Kendal at Lexington rating upgraded to BBB as balance sheet strengthens

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Kendal at Lexington rating upgrade

Highlights

Fitch Ratings upgraded Kendal at Lexington's Issuer Default Rating to BBB from BBB- and revenue bond rating to BBB, citing stronger finances and demand.
Kendal at Lexington reported five-year average independent living occupancy of 95%, a waiting list of nearly 250, and limited local competition.
As of Dec. 31, 2025, Kendal at Lexington had about $40.4 million debt, $57.3 million in unrestricted cash and investments, and maximum annual debt service coverage of 3.1 times.

Upgrade reflects stronger finances and demand

As reported by Fitch Ratings, the agency has upgraded Kendal at Lexington's Issuer Default Rating to BBB from BBB-, and raised the rating on the revenue bonds issued on its behalf by the Industrial Development Authority of Lexington, Virginia, to the same level.

Fitch says the one-notch upgrade reflects a healthier financial profile, led mainly by solid rate increases and strong investment returns. The agency also says the stable outlook is based on expectations of good cost management for the community's predominantly type A contracts, even as it begins evaluating an independent living expansion.

Kendal at Lexington is a small, single-site retirement community that benefits from its membership in the broader Kendal Corporation system. Fitch assesses its revenue defensibility as midrange, citing strong independent living occupancy, limited competition in its primary market area, and operational support from its management relationship with Kendal Corporation.

Demand remains firm, with five-year average independent living occupancy of 95% and a waiting list of nearly 250 members. Fitch notes that competition in Virginia is limited, with the nearest life plan community about 45 miles away, and says many residents come from outside the primary market area.

Capital needs and expansion capacity

The bonds are secured by a mortgage lien on the facility and a security interest in the gross receipts, unrestricted funds and other pledged assets of the obligated group, for which Kendal at Lexington is the sole member. A debt service reserve fund is cash funded to maximum annual debt service.

Capital spending has averaged 79% of depreciation over the past five years, while the average age of plant stands at about 12.7 years in 2025. Near-term priorities include replacing the phone system, implementing a new electronic medical record and carrying out heating and cooling replacements.

Fitch says the community is in the early stages of considering an independent living expansion and has not yet determined the product mix or number of units. The agency says it has already factored that possibility into the rating and believes Kendal at Lexington is positioned to absorb moderate project debt at the higher rating level.

As of Dec. 31, 2025, on an unaudited basis, Kendal at Lexington has about $40.4 million of debt and roughly $57.3 million in unrestricted cash and investments. That translates into cash-to-adjusted debt of about 149.1% and maximum annual debt service coverage of 3.1 times, supported by strong market returns and unrealized gains in 2024 and 2025.

In our earlier article on AM Best’s upgrade of Louisiana Farm Bureau Insurance Company, we covered how the insurer’s financial strength and issuer credit ratings were raised following its full inclusion in Southern Farm Bureau Casualty Group. We also noted that the stable outlook was supported by the shift to full ownership and a 100% reinsurance quota share arrangement designed to align capital, streamline operations, and strengthen the balance sheet.

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