Fitch Affirms 'A-' Rating on Friendship Village of Dublin, OH, Bonds, Stable Outlook.

Business Editors

NEW YORK--(BUSINESS WIRE)--May 27, 2004

Fitch Ratings affirmed its 'A-' rating on approximately $15.19 million outstanding County of Franklin, Ohio Health Care Facilities revenue and refunding bonds series 1997 (Friendship Village of Dublin, Ohio, Inc. Project). The Rating Outlook is Stable. Fitch's rating affirmation is in conjunction with the expected issuance of approximately $19.2 million series 2004 variable rate demand bonds. Fitch expects to assign an underlying rating of 'A-' to the series 2004 bonds. The series 1997 bonds may be refunded depending on market conditions.

The rating affirmation on Friendship Village of Dublin (FVD) is due to continued high occupancy rates, sound financial performance, strong liquidity with respect to expenses (days cash on hand of over 500 days), management contract with Life Care Services and favorable service area demographics.

Friendship Village of Dublin's proposed series 2004 bonds will be used to finance the construction of 51 two-bedroom independent living units and additional common area space that will include a second dining room, swimming pool, woodworking shop, clinic/home services offices and conference room. The new ILUs and common space will be contained in a five story wing that will be connected to the current facility. Pre-sales for the additional facilities currently stand at 20 units. FV Dublin will not issue the new bonds until pre-sales on the new units reach 60%. Fitch expects that all or a portion of the entrance fees received from the sale of the new independent living units will be retained on the balance sheet to improve liquidity. Although debt ratios will weaken, Fitch believes the added liquidity should be an offsetting credit factor thereby creating a neutral impact on FVD's ability to meet its debt service obligations on a timely basis. Fitch has not reviewed the legal documents associated with the proposed 2004 offering and will issue an updated credit report once the sale date of the 2004 bonds gets closer.

For the eight month period ending February 28, 2004, FVD posted a bottom line of $601,000 (7.6% excess margin) compared to a $494,000 gain (4.4% excess margin) for the fiscal year-ended June 30, 2003. FVD's budget through eight months was for a net loss of approximately $177,000. Unrestricted cash reserves stand at approximately $14.2 million (526 days cash on hand) and are expected to improve due to the inflow of new entrance fees associated with the additional units. Debt service coverage for the fiscal year-ended June 30, 2003, assuming the issuance of the new debt, was adequate at 1.5 times (x). Fitch notes that 2003 coverage, while below 'A' rated medians, does not take into account any net revenues associated with the new units. In addition, pro forma cash to debt of 42% does not take into account the redemption of any debt from entrance fees nor does it include the receipt of the new entrance fees. Fitch expects that once the additional units reach stabilized occupancy, FVD's cash to debt position should approach historic levels. Occupancy at the facility continues to be solid with independent living at 98.4%, assisted living at 92.8% and skilled nursing at 93.5%.

Fitch's credit concerns include the successful completion and fill-up of the additional units, the increase in the debt burden, reliance on entrance fees to meet debt service coverage requirements, and other pressures endemic to the industry such as insurance and staffing.

FVD covenants to provide quarterly and annual disclosure to Fitch and bondholders and disclosure to date has been good.

Located in Columbus, Ohio, FVD is a type-A continuing care retirement community providing 209 independent living units, 46 assisted living units, and 60 nursing beds. Total revenue in FY2003 was $11.1 million.