On July 31, Fitch Ratings announced that Covia once again has been given an A- rating with a stable outlook. Covia first received an A- rating in 2017.
Covia benefits from its diverse operating profile, high occupancy rate, and favorable debt position. According to Fitch’s report, “Along with a sophisticated and centralized management structure, the community’s revenue diversity offsets credit risks relating to operating volatility, competitive pressures and actuarial risk.”
The report also states, “The Stable Rating Outlook reflects Fitch’s expectation that operations will improve over the next year and maintain profitability levels that are in line with Fitch’s ‘A’ category medians.”
“We are on target when it comes to taking care of our residents and employees by having a solid, financially sound organization,” says Mitzi Hyland, Covia’s VP of Finance and Corporate Controller. “Being investment grade says it all about our leadership and staff.”
Covia’s President and CEO Kevin Gerber praised “the entire Covia team for this great outcome in these extraordinary times.”
As well as evaluating Covia’s current financial situation, Fitch took into account Covia’s intention to affiliate with Front Porch, which is rated A by Fitch. “Although the recent announcement of Covia’s affiliation with Front Porch Communities and Services is still pending regulatory approval, if approved, Fitch views the strategic move could further diversify Covia’s revenue base and market reach.”
Fitch Ratings is an international credit rating agency, used as a guide to help lenders and investors evaluate which investments will not default and subsequently yield a solid return. Fitch is one of the top three credit rating agencies internationally, along with Moody’s and Standard & Poor’s.
Download the full Annual Report with financial reports for FY 2019 here.
Looking back over the past months, I can say with great confidence that it has been a year full of progress. Some of it came from the momentum started in 2018 by the unified Covia brand, while other aspects have resulted from a strong strategic focus and our willingness to make difficult decisions. I can proudly say that we are positioned for a future where we can help more seniors live well and age well no matter where they call home.
In February, the Covia Communities Board made the difficult decision to close one of our communities — Los Gatos Meadows. We have long had a goal to redevelop this community to better support the needs of our residents. As we began our evaluation of this long-term plan, we uncovered some safety issues at the campus that accelerated our timeline. Since arriving at the decision, our focus has been on supporting and relocating the residents and fulfilling our commitment to our staff. Soon we will begin the preliminary work of redevelopment. We are committed to staying in Los Gatos with a reimagined approach to community living.
Our year-end financial results as of March 31, 2019, show continued stability and strength as outlined in the audit results in this report. This has been further reinforced by the reaffirmation of our A- rating with a stable outlook from Fitch. Even with the one-time costs for the closure of Los Gatos Meadows, Fitch recognized the operational consistency and strength we continue to demonstrate. Their confidence is a strong signal for a bright future.
One of the important commitments we are making as we move into the future is technology. Over the past year, we have continued to implement software platforms that help us improve the services we provide. From a more efficient electronic health record system, to a new human resource information system, to a refined customer relationship management system, we have invested to create solutions for our residents and employees alike.
And it was our employees that achieved one of our greatest accomplishments this past year. We were once again named a Great Place to Work. Because this certification is based wholly on employee feedback, it says a lot about the success of the efforts we have been making. I am thrilled that our team members throughout Covia, from Support Services to every community and program, feel engaged and committed in helping us fulfill our mission. They are the heart and essence of what we do and how we can make a difference.
Expanding the number of people that we touch was also a core focus over the past year. From high occupancy at our communities to signing a management contract for Friends House, a Life Plan Community in Santa Rosa, to increasing participation in our Well Connected program and launching Well Connected Español, we are involving more seniors. Add to that Home Match launching in other geographies and making ever more shared housing matches, and the measures of progress are truly profound.
We also piloted a meaningful sustainability initiative started by our residents — CoviaGreen. The brainchild of the Green Action committee at St. Paul’s Towers, CoviaGreen involves a pledge by residents and staff to live more sustainably and consider elements of environmental justice in our community planning. The program is slated to roll out to all of our communities and programs in the coming year.
From financial progress to community progress to progress for the environment, this past year has been one of commitment, engagement, and forward movement. I am grateful to the Covia staff, our leadership team, and our Boards for all that we have accomplished this year. Together we have established an incredibly strong foundation for progress and growth.
On July 2nd, Fitch Ratings affirmed the A- rating on Covia’s revenue bonds, with a rating outlook of “Stable.” Covia first received an A- rating in 2017.
“Covia benefits from its size and scale with five full service retirement communities located in desirable locations throughout Northern California, with a total operating revenue base of nearly $150 million,” Fitch reports. “Along with a sophisticated and centralized management structure, Covia’s revenue diversity offsets credit risks relating to operating volatility, competitive pressures and actuarial risk.”
After the February decision by the Covia Communities Board to proceed with the closure of Los Gatos Meadows, Diana Jamison, Covia’s Chief Financial Officer, immediately reached out to Fitch to provide them with details. “They appreciated our transparency and proactive response and requested specific information. Fitch then scheduled a formal surveillance process to review our rating given the impact of the closure,” reports Kevin Gerber, CEO.
During the surveillance meeting, which takes place every two years, “We demonstrated that we are a strong, healthy organization, even given this temporary closure of Los Gatos Meadows,” says Jamison. The Fitch report demonstrates that “they had faith in management and had faith in the strength of our financial performance.”
“Fitch understands our industry better than any other rating agency,” says Jamison. To be able to maintain Covia’s A- rating feels “Awesome. I don’t even know how to explain it any other way.”
“I’m proud of the fact that we’ve been able to maintain our financial strength. It says a lot about the organization.”