Fitch Rates Milwaukee Catholic Home Wisconsin $15.0MM Bonds 'A-'; Outlook Stable.

CHICAGO -- Fitch Ratings assigns an 'A-' rating on the approximately $15.0 million Wisconsin Health and Educational Facilities Authority refunding revenue bonds (Milwaukee Catholic Home), series 2006. In addition, Fitch assigns an 'A-' rating to the $15.3 million Wisconsin Health and Educational Facility Authority revenue bonds series 1996 (Milwaukee Catholic Home) currently outstanding. The Rating Outlook is Stable.

The series 2006 bonds are being issued to current refund the Milwaukee Catholic Homes' (MCH) outstanding series 1996 bonds, fund a debt service reserve fund and pay costs of issuance. Upon closing, the series 2006 bonds will comprise all of MCH's long-term debt. The bonds are expected to be sold through negotiation by Ziegler Capital Markets during the week of Oct. 30th.

The 'A-' rating reflects MCH's solid historical occupancies across all levels of care, strong balance sheet indicators, bottom line profitability, an affiliation with the Catholic Church and competitive pricing structure. While MCH maintains a high number of nursing beds relative to independent living units, average annual occupancy across each level of care has exceeded 94% since 2003. MCH has an excellent reputation for nursing care in the community which generates a steady referral of Medicare and private pay residents. Moreover, MCH's affiliation with the Roman Catholic Church differentiates MCH from its nearby competitors. More than three-quarters of MCH's current residents identify themselves as Catholic. Through the eight months ended Aug. 31, 2006, MCH maintained $20.0 million of unrestricted cash and investments which translated into 537 days of cash on hand and 131% of cash to long-term debt. According to management, MCH budgets 'break even' operations with investment income providing bottom line profitability. From fiscal 2002 through fiscal 2005, MCH has posted excess margins ranging from 3.2% to 5.4%. Through the eight month interim period, MCH's excess margin was 6.5%. MCH's attractive entrance fee and monthly service fees pricing relative to its local competitors, Eastcastle Place and St. John's Home (rated 'BBB' by Fitch), should ensure solid occupancy and provides a certain cushion to changes in MCH nursing payor mix.

Fitch's credit concerns include MCH's somewhat dated physical plant, a high proportion of nursing beds relative to independent living units, and the competitive service area. MCH's ILUs were constructed in the 1970's and 1980's. Fitch toured the facility and found it to be very well maintained. However, the facade and the unit configuration reflect the design model of that era. Fitch believes over the longer term, marketing may become more challenging as consumer expectations for larger units and greater amenities becomes more pronounced. MCH's unit configuration consists of one nursing bed for each ILU which is higher than most continuing care retirement communities (CCRCs). Fitch believes the higher proportion of nursing beds has the potential to make MCH's financial results more volatile than a typical CCRC due to reimbursement changes and the higher turnover of nursing units. MCH benefits from the referral volumes from Columbia-St. Mary's Hospital and management has been effective at managing the skilled nursing payor mix. Finally, MCH is located in highly competitive service area. Eastcastle Place, a 214 unit CCRC is located adjacent to MCH while St. John's Home, a 194 unit CCRC is located less than a mile away. Although MCH competes at a different price point, Fitch believes management will need to be attuned to consumer tastes and the increasing choice offered in the market.

The Stable Outlook reflects MCH's solid occupancy across all levels of care and competitive pricing of services. In addition, Fitch expects MCH's investment portfolio which heavily weighted towards fixed income investments to throw off greater investment income given the flattening of the yield curve. Currently, management has no plans for additional debt.

MCH is a type-C CCRC facility located just north of downtown Milwaukee, WI. The facility includes 125 IL apartments, 29 ALUs, a 122 bed SNF and a 30 person intergenerational adult daycare. Under the Continuing Disclosure Agreement, MCH covenants to provide audited financial statements and utilization statistics direct to the NIRMSIRs and requesting bondholders within 150 days of each fiscal year-end and quarterly interim financial statements and utilizations within 45 days of each fiscal quarter-end.

Outstanding Debt:

--$15,290,000 Wisconsin Health and Educational Facilities Authority revenue bonds series 1996 (Milwaukee Catholic Home) (to be refunded from the proceeds of the series 2006 bonds) 'A-'.

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