S&P Global Ratings Upgrades its Outlook for Foulkeways at Gwynedd behind ‘positive trends’

By John George – Senior Reporter, Philadelphia Business Journal
Sep 13, 2023

S&P Global Ratings revised its outlook for Foulkeways at Gwynedd, a Montgomery County continuing care retirement community, to positive from stable. The rating agency also affirmed its ‘BBB’ long-term rating on bonds issued to Foulkeways at Gwynedd by the Montgomery County Industrial Development Authority. “The outlook revision reflects Foulkeways’ recent trend of positive operating margins during the last four audited years, despite pandemic-related pressures and industry headwinds,” said S&P

The Quaker-sponsored Foulkeways at Gwynedd opened in 1967 and features 258 apartments, an 89-bed personal care unit and a 46-bed skilled nursing care unit. Mares said the rating affirmation further reflects the agency’s view of Foulkeways’ “consistent, solid adjusted maximum annual debt service coverage, stable balance sheet, improved occupancy rates, and significant waiting list.”

A ‘BBB’ rating is given to entities with adequate capacity to meet financial commitments, but are more subject to adverse economic conditions. The operators of long-term care facilities, in general, have struggled during the pandemic as admissions slowed and employee turnover became rampant, with more than 300,000 workers leaving jobs between February 2020 and December 2022.

Phil DeBaun, CEO at Foulkeways, said he believes the improved outlook is the result of “positive trends” the continuing care community has experienced over the past several years.
“We have a very strong occupancy rate,” he said. “We’re at 97% to 98%. For communities like this it all starts with having a high occupancy.” The Foulkeways waiting list noted by S&P, DeBaun said, applies to its more specialized housing options. DeBaun also noted that Foulkeways, which has more than 300 full- and part-time employees, recently improved its benefits plan. which has helped with employee retention.

S&P said a ‘well-tenured management team that demonstrates effective leadership and financial stewardship” also factored into its decision on Foulkeways. However, partly offsetting the strengths cited by the agency are Foulkeways’ high debt burden and its underfunded, and closed, defined benefit pension plan. S&P also said the facility’s limited revenue base leaves the organization vulnerable to industry pressures, and noted Foulkeways faces competition from numerous other long-term care providers in Greater Philadelphia.

Foulkeways at Gwynedd began this year with $105.2 million in long-term liabilities and total liabilities of $110 million. It generated revenue of $36.2 million in 2022, up 6% from just under $34 million the previous year. Foulkeways at Gwynedd recorded an operating income of $1.68 million last year, but a net loss of $1.8 million attributable primarily to nearly $4 million in losses on trading securities.