Colorado Springs Hsg Auth, CO's Bnds Rtd A+ by S&P.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/7/98-- Standard & Poor's today assigned its single-`A'-plus rating to Colorado Springs Housing Authority Colo.'s mortgage revenue refunding bonds (section 8 project) series 1998.

The rating reflects: -- Very strong 1.26 times (x) pro forma coverage of maximum annual debt service (MADS) from net operating income, assuming no further increase in HAP contract rents;

-- A very strong project owner/manager in the Colorado Springs Housing Authority, which has successfully operated the project since 1979;

-- A well-maintained, conveniently located 99-unit elderly apartment project with historically high occupancy, located in a stable, middle-income residential Colorado Springs neighborhood; and

-- Ample reserve funding including a 12-month debt service reserve; and, a $200,000 initial replacement reserve fund deposit plus annual deposits of $497 per unit, in accordance with the consulting engineer's recommendation

Bond proceeds will refund outstanding series 1978 bonds and fund various reserves under the indenture. The bonds are secured by a first mortgage lien on the project and a first lien on all project revenues, including payments under a Section 8 Housing Assistance Payment (HAP) contract. The HAP contract expires January 29, 2020, which is coterminous with the maturity of the bonds. The HAP contract is subject to renewal every five years at the sole option of the housing authority. The authority covenants to exercise all renewal terms under the HAP contract as long as the bonds remain outstanding. Section 8 assisted projects with contract rents significantly greater than fair market rents may face difficulty obtaining future rent increases from HUD. Contract rents at Centennial Plaza currently exceed HUD fair market rents in Colorado Springs by 32.3%. Standard & Poor's stress test for single-`A' rated section 8 assisted projects requires that net operating income exceed MADS after four years of 3.5% annual growth in pro forma operating expenditures. For Centennial Plaza, debt service coverage under this stress scenario is 1.05x, thereby meeting the test for a stable rating outlook.

Centennial Plaza is located in Colorado Springs, Colorado, approximately 70 miles south of Denver. The Colorado Springs metropolitan area has a growing population of approximately 470,000 residents, of which 330,000 live in the city. The city's population and economy are anchored by a large, stable military base presence; a strong retail trade, commercial and service sector; and a growing complement of high-technology, telecommunications and computer industry firms. The area's strong economic base and growing population ensure continued stable housing demand.

Centennial Plaza consists of a single, eleven-story building constructed in 1979, with 99 one-bedroom units occupied by elderly and physically handicapped residents. Amenities are more-than-sufficient and include parking; convenient access to mass transportation, shopping and services; laundry facilities; a community room; and access to the housing authority's wide network of social services and food services. Based on Standard & Poor's recent site visit, and a review of third-party engineering and environmental reports, the project is in good condition, well-maintained, and has no existing conditions that would adversely affect its long-term viability.

The project has been owned and operated by the housing authority since 1979. The authority is an experienced and highly competent organization, with a professionalized staff, and sophisticated management information systems to monitor project operations, finances and debt compliance. Overall, the authority manages a portfolio of approximately 3,200 units which achieved a portfolio-wide occupancy rate of over 97% during 1997. Currently, Centennial Plaza has only four vacant units, all due to normal turnover. The authority maintains a waiting list of approximately 200 prospective elderly tenants and typically turns around vacant units within 15 days.

Standard & Poor's reviewed Centennial Plaza's audited financial statements for the past five years, and interim financials for the fiscal year ending June 30, 1998. Historical operating and financial performance has been excellent, with consistently high occupancy rates averaging 98.3% during the past three years; strong cash flow and debt service coverage; and, a stable pattern of operating expenditures consistent with industry norms for the area. The project's economic occupancy rate dipped to 95.5% during fiscal 1997, due to a temporary increase in the normal rate of unit turnover.

The project is underwritten to provide 1.26x coverage of MADS, assuming no increase in contract rents, a 3.5% increase in operating expenditures over 1997 actuals, a $497 per unit annual deposit to the replacement reserve, a 4.0% property management fee, and a 98% economic occupancy rate.

OUTLOOK: STABLE The outlook anticipates strong management by the authority will sustain high occupancy rates and strong debt service coverage. The outlook also anticipates the project will generate sufficient cash flow to pay debt service assuming 3.5% annual growth in expenses and no increase in rents during the next four years, Standard & Poor's said. ---CreditWire

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               Lawrence Witte, 415/765-5037
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