ALG Senior

Based out of Hickory, North Carolina, ALG Senior is a best in class senior living owner, operator and developer, operating more than 150 independent living, assisted living and memory care communities in eight states, with a total of more than 12,500 beds under its management.

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Market Commentary: Angels of the Battlefield

by Gayl Mileszko

As the Civil War began, many women began collecting bandages and supplies for their troops. Among those who felt called to do more was a 40 year-old recording clerk in the U.S. Patent Office in Washington, D.C. Clarissa Harlowe Barton, who preferred to be called Clara, headed directly to the battlefields to cook for and comfort wounded Union soldiers. She read to them, wrote letters on their behalf, fed and prayed with them and, without any formal training, nursed them as she solicited and organized wagon loads of supplies then learned how to store and distribute them. Clara had already braved new worlds as a woman who taught school at a time when almost all teachers were men, and as one of the first women to work in the federal government. But her wartime efforts were seen as otherworldly, and she became known as the “Angel of the Battlefield”. Her efforts later took on international acclaim as a result of her service in Franco-Prussian war zones with volunteers for the International Red Cross. She came home to lobby for the Geneva Treaty, and to found and lead the American Red Cross until she retired in 1904 at the age of 83. More than a century later her legacy continues on through the many angels in nursing and personal care uniforms who believe as she did: “You must never so much as think whether you like it or not, whether it is bearable or not; you must never think of anything except the need, and how to meet it.”

Nancy Whitley, a direct descendant of Clara Barton, was so inspired by her life that she formed a home health care service in Clara’s home state of Massachusetts back in 1997. Barton’s Angels is one of more than 400,000 home care agencies now assisting the elderly and disabled with personal care, housekeeping, health care advocacy, meal preparation, and companionship in their own homes. Home care is a $97 billion market, a key segment in the health care continuum, and among the fastest growing healthcare industries in the U.S. with more than 1.8 million workers. Demand from those who prefer having assistance at home rather than congregate care is expected to grow significantly as 40% of seniors over age 65 need help with at least some daily activities, and ten thousand people are turning 65 every day. Family and friends serving as unpaid caregivers may not be able to provide the type of care needed for the length of time required. Many states have made their Medicaid programs more flexible, extending home-based care to more people. In the pandemic era, we have encountered an astonishing number of angels on the front lines. Providers have begun caring for those with much more acute needs while skilled nursing facilities continue to serve as many as 1.5 million with clear need for 24/7 care.

Home care and skilled nursing were among the many topics covered at last week’s 18th Annual Late Winter Conference. Several hundreds of our colleagues in senior care joined us virtually for informative presentations and enlightened discussions throughout the day. Over the course of the coming weeks, we will share many of the highlights from our panels and keynote speaker. All were of course interested having our capital markets update. It was only one week ago, but many things have since changed.

The biggest monthly rise in U.S. bond yields since 2016 in mid-February had all the markets struggling to find their footing and direction. Uncertainty and fears of higher rates and inflation took hold, triggering a new round of volatility. The Dow swung more than 1,000 points over three days amid the selloff in global bond rates. As the latest draft stimulus bill continued to inch through Congress, its size at nearly $2 trillion had all investors envisioning the massive Treasury debt sales that will be required to pay for the economic relief measure and all its assorted add-ons as vaccination rates increased, new case counts declined, and economic data came in better than expected. Those Treasury auctions held during the last week of the month were very poorly received. Even without action on the stimulus, the pace of the recovery appeared a lot stronger to traders than to Federal Reserve officials, who tried to calm markets by saying that higher rates would not alter monetary policy. It was a very familiar refrain but it met this time with a very skeptical crowd. The month, however, ended with the Russell 2000 up 6.1%, Dow up 3.2%, the S&P 500 up 2.6% and the Nasdaq up 0.9%. Oil prices climbed nearly 18% to $61.50 a barrel while gold fell 6% to $1,734 an ounce. Bitcoin prices swings looked alluring to some but quite dangerous to others.

Municipal bonds have been operating in a rosy world separate and apart from other markets, with tax-exemption and relative credit quality shielding them from the harsher elements affecting stocks and most other bonds. Higher yielding munis and corporates have been in great demand, and remain so, despite the sudden selloff over the past two weeks. The 2-year AAA general obligation bond was the least affected; yields rose by only 8 basis points to 0.19%. But the 10- and 30-year benchmark yields jumped by a whopping 45 basis points to 1.14% and 1.80%, respectively rose over the course of the month. The increase still leaves munis in the historically low range but nevertheless exceeded the jump in Treasury yields which, for the 2-year was only 2 basis points, but for the 10-and 30-year maturities meant 34 basis points. BAA-rated corporate bonds maturing in 10 years saw yields increase by 30 basis points from 2.75% to 3.05%.

This week, HJ Sims is in the market with a $103 million non-rated tax-exempt municipal bond financing for Fountaingate Gardens to construct 129 independent living entrance fee units adjacent to the campus of the Gurwin Healthcare System in Commack, New York on Long Island. This first week of March is expected to see about $8 billion of new money and refunding issues in total. Municipal bond volume exceeded $30 billion in February but was down 24% for the first two months when compared to 2020 and included $10.3 billion of taxable municipal bonds. Muni buyers are particularly starved for paper as investors have poured $20.3 billion into mutual funds and $3.9 billion into ETF’s so far this year but we have recently seen only a handful of financings with yields over 3%. Grand View Hospital in Pennsylvania came with $285 million of BB+ rated bonds priced with a coupon of 5.00% to yield 3.33% in 2054. Sunrise Retirement Community in Iowa had a $21 million non-rated financing that priced at 5.00% to yield 4.67% in 2051. Pulaski Academy in Arkansas sold $19.5 million of non-rated taxable refunding bonds convertible to tax-exempt in 2028 with a 2039 maturity priced at 3.00% to yield 2.70%. Riverwalk Academy in South Carolina borrowed $13.4 million in a 30-year non-rated transaction with bonds priced at par to yield 5.125%. And Pineapple Cove Classical Academy in West Melbourne, Florida offered one of the highest maximum yielding bonds at 6.356% due in 2056, but only $11.2 million were available.

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