Fitch Rates Greenspring Village, Virginia (Fairfax County Eco Dev Auth) $65.6MM Bonds 'BBB'.

NEW YORK -- Fitch assigns a 'BBB' rating on the approximately $65.6 million Greenspring Village, Inc. (Greenspring) Fairfax County Economic Development Authority bonds series 2006A and 2006B bonds, and affirms the 'BBB' rating on the series 1999A and 1999B bonds listed below. The Rating Outlook is Stable.

The series 2006A and B bonds will be used to refund the series 1999A and B bonds, fund a debt service reserve fund and pay for costs of issuance. The bonds are expected to sell the week of September 18, 2006, via negotiation by Ziegler Capital Markets Group.

The 'BBB' rating and Stable Outlook are supported by Greenspring's size, the management of Erickson Retirement Communities (ERC), solid occupancy, strong coverage and low leverage. Greenspring began construction of its facilities in 1998, and final construction of the campus was completed in January of 2005. Greenspring currently operates 1409 independent living units (ILUs), 99 assisted living units (ALUs) and 180 skilled nursing beds (SNFs).

Greenspring greatly benefits from ERC's marketing and operations expertise, which has been proven by the success of other ERC communities and is further demonstrated by Greenspring's current occupancy. Occupancy levels for Greenspring are strong through the six months of 2006 with levels for ILUs and ALUs of 99.4% and 94.9%, respectively. Occupancy in the SNF for this period was 81.8%. SNF occupancy has historically been above 90% and the recent decline in occupancy shows the effect of the opening and fill-up of the final phase of the new SNF units.

Greenspring expects occupancy to return to historical levels by the end of 2006. Greenspring currently has a waiting list of over 1,500, which should keep occupancy levels high. In fiscal-year (FY) 2005, pro forma debt service coverage was 5.7 times (x), compared to coverage of 13.7 x in fiscal 2004 which was affected by significant initial entrance fee receipts. Through the first six months of FY2006 (June 30, 2006), pro forma debt service coverage was 3.6x. Pro forma maximum annual debt service (MADS) as a percent of revenue declined to 6.1% through June 30, 2006, down from 6.6% in FY2005 and below Fitch's 'BBB' median of 9.7%.

Credit concerns include low liquidity, marketing challenges and a dependence on ERC for management and marketing. At FY2005, Greenspring had 181 days cash on hand (DCOH) and cash to debt of 32%, which is light for this rating category. At June 30, 2006, Greenspring's liquidity measures grew to 192 DCOH and cash to debt of 37%. The light liquidity is mitigated by the Greenspring's low leverage. Fitch expects this liquidity to grow in the near term as Greenspring receives turnover entrance fees.

Due to Greenspring's large size and the potential for significant turnover, maintenance of high occupancy rates will be a primary focus and challenge for management. Greenspring is located in Springfield, VA, which is approximately 14 miles southwest of Washington D.C. The facility is a type-C CCRC with 1409 ILUs in three neighborhoods, 104 ALUs and 180 SNF beds. Greenspring had total revenues of approximately $62.3 million in FY2005.

Greenspring covenants to provide audited annual financial information to the Nationally Recognized Municipal Securities Information Repositories (NRMSIRs) and to bondholders. Greenspring also covenants to provide quarterly financial information including balance sheet, income statement and cash flows but no management discussion and analysis to the NRMSIRS and bondholders. Fitch would like to see Greenspring incorporate a management discussion and analysis into its disclosure.

Greenspring had previously entered into a forward-starting floating-to fixed-rate swap with an effective date of October 1, 2009, that will be unwound with the series 2006 debt issue. Greenspring does intend to enter into another additional swap in conjunction with the series 2006 bond issue. For more information on this swap, please see Fitch's full new issue report which will be available by the sale date of the series 2006 bond issue.

New Bonds:

Fairfax County Economic Development Authority (Virginia) Retirement Community Refunding Revenue Bonds (Greenspring Village, Inc. Facility)

--$35,000,000 Fixed Rate Series 2006A 'BBB';

--$30,630,000 Variable Rate Demand Series 2006B(a) 'BBB'.

(a) This is an underlying rating. The bonds are expected to be supported by an irrevocable direct-pay letter of credit issued by Wachovia Bank N.A.; however, Fitch Ratings was not asked to assign a long-term and short-term rating to these bonds.

Outstanding Debt:(b)

Fairfax County Economic Development Authority (Virginia) Retirement Community revenue bonds (Greenspring Village, Inc. Facility)

--$61.7 million series 1999A; 'BBB';

--$4 million series 1999B Extendable Rate Adjustable Securities (EXTRAS) 'BBB'.

(b) These bonds will be refunded following the series 2006A and B issue

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.