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.

Exclusive Opportunities For Our Clients

An Exclusive Investment Opportunity: Fountaingate Gardens

**This financing has been successfully closed. Please contact you advisor for any potential secondary market opportunities.**

$103,245,000*
THE TOWN OF HUNTINGTON LOCAL DEVELOPMENT CORPORATION

Series 2021A Long Term Fixed Rate Bonds $39,745,000
Series 2021B Entrance Fee Principal Redemption BondsSM $32,500,000
Series 2021C Entrance Fee Principal Redemption BondsSM $31,000,000
(Gurwin Independent Housing, Inc. / Fountaingate Gardens Project)

HJ Sims is pleased to serve as sole underwriter for Fountaingate Gardens, a Gurwin Community, located on Long Island in Commack, New York. A not-for-profit life plan community, Fountaingate Gardens consists of 129 independent living apartments, common areas and a range of services and amenities. Residents will have access to the current offerings of Gurwin Healthcare System, which include assisted living, skilled nursing and short-term rehabilitation, among other services.

The Series 2021 bonds will provide (1) financing or refinancing of the construction, equipping, and furnishing of Fountaingate Gardens; (2) funding of a debt service reserve fund with respect to the Series 2021 Bonds; (3) funding of initial working capital needs directly related to the community and funding of capitalized interest with respect to the Series 2021 Bonds; and (4) paying of certain costs of issuing the Series 2021 Bonds (collectively, the “Project”).

Gurwin Independent Housing Inc., dba Fountaingate Gardens, is a New York not-for-profit corporation incorporated in 2014 to develop, construct and own Fountaingate Gardens. The Gurwin organization is dedicated to delivering a multi-faceted healthcare system committed to providing quality health care and services to Long Island residents, which include Gurwin Jewish Nursing & Rehabilitation Center, a 460-bed skilled nursing and rehabilitation center providing short and long term care, a memory care unit, ventilator care, infusion center and dialysis center; and Gurwin Jewish-Fay J. Lindner Residences, an assisted living community with 201 assisted living apartments including a memory care unit; and two home care agencies.

Artist's Rendering; subject to change

Virtual Site Visits/Tours

Tour the planned campus and project:

About the Bonds

  • Series 2021A
    • $39,745,000
    • Non-rated, tax-exempt
    • Bonds are exempt from Federal Income Tax and exempt from State of New York Income Tax
    • Denominations of $5,000
    • Interest will be payable on January 1 and July 1 of each year, commencing July 1, 2021
    • First principal payment: July 1, 2026
    • Call Feature: 104% on July 1, 2026, decreasing annually to 100% on July 1, 2030
    • Final maturity: July 1, 2056
  • Series 2021B
    • $32,500,000
    • Non-rated, tax-exempt Entrance-fee Principal RedemptionSM bonds
    • Bonds are exempt from Federal Income Tax and exempt from State of New York Income Tax
    • Denominations of $5,000
    • Interest will be payable on January 1 and July 1 of each year, commencing July 1, 2021
    • Principal redemptions made with initial Entrance Fees after funding working capital and full redemption of the Series C bonds (no sinking fund payments – anticipated to occur 23 months after initial occupancy at approximately 86.1% occupancy)
    • Final maturity: July 1, 2027
  • Series 2021C
    • $31,000,000
    • Non-rated, tax-exempt Entrance-fee Principal RedemptionSM bonds
    • Bonds are exempt from Federal Income Tax and exempt from State of New York Income Tax
    • Denominations: $5,000
    • Interest will be payable on January 1 and July 1 of each year, commencing July 1, 2021
    • Principal redemptions made with initial Entrance Fees after funding working capital (no sinking fund payments – anticipated to occur 11 months after initial occupancy at approximately 47.8% occupancy)
    • Final maturity: July 1, 2025

 Use of Proceeds

Project

  • Fountaingate Gardens will be located on 10.47 acres of land in Commack, NY, adjacent to the Lindner Residences.
  • It is a Life Plan Community consisting of 129 one- and two-bedroom independent living apartments, common areas and a range of on-campus services and amenities including: fitness and exercise areas, an indoor pool area, locker room space, accessory/storage space, library, kitchen, marketplace, and dining spaces, business area, assembly space, art studio, salon and day spa, game room and multi-purpose room.
  • As of February 12, 2021, 71 of the Independent Living units, representing approximately 55% of the total Independent Living Units, were reserved by prospective residents.

 Security

  • First mortgage lien
  • Debt service reserve funds
  • Capitalized interest funded for 22 months during construction
  • $2.85 million Entrance Fee Payment Guaranty from Gurwin Jewish Healthcare Foundation
  • $10.00 million Liquidity Support Agreement from Gurwin Jewish Healthcare Foundation

 Key Financial Covenants

  • Cumulative cash loss covenant (until Series B and Series C bonds redeemed)
  • Debt service coverage ratio of 1.20x (tested quarterly commencing with redemption of Series B and Series C bonds)
  • Liquidity covenant of 200 days cash-on-hand (tested semi-annually)

We are currently accepting indications of interest for these tax-exempt bonds with an expected pricing the week of March 1, 2021, and anticipated settlement during the week of March 15, 2021. For more information including risks, please read the Preliminary Official Statement in its entirety. If you have interest in purchasing these bonds, please contact your HJ Sims financial professional as soon as possible.

*Subject to change

No dealer, broker, salesperson, or other person has been authorized to give any information or to make any representation other than those contained in the Preliminary Official Statement and, if given or made, such other information or representation should not be relied upon as having been authorized by the Issuer, the Borrower, or the Underwriters. The information set forth herein has been obtained from the Issuer, Borrower, and other sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness by, and is not construed as a representation of, the Underwriters. The information contained herein is subject to change without notice. Under no circumstances shall this constitute an offer to sell or solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any offering or solicitation will be made only to investors pursuant to the Preliminary Official Statement, which should be read in its entirety. Investments involve risk including the possible loss of principal. HJ Sims is a member of FINRA and SIPC, and is not affiliated with Gurwin Independent Housing, Inc. d/b/a Fountaingate Gardens or any Gurwin entity.

Market Commentary: All the Fixin’s

by Gayl Mileszko

Some of our favorite local coffee shops, lunch spots, and five-star dining rooms where we have celebrated life’s most momentous occasions, have scaled down, converted to take-out or shuttered in the past year. There is no doubt that restaurants have been among the businesses hit hardest during the pandemic. More than 110,000 eating and drinking establishments closed last year, temporarily or permanently. On average, these eateries had been in business for 16 years; 16% had been open for at least 30 years. The restaurant and food service industry which represents about 10 percent of all payroll jobs in the economy has suffered massive damage even with Paycheck Protection Program assistance. The National Restaurant Association estimates that nearly 2.5 million jobs have been erased. Many of those who have struggled to survive have downsized, pivoted to outdoor venues or artisanal grocery stores. They have innovated by creating meal kits, adding alcohol-to-go, or dramatically altering their menus to offer more of the comfort foods in greatest demand from those of us who have been in great need of comfort.

There are approximately 216 Philadelphia area eateries that have closed in the past year but Vetri Cucina is not among them. This highly acclaimed restaurant also features private dining, sponsors classes, and has run an innovative community partnership for the past 12 years along with having a second location in Las Vegas at The Palms. We are pleased to have Chef Marc Vetri, a past James Beard award winner, with us for our Sims Late Winter Conference next week. He will be offering a virtual pasta-making class as one of the four special networking opportunities to conclude our day-long series of keynote speakers, breakout sessions, panels and roundtables on financing methods, operating strategies and technological advancements in senior living. We invite you to join us for the conference. The full agenda and registration process can be accessed via this link.

Philadelphia is just one of more than 19,500 cities, towns, and villages in America significantly impacted by the pandemic. The hits to business and labor have dented state and local revenue while costs related to COVID-19 have soared in many places, producing budget holes that have forced service reductions and layoffs from within a workforce of 18.6 million. State revenues fell 1.6% in FY20 and are expected to decline another 4.4% in FY21, but the variance is significant. Eighteen states are in fact seeing revenue come in ahead of forecasts. Revenue losses may total as much as $300 billion through 2022 while the need for higher spending on health care, jobless aid and food assistance has grown. Federal assistance has totaled $300 billion so far and the debate rages on over the amount and terms to be included in the stimulus bill still making its way through Congress. State and local borrowing has been understandably reduced in the interim. This, in turn, has led to lack of supply in the municipal bond market just as demand for paper, yield, and tax-exempt income has surged.

Municipals are outperforming taxable counterparts for four consecutive weeks and net inflows into municipal bond mutual funds and ETFs exceed $20 billion so far this year. The ICE BoAML Treasury Index is down 0.71%, and the Corporate Index return is down 0.39% but the Muni Index is up 0.34% and the High Yield Muni Index has gained 0.74% as prices reach nosebleed levels. Examples of high priced fixin’s include University of Texas bonds with a 5% coupon due in 2049 which traded last week at $163.429 and New York Dorm Authority bonds for Columbia University due in 30 years at $166.494. The ratio of municipal bond yields to Treasury yields has hit all-time lows, reflecting how rich tax-exempt valuations are relative to governments; the 10-year ratio is 58% and the 30-year is 67%. AAA municipal general obligation bond benchmarks have dropped 3 basis points since the start of the month. The 2-year stands at 0.08%, the 10-year at 0.69% and the 30-year at 1.34%. The 2-year Treasury is flat at 0.10% but the 10-year has gained 14 basis points and stands at 1.20%. The 30-year at 2.00% is up 18 basis points. Over $14 billion of U.S. high yield corporate bonds priced last week and yields fell below 4% for the first time in the market’s history. Party City received orders in excess of $3.5 billion for a $750 million five-year corporate bond offering rated Caa1/CCC+ which was increased in size and priced two days earlier than expected at a price of 8.75%. On the equity side, volatility has dropped by 40% on positive vaccine and stimulus news; the VIX Index at 19.97 is down from the year’s high at 33.09. The rally in stocks continues. The Dow is up over 5%, the S&P 500 up 6%, and the Russell 2000 up 10%. The Nasdaq, which just marked its 50th birthday, has gained 7.8%. Oil prices have increased more than $7 a barrel to exceed $60, silver prices are up 1.4% and Bitcoin has skyrocketed more than 37%.

The best news is that COVID case counts have dramatically declined since the peak on January 8. The daily trend in the number of reported COVID-19 deaths has significantly fallen since the worst days on April 15 and February 12. More than 52 million doses have been administered since December 14, reaching 11.5% of our population. There is nevertheless still talk of possible travel bans and /or negative testing mandates for interstate air travel. Such trends and chatter are of course very closely monitored by global financial markets. There are of course many other major market moving events, including disruptive ones such as the deep freeze in Texas, unexpected tweets on cryptocurrency buys, fast-moving IPO’s like Bumble, and Gamestop-like gambits. Traders continue to linger over every word uttered by Federal Reserve Bank officials. Every step in the process of producing a multi-course stimulus package is being noted even though no final menu is expected until next month at the earliest. There are also fourth quarter corporate earnings, Treasury auctions and daily economic reports to feast upon. Fears of new strains, inflation, and negative rates are often peppered in.

In this holiday-shortened week, about $6 billion of municipal bonds are expected to come to market, including $1.8 billion of taxable munis. Last week’s calendar totaled $7.5 billion. In the high yield sector, the Oklahoma Development Finance Authority issued $72.1 million of non-rated revenue bonds for the Oklahoma Proton Center including 2051 term bonds priced at par to yield 7.25% and taxable 2041 term bonds priced at par to yield 11%. The Suffolk County Economic Development Authority in New York sold $35.6 million of non-rated revenue bonds for St. Johnland Assisted Living structured with 2054 term bonds priced at 5.375% to yield 5.325%. Gallatin County, Montana came to market with $7.3 million of non-rated taxable industrial development bonds for Bridger Aerospace Group that had a sole maturity in 2040 priced with a coupon of 6.50% to yield 6.75%. For today’s high yield taxable and tax-exempt offerings, we encourage you to contact your HJ Sims representative.

Exclusive Opportunities For Our Clients

Market Commentary: Hero With A Million Faces

by Gayl Mileszko

Sarah Lawrence College Professor Joseph Campbell was a comparative mythologist who studied and relished stories told by peoples all around the world. He found a common theme across cultures and labeled it a monomyth. The tale always involves a hero who ventures forth from the ordinary world into a region of supernatural wonder when he receives a call to adventure. He or she receives help from a mentor along the way as fabulous forces are encountered and none of the familiar laws and order apply. Our hero endures a series of trials, sometimes assisted by allies, and manages to win a decisive victory. He receives a “boon” or award of some type and then must decide whether to return to the “world of common day”. The hero always decides to go home, of course. He encounters new trials along the way before making it back safely to share the bounty with his family and community.

For much of the past year, we have been immersed in a world that became supernatural. We have battled forces that we never before encountered in our lifetimes. Although never feeling heroic, countless numbers of mothers, fathers, teachers, doctors, nurses, grocery and postal workers, gas station attendants, long-haul truckers, farmers, public safety officials and National Guard troops have manage to fend off monotony, exhaustion, violence, disease, hunger, abuse, despair, homelessness, social isolation, and even bankruptcy while faced with joblessness or working multiple jobs, relocations, home schooling, triaging the sick, or caring for a frail relative. We live among these heroes and would love to shower great bounty upon them. We think in terms of the amazing fortune of Elon Musk, 49, a serial entrepreneur who is not only surviving but thriving in these challenging times. With a brilliant mind and boundless energy plus an array of mentors and allies, he has a current, personal net worth of $185 billion. Now the richest person in the world. Mr. Musk has pledged to share his reward by giving at least half of this vast sum to charity. If only we had such sums to bestow, we certainly know the most deserving.

Innovative, hard-working Americans of all backgrounds and ages are achieving mythical levels of success in the midst of this pandemic and it is inspiring. None of the usual laws and order seem to apply in the financial, scientific, academic, technological or service industries as central banks have taken monetary policy into heretofore unimaginable directions, elected officials have produced fiscal stimulus that is the wonder of all history, and the status quo of the world in 2019 was entirely upended by the COVID-19 pandemic. So: the opportunities are endless for those called to start ventures and expand businesses. Last year saw 56 new American billionaires, including IPO winners at Airbnb, DoorDash and Snowflake, and the founders of Zoom, Nvidia, and Netflix. Any number of our readers could be next.

It is not fable but fact that the divide between the wealthiest and poorest Americans has been exacerbated by COVID-19. Our economy has long been being described as having a “K” shape, meaning that wealth is built on wealth at the top while those people and industries closer to the bottom struggle and often sink. The current K shaped recovery reflects that prosperity and wealth is returning more rapidly for those at the top while many others strain more and more to get by. Debates rage in Washington over whether and how to address the disparities. Proposals are once again being circulated for increases in the minimum wage, affordable housing, tax credits, student debt forgiveness, tuition-free public colleges, stimulus checks, and child allowances, among others.

The latest economic data tells the story. Weekly jobless claims remain higher than in any previous recession dating back to 1967. We are still down 11 million jobs from pre-pandemic days. The employment-to-population ratio at 57.5% has barely budged over the past four months. Labor productivity fell at a 4.8% annual pace in the final months of 2020, the biggest quarterly decline since 1981. The overall economy has split in two, with some sectors booming and others depressed. Some of those shifts are temporary, but many others are long-term and structural. Very, very little of this is reflected in the stock and bonds markets, where the divide between Wall Street and Main Street is most evident.

Since the national emergency was declared on March 13, the Dow has gained 8,200 points or 35%, the S&P 500 is up 44%. the Nasdaq is up nearly 78% and the Russell 2000 has increased by 1,080 points or 89%. Oil prices have increased by 83% or $26.24 per barrel. Gold is up 20% or $303 an ounce. Silver prices have gained almost 13% or $12.73, and Bitcoin has smashed all records with its 728% increase. On the bond side, the 2-year Treasury yield has plunged 78% to 0.11% but the 10- and 30-year yields have recently climbed. The 10-year is up 21 basis points to 1.17% and the 30-year has increased by 43 basis points to 1.95%. Municipal benchmarks have dramatically outperformed their government counterparts. As demand from individual and institutional buyers has escalated while supply has significantly lagged, the 2-year AAA general obligation bond yield has fallen by 102 basis points from 1.12% to 0.10%. The 10-year is down 88 basis points to 0.73%. And the 30-year has dropped 94 basis points from 2.32% to 1.38%.

New records are again being set this month and feel surreal in the context of the pandemic and recession. Stock indices are at record highs. Bitcoin has topped $47,000. Dogecoin, a cryptocurrency that started out as a joke intended to parody the thousands of currencies that sprang up after Bitcoin in 2013, topped $10 billion in market value on Monday. Corporate high yield indices have fallen to all-time lows: the Bloomberg Barclays High Yield index dropped to 3.96% and CCC rated issues fell to 6.21%. The ratio of municipal yields to Treasury yields is at historic lows: state and local debt maturing in 10 years now yields 60.29% of Treasuries; the historic ratio averages 85%.

The hunger for yield and income has driven bond prices to extreme levels. On the corporate bond side, more than $59 billion of high yield bonds have already been sold this year. U.S. Steel (rated Caa2/B-) just received orders for more than $3 billion of bonds in a $750 million note sale that priced at 6.875% and is trading above par. On the municipal side, Austin, Texas wastewater bonds are trading at $136, New York City water and sewer bonds over $132, Durham, North Carolina general obligations at $141, California general obligations at $135, and Nashville subordinate airport bonds at $127. The City of Detroit, which filed the largest municipal bankruptcy in 2013 and saw its full faith and credit tax pledge produce a recovery of only 74 cents on the dollar just brought a $175 million Ba3 rated general obligation self-designated social bond deal structured with 2050 term bonds with a 5.00% coupon that sold at a price of $123.577 to yield 2.37%. The offering was reportedly 20 times oversubscribed.

We are living in a world that is far from ordinary, facing our own individual trials and celebrating our victories, small and large, every day. As with the mythical heroes, we all have mentors and allies, whether or not we recognize them as such. We encourage you to look to your HJ Sims representatives as your constant allies. To that end, we invite you to join our Late Winter Conference, a virtual event to be held on February 24 hjsims.com/2021lwc, to hear from us along with senior living industry leaders and experts including Joseph Coughlin, the Director of the Massachusetts Institute of Technology AgeLab, who will provide thought-provoking insight into how COVID-19 has impacted the 50+ demographic. In the interim, in much the same way as we commend the everyday heroes within the talented and dedicated members of our Sims family of companies, we hope that you too continue to recognize and reward those of mythic proportions within your own families and organizations.

Exclusive Opportunities For Our Clients

HJ Sims Partners with StoneCreek Real Estate Partners to Facilitate $2.8 Million in Non-recourse, Low-interest Rate PACE Financing

CONTACT: Tara Perkins, AVP | 203-418-9049 | tperkins@hjsims.com

HJ Sims Partners with StoneCreek Real Estate Partners to Facilitate $2.8 Million in Non-recourse, Low-interest Rate PACE Financing

FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce the successful November 2020 closing of a $2.8 million PACE financing on behalf of StoneCreek Real Estate Partners (StoneCreek).

Based in Dallas, TX, StoneCreek is a collaboration of recognized and seasoned professionals with 50+ years of combined experience in the operations, development and ownership of successful senior living communities in TX, CO, and AZ.

The StoneCreek of Copperfield development is a new construction, 108-bed senior housing community that will include 74 assisted living units, 22 memory care units and 12 independent living cottages, providing local access to quality senior housing and care in the Copperfield area of Houston, TX. The community will be operated and managed by Civitas.

Founded in 2012, Civitas is a Fort Worth, TX based for-profit owner/operator of senior living communities in TX, FL, OK, NM, KY and AZ. Civitas has 100+ employees and manages 45+ senior living communities. In 2018, Sims provided $5.85 million in preferred equity to Civitas for the development of a new community in Red Oak, TX. In 2019 Sims completed a $72.32 million all-bond acquisition financing of three communities operated by Civitas in east TX.

While assisting StoneCreek in their search for financing alternatives, Sims proposed the use of Property Assessed Clean Energy (PACE) financing, a voluntary low-cost, non-recourse assessment placed on a property and based on the qualified energy efficiency, renewable energy, water conservation, residency improvements and related costs, contributed by the project. The program finances 100% of the energy efficiency, renewable energy, water conservation, resilience improvements and the related costs for ground-up new construction and renovations/retrofits up to 20% of the property’s appraised value. The financing is collected with regular local real estate taxes and assessment payments are amortized at a fixed rate throughout the useful life of the project.

Sims coordinated with StoneCreek, Civitas, the PACE provider and the Texas PACE Authority to obtain approval for PACE from the senior construction lender. Despite the atypical nature of the program, the financing team was able to assuage the concerns of the senior construction lender while navigating a variety of bureaucratic components. In place of typical mezzanine debt with interest rates between 12-15%, StoneCreek implemented the strategy PACE to fund $2.8 million in construction financing at an interest rate of 5.85%, a significantly lower interest rate.

StoneCreek, with the guidance of Sims, accessed $2.8 million in TX-PACE financing to lower their total cost of capital. The project is also supported by a $19.6 million construction loan from a traditional lending partner.

Financed Right® Solutions—James Rester: 901.652.7378 |  jrester@hjsims.com, Curtis King: 603.219.3158 |  cking@hjsims.com or Ryan Snow: 843.870.4081 | rsnow@hjsims.com

 

ABOUT HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm. Headquartered in Fairfield, CT, Sims has nationwide investment banking, private wealth management and trading locations. Member FINRA, SIPC. Testimonials may not be representative of another client’s experience. Past performance is no guarantee of future results.  Facebook, LinkedIn, TwitterInstagram.

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HJ Sims Releases 2020 Corporate Social Responsibility Annual Report

The HJ Sims Corporate Responsibility program is designed to provide inspiration to our team, clients and to those we serve. Our mission is to:

  • Affect change and make a difference in our local communities by bringing awareness to and increasing support for economic, social and environmental well-being through coordinated corporate and regional efforts, including the donation of funds and/or volunteering staff time
  • Engage and inspire our staff by providing access, time and opportunities for giving back in meaningful ways

Read the HJ Sims 2020 Corporate Social Responsibility Report.

Download Your HJ Sims Documents into TurboTax

 

Market Commentary: Peering Out From Our Burrows

by Gayl Mileszko

On Groundhog’s Day, we learned that there are six more weeks of winter ahead and we were not surprised. Gobbler’s Knob was perfectly reflective of much of America: full of excitement over the prospect of good news but depressed by the prevailing climate, the big COVID-19 shadow hovering over everything, and the virtual nature of this year’s celebration causing us to watch yet another event live-streamed to our remote burrows. Even though we live in an era of smart phones and mega data, we still eagerly anticipate the groundhog’s prognostication every February 2nd. The little eight-pound rodent may be wrong 75% of the time but, full of hope, we still tune into the annual announcement from the inner circle of top-hatted club members. This year was particularly gloomy for the rural western Pennsylvania borough, as it has been for many towns reliant upon tourism. The annual festivities, which typically bring in as many as 50,000 revelers and $4 million of revenues, were limited to a small number of organizers due to the Pandemic.

The past year has created a painful emotional bookmark for billions of people with its unforgettable sacrifices and losses. While many traditions have been upheld in some form, COVID-19 has been a huge disrupter, and an accelerant of change. It has revealed broken health systems, brittle supply chains, deep political divisions, a fragile social fabric and real economic inequality, forever changing much about what we value, how we reason, how we make decisions. Many industries and neighborhoods have been entirely transformed. Some of this may have been inevitable. Nonetheless, there are many positives to be found. Communities and causes have become very important to us and a tremendous amount of good and good will has been generated. Health care heroes have worked selflessly to care for the stricken, and we developed new appreciation for our farmers, truckers, grocery store, manufacturing, and pharmacy workers as brilliant minds converged to create and deliver vaccines in record time. Further developments in artificial intelligence, retail robotics, drone deliveries, cellular medicine, 3-D printing, and urban agriculture, to name a few, have been accelerated. We expect to see innovators and entrepreneurs deliver spectacular new products and services in the months and years ahead.

Future trends are among the topics that we will address in more depth at the HJ Sims 18th  Annual Late Winter Conference later this month. The virtual gathering will focus on how the Pandemic has impacted retirement living and planning, some of the new strategies, technologies and best practices being employed by senior living providers, and innovative ways to finance acquisitions, developments, and expansions. To attend the virtual event being held on Wednesday, February 24, please register at hjsims.com/2021lwc.

The first month of 2021 just came to a close. January was a symphony in at least three movements involving mass vaccinations, new swearing-ins, and short squeezes that ended on many uncertain notes. The Fed kept short-term rates unchanged, as everyone expected, and is continuing its bond-buying program at $120 billion per month. The initial reading for fourth quarter gross domestic product came out at 4%, below expectations. Many market observers were mesmerized and traders were distracted by the retail investor-fueled rallies in extremely shorted stocks including GameStop and AMC, portrayed by some in the media as a modern day David and Goliath story. Stock markets reacted in shock and weakened as trading and clearing operations were disrupted by restrictions, margin calls, and delays. In addition, investors began to face the realities of very different energy, trade, immigration, regulatory, and tax policies as the new Administration issued executive orders. The VIX volatility index rose 6% on the month, the Dow lost 2% and the S&P fell 1%, while the Nasdaq gained 1.4% and the Russell 2000 climbed 5% as fourth quarter earnings season began. Oil prices increased by 7.6% to $52.20, silver was up 2.4% to $26.98, and Bitcoin gained 25% to close at $35,725 while gold prices fell 2.5% to $1,847.

U.S. Treasuries lost 1.13% in January and high grade corporate bonds fell 1.23% while high yield corporates gained 0.37%. The 2-year Treasury yield closed down 2 basis points on the month to 0.10% while the 10-year increased by 15 basis points to 1.06% and the 30-year ended 18 basis points higher at 1.82%. The 10-year Baa corporate bond benchmark yield rose by 10 basis points to 2.75%. Investment grade corporate issuance on the month totaled $127.5 billion with the financial sector accounting for 62%. High yield issuance totaled $49 billion, the third largest monthly total on record, and demand remains very strong: PetSmart, for example, saw more than $12 billion of orders for its $2.35 billion CCC rated deal. In other fixed income sectors, convertible bonds returned +3.55% in January while preferreds lost 1.36%

The municipal market posted a 0.65% gain last month; high yield led the way with returns of 1.91%. Transportation bonds gained 1.56% and hospital bonds were up 0.72%. Taxable munis maturing in 10-15 years finished 1.31% higher. The 2-year AAA general obligation benchmark yield fell 2 basis points to finish at 0.11%, the 10-and 30-year yields ended basically flat at 0.72% and 1.38%, respectively. The traditional relationship with U.S. Treasuries has been upended. Municipal/Treasury ratios dropped to new lows with the 10-year at 67% and the 30-year at 76%. Investors added record amounts of cash to municipal bond funds and ETFs, $10.7 billion so far this year. As is typical for January, new issue supply was low at $24 billion, with $6.7 billion coming as taxable debt, and the clamor for bonds with yield was unrelenting. The Chicago Board of Education sold $558 million of BB-/BB rated bonds at levels unrelated to its credit in the midst of a threatened strike by teachers. General obligation bonds due in 2041 were priced with a coupon of 5.00% to yield 2.24%, only 105 basis points over the AAA benchmark yield. The issue was reportedly 30 times oversubscribed. The CSCDA Community Improvement Authority issued $176 million of non-rated multifamily housing revenue debt designated as social bonds due in 2056 at a rate of 4.00% to yield 3.55%. The District of Columbia came to market with a $28.1 million non-rated charter school financing for Rocketship structured with 2061 term bonds priced at 5.00% to yield 3.33%.

February begins the second chapter of the 12-month investment cycle and we encourage you to contact your HJ Sims representative for a conversation on preparedness. What should you do? What should you NOT do? If there is one thing we have learned in the past year, it is that we are in a transition, with a new kind of permanent volatility, and we need to take preparedness to a new level. We are surrounded by predicters, from groundhogs to Nobel economists, from strategists to futurists, mystics to pollsters, entrepreneurs to oddsmakers but they all missed the timing and extent of the Pandemic that made Time Magazine declare 2020 the “worst year ever”. More surprises are undoubtedly in store. It makes sense to seek the best advice possible so as to be prepared as best we can to adapt to whatever the future has in store.

Exclusive Opportunities For Our Clients

Innovative Financing Strategies Create Operational Cashflow during COVID-19

CONTACT: Tara Perkins, AVP | 203-418-9049 | tperkins@hjsims.com

 FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce the closing of a number of financings utilizing innovative financing strategies to create operational cashflow and advantageous results for senior living organizations.  

The Tax Cuts and Jobs Act of 2017 (the 2017 TCJA) had an enormous impact on the municipal bond market with the elimination of advance refundings. In 2018, Sims identified alternative strategies in the absence of advance refundings. Strategies included (1) Cinderella bank-held bonds, (2) taxable fixed rate advanced refundings, (3) forward refundings and (4) tender offers.

 

The use of Cinderella Bonds aims to secure an advance refunding that is at first taxable and converts to tax-exempt when permitted. It was applied to the financing of Marshes of Skidaway Island (The Marshes) in GA. In 2020, Sims approached The Marshes noting that a bank-placed Cinderella refinancing of outstanding fixed rate bonds would provide significant savings. Sims successfully closed the $47.1 million financing in December 2020, saving approximately $1.14 million annually and $15.36 million, in the aggregate, through a bank financing.

 

Westminster Communities of Florida, the largest provider of life plan communities in the State of FL, employed Sims to utilize a taxable fixed rate advance refunding of bonds issues to acquire Glenmoor after its successful turnaround. Sims analyzed bank-held and fixed rate bond advanced refundings, with a rapidly growing taxable fixed rate bond market. Westminster proceeded with a taxable advanced refunding and tax-exempt new money issuance to fund upcoming capital projects. Sims procured strong investor interest in the successful $107,360,000 transaction, achieving superior execution.

 

A Forward Refunding approach was utilized with Peconic Landing at Southold (Peconic) in NY. This strategy utilizes tax-exempt fixed rate bonds priced on a present-day basis, but not delivered and “closed” until ninety days prior to the call date of the refunded bonds. In 2019, Sims discussed potential refunding of Peconic’s bonds. The elimination of tax-exempt advance refundings meant immediate access to the tax-exempt market wasn’t possible, and the current BBB- rating made access to the taxable bond market impractical. Sims helped facilitate a forward refunding, securing pricing on a 20-year term on the refunding in late 2019 and saving Peconic $300,000+ in annual debt service with the ultimate settlement occurring in November 2020 amidst the COVID-19 pandemic.

 

A Tender Offer financing was implemented for the MD Obligated Group of Asbury Communities (Asbury). In 2018, Asbury MD Obligated Group’s capital stack was comprised of outstanding bonds placed directly with an institutional investor without an optional call feature and with a balloon payment. Sims negotiated an exchange of the bonds at a purchase price for a new series of bonds, extending the amortization, providing additional years of repayment and reducing the overall debt burden.

 

The 2017 TCJA changed the borrowing landscape for 501(c)(3) organizations. As the new administration and Congress identify and implement their fiscal policies, the Sims’ Financed Right® approach will ensure Sims will continue to assist clients in navigating the ever-changing market landscape, as we monitor market response to new laws and update the industry of developments and trends.

 

To learn details about each strategy, read the Sims Perspective, click here.

 

ABOUT HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm. Headquartered in Fairfield, CT, Sims has nationwide investment banking, private wealth management and trading locations. Member FINRA, SIPC. Past performance is no guarantee of future results.  Facebook, LinkedIn, Twitter,  Instagram.

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