Repurposing Aging Senior Living Facilities to Affordable Senior Housing


Older senior housing communities, in particular skilled nursing facilities, face numerous financial and operational challenges.  For example, combinations of changing neighborhood demographics, shifting care option preferences, the presence of newer, modern competition and constraints on third-party reimbursement have increasingly caused nursing homes to struggle to maintain healthy occupancy ratios and cash-flow.  Often, when cash-flow is tight, repairs and improvements are delayed, if done at all; senior housing property executive management and their governing boards can reasonably ask:

  • Does it make sense to invest in a component of our campus that no longer may be as relevant?
  • Is our mission as an organization being limited or compromised because of an inefficient physical plant that no longer serves the needs of residents and potential new residents?
  • Are there repurposing options for older, inefficient buildings, and if so, how can they be financed?

These questions, important to all senior housing operators, are perhaps more acute for not-for-profit, mission-based organizations, who generally operate on tighter operating budgets.  Moreover, the option of selling a building on campus to outside, third-party interests, may be counterproductive to the overall reputation of the community, as the buyer may not operate the property in a manner consistent with the original charitable mission.  With so many aging senior living facilities facing financial hardship, creative measures must be taken to avoid eventual closures and bankruptcies.

One Solution: Conversion of a Portion of a Senior Housing Community to Affordable, Low-Income Senior Housing

The way forward may be the conversion of older, less-functional components of a senior housing campus, like a skilled nursing facility, to an affordable assisted living or age-restricted multifamily housing.

Such a conversion could serve the dual purposes of: (1) expanding the mission of a not-for-profit provider whose primary operation is in the market-rate sector and (2) addressing a dramatic shortage nationwide of affordable housing, especially for lower-income seniors.

Consider that the National Low-Income Housing Coalition reports that there are 7.2 million affordable housing units needed for low-income families and individuals across the country. By re-purposing healthcare or other older buildings on campus to affordable housing or assisted living, not-for-profit sponsors can avoid closures, unwanted sales to unrelated buyers, and financial hardship.

Key Element of Affordable Housing Finance: Low – Income Housing Tax Credits (LIHTCs)

One of the major challenges to the development of affordable housing is that there is typically a large gap between the costs of the project and the amount of financing that can be supported by operational cash-flow. In many affordable transactions, the gap is filled with equity generated from the procurement of Low-Income Housing Tax Credits (LIHTCs). These credits can significantly lessen the financial burden of conversion or repurposing senior living facilities into affordable assisted living or age-restricted senior housing.

LIHTCs provide developers and owners with a significant equity contribution towards the new construction, substantial rehabilitation, refinance, or acquisition of affordable housing projects. The program is administered by the Internal Revenue Service (IRS) through State Housing Finance Agencies and local Development Agencies. LIHTCs connect investors with sponsors and developers, providing the investors with considerable tax benefits over a period of approximately 10 years in exchange for their investment into the creation or preservation of affordable housing properties.

LIHTCs are generally available under two programs: 9% credits and 4% credits. The 9% credits cover more development costs but are extremely competitive to secure and often require a sponsor to commit to a higher degree of affordability with respect to rents and income limitations of residents. Moreover, the highly competitive and limited-supply 9% credit is typically reserved for new construction without any other federal subsidies.

The 4% credits, which often are accompanied by an allocation of tax-exempt multifamily housing revenue bonds, is typically allocated on a non-competitive basis. The 4% credits are considered part of the bond allocation, and given these credits are more accessible than their 9% counterpart and are available for repurposing existing buildings, the 4% execution will likely be the more likely product available.

In a typical LIHTC transaction, the credits would produce equity that covers anywhere from about 30% – 70% of the development costs associated with repurposing existing facilities into affordable housing. The LIHTC is equity, not to be repaid by the Project Owner. The typical Project ownership structure for LIHTC transactions is a Limited Partnership or Limited Liability Corporation, with the not-for-profit sponsor serving as a general partner or managing member and the tax credit investor acting as a limited partner or member. The not-for-profit sponsor can earn a development fee in a LIHTC transaction.

Debt Structures: HUD Mortgage Insurance as a Complement to 4% Credits/Tax Exempt Bond Financing

LIHTCs provide the equity for an affordable senior housing development; however, additional sources of financing will be needed to complete the capital stack.

Three HUD-insured mortgage loans can provide a source of financing for the debt component of a LIHTC transaction: Section 221(d)(4); Section 223(f); and Section 232 (assisted living). While a modest number of affordable assisted living facilities have been financed under the Section 232 program, the vast majority of HUD transactions that involve LIHTCs occur with the Section 221(d)(4) and Section 223(f) multifamily programs. (For a detailed summary of HUD’s mortgage insurance programs, please visit

The HUD 221(d)(4) program is the most likely option to accomplish the goals of a senior living sponsor to repurpose to affordable housing when the cost to renovate the property is higher than $40,000 per unit. This program is used for new construction and substantial rehabilitation and combines construction and permanent financing into one mortgage with an amortization and term of up to 40 years. Interest rates for the 221(d)(4) loans are currently in the low 3% range. The industry-best 40-year amortization lowers debt service payments, enhancing the feasibility of the Project.

Section 223(f) can be used when the cost of the renovation is less than $40,000 per unit. This program features a maximum 35-year amortization and current interest rates in the range of 2.50%. Both Section 221(d)(4) and Section 223(f) have .25% annual mortgage insurance premiums for affordable projects. These premiums are payable on the unpaid principal balance throughout the life of the loan.

A HUD-insured loan typically complements the tax-exempt bond financing that is needed “up front” to qualify for the 4% LIHTCs. That is because bond proceeds must be disbursed to pay project costs. However, the tax-exempt bonds are of limited duration, typically maturing after the rehabilitation is completed and the project is placed into service. The HUD-insured loan becomes the long-term financing after the bonds are redeemed post-rehabilitation.

LIHTC transactions often need additional sources of funding beyond the equity and tax-exempt bond/HUD debt. This funding can come from a variety of sources such as state grants or supplemental financing programs, Federal Community Development Block Grants (CDBG), HOME funds and deferred development fees.

Are LIHTCs for You?

The LIHTC process is complex and involves significant administrative and reporting activities once the project is placed into service; however, if utilized properly, tax-credits can be a uniquely beneficial tool to preserve or create affordable assisted living or age-restricted housing. This process is further complicated if the converted units are part of an existing building financed with taxable or tax-exempt debt under a Master Trust Indenture (MTI). While it’s not impossible to layer tax-credit debt into the existing capital stack, additional legal and advisory work would need to be done to determine the correct path forward.

Due to the highly complex nature of these transactions, LIHTC consultants are typically used to assist with the tax credit application and ensure IRS compliance issues are followed. Not-for-profit sponsors without LIHTC experience may partner with an experienced developer, who becomes part of the ownership structure, albeit in a limited control setting.

Sims Mortgage Funding, Inc. (SMF) would perform the upfront screening of the transaction from the LIHTC and HUD-insured loan perspectives, and would coordinate with our parent company, HJ Sims, on the identification of tax-exempt bond issuing agencies with access to 4% credits and the selection of the agency most suitable for the sponsor’s needs. Moreover, we may be able to recommend specific LIHTC developers, consultants and attorneys based on the sponsor’s geographic location. Finally, SMF would help the provider identify legal help to ensure the new debt works with the existing MTI debt on the campus.

For more information, please contact Johnny Sears at

Sims Mortgage Funding, Inc. originates, underwrites, and funds loans for Healthcare, Multifamily and Hospital projects. We have completed over $2 billion in HUD-insured transactions and are an approved LEAN (healthcare) and MAP (multifamily) lender.

HJ Sims Expands Team in Puerto Rico, Welcomes José Iván Acosta Jordán


July 29, 2020

 CONTACT: Tara Perkins, AVP Marketing Communications | 203-418-9049 |

HJ Sims Expands Team in Puerto Rico, Welcomes José Iván Acosta Jordán

FAIRFIELD, CT– HJ Sims (Sims), an independently and privately held wealth management firm and investment bank founded in 1935, is pleased to announce the addition of José Iván Acosta Jordán as Senior Vice President in its Guaynabo, Puerto Rico office. José joins Sims with more than 30 years of financial services experience in San Juan, Puerto Rico.

As one of America’s most enduring investment firms, Sims is proud of its 85+ years of expertise managing wealth and generating income for clients. In 2015, Sims established its first office on Puerto Rico and has since retained a strong and growing presence. In late 2019, Sims moved its Guaynabo private client headquarters to a larger space in Metro Office Park. The spacious quarters enable the team to better serve and host clients, while the expansion reinforces Sims’ commitment to the island.

“I was attracted to Sims because of the firm’s stability, strength and depth of innovative financial solutions. Sims is highly respected with a solid reputation in Puerto Rico, which enables me to offer my clients the benefits of a firm that has permanence on the island. With the tools and support at Sims, I can provide my clients with customized solutions, while navigating uncertain markets and positioning them for market opportunities. Along with my experience in insurance products, my clients now have access to more unique opportunities in tax-exempt/taxable bonds, private placements and other alternative investments,” said Acosta Jordán.

Among Jose’s many talents, he brings advanced experience in financial planning, investments and private banking. Prior to joining Sims, José was with Drexel Burnham Lambert, graduating from Shearson Lehman Brothers Financial Consultant course. José also served as Senior Vice President in the Global Private Client Division of Merrill Lynch Private Wealth Management, where he staffed the office and participated on the President’s Council.

“We are thrilled to welcome José to our team. A financial advisor of the highest caliber, Jose is a superb addition to our organization, bringing a wealth of skills and experience to our group of talented financial professionals. I am confident José will work tirelessly to help his clients meet their financial and lifestyle objectives,” stated German Ramirez de Arellano, Managing Director, Puerto Rico.

José attended the University of North Carolina, Charlotte, where he played tennis on the NCAA Division I team. He graduated from University of the Sacred Heart, Santurce, with a BBA in finance and marketing. He holds his Series 7, 63, 65, fixed and variable insurance licenses.

In his spare time, José spends time with his family and their five rescue dogs. He has a strong passion for sports, and for guiding his daughters to follow their fellow interest in sports, as well as their pursuit of scholarly success.

Jose Ivan Acosta, Senior Vice President

José Iván Acosta Jordán, Senior Vice President, HJ Sims

Contact José: | 939-399-0128

HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm, headquartered in Fairfield, CT, with locations throughout the nation, including Puerto Rico. Investments involve risk, including loss of principal. This is not an offer to sell or buy any investment. Past performance is no guarantee of future results. Member FINRA, SIPC. Facebook, LinkedIn, Instagram Twitter.

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Market Commentary: Investment Ballpark

The investment ballpark, much like every stadium across the country, looks different at this point in the season. It has changed as a result of the coronavirus and is still morphing as major players study the whole lineup of social unrest, campaign platforms, and this start-and-stop economic recovery with its unprecedented unemployment, school and business closures, and financial pressures that caused nearly one third of all Americans to miss their housing payments due on July 1. In the same way that Major League Baseball has been struggling with health and safety issues affecting players and fans to determine the future of the game amid alarming increases in cases, conventional financial analysts taking in all these unsettling conditions might deem most investments ill-advised at this time, perhaps none more so than the obligations of state and local government whose revenues have plummeted alongside incomes and sales.

There are some 65,000 individual municipal borrowers with about a million different credits outstanding. Many are general obligations of state and local governments stressed by six months of tax streams that have dried up and a gush of unexpected social spending. Some are backed by specific revenues that have been more impacted than others. Common problems for all are compounded for some by issues stemming from trade wars, court decisions, violent crime, and population moves. Many government and nonprofit borrowers began the year with robust rainy day funds — but plenty of others did not and their best laid plans have been scuttled by Covid-19 related shutdowns. Urgent needs and wish lists have been exchanged with Congress, but the terms of a fifth federal aid package have yet to be determined at this writing. In the meantime, in spite of all the facts and headlines, the 11-week rally continues and municipal bonds are advancing steadily once again. Last week, the 10-year tax-exempt AAA general obligation benchmark yields fell another 4 basis points to 0.71% right alongside U.S. Treasuries, which fell like a sinking fastball from 0.63% to 0.59%. The 30-year muni yield also dropped 4 basis points to 1.43% while the long bond boosted its slugging percentage such that its yield fell a full 10 basis points to 1.23%.

Several factors contribute to the string of rising bond prices. First, the Federal Reserve has not only held rates near zero but also positioned itself as the equivalent of a baseball backstop for both municipal and corporate bonds with liquidity programs that have lulled markets into thinking they are protected from wild pitches. Second, whether or not historic data is relevant to the current times, analysts continue to point to an “error rate” for munis that remains extremely low. Moody’s data from 1970 through 2019 shows that the average five-year annual default rate for its rated municipal bonds was 0.08%. Corporate bonds, which have lower ratings, had a 6.7% default rate over the same period. Third, cash that has been sitting on the sidelines continues to pour into the mutual funds and ETFs from households and institutions; Lipper reported $2.1 billion of municipal inflows and $11 billion of taxable bond fund inflows for the week ended July 22. Fourth, many corporations have paused or cut stock dividends, causing some to exit the equity markets and look to the bond markets for less volatile and more reliable sources of income.

A fifth factor, and one of the most significant, involves the supply/demand imbalance. The low rate environment and need to bolster liquidity to survive a pandemic of uncertain length and effect, has caused a record surge in taxable bond issuance. The U.S. Treasury has borrowed more than $3.4 trillion as of June 30 and plans another $677 billion of debt issuance by the end of the third quarter. Corporation have issued more than $1.2 trillion of investment grade debt and $230 billion of below-investment grade debt so far this year. The year-to-date supply of municipal bonds totals $239 billion, up 25% from last year at this time, despite the pullback in issuance during volatile conditions in March. But an increasing percentage of this debt is coming in the form of taxable issues for hospitals, colleges and large borrowers refinancing debt under the 2018 tax law. So far this year there have been about $69 billion of taxable munis issued; this month, taxable munis are expected to exceed 50% of new issuance according to Municipal Market Advisors. This exacerbates the supply/demand imbalance for tax-exempts which are being sought in great part to offset the loss of state and local tax deduction. The loss was felt by millions again on July 15, the tax filing deadline that was extended due to the coronavirus.

Major bondbuyers — life, property and casualty insurers, pension funds, and foreign institutions have become switch hitters — crossing over into the muni space historically dominated by U.S. households. As sovereign and corporate yields have plummeted under fiscal and monetary policy, and negative yielding debt approaches $15 trillion, tax-exempt and taxable U.S. muni yields are waving buyers in like a third base coach. The 30-year A rated taxable muni yield was 2.94% on Monday, versus 2.76% for the comparable A rated corporate maturity and 1.88% for the comparable A rated tax-exempt.

As we approach August 1, the municipal market is expected to see the largest of the year’s major coupon, call, and principal maturities deliver even more cash to an undersupplied market. Investors will not find as much in the way of pinch runners as they would like. Yields are lower across the board. Dealer inventories are at also at historic lows. Many of the bonds in the few bid-wanted “rosters” in circulation have yields so low that they are in fact negative after accounting for fees and inflation.

The new issue market has been the only game in town for buyers of yield. This week’s calendar will likely come in under $7 billion, so there will not be enough to go around. Last week in the high yield sector, we saw five charter schools. Warren Academy of Michigan came to market with a non-rated $9.6 million limited offering structured with a 30-year maturity that priced at a premium 5.50% to yield 5.45%. Landmark Academy in Michigan sold $13.4 million of BB rated bonds that had a maximum yield of 5.00% in 2045. The College Prep Middle School in Spring Valley, California placed $12 million of non-rated bonds at par to yield 5.00%. MAST Community Charter School in Philadelphia had a $27.7 million financing with BBB-minus rated bonds structured with a 2050 term maturity priced with a 5.00% coupon to yield 3.32%. And Renaissance Charter in Florida borrowed $66.1 million in a non-rated financing that included 30 year bonds priced at 5.00% to yield 4.375%. The Sweet Galilee at the Wigwam assisted living community in Anderson, Indiana brought a $22.4 million non-rated transaction priced at par to yield 5.375% in 2040. The White River Health System in Arkansas had $32.6 million BBB-minus rated bonds issued through the City of Batesville that had a final maturity in 2032 priced with a coupon of 3.25% at a discount to yield 3.35%. McLean Affiliates in Simsbury, Connecticut brought a $64.8 million BB+ rated bond financing due in 2026 and priced at par to yield 2.75%. And Navistar International Corporation had a $225 million B3 rated financing priced at par to yield 4.75% in 20 years.

U.S. Corporations are in the process of reporting second quarter earnings which, while devastating, are in many cases slightly better than feared. Through last Friday, more than a quarter of S&P 500 companies have announced results. Losses larger than those taken at the height of the last recession have not, however, steered investors away from the stock or corporate bond markets. The Dow gave up 202 points last week to close at 26,469. The index is down 7.25% on the year but has crawled back from its March low of 18,591. The S&P 500 lost 9 points but has erased nearly all its early season pandemic loss and is nearly flat in 2020. A handful of all-star technology stocks have caused The Nasdaq to outperform; although the index fell 140 points last week, is up 15.5% this year. Oil held steady at $41.29 but is off 32% since January. Gold has rallied to record highs; last week prices per ounce rose $92 or 5% and are currently 28% or $473 higher than where they started the year.

HJ Sims has been working with a number of nonprofit and for-profit borrowers to help them take advantage of current market conditions and opportunities. Our traders and advisors have been proactive in working with our investing clients on portfolio reviews, swaps and recommendations for strategically putting free cash to work. We are closely following some of the trends in credit impairments and encourage careful and regular professional surveillance of holdings to ensure that current risk limits and future income needs are in line. Those taking summer staycations, those with time to spare when MLB games are postponed, and those doing quarterly or mid-year reviews can benefit from a conversation with their HJ Sims

HJ Sims Completes Innovative Financing for New Independent Living Campus


July 28, 2020

CONTACT: Tara Perkins, AVP Marketing Communications | 203-418-9049 |

HJ Sims Completes Innovative Financing for New Independent Living Campus

FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce the June 2020 closing of a $29.3 million financing for Presbyterian Senior Care’s Encore on the Lake (Encore), a new independent living community in North Strabane Township, Washington County, PA.

Encore will include 80 independent living apartments with underground parking, in a four-story building and is positioned to be affordable to seniors of modest means. The project is being undertaken in partnership with Senior Housing Partners (SHP), a subsidiary of Presbyterian Homes & Services (MN).

Encore is an affiliate of Presbyterian SeniorCare Network (PSCN) and parent organization Presbyterian SeniorCare (PSC). PSCN is a not-for-profit, faith-based, multi-site network serving 6,500+ older adults in Western PA, and offering a continuum of care to adults through 53 senior living communities, affordable housing facilities and at-home programs/services.

Sims has provided investment banking services to PSC and its affiliates, including financing in 2017 for construction of the Woodside Place memory care facility at PSC’s Washington campus, and 2019 refinancing/financing at Shenango on the Green. PSC engaged Sims to provide services for Encore, including exploration of financing options.

For this financing, Sims ultimately identified commercial bank financing as the preferred option for the majority or the financing, with the need for supplemental/subordinate financing to be determined upon completion of a bank solicitation and appraisal. Following a bank solicitation process, PSC selected First National Bank of Pennsylvania (FNB) as the commercial banking partner.

Elements of plan of finance implementation included: i) confirmation of appraised value, potential need for supplemental financing and source of financing and ii) finalizing the financing structure, including application of entrance fees, interest rate mode and debt security, and covenant provisions. Based on appraised value and loan-to-value requirements, supplemental financing was required with several of the considered options. PSC utilized additional bank financing, provided by Washington Financial Bank (WFB) and credit-supported by PSC.

The $29.3 million financing was comprised of $26 million of senior debt financing from FNB with a 28- year maturity combined with $3.3 million of supplemental financing from WFB with a 10-year maturity. Both components of debt, totaling $3.5 million, included portions to be repaid with some residency membership deposits following project completion and resident move-in. While the outbreak of COVID created uncertainty, the financing was successfully completed on June 30, 2020.

“For the third time, the Sims team partnered with PSCN to achieve success with a financing and favorable terms for another mission‐critical project, a new Independent Living rental model to serve moderate income older adults, which we hope to replicate. The Sims team did this in the midst of the disruptive COVID pandemic environment and a CFO transition. Our organization places great value on collaboration, and the Sims’ philosophy and culture align extremely well with ours,” said Paul Winkler, Chief Executive Officer, Presbyterian SeniorCare.

Financed Right® Solutions: James Bodine: 267-360-6245 | or Siamac Afshar: 267-360-6250 | or Patrick Mallen: 203-418-9009.

HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm, headquartered in Fairfield, CT, with nationwide locations. Investments involve risk, including loss of principal. This is not an offer to sell or buy any investment. Testimonials may not be representative of another client’s experience. Past performance is no guarantee of future results. Member FINRA, SIPC. Facebook, LinkedIn, Instagram Twitter.


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Market Commentary: The Storm of Alternative Currency

One hour east of Austin, the small post-industrial city of Rockdale, Texas has been suffering through a bit of an identity crisis. Its roots date back to 1873 and its history is largely tied to the expansion of railroad lines hauling local cotton and coal. The salad days for this community began in 1920 when oil was first discovered. Life there only got better in 1952 when the Aluminum Company of America opened the largest smelting operation in the country, eventually producing 1.67 million pounds of aluminum a day for use in everything from U.S. skyscrapers to fighter planes. A Saturday Evening Post article immediately featured Rockdale as “The Little Town That Rained Money”, and these were happy days for everyone. Governing recently reported that, together with the adjacent power plant and mine, Rockdale Works employed about 2,000 locals at its peak. But in 2008, the company announced that it was shutting down all aluminum production due to market conditions. The plant started laying off workers and finally closed in 2014.

Things reached rock bottom for the small city and surrounding Milam County when both local hospitals closed, but then two miracles occurred. The high school football team won the 2017 state championship and the big Chinese company Bitmain arrived with a $500 million plan to build a mammoth plant with 325,000 cryptocurrency mining computers on the old Alcoa site. Unfortunately, the price of bitcoin plummeted in 2018, and the project was dramatically scaled back.

There was national media coverage of Rockdale’s bad turn of events, however, and the area came to attract the attention of another company: the Whinstone Group, a subsidiary of Germany’s Northern Data AG. Whinstone is now constructing one of the largest bitcoin computing mines in the world in Rockdale. So, there are now two crypto mining operations setting up rows of tall computer servers running the lengths of multiple hometown “Tiger” football fields. These mining machines will be used to build a blockchain needed to unlock as much as possible of the limited supply of bitcoins that becomes available. The world’s top operators run thousands of miners and consume massive amounts of electricity to obtain the cryptocurrency, but facilities in this city, county and state are now becoming global competitors. Texas has formed a Blockchain Council to make the state a leader in national blockchain growth, education and business development. Rockdale is simply hoping to become the Little Town That Rained Cryptocurrency.

Bitcoin, first proposed by an anonymous programmer in a 2008 white paper, is a decentralized, independent, digital currency, not regulated or associated with any one country or authorized by a central issuer. It made the headlines this week when Twitter was hacked and several noteworthy user accounts were used to post a crypto giveaway scam. Some consider cryptocurrencies to be worthless or fraudulent and there has been talk of a U.S. ban, but others such as the former chair of the Commodity Futures Trading Commission are lobbying for a U.S. central bank digital currency.

The cryptocurrency creation process is hard to explain as are the transactions which are performed in a network maintained by miners who process and verify them through algorithms. But there is no doubt that institutional demand for the end product is growing; Grayscale’s Bitcoin Investment Trust reported $1 billion of inflows in the most recent quarter. In addition, the pandemic has caused something of a coin shortage such that some banks are offering $5 for every $100 worth of coins brought in from piggy banks and couch cushions. Many businesses are no longer accepting paper currency for fear that it can be a vector for spreading coronavirus.

These days, we find that our lives and routines are changing in so many ways, perhaps permanently. Alternative currencies may in fact continue to become more popular. Major companies including AT&T, Expedia, Microsoft, and PayPal already accept cryptocurrency. At the time of this writing, one bitcoin is worth $9,361.16, up from $5,082.26 in mid-March, but down from its all-time high of $18,571.57 in late December 2017.

Money is all forms is central to every discussion at present. Federal grants and loans have rained on America since March. The Administration and Congress are debating a fifth aid package to extend unemployment assistance and provide additional funding for essential service providers. Furloughed workers are taking withdrawals from retirement accounts. Households are adjusting budgets to meet the new realities created by the pandemic. Students considering a return to campus are negotiating with colleges for more financial aid. Caribbean nations are selling residency certificates, passports and citizenships for major contributions. Corporations are borrowing at record paces. State and local governments, agencies, and nonprofits faced with major revenue losses are taking on new debt at very low rates and lots of investors are wrestling for access to their bonds. OPEC+ is adjusting production limits to maintain prices in the $40-$50 range. Law firms are filing wrongful Covid-19 death tort lawsuits in pursuit of high-dollar damages or settlements. With only 100 days to go until election day, political candidates are asking for lots more donations.

Earnings season began and the first few 2Q20 reports were terrible, as expected, but not as awful as some feared. Covid-19 cases have been increasing, the prospects for recovery remain uncertain, and many cities and states are starting to reverse some re-openings. But traders continue to look to every bright side. The Nasdaq has hit another all-time high and has gained 4.4% since the start of July; the Dow is up 3.3% and the S&P 500 has gained 4%. The investment grade corporate bond calendar totaled $11 billion last week, bringing the year-to-date total to an astonishing $1.2 trillion. The high yield corporate slate, led by Carnival Cruise and Norwegian, added up to $6 billion and mutual fund inflows exceeded $840 million. On the commodity side, gold futures have seen 6 weeks of gains. Oil prices have climbed 3.4% to $40.59 a barrel and gold is up 1.5% to $ 1,810 per ounce.

The U.S. Treasury has also strengthened in July, although not as much as tax-exempts. The 2-year is flat on the month at 0.14%, the 10- year yield is down 3 basis points to 0.62% and the 30-year at 1.32% has fallen 9 basis points. In the municipal bond market, customer selling was at the low point of the year last week and investors are refusing to part with their higher coupon holdings. Primary dealer inventory is at all-time lows. The new issue calendar this week should exceed $8 billion but that will not be able to satisfy the relentless four month-long demand. As of the close on Friday, the 2 -year muni AAA general obligation benchmark yield has fallen 10 basis points to 0.17% so far in July, the 10-year yield has fallen 15 basis points to 0.75% and the 30-year at 1.47% is down 16 basis points. The only thing placing a lid on a bigger rally is the unbelievable upswing in higher risk equity markets.

HJ Sims successfully Positions SearStone for Accretive Phase II

July 22, 2020

CONTACT: Tara Perkins, AVP Marketing Communications | 203-418-9049 |
HJ Sims successfully Positions SearStone for Accretive Phase II

FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce a June 30 closed financing in the amount of $6.6 million for Samaritan Housing, Inc. d/b/a SearStone Retirement Community (SearStone), a life plan community located in Cary, NC. SearStone consists of 131 independent living apartments, 38 independent living estate homes, 14 assisted living units and 25 skilled nursing beds. The assisted living and skilled nursing services are offered at the Brittany Place Healthcare Center (Brittany Place).

Sims financed the first phase of SearStone with a $117.5 million non-rated fixed rate bond issue in June 2012 and an expansion of the Healthcare Center in 2016 with an $8 million issue. Sims provided the original seed capital, and the funds to advance refund the 2012 issue, and provided a portion of the pre-development capital for the Phase II expansion in 2017. Given the growing demand for independent living units, planning commenced for a Phase II expansion project and pre-development costs were funded with $5.5 million of proceeds from the Series 2017B Bonds. Phase II should double the size of SearStone and is projected to be financially accretive; additional pre-development capital was needed. Phase II is known as the Highview at SearStone and contemplates the addition of 152 independent living units, 28 assisted living units (14 specialized memory care units) and 24 skilled nursing suites. New dining venues, along with additional common and green spaces will be also provided.

Sims successfully underwrote $4.6 million of tax-exempt bonds and $2.0 million of taxable bonds to provide supplemental pre-development capital for Phase II, scheduled for financing in early 2022.The financing was completed as one of the first non-rated senior living financings placed in the bond market since COVID-19, and provided close to $6 million of expendable proceeds, that combined with remaining funds from the Series 2017B Bonds and $1 million+ in borrower equity, will fund predevelopment costs associated with the Phase II.

With Sims’ leadership and the collaborative work of SearsStone’s senior management team, Board, Management Company (Retirement Living Associates), Developer (Greenbrier) and the financing working group, SearStone successfully completed the financing and obtained bondholder consent to issue the proposed debt; secured sufficient pre-development capital to pursue Phase II; and provided covenant relief and maintained sufficient operating, financial and strategic flexibility to implement the future expansion to optimize its campus.

“SearStone has once again benefitted from the superb leadership of Aaron Rulnick and the Sims team. Our financing would have been challenging in any environment, but we were facing a tight time-frame in a market shut-down by COVID. Sims worked tirelessly and creatively to overcome obstacles, and we are so pleased with the result. SearStone can continue to pursue the Highview Expansion project, which will right-size and optimize our campus, with the financial resources and flexibility we need to be successful,” said Stan Brading, President, Samaritan Housing Foundation, Inc.

Financed Right® Solutions: Aaron Rulnick: 203-418-9008 | or Tom Bowden:-804-398-8577 |

HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm, headquartered in Fairfield, CT, with nationwide locations. Investments involve risk, including loss of principal. This is not an offer to sell or buy any investment. Testimonials may not be representative of another client’s experience. Past performance is no guarantee of future results. Member FINRA, SIPC. Facebook, LinkedIn, Instagram Twitter.

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Encore on the Lake

HJ Sims completes innovative dual bank senior – supplemental debt financing for Encore on the Lake. This new middle market independent living campus is a planned 80-unit Independent Living Community to be constructed on a 6.8 acre site in North Strabane Township, Washington County, PA.

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Market Commentary: Have We Got This Handled?

The open prairies, sandstone quarries, and coal mines gracing the land halfway between the cities of Seattle and Portland in Washington attracted many American settlers back in the 1860s and the Town of Tenino became a popular whistle stop on the Northern Pacific Railroad route. The Town’s fifteen minutes of fame came some seventy years later during the Great Depression when the Citizens Bank closed, all bank accounts were frozen, and cash became very scarce. In December 1931, the local chamber of commerce came up with the idea of issuing Tenino Wooden Dollars to restore confidence and spur commerce. The scrip was printed in one-dollar denominations and was redeemable in Thurston County stores during the month it was issued. The alternative currency circulated for two years. Ninety years later, the community decided to break out those old wooden presses again to help workers who have lost income due to the pandemic. Residents are eligible for up to $300 a month to spend for necessities and services from local providers. The bills are made of wood veneer, issued in $25 denominations, and engraved with the Latin phrase Habemus autem sub potestate, translated as “We’ve Got This Handled.”

Communities with less than 2,000 people like Tenino, as well as cities with more than 1.5 million across the country and around the world have been taking maximum advantage of state, federal and private aid but have also been coming up with their own creative solutions to handle a wide range of individual needs as the pandemic rages. A focus on the health and safety of neighbors, customers and employees is in fact contributing to the demise of coin and currency usage. Cashless, contactless transactions have been increasing as case counts have surged. At this writing, there are more than 3.4 million confirmed cases in the U.S. and there have been 136,463 deaths. The Centers for Disease Control reports an overall cumulative Covid-19 hospitalization rate at 107.2 per 100,000, and the median cost of each stay is $45,000. The number of employed workers has fallen to 137.8 million, down 14.7 million from the 152.5 million reported in February. More than 32.9 million Americans were receiving some type of unemployment assistance as of June 20. At the end of the month we will have the first estimate of second quarter growth but it is estimated to show a drop of at least 30%.

U.S. financial markets appear convinced that there is a fall safety net beneath them, fashioned with the shock absorbing synthetic mesh of the Federal Reserve and the U.S. Treasury. Many investors feel certain that a worsening of the pandemic will only produce more stimulus, making COVID-19 in the words of one trader “inversely related” to market performance. But the massive social and economic disruptions and mitigation response that have produced a $2.7 trillion U.S. budget deficit and $7 trillion Fed balance sheet nine months into the fiscal year seem destined to create at least a few market bubbles.

For five months now, we have been relying on government officials to handle decisions affecting just about every waking hour of our lives. They exercise unprecedented control over our whereabouts and activities and, in the process, we have lost so many of our most pleasant summer distractions. Vacations are being postponed, barbecues limited, beaches closed. We miss seeing our favorite seasonal competitions for baseball’s all-star MVP, the Tour de France’s yellow jersey, the British Open’s Claret Jug, and Wimbledon’s trophies. Instead, we listen to the field chatter of central bank officials, follow the wrestling matches involving teachers’ unions and epidemiologists and parents over fall school openings, make wagers on the changing names of professional football teams, and cheer or boo some of the more unusual alliances formed in recent U.S. Supreme Court opinions. In one such ruling last week, the Court decided that nearly half of Oklahoma is Native American reservation land allocated under an 1866 treaty, suddenly raising a host of new tax, zoning, and law enforcement issues for 39 counties.

This week, taxpayers are scrambling to finish 2019 returns after a three-month blanket extension granted for state and federal filers. Traders are watching the first reports of second quarter corporate earnings, assuming that the worst of the coronavirus impact will be reflected therein, more interested in the forward guidance offered by chief executives and progress on vaccine trials. It is hard to say at this point whether the markets have baked in some of the uglier possible scenarios. The S&P 500 is currently trading at 25 times estimated earnings, the highest point since the era of the dot-coms. It has risen 42% since its low point in March 23. A record $184 billion was raised in U.S. equity capital markets in the second quarter according to Refinitiv IFR data. Investors are also fueling rallies in the bond markets. The $1.2 trillion of investment grade corporate bond issuance in the first half of the year is the highest on record. Municipal bond mutual fund and ETF flows have been positive for 10 consecutive weeks, and the ICE BoAML tax-exempt muni index has seen 10 straight weeks of positive returns.

The municipal bond calendar may total as much as $14 billion this week, with nearly $5 billion coming as federally taxable bonds, led by hospital, college, port and airport deals. The 30-day visible supply exceeds $19.1 billion, a high reached only on seven other occasions according to Municipal Market Advisors. On the corporate bond side, investment grade issuance is expected to come in at $20 billion, bringing us closer to a July total of $100 billion. The high yield corporate calendar changes daily; so far this year, new issue volume adds up to more than $219 billion. At this writing, the 10-year Baa corporate bond yield stands at 3.28%, 11 basis points lower on the month. The 2-year AAA rated municipal general obligation bond yield at 0.24% is down 3 basis points on the month while the 2-year Treasury yield is basically flat at 0.15%. The 10-year muni benchmark yield at 0.81% has fallen 9 basis points, outperforming the Treasury 10-year counterpart, nearly flat at 0.64%. The 30-year muni benchmark yield at 1.53% is 10 basis points lower as compared to the 30-year Treasury at 1.33%, which is down 8 basis points in July. The long muni has not seen a 2-handle or 2% yield since May 7; the long bond has not seen a 2-handle since February 19.


Searstone picture

HJ Sims successfully completes $6.6 million of Tax-exempt and Taxable Revenue Bonds to position Samaritan Housing Foundation, Inc., d/b/a Searstone Retirement Community, a life plan community located in Cary, NC, for accretive Phase II.

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