LeadingAge OH Month of Marketing Webinar Series

Virtual Webinar

Session Date & Time: Wednesday, June 2, 2021 from 1:00pm-2:30pm ET

Thought Leadership and Educational Session:

Embracing New Marketing Strategies in a Post-COVID Environment

The Senior Living COVID-19 Sentiment Report surveyed more than 23,000 residents and staff at senior independent living communities across the country, along with prospective future residents to better understand what it was like to live and work in a senior living community during the pandemic and to identify whether prospects felt differently about moving to a senior living community due to the pandemic. The results of the survey demonstrate that residents overwhelmingly felt safe during COVID-19 and confident their communities had taken appropriate precautions to keep them safe. The study also identified there are opportunities for improvement.

This session will focus on the results of the report as it relates to marketing. It will include a facilitated Leadership Roundtable Discussion about how providers plan to leverage the data to enhance their marketing approach, redefine the value proposition that senior living has to offer, and implement innovative marketing and sales solutions to improve prospect and waitlist engagement and ultimately increase census.

Learning Objectives:

  1. Attendees will hear the results of the COVID-19 Sentiment Report – A survey of independent living desirability and safety;
  2. Learn best practices and innovative ideas specific to sales and marketing to increase census as we are coming out of the pandemic;
  3. Learn how to leverage the data to enhance the resident experience, redefine the value proposition that senior living has to offer and implement marketing and sales solutions to improve prospect and waitlist engagement and ultimately increase census.

Featured Speakers:

  • Lynn Daly, Executive Vice President, HJ Sims
  • Mica Rees, Chief Brand and Growth Officer, Ohio Living
  • Aimee Riemke, Vice President of Marketing, Greencroft Communities
  • Shona Schmall, Director of Marketing & Sales for Cooperative Development
  • Dana Wollschlager, Partner & Practice Leader, Plante Moran Living Forward

Contacts:

As we continue to experience fluctuations in our capital markets, HJ Sims is committed to Tracking the COVID-19 Impact.

Market Commentary: Pleasant Paths

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by Gayl Mileszko

Twenty four centuries after the Athenian statesman leader Pericles gave his famous oration honoring the many warriors who were killed in battle after the first year of the Peloponnesian War, Commander in Chief John A. (“Black Jack”) Logan of the Grand Army of the Republic, a veterans group comprised of former Union Army soldiers, issued General Order Number 11 designating May 30 as a day to commemorate comrades who died in defense of their country in the Civil War by decorating graves “with the choicest flowers of springtime.” He urged that “We should guard their graves with sacred vigilance. … Let pleasant paths invite the coming and going of reverent visitors and fond mourners. Let no neglect, no ravages of time, testify to the present or to the coming generations that we have forgotten as a people the cost of a free and undivided republic.”

Originally called Decoration Day, the first national Memorial Day celebration took place on May 30 of 1868 at Arlington National Cemetery, where both Confederate and Union soldiers were buried. Local tributes to the fallen had been taking place for several years. Waterloo, New York, and Boalsburg, Pennsylvania, Macon, Georgia, and Richmond, Virginia are among the towns and cities that lay claim to being the first to hold an observance. At the turn of the 20th century, May 30 was re-designated as Memorial Day. After World War I, the day was expanded to honor those who have died in all American wars, and the tradition of adorning one’s clothing with a single red poppy in remembrance was born. In 2000, Congress passed “The National Moment of Remembrance Act,” calling on the people of the United States in a symbolic act of unity to pause wherever they are at 3 p.m. local time on Memorial Day for a minute of silence to remember and honor those who have died in service to the nation in the pursuit of freedom and peace.

Bond markets close early on Friday ahead of this Memorial Day, largely in acknowledgement that traders and investors will be among the 37 million Americans expected to hit the road to join family and friends to celebrate high school and college graduations and the unofficial start of summer. Red, white and blue décor will prevail at parades, speeches, barbecues, and picnics. Millions will place flags on gravesites, millions will watch the wreath-laying ceremony at the Tomb of the Unknown Soldier at Arlington National Cemetery, and millions more will be checking prices at nearby gas stations to see how much this first vacation of the season will cost them. Inflation anxieties prevail, and with good reason. Every penny increase in gasoline takes $1 billion out of the pockets of American consumers. The national average price of gasoline has fallen 1.9 cents per gallon in the past week, averaging $3.02 Monday — but they are up 14 cents from one month ago and $1.07 higher than one year ago. These increased fuel costs, along with disruptions in the reliability of transportation and labor, a general trend toward inflation, and a head-snapping surge in demand have also been factors in the recent major increase in the prices of supplies of supplies such as plywood, steel, and copper as well as foodstuffs including beef, poultry, fish, and dairy.

In addition to the rising cost of dinner itself, travel is the topic of many family dinnertime conversations. Las Vegas has always been a favorite destination and it happens to be the site of the first large, in-person trade show scheduled in the United States since the pandemic began. Conventions have historically generated about $11 billion in annual revenue for the Las Vegas area and employed tens of thousands of workers, but the pandemic has shut all this activity down for 14 months.  Without blackjack, tourists and trade shows, the Las Vegas area posted an unemployment rate of 33.5% in April 2020, and half of the 60,000 members of the Culinary Workers Local 226 still remain out of work. But state and local officials are seeing green shoots. Gambling revenue in the state totaled a whopping $1 billion in March, the highest monthly total in over eight years. Convention bookings are increasing for later this year and next year, but how quickly they resume may hinge on the success of the three-day World of Concrete convention which begins June 8 at the new $989 million addition to the Las Vegas Convention Center and its outdoor parking lot. The gathering will operate under previously approved limits of 80 percent capacity, social distancing of three feet, temperature screenings, and hand-sanitizing stations. Hundreds of major trade groups will be watching closely to see if this first convention goes off without major issues and literally paves the way for the return of business and tourism in popular convention cities like Chicago, Los Angeles and Miami.

The pandemic is not over, but during this phase life is clearly becoming more pleasant for many. New COVID-19 cases dropped to 53 on Monday and there is good news about school re-openings in the fall. There are few mandates but the return to campus, to work, to entertainment venues will place heavy reliance on the “honor system.” Honor is a watchword of the National Guard, the military reserve force dating back to 1636 which is under the dual control of state and federal governments. There were 26,000 members of the Army and Air National Guards called to the U.S. Capitol in January; two thousand troops remain but they are slated to head home this week as Members of Congress return to their own home districts. The calendar shows that only about 31 voting sessions remain until the end of the fiscal year on September 30, so that does not leave a lot of room for legislative action on spending bills, infrastructure, or many other policy priorities. The municipal bond industry is closely watching to see the contents of the Green Book on Friday; this publication will include revenue estimates and detail the Administration’s tax proposals and those in public finance hope that there will be a provision restoring advance refundings on a tax-exempt basis. There also appears to be growing bipartisan support for a new incarnation of Build America Bonds to aid in rebuilding critical infrastructure. Treasury officials may address these plans in its tax report, expected to be released during a busy week that includes three auctions involving $180 billion of bond sales.

U.S. Treasuries, municipal, and corporate bonds as well as stocks and gold have all strengthened in the past week at this writing. Bitcoin trading took a volatile path with the market value plunging about $1 trillion from a peak of $2.6 trillion earlier this month and the wild price swings gave stocks some pause. The Dow at 34,393 is up 1.5% in May and 12.4% in 2021. The S&P 500 at 4,197 is up slightly this month and 11.7% year-to-date. The Nasdaq at 13,661 is off by 2% since the start of the month but up 6% this year. The Russell 2000 at 2,227 is down 1.7% in May but up nearly 13% since the start of the year. Oil prices at $66.05 per barrel are up 4% on the month and 36% this year. Gold at $1,883 an ounce has gained more than 6% in May but nearly flat on the year.  Silver at $27.75 an ounce has risen 7% this month and 5% since January. Bitcoin at 37,403 has plunged 34% this month but is up 30% in 2021. On the bond side, Treasuries are nearly flat on the month at this point. But the 2-year Treasury at 0.14% is 2 basis points higher on the year, the 10-year at 1.60% has risen 69 basis points, and the 30-year at 2.29% is 65 basis points higher.  The 10-year Baa corporate bond yield at 3.23% has fallen 4 basis points this month, but is 58 basis points higher in 2021. For a variety of technical reasons, municipals have been less impacted by Treasury moves, inflation talk, Fed speculation, and chaotic crypto. Expectations for higher taxes, light volume, increased supply of taxable munis and nonprofit corporate CUSIP issuance, record levels of inflows into muni bond funds and ETFs for 11 straight weeks, heavy cash generated from coupon income, calls and maturities with no options for reinvestment at the same yields have all kept munis strong and fairly rangebound this year. The 2-year AAA general obligation bond yield at 0.14% is up 4 basis points this month but flat on the year. The 10-year yield at 1.01% is up 2 basis points in May and 30 basis points in 2021. And the 30-year benchmark yield at 1.57% is 2 basis points lower on the month but up 18 basis points since January. High yield municipal bond indices reflect returns of 3.90% so far this year, while leveraged loans are up 2.82%, high yield corporate bonds are up 1.93%, convertibles are up 0.93%, investment grade munis are up 0.78% and preferreds are up 0.24%. On the other hand, Treasuries are down 3.84% year-to-date, investment grade corporate bonds are down 3.17%, taxable municipal bonds are down 2.39% and mortgages are down 0.86%.

This week’s muni slate includes more high yield offerings than we have seen all year. It includes a $308 million non-rated start-up green bond financing for Enso Village in Healdsburg, California, a $150 million non-rated deal for Lutheran Services for the Aging in Salisbury, North Carolina, a $100 million non-rated Waste Pro USA solid waste disposal issue in Florida, a $70 million non-rated taxable deal for Santa Cruz Valley Regional Hospital in Arizona, a $58 million refunding for BB+ rated Lasell University in Newton, Massachusetts, a $16 million BB rated issue for Seven Generations Charter School in Emmaus, Pennsylvania, a $12 million non-rated Wisconsin Public Finance Authority deal for High Desert Montessori Charter School, and a $10 million non-rated financing for Seven Oaks Classical School in Ellettsville, Indiana. Last week, the Government of Guam sold $278 million of Ba1 rated business privilege tax refunding bonds; bonds were structured for forward settlement in October and had a 2042 maturity priced with a 4% coupon to yield 2.54%.  Grand Forks County, North Dakota brought a $120 million non-rated green financing subject to the alternative minimum tax for Red River Biorefinery; the 2043 term bonds were priced at par to yield 7.00%. The Public Finance Authority issued $67 million of BB+ rated refunding bonds for Rider University in New Jersey with a single term bond in 2048 priced at par to yield 4.50%, and a $6.4 million charter school financing for Lead Academy with a 2056 maturity priced at 5.00% to yield 4.50%. The North Carolina Medical Care Commission came to market with a $44.4 million BBB rated deal for The Forest at Duke that had a 30-year final maturity priced at 4.00% to yield 2.38%. Tipton Academy in Michigan had a $6.4 million BB rated financing priced at par to yield 4.00% in 30 years.

For current offerings, portfolio reviews, and financing options, we invite you to reach out to your HJ Sims representative this week. For the holiday weekend ahead, we wish you and your family safe journeys and pleasant paths.

Exclusive Opportunities For Our Clients

MoneyShow Orlando 2021

Please join HJ Sims for MoneyShow Orlando June 10-12 at Omni Resort at ChampionsGate. Visit our team at Booth 303. Join us for two special presentations on June 11, 3pm-4:15pm, and June 12, 11am-11:45pm:

What if You Choose Not to Follow The Crowd? POWeR Your Portfolio.

What if you could stress test the Top 10 positions against world, political or economic scenarios?

What if you could identify investments that might adversely impact your portfolio within a rising inflation environment?

What if you could help design your own strategies (i.e., socially responsible or disruption innovation)?

What if you could identify investments that could help offset Capital Gains taxes?

Join Cliff Edelmann, Geoff von der Linden, Les Campbell, John Koene and Jonathan Jarow.

Market Commentary: Bells and Whistles for the City That Never Sleeps

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by Gayl Mileszko

The New York Stock Exchange has invited occasional guests to ring the ceremonial opening bell since 1956. The current practice is to have them stand on the marble balcony weekdays at 9:30 a.m. to mark the start of the day’s trading. At 4 p.m., they bang a gavel after the closing bell, which is sometimes met with cheers at the end of a long, hard day of loss, or boos when no one wants the day’s rally to end or if the guests inadvertently cut short the precise 15 second ritual. The 18-inch bell, specially manufactured by the G.S. Edwards Company of Norwalk, Connecticut in the late 1980s, is said to have the sound of a brass bell tuned to the pitch D with an overtone of D-sharp. It replaced several other bells and, going back to the 1870s, a Chinese gong. Since 1995, company executives with NYSE stocks or exchange-traded funds have been permitted to ring the bill, often on the day their company goes public or releases a new product. Celebrities, dignitaries, charities and other groups are also often invited or may apply for the honor. The selection process is a bit mysterious, but the lucky ones are invited to sign the wall and become a permanent part of exchange history.

On Monday, May 17, the NYSE welcomed the Madison Square Garden Sports Company and JP Morgan Chase as they virtually rang the closing bell to celebrate the New York Knicks making the playoffs. That morning, the Chairman of New York’s Metropolitan Transportation Authority had the honors of pressing the green button, activating the big silver bell and prompting cheers from the assembled floor brokers and media representatives. The bell resounded across the floor for ten seconds to mark the return of 24/7 subway service in New York City earlier that morning. The Chairman was accompanied by representatives of the authority’s front-line workers who later noted that ridership had achieved pandemic records on May 14 with 2,265,489 subway trips, 104,885 on the Long Island Rail Road, 85,684 on the Metro North Railroad, and 1,188,284 bus rides.

Prior to the pandemic, average MTA weekday ridership totals routinely exceeded 5.5 million in the subway system alone. That number fell to a low of 300,000 in April of 2020, primarily heroic healthcare workers and public safety officials. On Monday, full overnight subway service resumed for the first time since May 6, 2020 when the subway system was closed for an unprecedented cleaning regimen involving 500 stations. The return of round-the-clock service paves the way for the end of the city’s outdoor midnight curfew and lifting of limitations on restaurant capacity, but brings with it new concerns about safety on the part of riders. Violent crime and harassment remain significant fears for many, while others worry about the possibility of a new coronavirus wave as a result of travel in trains and buses often equated to sardine cans.

Taxpayers and bondholders have additional questions and concerns. Even before the pandemic, rating agencies cited the MTA’s budget imbalances, missed capital commitment goals, capital funding risks and escalating debt. That debt has more than tripled in the last 20 years and now totals $49.4 billion. Some wonder if the Authority is whistling in the wind when it comes to projections about a return to pre- pandemic ridership levels given polls showing that the majority of city office workers do not plan to return to work five days a week under any transportation scenario. More than $14.5 billion of federal aid has plugged at least two years of budget gaps and reduced the immediate need for additional deficit borrowing but questions remain about the agency’s structural deficit, its plans for funding a five-year $51.5 billion capital program, its central business district tolling program, its labor issues, debt service, escalating retiree benefit costs, and doubtful ability to raise fares for the foreseeable future.

The U.S. bond market never officially closes so there are no bells to mark its sessions. There is round-the-clock trading in U.S. Treasuries and other bonds but the bulk of activity occurs between 8 a.m. and 5 p.m. and there are plenty of whistles throughout the trading day to accompany tickets written at unusually high and low levels. The A3/BBB+/A- rated MTA is among the largest U.S. municipal bond issuers, and is very actively traded. It has been in the market seven times since the pandemic began and twice tapped the Federal Reserve’s Municipal Liquidity Facility last year. At the time of this writing, the 5% MTA Transportation Revenue Bonds due in 2042 are trading at $108.333. The 5% MTA Transportation Revenue Green Bonds due in 2044 are trading as high as $124.80. In the current market, with limited supply available to satisfy demand for tax-exemption in high-tax states like New York as well as for bonds of relatively high credit quality, these are by no means the highest prices we are seeing. Certain taxable State of California general obligation bonds are trading over $164, and taxable New Jersey Turnpike bonds over $158. Tax-exempt Massachusetts Water Resources Authority bonds are trading over $151 and Mayo Clinic bonds over $150. At the opposite end are odd lots of bonds that have defaulted. These include subordinate Puerto Rico Highway bonds trading below $14 and St. Paul Port Authority parking ramp bonds just over $25.

In the new issue municipal market last week, investors scooped up and paid up for bonds at points on the credit scale with very little compensation for the extra risk. School bells rang for the triple-A rated San Antonio Independent School District which had a $268.3 million low-cost financing structured with 2051 term bonds priced with a coupon of 2.375% to yield 2.29%. Twelve hundred miles away, the Florida Development Finance Corporation issued $89.2 million of non-rated bonds for The Glenridge on Palmer Ranch in Sarasota with a 30-year term bond that had a 5% coupon but priced to yield just 127 basis points more than San Antonio at 3.56%. The City of Forest Lake, Minnesota brought a $29 million non-rated charter school transaction for North Lakes Academy that had a 2056 maturity priced at 5.00% to yield 3.90% and the City of Woodbury, Minnesota issued $21.9 million of BB-minus rated bonds for Woodbury Leadership Academy that included a similar 35-year maturity priced at 4.00% to yield 3.15%. The Colorado Educational and Cultural Facilities Authority sold $25.1 million of Baa3 rated bonds for Aspen View Academy that had a 2061 final maturity priced with a coupon of 4.00% to yield 2.95%.

Inflation alarm bells tolled again last week after the consumer and producer price indices came in higher than estimated. All three major stock indices weakened as did Treasuries and municipals while oil, gold and silver prices climbed. Halfway through the month of May, the Dow is up over 1% to 34,327, the S&P 500 has slipped 17 points to 4,163, the Nasdaq is off by more than 4% at 13,379, and the Russell 2000 is off 39 points to 2,227. Oil prices are up 4% to $66.27, at $1,868 gold has gained more than 5% and silver is up nearly 9% to $28.19. Bitcoin prices have plummeted 25% to 42,562. The 2-year Treasury is flat at 0.15%, the 10-year yield is up 2 basis points to 1.64% and the 30-year yield is 7 basis points higher at 2.36%. The Baa corporate bond yield is flat at 3.27%. The 2-year muni yield climbed 4 basis points to 0.14% and the 10-year yield is 3 basis points higher at 1.02%. The 30-year AAA municipal general obligation bond benchmark is flat at 1.59% but valuations hit a record low against Treasuries last week. The long muni yield slipped to 68.4% of its Treasury counterpart after having averaged about 103% between 2001 and 2020. We invite you to ring your HJ Sims representative to discuss any of these developments between your own day’s opening and closing bells.

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Four Innovative Financing Strategies for Life Plan Communities to Create Operational Cashflow during COVID-19

With how unpredictable the last year has been, it would be foolish to believe that we can reasonably predict what will happen in the next five years as it relates to Life Plan Community financing and capital markets as a whole.

However, we have learned in recent months that communities can implement innovative financing tactics to create operational cashflow in this current market situation. Here are some thoughts, considerations and possible opportunities for your organization.

Read more insights from Melissa Messina, SVP, HJ Sims, in the Love & Company Blog.

LWC21 Technology Brunch Session

In this session from our 18th Annual HJ Sims Late Winter Conference, in February 2021, thought-provoking insight from an expert panel focused on the role of technological infrastructure, and integration in the flexibility and strength of an organization – important themes for fighting the COVID-19 Pandemic and the future. In this age-qualified industry, technology presents both challenges and opportunities, a few that have been highlighted in this session include:

  • Tech Use among Seniors
  • Organizational Technological Infrastructure
  • Integration of Technology
  • Emerging Technologies

Tech Use Among Seniors

The session opened with a general overview of technology usage research conducted by Pew Research Center. Included in this research were several standout statistics. As of 2016, Pew reported that smartphone adoption among surveyed seniors (people aged 65+) had nearly quadrupled from 11% to 42%; the panel echoed that the technology-adoption trend has only continued. Pew also notes affluent and better educated seniors are more likely to report smartphone ownership. However, despite the trends towards technology use amongst seniors, the Pew research points out that technology use was significantly lower amongst seniors aged 75+ compared to their younger counterparts. Transitioning from the use of technology among prospective senior living residents, the panel moved to discussions of the role of technology within senior living organizations.

Organizational Technological Infrastructure

To frame the discussion of organizational technology adoption, Nick Patel used a “Technology Maturity Model” pyramid to represent organizations’ level of technological maturity and adoption. His analysis showed that the fundamental aspect of technology adoption is a solid foundational network and data infrastructure. He defined this as the internet and data sharing networks that allow for layering of more complex data collection and distribution. For example, without reliable and accessible internet, investment in complex resident tracking software is ineffective. For most organizations, the climb to the top of this pyramid can take three to five years. 

Shaun Smith noted that the pyramid prototype is the useful to his organization. In relation to Asbury, the organization was able to head off some of the technology stress of the Pandemic to buttress Albright’s technology infrastructure. Nick echoed this sentiment. Organizations which had already begun scaling the pyramid were more prepared to pivot at the onset of the Pandemic.

However, sometimes there are still unforeseen  technological challenges. When Asbury staff needed to reach its LIFE Center participants (Pennsylvania’s PACE program) at the onset of the Pandemic, they quickly realized those seniors were largely without access to broadband internet or smart technology. Pivoting, the team at Asbury canvassed door-to-door with iPads. Though it was originally a challenge, the processes they developed are now used to more quickly onboard new residents. 

Integration of Technology

An important theme that emerged during the discussion was the human component of technology. AJ Peterson, as a technology solution provider, discussed how their goal is to craft platforms integrating all of the  technology tools into the workflow. He highlighted the importance of obtaining feedback from the end user throughout the process of developing a tool. If tools are easier to navigate, and fit the working needs of those using them, they are more likely to be adopted widely. Shaun echoed these sentiments, saying they have found that technology must be human-oriented. Adoption and integration are easier if there is a human connection element on the front-end. Residents and caregivers increasingly adopt the technology if they have human-centered training at the start. AJ also noted the ways in which these tools will continue to shift. Particularly, he discussed the role virtual care would play as part of the larger care strategy. He positioned the question: How does the entire care team engage with residents and  family members? They are anticipating growth in the remote patient monitoring space and seeing a shift that emphasizes a wellness-focused model, where risk is identified sooner and mitigated.

Emerging Technologies

The session concluded with discussion related to the emerging technologies impacting the senior space.  Whereas some tools, used to reward employees, may somewhat alleviate staffing and expense concerns, other tools, like VitalTech, Trueloo, Apple Watches, and Amazon Alexa, may allow more seniors to stay at home longer. Likewise, Mynd VR, Zoom, Mirror, and other technologies allow seniors new outlets to improve mental and physical health. The panelists all shared interest in how these new technologies would impact the aging space, but they unanimously voiced the need for careful adoption of the right tools versus chasing the newest technology.

For more information, please contact Melissa Messina at [email protected].

For coverage on any of our other conference sessions, please visit our events page.

Panel of Experts

Nick Patel
President
The Asbury Group – Integrated Technologies

Shaun Smith

Shaun Smith
President & Chief Executive Officer
 Albright Care Services

AJ Peterson

AJ Peterson
Vice President and General Manager
Netsmart Technologies

Replay our 18th Annual Late Winter Conference

Market Commentary: Feathers Flying

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by Gayl Mileszko

“Hope”, wrote the poet Emily Dickinson, “is the thing with feathers that perches in the soul and sings the tunes without the words.” Along with love and faith, hope has been one of the mainstays for millions upon millions of us throughout the 425 days and counting of this Pandemic, often resting in the form of doctors and nurses, paramedics, caretakers, scientists, manufacturers, deliverymen, employers or employees. Hope — with its superhuman strength — still prevails for most of us amid all the new questions surrounding the origin of the coronavirus, the effectiveness and durability of the vaccines and treatments, and the emergence of variants. Just this past week, new hopes have arrived to hover over deadly clashes in Jerusalem and Gaza, the DarkSide pipeline cyberattack, rising food and gas prices, shortages of staffing and supplies, those in search of affordable housing, honest work, and in-classroom learning. Today, this year, as always, there is no shortage of need for hope.

On Wall Street, the hope for more than 12 years has been that nothing changes, that the stock, bond, and commodity rallies go on ad infinitum. With their unprecedented interventions, the Federal Reserve and other central banks have eliminated most every semblance of a free market, virtually guaranteeing price appreciation, access to cash that is nearly free, and excessive risk-taking. In the U.S., the Fed has been buying more than $120 billion worth of bonds each month since last June and the assets on its balance sheet now exceed $7.8 trillion, a sum that represents over 34% of our gross domestic product. Included in the total is $2.18 trillion of mortgage-backed securities at a time when the housing market is setting new records for prices, competition and speed of sales. The substantial increase in housing and other prices we are experiencing is seen by many as a precursor to more widespread and escalating inflation, a plight that no poet extols.

Investors are typically spooked by the mere talk of inflation. Now, home buyers, gas pumpers, food shoppers, and car renters, among others, know that it is omnipresent, the question being how accurately it is being measured and whether its rise is transitory or non-transitory. At this writing, higher prices along with shortages in everything from microchips to rubber, chicken and diapers, lumber and gasoline have caused both stock and bond markets to sell off ahead of producer and consumer price index data releases on Wednesday. Short and intermediate U.S. Treasury yields are flat on the month at 0.15% for the 2-year and 1.60% for the 10-year. Long 30-year yields are 5 basis points higher at 2.32%, pressured somewhat by the unusually heavy auction schedule. Corporate bond yields, as measured by the 10-year Baa benchmark are up 5 basis points to 3.37%. Municipal bonds have generally strengthened so far in May with the 2-year AAA general obligation bond yield at 0.11%, the 10-year at 0.97% and the 30-year at 1.55%. On the equity side, the VIX Fear Index has risen 18% this month to 22.02 but the Dow is up 418 points to 34,293 and the S&P 500 has dipped 1% to 4,144. The Nasdaq is down 4% to 13,420. And the Russell 200 is down 2.6% to 2,206. Oil prices are up 2.6% this month to $65.21. As is typical when markets sense inflation, gold prices have risen by nearly 4% to $1,834 and silver prices are up 6% to $27.55. Bitcoin, which has again experienced sessions of extreme volatility in May, is basically flat on the month at $56,694.

In the municipal market, the widespread hope is for more tax-exempt supply. The volume coming in the primary market is light, as are dealer inventories. Buys significantly outnumber sells in the secondary market, and institutions dominate daily trading. Investors bracing for higher taxes have poured $43.1 billion into municipal bond mutual funds and exchange traded funds this year. On top of all this, a surge of bond redemptions begins in June and lasts all summer: principal from maturing and called bonds plus interest will amount to $158 billion, and issuance may not even cover half the amount required for reinvestment. Bond buyers, traders, bankers and advisers along with state and local officials, industry associations, and non-profit organizations have all come together in support of congressional action to restore the tax-exempt status of advance refundings as one solution.

The ability of state and local borrowers to refinance many bonds on a tax-exempt basis was eliminated with the 2017 Tax Cuts and Jobs Act. The Joint Committee on Taxation estimated that this would save the federal government $16.8 billion over ten years. But it does not appear that legislators considered all of the ramifications of this major change affecting their state and local counterparts and joint constituents: the inability of cash-starved cities and nonprofits to achieve debt service savings or finance other critical public works projects in an historically low rate environment, the higher interest costs that would have to be paid by state and local taxpayers, the dramatic drop in tax-exempt supply available to meet investor demand, a demand that increased in response to Act’s state and local tax deduction limits. Advance refundings were said to represent 27% of the municipal market in 2016. In 2018, investment bankers had to respond to borrower refinancing needs with structures including shorter call features, corporate bonds, federally taxable municipal bonds and “Cinderella” bonds issued as taxable but transformed into tax-exempt securities at the redemption date. On last week’s primary calendar, 42% of the par amount was issued as refunding bonds.

There have been bipartisan efforts to restore tax-exempt advance refundings since 2018. Most recently, a provision was included in the infrastructure bill that passed the House on July 1, 2020. Several measures are pending now in the 117th Congress. These include H.R. 2288 and S. 479. Both require action by the House Ways and Means Committee, chaired by Richard Neal (D-MA) who supports the effort to restore tax-exempt advance refundings, and the Senate Finance Committee, chaired by Ron Wyden (D-OR), who has in the past advocated for tax credit bonds in lieu of tax-exempts. To guide the process, all await the Biden Administration’s full 2022 proposed budget with its Treasury Department Green Book detailing the tax proposals.

We at HJ Sims continue to encourage our clients and colleagues to contact their Members of Congress to urge support for this important effort. While it is unlikely that either of the pending bills will pass on a standalone basis, we see a good possibility that authorizing language could be included in an infrastructure bill, separate tax reform measure, debt limit extension, or omnibus spending bill, with or without a sunset provision. We are following developments closely and will keep readers informed.

While still too low to meet demand, so far this year, the municipal issuance level is perched 17% higher than 2020. In large part this is due to the significant drop in market entry during the turmoil ensuing after the pandemic declaration. Tax-exempt issuance in 2021 as of last Friday totals $108 billion vs $93 billion in 2020. Taxable issuance at $47 billion is nearly $6 billion or 13% higher. Among the smattering of high yield offerings last week, Lincoln County, South Dakota sold $82.4 million of BBB-minus rated revenue bonds for Augustana University in Sioux Falls structured with 40-year term bonds priced at 4.00% to yield 3.29%. The Arlington Higher Education Finance Corporation issued $28.2 million of BB rated bonds for Wayside Schools in Austin that featured 2046 term bonds priced with a 4% coupon to yield 3.31%. This week’s calendar will likely come in under $7 billion and includes an $89 million non-rated refunding for Glenridge on Palmer Ranch in Sarasota, and financings for two Minnesota charter schools: $30 million for non-rated North Lakes Academy in Forest Lake and a $22 million for BB-minus rated Woodbury Leadership Academy.

Feathers were flying in the wake of Friday’s surprisingly low jobs report. Only 266,000 jobs were added in April, well below the estimates for 1 million. Some view the numbers as an anomaly, perhaps to be revised upward in the next release. Otherwise the economic tune is an upbeat one. First quarter GDP increased at a 6.4% rate. Job openings have just risen to a record high 8.12 million, and the number of vacancies exceeds hires by more than 2 million, the largest gap on record, in part due to COVID-19 fears, child care responsibilities, and what some consider to be overly generous unemployment benefits that may continue through September.

There has never been times like these, but there are always investment needs and goals. HJ Sims representatives welcome your contact to discuss your borrowing and investing plans. We invite you to share your portfolios, strategies, fears, doubts and hopes. Right now, the major credit reporting agencies have upwardly revised their outlooks for most sectors. Business travel is picking up, new clothes are being fitted as major firms begin bringing employees back to work in corporate offices, airlines are all filling their middle seats. Conventions, expos and state fairs are finally all going live in the coming months, and live bands singing our favorite tunes are on tour. America is on the mend and hope abounds as feathers fly.

Exclusive Opportunities For Our Clients

COVID-19 Response

Dear Valued Client,

As you are likely closely monitoring the developments and impact of COVID-19, we are doing the same at HJ Sims. Our primary focus is the safety and well-being of our employees, our clients and their families.

We would like to update you on important preparations currently in place, and our ability to respond to your needs during this unprecedented time.

  • We have enacted a comprehensive COVID-19 business response plan and remain confident that as a nimble and resilient organization, we will maintain business continuity. We are prepared in the event the situation continues to escalate.
  • During this extraordinary time, we recognize that you rely on access to our financial professionals and representatives. As such, we have prepared plans for employees to work from different locations, as well as remotely from home. Alternate site work arrangements are intended to balance and diversify our resources to minimize risk for an extended period, if required, while using today’s technology to be ever-present for our clients.
  • Our employees are being kept fully aware of the situation by our Executive Committee. We have established access to online company resources to help them manage during this unparalleled time.

Please be sure to keep us updated with your contact information so we may stay in touch with you.

We are confident that we are taking proper steps to ensure the continued operation of our business, and continue to follow guidance from official local, state and Federal Government and public health agencies, including the Centers for Disease Control (CDC). We will monitor and evaluate the situation and determine whether additional steps are needed to support our clients and communities.

We have strong financial talent who have the experience to weather all market cycles. We appreciate your trust and confidence in us. Please let us know if we can help in any way.

We wish you, your communities and your family all the very best.

Thank you,

William Sims
Managing Principal
HJ Sims

How to Do It… Borrow in a Pandemic

Owner-operators will soon be confronting thorny financial questions as they emerge from the fog of the pandemic. How should skilled facilities prioritize spending? As one banker observed, the capital markets for skilled nursing may not have returned to where they were before COVID-19, but both debt and equity are available for operators who can prove their clinical expertise.

Read more in this McKnight’s article featuring insight from HJ Sims’ Curtis King.

LeadingAge MN Institute and EXPO

Virtual Meeting

Session Date & Time: Tuesday, May 18, 2021 from 10:45am-11:45am CT.

Thought Leadership and Educational Session:

COVID-19 Sentiment Report: Leveraging Data to Adapt Operations, Enhance Resident & Staff Experience, & Improve Marketing & Sales

Embracing Our New Reality: Rethinking Our Business Model in a Post-COVID World, A Leadership Roundtable Discussion

The Senior Living COVID-19 Sentiment Report surveyed over 4,000 current and prospective senior living community residents to assess their thoughts and feelings at the beginning of and during the COVID-19 pandemic. Since the survey results were first reported in 2020, senior living communities have identified lessons learned. This session explores the results to learn from residents, prospects and staff about their experience living through this Pandemic and how the industry can rethink our business models and adapt our operations to a post-pandemic reality in the hopes of increasing the perception of safety, security and peace of mind.

Learning Objectives:

  1. Understand the need to rethink the way your organization operates and discover ways to adapt in the new evolving reality.
  2. Learn strategies to position your organization for success in a post-coronavirus world.
  3. Hear from a multidisciplinary panel of experts representing operations, development, design, marketing and finance.

Featured Speakers:

  • Lynn Daly, Executive Vice President, HJ Sims
  • Margaret Yu, Director of Client Experience, RLPS
  • Victoria Vega, Senior Vice President of Operations, Unidine Corporation
  • Susan Farr, VP of Business Development & Marketing
  • Brian Pangle, President & CEO, Clark Retirement Communities
  • Moderated by: Dana Wollschlager, Partner & Practice Leader, Plante Moran Living Forward

Contacts:

As we continue to experience fluctuations in our capital markets, HJ Sims is committed to Tracking the COVID-19 Impact.

HUD’s Three-Year Waiver – One Year Later

Sims Mortgage Funding, Inc.

by Anthony Luzzi

It has been slightly over one year since HUD waived its “three-year requirement” for multifamily projects to be eligible for mortgage insurance under the Section 223(f) refinancing and acquisition program.  Prior to that, a multifamily property could not benefit from obtaining a 223(f) loan until it was in service for three years, an eternity, especially when current rates for HUD-insured loans have been at historically low levels.  Developers unwilling to wait three years have typically used HUD’s Section 221(d)(4) program to finance new projects. 

However, the three-year waiver has given multifamily developers an opportunity to finance new projects with the best of both worlds – short-term bank financing for construction followed by a HUD take-out once the project has reached a modest level of stabilization.  How modest?  HUD will accept an application for 223(f) mortgage insurance after the property has reached one month of 1.176 debt service coverage and will close on the loan after three consecutive months at that same coverage has been achieved.  

However, developers considering bank financing for multifamily construction instead of a 221(d)(4) loan, then using a 223(f) loan to take out the bank debt should consider the advantages and disadvantages of that approach.

The Advantages:

  • The time to complete the bank financing will be shorter, enabling construction to start sooner.
  • Davis-Bacon “prevailing” wages for construction will not be required with a bank loan.
  • The construction contract and architect agreement can be structured with more flexibility.
  • The bank’s application will be less complicated and esoteric.

The Disadvantages:

  • Bank loan-to-cost ratios are lower, which means more equity will be needed to complete a bank deal. Some of this additional equity can be recovered with the 223(f) loan, as cash-outs at 80% loan-to-value underwriting are permitted.
  • Banks require recourse and personal guarantees.
  • There is interest rate risk on the 223(f) loan since it will not close until after construction is completed and there has been at least three months of stabilized debt service coverage.
  • Construction lending by banks has been somewhat curtailed during the COVID-19 pandemic.

We recently assisted a prospective client evaluate these options for a market-rate multifamily development in Florida and would be pleased to do the same for you.  What was his decision? For more information, please contact Anthony Luzzi at [email protected].

Sims Mortgage Funding, Inc., a wholly owned subsidiary of HJ Sims, 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.

Market Commentary: Pay It Forward

HJ Sims Logo

by Gayl Mileszko

In Raleigh, North Carolina, there is a special place on Hargett Street that opened six years ago in a building that once housed a bank and a funeral home. Building renovations took several years and, during this time, the insightful James Beard Award-winning chef/owner had plenty of time to consider what she would name the new restaurant that would occupy the space. It was, of course, inspired by Benjamin Franklin and called it Death & Taxes. But after several acclaimed seasons, this small business along with almost every restaurant in the country was forced to close temporarily due to the pandemic. Hers managed to survive while dozens and dozens of others beloved by the Triangle community closed permanently. Death & Taxes re-opened for takeout in February and now has a dining room with reduced capacity that is open four nights a week. The menu still features the “Tax Free”, a fine rye whiskey cocktail with smoked cherries and bitters, and “The Catacomb”, an unusual mix of gin, vodka, red vermouth, and cappelletti pasta.

The famous quote “In this world, nothing is certain except death and taxes” was attributed to Franklin in 1789. Since the pandemic was declared, we in the U.S. have suffered 577,845 reported COVID-19 related deaths. The world has lost 3,217,512 of its citizens at the last count of the John Hopkins Coronavirus Resource Center, which has been our first, most steady, and apolitical tracker. With respect to taxes, the latest tax filing deadline looms ten days from now. Higher brackets may be in store for next year under the Biden Administration’s proposals. We await specific details. But for now it appears that the new estate tax, a new higher capital gains rate, and the repeal of step-up in basis could bring total effective marginal rates to 61% for some, the highest level in nearly a century according to an analysis from the Tax Foundation.

On the federal level, it is unclear whether any or all of the White House proposals can pass Congress. We outlined some of the hurdles last week. But several states have already enacted hikes for the 2022 fiscal year. So accountants and financial planners are advising families to consider the impacts of various higher rates and the possible advantages of making gifts and realizing capital gains at this time. We encourage you to begin conversations with your HJ Sims financial professional. We are working hard to guide our clients through these uncertain times with a host of resources.

For most investors looking forward, there is no doom and gloom associated with stock, bond or commodity market outlooks. Equity market rallies have certainly been unprecedented since the September 2008 and March 2020 crises. The vast majority of analysts see them extending as long as the Fed continues its massive bond-buying and rate-compressing policies. But stock buyers cannot always rely upon dividends and appreciation to meet all of their investment and income needs. Bonds have represented a significant and critical percentage of family as well as institutional portfolios since at least the 17th century when England first issued debt to finance a war against France. Yes, yields have been on a long, continuous decline for more than 40 years since the 10-year Treasury peaked at 15.84% in September of 1981, forcing even many of the most conservative investors into far riskier assets while providing fantastically low rates for  non-profit and for-profit borrowers.

Since we are still at the very low end of historic yields, many–if not most–analysts see them continuing to rise alongside inflation throughout the near future. Several prominent market participants see bonds as a poor investment choice right now.  Berkshire Hathaway’s Warren Buffett recently said that fixed income investors face a bleak future. JP Morgan Chase’s Jamie Dimon recently quipped that he wouldn’t touch Treasuries with a 10-foot pole. Ray Dalio, founder of Bridgewater Associates, is quoted as saying that investing in bonds has “become stupid”. We disagree with these generalizations. We have bought, structured, and underwritten bonds throughout the course of our 86-year history and remain huge proponents of tax-exempt and taxable bonds as critical components of long-term investment portfolios. Our banking, trading, underwriting, analytic and sales teams specialize in products including Cinderella, capital appreciation, refunding, taxable, and corporate bonds. We are among the few broker dealers with expertise in non-rated and below investment grade securities, aiding many borrowers with smaller, start-up, and novel projects in securing financing and identifying suitable higher yielding opportunities for our investing clients. As you, our readers, think about your own holdings, your capital and income needs going forward, we again encourage you to contact your HJ Sims representative to discuss how bonds may work for you.

U.S. bonds should never be dismissed, particularly in a world replete with negative yielding sovereign debt. At this writing, the 5-year bonds of Japan yield negative 0.105%, Spain’s yield negative 0.245%, and those of France yield negative 0.54%. The 10-year bonds of Germany yield negative 0.24% and those of Switzerland yield negative 0.26%.  The U.S. Treasury 5-year currently yields 0.81%, the 10- year 1.58% and the 30-year 2.25%. Our 10-year A rated corporate bonds yield 2.74% and comparable 30-year bonds yield 3.51%.  Our 10-year AAA municipal general obligation bonds yield 0.99% and the 30-year yields 1.57%.  Last week, non-rated student housing bonds at Lynn University in Boca Raton were sold in the primary market with 5.00% coupons, priced at par. John Knox Village in Lee’s Summit, Missouri came to market with non-rated bonds due in 2056 priced with a coupon of 5.00% to yield 4.35%. Central Wyoming College offered non-rated bonds due in five years at 4.125%. In the secondary municipal market, Cherokee Charter Academy in Gaffney, South Carolina had bonds with a 7% coupon due in 2050 trade at $102 to yield 6.69%. Virgin Islands Water and Power Authority bonds with a 5% coupon due in 10 years traded at $90.50 to yield 6.228%.

So far this year, both individual and institutional investors have benefitted from an influx of cash via federal aid, bonds maturing, coupons and dividends paid, tenders and calls. Corporate bond buyers have had a field day with record amounts and wide arrays of investment grade and below investment grade rated issues. Municipal bond buyers have seen much less supply, as some borrowers have elected to postpone deals, refinance on a taxable basis, issue corporate bonds to take advantage of broader investor bases, or privately place debt with banks. We note a growing trend for forward delivery bonds, with sales taking place in favorable market conditions for settlement four, six, or even twelve months ahead when bonds are eligible for redemption. Current refundings on a tax-exempt basis are permitted within 90 days of the date of the refinancing. Buyers looking to lock in current rates or plan for reinvestments with cash expected from future redemptions or interest income are making commitments to buy these forwards. Borrowers are not having to pay up very much for this flexibility.

Last week, the BBB/BBB+ New Jersey Transportation Trust Fund Authority came to market with $1.58 billion of bonds in four parts. More than $893 million were for forward delivery on April 27, 2022. The 2036 maturity in the forward bonds priced with a coupon of 5.00% to yield 2.53% while the 2036 bonds settling this week yielded 2.00%. The state paid only 53 basis points more for the one year forward delivery piece, and it outperformed the market by Friday. Also last week, the city and county of San Francisco brought $178.1 million of general obligation refunding bonds in two parts; $86.9 million was issued for forward delivery in four months. The 2028 maturity in the forward deal priced with a 5.00% coupon to yield 0.80%, 19 basis points higher than the same bond maturity yielding 0.61% that settles on Friday.

Buyer willingness to wait up to a year for the delivery of their bonds is one of the many things that has changed in the past year. We are noting some positive trends in hotels, rental cars, domestic air travel, life plan communities and charter schools, all of which were hit hard last year. For investors worried about higher tax rates and looking to sell equities, you may find some good value as well as tax advantage in some of these tax-exempt sectors.

Exclusive Opportunities For Our Clients

LeadingAge NY Annual Conference & EXPO

Virtual Conference and EXPO 

A virtual conference experience that brings together all who work in skilled nursing, adult care, assisted living, home care, PACE/managed long term care, senior housing or community service environments, vendors of services and products beneficial to providers of long term care. Attendees will be able to connect in a forum that provides high-quality programming and the latest information from industry experts.

Round Table Date & Time: Tuesday, May 25, 2021 from 9am-10am.

Thought Leadership and Round Table Discussion:

Financing Strategies to Create Operational Cashflow During Times of COVID-19

Join our interactive conversation centering around the changes affecting tax-exempt advance refundings as part of the tax code enacted with the Tax Cuts and Jobs Act. Our round table discussion will allow attendees to share individual experiences, best practices, insights, and expertise in a small group as well as learn from industry peers. 

Featured Speaker & Moderator:

Conference Contacts:

As we continue to experience fluctuations in our capital markets, HJ Sims is committed to Tracking the COVID-19 Impact.