Tier CA A- Stable Positive
Southeast Housing, LLC - Navy Southeast Family Housing 1st Tier DE BBB+ Stable Positive

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at for further information. Complete ratings information is available to subscribers of RatingsDirect at All ratings affected by this rating action can be found on S&P Global Ratings' public website at Use the Ratings search box located in the left column.

Primary Credit Analyst:Marian Zucker, New York (1) 212-438-2150;
Secondary Contact:Daniel P Pulter, Centennial (1) 303-721-4646;

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