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Yugo
Two 2025 Florida pupil housing offers that went to market with speculative-grade rankings are exhibiting indicators of misery.
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Moody’s downgraded Florida Capital Initiatives Finance Authority pupil housing income bonds issued for the PRG-UnionWest Properties LLC venture to Ba3 from Ba1 on Dec. 11 and revised the outlook to detrimental from rankings beneath overview, the place the bonds have been positioned in November.
The proceeds of the 2024 bonds, offered a yr in the past
Individually, the borrower for Florida Growth Finance Corp. pupil housing income bonds, SFP-Tampa I LLC, drew on reserves and subsequently
SFP-Tampa I LLC used the proceeds from the 2024 bonds primarily to buy The Henry constructing in Tampa close to the College of Tampa, a personal college, and the College of South Florida’s Well being Companies campus.
Fitch Rankings rated the senior SFP-Tampa I bonds BB-plus at issuance in June 2024. It lowered its outlook
The PRG-UnionWest bonds encompass $100.5 million of collection 2024A-1 senior tax-exempt bonds, $8.8 million of collection 2024A-2 senior taxable bonds and $28.4 million of collection 2024B subordinate tax-exempt bonds. Moody’s solely charges the 2024A and B bonds. The subordinate bonds are anticipated to have an accreted worth at maturity in 2062 of $210.4 million and are unrated.
The SFP-Tampa I bonds embrace $113.5 million of collection 2024A-1 senior tax-exempt bonds, $13.1 million of collection 2024A-2 taxable bonds and $29 million of collection 2024B tax-exempt subordinate bonds. The subordinate bonds are unrated.
“The PRG-UnionWest Properties deal is following the pathway that displays underwhelming occupancy versus projections. The explanations introduced [by PRG] do not appear to get to the core of what’s or just isn’t driving demand,” stated Muni Credit score Information Writer Joseph Krist.
“Wanting on the main supply of occupancy, the present mixture of residents would appear to have been extra susceptible to financial points or modifications in pupil mortgage entry,” Krist stated. “Coming after a beneath goal pre-leasing consequence, there’s not a number of room for error. The prospect of further provide focusing on the identical if not comparable market segments is a priority.”
The only real member of PRG-UnionWest Properties is Provident Assets Group.
“The longer term efficiency of the venture in 2026 and ahead will show the error in Moody’s downgrade,” stated Steve Hicks, chairman and CEO of Provident Assets Group.
“UnionWest is an important platform for pupil housing, educational, and coaching services for each College of Central Florida and Valencia School,” stated Chris Hicks, PRG president. “Provident stays dedicated to the venture, working with our companions at UCF in addition to our managers at Yugo, with the objective of making certain the long-term success of the venture.”
UnionWest incorporates 10 flooring of pupil housing, 5 flooring of educational areas and a floor flooring of retail and educational house and parking. There may be additionally a nine-level hooked up parking house. In fiscal 2024 about 77% of the income was derived from the coed housing portion of the venture and 11% from the educational house, with the rest from retail.
PRG used the 2024 bond proceeds primarily to buy and renovate UnionWest.
PRG, a nonprofit group, was based in 1999 and has acquired, developed, and financed services offering greater than 27,750 beds of pupil housing in 13 states and the District of Columbia.
Moody’s stated its downgrade of the senior PRG-UnionWest bonds “to Ba3 displays the sharp decline in fall 2025 occupancy, which was 68% in comparison with 94% [in fall 2024], primarily because of resident no-shows, skips, and evictions,” Moody’s stated. PRG made the Dec. 1 debt service fee with cash from the bond fund and working contingency accounts. All escrow accounts apart from the debt service reserve fund have been “largely depleted,” Moody’s stated.
“Working revenues and the remaining contingency funds will possible not be sufficient to cowl the June 1, 2026 fee, which is able to lead to a draw on the debt service reserve fund,” Moody’s stated.
In a posting to EMMA on Dec. 1, PRG-UnionWest stated it anticipated occupancy at 71.3% by February although this estimate would not account for potential “no-shows” or evictions.
Moody’s stated its detrimental outlook on the PRG-UnionWest bonds displays the venture’s “ongoing liquidity decline and chronic occupancy challenges, that are anticipated to proceed over the outlook interval. An extra downgrade is probably going upon a faucet to the debt service reserve and/or if monetary efficiency fails to materially enhance in the course of the 2026-2027 educational yr, leading to vital further reserve attracts.”
Strategic Household Companions, an Ohio nonprofit, is the borrower for the SFP-Tampa I bonds.
Its constructing, The Henry, has 23 tales, 188 flats, and 537 pupil beds. It was accomplished in 2021 and
“There have been no attracts on the senior debt service reserve funds; the newest draw was on the subordinate debt service reserve fund,” stated Richard Rieth, president of SFP. “The draw was required as a perform of the timing of money flows throughout the fiscal yr, however the venture just isn’t anticipated to make additional attracts on debt service reserve funds and the borrower anticipates refilling debt service reserve funds.”
In its April report, Fitch stated its detrimental outlook on the SFP bonds was because of the “considerably weaker than anticipated occupancy charges on the pupil housing facility in fiscal 2025 which elevate uncertainty concerning how shortly occupancy will ramp up and at what degree it would stabilize.” Fitch had assumed in its ranking case a 93% occupancy however there was anticipated to be an 81% occupancy in fiscal 2025.
The opening of one other new pupil housing facility contributed to decrease occupancy, Fitch stated. SFP reached an affiliation and advertising settlement with College of South Florida and College of Tampa in June 2024, after most college students had already entered into lease agreements. Moreover, delays and technical points with the 2025 Free Utility for Federal Scholar Support course of additionally contributed to decrease occupancy charges, Fitch stated.
A few of these results are now not related and pre-leasing charges have been improved in comparison with the identical level in April 2024, Fitch stated. Nonetheless, until the occupancy improves past 90% within the present fiscal yr, it stated there would possible be downward strain on the ranking.
Fitch stated its ranking mirrored the “small, single facility nature of the venture and its desirability and marketability to each upperclassmen at College of Tampa and graduate college students at USF’s well being providers campus.” The venture additionally advantages from beneath market pricing.
To make the Dec. 1 fee on the subordinated bonds, SFP drew $678,744 from the subordinate debt service reserve fund, $1,108 from the working reserve fund, and $106 from the restore and substitute fund.
Moody’s has an Aa2 issuer ranking with a steady outlook on the College of South Florida, citing, amongst different issues, “strong pupil demand.” College students from USF and College of Tampa are the first renters of house at SFP’s The Henry constructing.
The rankings company assigns the College of Central Florida an issuer ranking of Aa2 with a steady outlook. UCF college students are among the many most important tenants of PRG’s UnionWest constructing.
Moody’s
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