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With more than 85 years of expertise, we help you to reach your investment goals. Why just invest in bond funds when your portfolio holds so much more potential? We offer in-house holistic wealth management, examining equities, individual high-yield instruments, alternative investment strategies, portfolio management and more – helping you leverage the potential within the market, adjusting your portfolio to meet current conditions and better protect your assets.

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Market Commentary: Blazing Straddles

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by Gayl Mileszko

We live in an era when past history is being denounced, flags and monuments buried, and classic old books and movies pulled from the shelves as perceived evidence of systemic racism. One fellow who paid a pretty sum to send his pre-teen daughter to a prominent prep school in New York felt that school leaders were going too far with sudden changes to the school’s curriculum and admissions requirements. He categorized the new policies as mob appeasement and sent a thought-provoking letter expressing his opinion on the woke wars and cancel culture to other parents at the school, entreating them to make their views known to the administration and board. His words soon went viral, stirring emotional responses and revealing how differently we view civic-mindedness.

The Pandemic has certainly magnified some big social, economic and political gulfs in our society that cannot be ignored. But as a republic, as a nation, we will always have certain continental divides. Every generation has stories about the societal changes and challenges we have encountered, fought, adapted to, and overcome. For those of us who grew up in the 1970’s, we had the crises of the Vietnam War, Watergate, double-digit inflation and energy shortages. But this was the decade in which we built the Sears Tower, invented floppy disks, digital wristwatches, portable cassettes, cell phones and voice mail, recorded great music, and passed a gender equality law. We took inspiration from the perfect wins by Mark Spitz, Nadia Comaneci, the Miami Dolphins, Billie Jean King, and Secretariat. We escaped by reading J.R.R. Tolkien fantasies and Agatha Christie mysteries, and by watching movies like the Godfather and Rocky. And we were able to laugh at ourselves and all the stereotypes portrayed in Blazing Saddles, the off-color comedy which has been deemed – at least for now – “culturally, historically, or aesthetically significant” by the Library of Congress and preserved in the National Film Registry.

It will be several decades before historians assess the moment in which we now live and document the social and political highlights and lowlights of this Pandemic era. In retrospect, economic conditions will be the focus for many. Reference will be made to the blazing hot financial markets that categorized the start of the decade, in spite of everything else, stoked by unprecedented central bank interventions and fiscal stimulus. In the depth of a worldwide recession, an endless series of records is being set. Given assurances of more bond-buying and rate controls for the next few years, there may be no stopping the rallies as the recovery takes hold. For new investors unaccustomed to volatility, the day-to-day performance are often jittery with dips and bumps driven by virus case reports, corporate earnings announcements, and weekly government data almost always released with a positive spin. There are also numerous technical factors, policy decisions involving negative interest rates by other central banks, and unexpected events like the situation with Ever Given, that massive container ship that clogged one of the world’s most vital waterways for six days and affected billions of maritime commerce.

Straddles, for those unfamiliar with the official definition, are typically strategies used by traders who anticipate a big move in the price of a stock but want to hedge their bets as to whether it will go up or down. So straddling is a neutral strategy involving the simultaneous buy of a put option and a call option on a stock with the same strike price and expiration date. The straddler profits whenever the stock rises or falls from the strike price by an amount that is more than the cost of the premium. In the current market, we are seeing a different type of straddler – the equity buyer that also likes higher yielding municipal bonds. This is typically a higher income individual residing in a high tax state who likes the dividends and returns of equities but seeks offsetting tax-exempt income and relative safety, mostly from essential public purpose bonds issued with both state and federal tax exemptions paying semi-annual interest and pledging the return of the original principal at maturity. He or she sees the muni market as solid, fairly liquid, and social good-promoting, one that has been rising with — although uncorrelated to — stocks. This investor might straddle other sectors and asset classes as well; CCC-rated corporate bonds, leveraged loans, bitcoin, and even non fungible tokens (NFT), units of data stored on blockchain that commodify and certify digital assets in art, music and sports, for example, as unique.

Municipal bonds have been in particularly great demand, and the clamor for tax-exempt coupons (if not yields) of 5% continues. High-yield municipal bond mutual funds just reported a record $1.28 billion of inflows, breaking a record set in January. In the week ended April 14, muni funds in total took in $2.255 billion. Exchange-traded muni funds reported inflows of $478 million, after having added $350 million in the previous week. Fund assets under management have surpassed $900 billion for the first time and inflows this year have already surpassed the 12-month total for 8 of the last 11 years. In this context, fund portfolio managers, like individual buyers, are understandably having a hard time sourcing product. The supply calendar continues has been light, typically running between $6 billion to $8 billion a week, much lower during holiday-shortened trading sessions. Prices continue to escalate in the primary and secondary markets. The one-year AAA muni yield is at an all-time low of 0.05%.

Some Members of Congress are straddling the fence, but there is non-stop tax talk coming out of Washington. It has many families searching for tax-advantaged investments. The last round of state and local stimulus has bolstered the finances of many frequent borrowers and investors heavy with cash see municipal credit outlooks as improved. Credit spreads continue to compress, so any coupon or call structure that offers additional yield is being bid up. Few muni investors are deterred by the recent gyrations in the Treasury market and auction results. At the close on Tuesday, the 10-year AAA muni general obligation bond yield stood at 0.93% or 60% of the comparable U.S. Treasury yield at 1.56%. The 30-year muni benchmark yield at 1.55% was 69% of the comparable Treasury at 2.25%.

Last week, Florida’s Capital Trust Agency sold $859.6 million of non-rated charter school bonds structured with a 2056 maturity that priced with a coupon of 5.00% to yield 4.00%. The Arizona Industrial Development Agency brought a $33.4 million charter school financing for BB rated Somerset Academy of Las Vegas featuring 2051 term bonds priced at 4.00% to yield 3.22%. The California School Finance Authority had an $11.8 million non-rated charter school social bond issue for iLead Lancaster with a 2061 maturity priced at 5.00% to yield 3.64%. And the Public Finance Authority brought a $9.8 million non-rated transaction for Davidson Charter Academy with a single maturity in 2056 priced with a rare 6.00% coupon and an even rarer discount o yield 6.432%. Among other high yield financings, the Cleveland Cuyahoga County Port Authority came to market with a $250.5 million taxable federal lease revenue bond issue for the Veterans Administration Health Care Center that priced at par to yield 4.425% in 2031. The California Community Housing Agency issued $174.1 million of non-rated essential housing bonds due in 2056 with a 4% coupon yielding 3.05%.

This week, we expect the biggest calendar of the year at $10 billion with a significant percent coming as taxable. So far this year, approximately $41.6 billion of municipal bonds have been issued as taxable or with corporate CUSIPs, up 16% over the amount in 2020. California is issuing general obligation bonds with a 5-month forward delivery date, the largest such forward settlement on record and the latest of $5 billion sold in 2021. The State of Connecticut is also coming with $145 million of special tax obligation transportation infrastructure refunding with a forward settlement in mid-October. Approximately eight financings designated as green, social and sustainable bonds are scheduled for sale. But higher yielding offerings are sparse. Three more charter schools plan sales. At this writing, the Dow is up 2.5% so far in April, the S&P 500 and Nasdaq are up more than 4%. The Russell 2000 has declined by 1.45% while oil is up 5.5%, gold is up 3.8%, and silver is up 6%. Bitcoin is down about 5% but Dogecoin, the meme cryptocurrency created as a joke, is blazing new trails with a market cap of $54 billion, one that exceeds that of Ford Motor and Kraft Heinz.

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Why Small Businesses Matter: HJ Sims

HJ Sims ‘ Managing Principal, Bil Sims, was recently interviewed by the Fairfield Hamlethub. In the article, he discusses HJ Sims’ history, investment banking, bond and wealth management expertise. Read more.

Market Commentary: Mint Condition

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by Gayl Mileszko

The U.S. Bureau of Engraving and Printing has responsibility for producing all of our paper currency but the U.S. Mint is the sole manufacturer of legal tender coinage. Originally placed with the State Department in 1792 to produce the coins needed for the nation to conduct its trade and commerce, the Mint became an independent agency in 1799 and then a bureau of the U.S. Treasury in 1873. It is now the world’s largest producer of gold and silver bullion coins. In addition to bullion, pennies, nickels, dimes, and quarters, the Mint also produces coin-related products such as Congressional Gold Medals and commemoratives like the silver dollar, silver half-dollar and gold five-dollar coins just issued in January for the National Law Enforcement Memorial and Museum. More than 1,600 employees work at Mint facilities in Washington, Philadelphia, San Francisco, Denver, West Point and Fort Knox. Although its facilities are closed to the public during the pandemic, the Mint has long offered tours of the production sites in Pennsylvania and Colorado where visitors learn about the craftsmanship involved in the design, sculpture and striking processes for U.S coins, each a miniature work of art.

Last year, the U.S. experienced severe coin shortages as consumers moved to digital transactions and so few of us emptied out piggy banks or cleaned under couch cushions and car seats for loose change and cashed in our coins. The urgent needs of merchants and banks prompted the Mint to increase production to the highest levels since 2001 just as spot prices for nickel increased 5.6% over 2019, platinum cost 3.8% more, gold rose 25.8%, copper dropped 3.6%, and zinc fell 15.4%. The Mint shipped 15.5 billion circulating coins to the Federal Reserve Banks and, in response to the soaring demand for gold, more than 24.7 million ounces of bullion. It transferred the seigniorage, the difference between the face value and cost of production which amounted to $40 million, to the Treasury, chump change in the effort to reduce a federal deficit that has now grown to $1.7 trillion in the first six months of Fiscal Year 2021.

The dictionary definition of coin long read: “a small, flat, and usually round piece of metal issued by a government as money.” The key point was that the coins were issued by a government. This week, COIN is the new Nasdaq ticker symbol for Coinbase, the largest U.S. cryptocurrency exchange. The company has only been around since 2012 but Wednesday’s IPO-like entry has been one of the most anticipated market events of 2021 as it appears to reflect acceptance of crypto as a legitimate industry and points to the possibility of widespread adoption of digital currency. The Coinbase platform enables some 7,000 institutions and 56 million retail customers to buy, sell, and store cryptocurrencies such as Bitcoin and Ethereum. The majority of its revenues come from transaction fees of about 0.5% and services such as storage and analytics, while about 10% of the company’s revenues come from sales of its own crypto assets to customers. It also makes money from things like margin fees and a rewards credit card program. In 2020, total revenue amounted to $1.28 billion, up from around $534 million in 2019 as the company’s monthly transacting user base rose from about 1 million to about 2.8 million. Net income was $322 million. In the first quarter of 2021, estimated revenues grew to $1.8 billion on trading volume of $335 billion as the price of Bitcoin almost doubled, causing the number of active monthly traders to more than double to 6.1 million.

COIN is using the less common practice of a direct listing on the Nasdaq. No new shares will be created in the process, and only some of the 130.7 million of Class A shares and 68.5 million of Class B shares outstanding are being sold to the public. No underwriters are involved, and there is said to be no share dilution or lockup period. Nasdaq and Goldman Sachs set a reference price of $250 per share, giving Coinbase a valuation of $66.5 Billion. Demand appears to be overwhelming and valuations extremely high. The overall value of more than 6,600 coins tracked by CoinGecko recently surpassed $2 trillion. Even Dogecoin, with a Shiba Inu dog as its logo and launched as a joke, now has a market cap of $17 billion. But the decentralized and largely unregulated finance business is unquestionably volatile and still highly mysterious and suspicious to many of us. There is a very complex process of mining with staggering energy requirements and environmental costs. There are caps on supply. Anybody with basic programming skills and an understanding of the technical infrastructure can create and market their own private digital currency. Crypto is understood or misunderstood to involve instruments of money laundering. Assets are kept on a shared ledger known as a blockchain, but if you forget your password you can lose access to your entire digital wallet. Some call it hackproof while others know of scams and see plenty of security risks in trading and network storage. Warren Buffett called Bitcoin a “mirage” but strategists at JPMorgan are suggesting cryptocurrency as a way to hedge against significant fluctuations in traditional asset classes and Bank of New York Mellon has announced plans to hold, transfer and issue digital currencies for its clients. Goldman set up a crypto trading desk and plans to begin offering investments in digital assets. A number of companies including Tesla, Burger King, Xbox, PayPal, and Starbucks now accept bitcoin, recognized as the original cryptocurrency founded in 2009, as a form of payment.

Cryptocurrencies are often confused with other digital currencies but both are now a major focus of central banks around the world. Privately issued digital currencies can certainly reduce the ability of the Federal Reserve to control exchange rates and money supply. But with respect to sovereign digital currencies, the Fed Chair said in February that they are looking “very carefully” at a digital dollar. The Treasury Secretary testified that a digital version of the dollar could help address hurdles to financial inclusion in the U.S. among low-income households. Many concerned with privacy, however, are alarmed as digital currencies are trackable, allowing for surveillance and — potentially — supervision over individual transactions as well as the size of accounts. They can also be programmed to have expiration dates. Sovereign digital currencies could be used to work around U.S. sanctions and potentially oust the dollar as the world’s dominant reserve currency. India is considering a new law that bans all tokenized representation of money unless it is electronic cash from its own central bank. The People’s Bank of China just became the first major central bank to launch a virtual currency, e-CNY. Officials there claim that the purpose is to replace banknotes and coins, to reduce the incentive to use cryptocurrencies and to “back up” privately run electronic payments systems. The trial issuance of digital yuan has begun after 7 years of research, and China plans a broader roll-out next February during the Winter Olympics in Beijing. Officials at the U.S. Treasury, State Department, Pentagon and National Security Council are taking a close look at the implications.

The future of our global financial system appears to be changing, perhaps our legal systems as well with the introduction of smart contracts run on cryptographic code. In a low rate environment with high leverage and sensations of inflation and bubbles, plus policies and conditions arising from the pandemic, capital may be re-deploying from stocks and bonds. But for now, the financial markets remain immersed in day-to-day economic news, which indicates modest inflation and record global growth, as well as developments on the Russia-Ukraine border, with China and Taiwan, Iran and Israel, Minneapolis and Portland, Johnson & Johnson’s vaccine, Washington infrastructure talk and first quarter earnings reports. With the Fed playing down inflation and repeating familiar dovish narratives over and over, the Dow and S&P flip to record highs. Some question the numbers, but Bank of America just reported that inflows into global stock funds in the past 5 months ($576 Billion) have exceeded inflows in the prior 12 years ($452 Billion). Since 2008, inflows to stock funds have totaled $1 trillion versus $2.4 trillion for bond funds.

This week, Treasury auctions are expected to total $271 billion and the first one on Monday met with strong demand. The municipal calendar could total $7 billion, dominated by taxable sales. Five green, social and sustainability bond deals are featured and there is a $252 million non-rated deal for Florida charter schools. Municipals, which saw another $1.77 billion of mutual fund inflows last week, and continue to outperform Treasuries. Tax filings have been delayed to May 15 and cash is abundant. New issue pricings continue to be well received with both price bumps and positive secondary follow-through. Last week’s $7.6 billion slate included a $332.5 million non-rated California CSCDA Community Improvement Authority social bond financing for Altana-Glendale that had a 2056 maturity priced at 4.00% to yield 3.58%. The same maturity and coupon in a California Community Housing Agency issue for Mira Vista Hills Apartments priced to yield 3.70%. Among other high yield deals, the New Jersey Educational Facilities Authority had a $5.6 million tax-exempt series with a $38.5 million taxable Baa3-rated transaction for New Jersey City University structured with 2051 term bonds priced at par to yield 4.431%.

Corporate syndicate desks expect $25 billion of investment grade deals this week and $31 billion of high yield sales including the $5.5 billion United Airlines refinancing and a $1.8 billion deal for the Kissner purchase of Morton Salt. At this writing, the 2-year Treasury yield stands at 0.16%, the 10-year at 1.62%, and the 30-year at 2.30%. The 2-year Baa rated corporate bond yield is 1.77%, the 10-year is at 3.31% and the 30-year stands at 4.17%. The 2-year AAA municipal general obligation bond yield is 0.10%, the 10-year is at 1.01% and the 30-year is at 1.62%. The Dow stands at 33,677, the S&P 500 at 4,141, the Nasdaq at 13,996, the Russell 2000 at 2,228. Oil prices have climbed in the past week to $61.22 a barrel. Gold is priced at $1,745 an ounce, silver at $25.40, and platinum at $1,179. Bitcoin is at $64,478 and Ethereum is nearing $2,383.

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Market Commentary: Home is Where the Heart and Wealth Are

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by Gayl Mileszko

Our homes have been our anchors, true ports in the storm of this past year, our refuge from all the uncertainty outside. They have evolved as we have, morphing into classrooms and workstations, gyms and bistros, chapels and clinics. It is said that there is no place like home, the place where our stories begin and unfold. Home is the starting place of love, hope and dreams, the place where we can go just as we are, feel safest and always belong. In these and other ways, our homes are priceless. The physical structures themselves, however, have values that can be pinpointed quite precisely and unemotionally. Let us take a look at some of the latest price tags and trends for housing because these structures, our primary residences, in most cases represent the largest percentage of all assets that we hold. 

Despite all that we have been through in this past year, it is astonishing that the U.S. housing market has remained sizzling hot with prices surging at the fastest pace in 15 years. Sales just recently cooled off as new home construction has lagged behind demand and many homeowners have elected to hold onto their houses longer. But buyers in search of better space in which to live, study and work during this pandemic have been in fierce competition for what has become a record-low supply of homes. The residential real estate market has never been tighter. Housing inventory remains at a record low of 1.03 million units, having dropped by 29.5% year-over-year. That amounts to a 1.9-month supply, well below the level said to be needed in a balanced market at six months. Properties are typically selling in 20 days, another record low.  As a result, existing home sales fell 6.6% in February and pending home sales also fell after eight consecutive months of year-over-year gains, according to the National Association of Realtors. Entry-level homes in particular remain in short supply. Median existing home prices, meanwhile, rose to $313,000, 15.8% above the comparable 2020 level, with all regions of America posting double-digit gains. First-time buyers have been responsible for about 31% of sales, and a new Zillow survey finds that these buyers are increasingly comfortable buying online. 

CoreLogic forecasts that home prices will increase by an average of 3.3% by January 2022, with only a few metro areas including Houston, Las Vegas and Miami seeing declines. The Case-Schiller 20-city index shows that Phoenix has had the fastest home-price growth in the country for the 20th straight month, at 15.8%, followed by Seattle at 14.3%. The average commitment rate for a 30-year conventional fixed rate mortgage is about 2.81%, still well below the 2020 average of 3.11%. Rates, which dropped below 3% in July for the first time ever, are expected to remain below 3.5% this year. As they rise along with prices, however, affordability becomes a key and continuing concern for many. As it is, about one in five renters is behind on rent payments and 2.8 million are in mortgage forbearance. But in the four weeks ended March 21, 39% of homes that went under contract sold for more than their list price, up from 23.9% a year earlier according to Redfin Corp. As a result, 76% of nonhomeowners in the U.S. say they have no plans to purchase a home in the next six months due not only to affordability constraints but fear that the market will turn and leave them owing more on their mortgage than their home will be worth. In the fourth quarter, some 410,000 U.S. residential properties with combined mortgage debt of $280.2 billion were underwater. Real estate data firm Black Knight reports that at least one of every 14 residential mortgages in Connecticut was delinquent or in foreclosure.

Homes with a mortgage account for about 62% of all U.S. properties and the home equity for these properties surged to more than $1.5 trillion last year, an increase of 16.2% from a year earlier. Homeowners aged 62 years and older saw their housing wealth grow by a net of 3%, or $234 billion, in the fourth quarter of 2020, according to new data from the National Reverse Mortgage Lenders Association. The increase brings senior housing wealth to a record $8.05 trillion. During the pandemic, some seniors have turned to reverse mortgages to assist with expenses, including in-home care, while others have refinanced their homes or taken out home equity lines of credit. Total cash-out refi’s surged 42% year over year in 2020 averaging $50,000 per borrower and adding up to $152.7 billion in total according to Freddie Mac. Home equity line of credit volume more than doubled to $74.9 billion in 2020 from a year earlier. Many seniors are looking in shock at area home sale prices and wondering if this is the ideal time to sell the family home and move to something smaller or perhaps better located. Prices could certainly rise further — but how much more? The market looks ripe for a correction. At some point, who will be able to pay these high prices for existing homes plus all the necessary repairs, remodeling, and refurnishing costs? The average American family in 2020 consisted of only 3.15 people. So how much interest will there be in a four-bedroom home? Maybe it is better to seize the moment and sell rather than wait until there may be no real choice. We are not getting any younger, after all. The 65-and-older population has grown by 34.2% or 13.7 million during the past decade. And more and more of us are living alone. That includes 27% of adults ages 60 and older. Do we want to be home alone for the next decade (or more) cooking and cleaning for ourselves and waiting for visitors and the occasional offer of help?

For some who have struggled in isolation during this pandemic, the thought of a safe, caring, well-managed senior living community has become very appealing. Thousands of folks in their 60’s, 70’s and 80’s are researching options on line and taking virtual tours of neighborhoods with similarly aged and active people, organized social activities, high quality dining, cleaning services, concierges, and higher levels of service when needed. Life plan communities present countless options and configurations for garden homes, cottages, and high-rise apartments, assisted living, memory care, rehabilitation and nursing facilities. At Bailey Station in Collierville, Tennessee they offer seniors a “Return on Life”. At Ingleside at Rock Creek in Washington, D.C, they attract residents with “Truly Engaged Living”.  At Broadview at Purchase College in New York, they promote “Think Wide Open Lifelong Learning”. At Sinai Residences in Boca Raton, they say “No One Does Livable Luxury Like This.”  At The Homestead at Anoka in Minnesota, they assure “It’s your life. We’re Here to Help You Live It.”

Throughout the COVID-19 crisis, life plan communities have evolved with new safety procedures, technology, and services. Many have continued with expansion and renovation plans, uninterrupted or only slightly delayed for labor or material-related reasons. Several have come to the bond markets for financing projects on a tax-exempt basis. In the past few weeks, this included Plymouth Place in La Grange Park, Illinois (“The Time and Place For You”) which sold $23.9 million of BB+ rated bonds structured with 5% coupons due in 2056 to yield 3.61%. In the secondary market, bonds issued for Ralston Creek at Arvada in Colorado traded at $89.95 to yield 6.552% (19648FCK8). Arizona’s Great Lakes Senior Living Communities’ 5.125% bonds traded at $85 to yield 6.20%. 04052TBV6 The Shelby County, Tennessee’s Farms at Bailey Station 5.75% bonds due in 2049 traded at $100.332 to yield 5.70%. 82170 KAE7 Roanoke County’s Richfield Living 5.375% bonds due in 2054 traded at par. 76982TAE8.

Unlike the corporate bond market which has seen record high yield issuance this past year, the municipal market has not seen much in the way of high yield financings and this is vexing many investment strategies. Demand for yield in this low rate environment has been insatiable.  Individuals, funds, insurers, banks, and foreign buyers cannot find enough to meet their investment needs. Prices remain extremely elevated. Among the few higher yielding deals of late, a Georgia issuer brought $439.5 million of BBB-minus rated hotel and convention center bonds to market with a final maturity in 2054 that priced with a 4% coupon to yield 2.95%. The Public Finance Authority sold $135.9 million of Ba2 rated taxable bonds for Noorda College of Osteopathic Medicine due in 2050 priced at 5.625% to yield 5.75%. The Latrobe Industrial Development Authority in Pennsylvania had a $42 million BBB-minus rated transaction featuring 2051 term bonds priced at 4.00% to yield 3.30%. The California CSCDA Community Improvement Authority brought a $112.9 million non-rated social bond issue for Moda at Monrovia Station due in 2046 that priced at par to yield 3.40%. The Pennsylvania Economic Development Authority brought a rare $75 million Caa1/CCC rated solid waste disposal financing for CONSOL Energy that was subject to the alternative minimum tax; it had a sole term bond in 2051 priced at par to yield 9.00%. The Capital Trust Agency in Florida issued $17.2 million of non-rated bonds for St. John’s Classical Academy structured with a 2056 maturity that came with a 4% coupon priced to yield 4.075%. The 2-year AAA rated general obligation bond benchmark yield currently stands at 0.15%, the 10-year is at 1.11%, and the 30-year is at 1.73%.

As we begin the second quarter of the year, technical factors continue to buoy the municipal market. Cash continues to flow into bond funds and ETFs, buying activity is at the highest levels since 2009, issuance is below average, bids in the secondary market for many bonds are strong as the gusher of federal funds is making many credits appear stronger and not much product is available. In addition, the tax chatter in Washington and several state capitals is getting louder, muni/Treasury ratios have dropped below historic averages. Economic data reports also appear to reflect a solidly recovering economy. New orders, employment, business activity, and prices all increased last month. High yield muni performance has been good: returns on the S&P High Yield Muni Index in the first quarter were +1.77%; the ICE BoAML High Yield Muni Index was up 2.1% . However, investment grade tax-exempts posted negative returns (-0.26% for S&P, -0.4% for ICE BoAML). The best performing sectors so far this year have been airport and transportation. Away from munis, markets have been volatile due to surging inflation expectations. U.S Treasuries lost 4.61% in the first quarter, and corporate bonds were down 4.49% while the Dow gained 8.2%, the S&P 500 6.1% and the Nasdaq 2.95%. Oil prices have dropped in recent days but are still up26% on the year. Gold and silver prices have fallen. Bitcoin is up more than 100%.

HJ Sims has an 86-year history of guiding our individual and institutional clients through changing markets. In addition, we have either financed, advised on, or followed the progress of continuing care communities in every major U.S. market area. So, whether you are seeking assistance with executing your investment plan, in need of a trained eye to review the credits in your bond portfolio, searching for higher yielding bonds to boost your income, looking for specific advice on how best to meet your community’s financial and capital needs, or researching suitable senior living or care communities for a friend or family member, we encourage you to contact your HJ Sims representative. We aim for amazing.

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HJ Sims Partners with Gurwin Healthcare System to Finance New Community with 55% Pre-sales

FOR IMMEDIATE RELEASE

CONTACT: Tara Perkins, AVP | 203-418-9049 | [email protected]

HJ Sims Partners with Gurwin Healthcare System to Finance New Community with 55% Pre-sales

FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce the successful closing in March 2021 of a $102.1 million financing for Fountaingate Gardens, an independent living community to be located in Commack, NY.

The Gurwin Healthcare System has been providing healthcare services to Long Island residents since 1988, through the Gurwin Jewish Nursing and Rehabilitation Center and the Fay J. Lindner Assisted Living Residences.  Gurwin Jewish Healthcare Foundation acquired land adjacent Fay J. Lindner Residences with the goal of completing the continuum of care through development of an independent living community to be known as Fountaingate Gardens. Working with Eventus Strategic Partners and Perkins Eastman, Fountaingate Gardens will initially add 129 independent living apartments and offer various services/amenities to its residents. Healthcare services will be provided at the Gurwin facilities contiguous to the community.

The Foundation donated $4 million to cover early expenses and loaned nearly $16 million for pre-development capital. It also donated the 10.5-acre site, appraised at $4.675 million. Total development costs, including the tax-exempt bonds, is approximately $113.8 million. The Foundation has committed $25.5 million to the project, providing confidence to investors and enabling the bonds to be issued with only 55% of the independent living units reserved with deposits from future residents.

The Foundation agreed to an Entrance Fee Guaranty Agreement, whereby it would advance up to $2.85 million, equal the entrance fees on six independent living units, in the event occupancy did not meet expectations upon opening. It also committed $10 million in the form of a Liquidity Support Agreement.

The $102,115,000 tax-exempt bond issue was divided into two short-term Entrance Fee Principal Redemption BondsTM series and a long-term bond series. The Series 2021C bonds ($31,000,000) will be repaid when occupancy reaches 48%. The Series 2021B bonds ($32,500,000) will be repaid when occupancy reaches 86%, expected to occur in 2023. The Series 2021A ($38,615,000) has a final maturity of 2056.

Sims closed on the Series 2021 Bonds with $10.5 million of the issue purchased by Sims’ Private Wealth Management clients and the remainder purchased by 28 institutional firms. The yield on the Series C bonds is 3.125%, the yield on the Series B bonds is 4.125% and the yield on the Series A bonds maturing in 2056 is 5.375%, demonstrating demand for the project and strength of the Gurwin name in the local market.

“With tremendous support from the Sims’ team, we successfully secured bond financing for Fountaingate, Gurwin Health’s new independent living community. Despite the challenges we faced the past year, with the impact of the pandemic, Sims found creative solutions, with a firm determination to bring this project to completion. Sims not only serves as a lender; they are a model for senior housing and development. They embrace the same goals that we have as a healthcare provider: caring, quality and excellence. Thank you, Sims for all you have done to help secure the future for our community,” said Stuart Almer, CEO, Gurwin Healthcare System.

Financed Right® Solutions—Andrew Nesi: 203.418.9057 |  [email protected]

 

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, Twitter,  Instagram.

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Market Commentary: Aiming for Amazing

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by Gayl Mileszko

1784 was another one of those years when nothing was normal. The Treaty of Paris with Great Britain was ratified, ending the American Revolutionary War.  New guidelines were being adopted for adding to the original 13 states. The New York Governor asked Congress for a declaration of war against Vermont. The first successful daily newspaper was published in Pennsylvania, and the bifocal spectacles needed by some to read it were invented by Benjamin Franklin. In Massachusetts, Governor John Hancock signed the charter for Leicester Academy, a private school initially funded by the town and its citizens, later supported for a time with state monies. Its purpose was to “promote true piety and virtue” along with the study of the English, Latin, Greek, and French languages, arithmetic and the art of speaking. Soon after its founding, the Academy broke some new ground by admitting young women. Among its earliest graduates was Eli Whitney and one of its most prominent buildings was a stop on the Underground Railroad.  Over the decades, the school moved, expanded and contracted several times, adapted to new laws making education compulsory and then prohibiting public funding of private schools, and trained cadets that served in the Union Army and World Wars I and II. The Academy eventually merged with Leicester Junior College in 1954 and with Becker Business College in 1977. Becker College, as it became known, features two campuses six miles apart in Leicester and Worcester, and offers 40 undergraduate degrees including veterinary science and e-sports management along with master’s degrees in nursing and mental health counseling. It has been the home of the state-designated Massachusetts Digital Games Institute and proudly features one of nation’s the top five video game design programs.

As with many small, private colleges, however, Becker has suffered from declining enrollment in recent years and in the 2020 Fall Semester the total fell to a low of 1,500 students. Several years of hundred thousand-dollar deficits were plugged with endowment funds that have rapidly declined to $5 million. College leadership tried mightily to bolster its finances by renegotiating contracts, selling assets, consolidating departments, cutting staff and salaries, and aggressively pursuing affiliations and mergers. But the Pandemic exacerbated the revenue loss and no alliances materialized. Despite $3.31 million from the Paycheck Protection Program, and $1.6 million of CARES Act funds, the state’s Department of Higher Education concluded in early March that the school’s financial situation was such that it was unlikely to make it through the next academic year. After a weekend of agonizing discussion, the school which has boasted its status as one of the 25 oldest academic institutions in the country, just announced on Monday that it would close in August and arrange for its students, all Becker “Hawks”, to transfer to one of 18 other local schools to complete their degrees.

The closings of longstanding schools and businesses — unimaginable just one year ago — continue to make headlines, although at a rate well below the terrifying forecasts of last Spring in large part due to the $5.2 trillion of federal stimulus that has propped up income for millions. The American “can-do” spirit is, however, never to be discounted. Despite many devastating losses, more than 4.4 million new businesses have been created in the past year according to the Census Bureau, a half million this past January alone. This is an extremely hopeful sign for those of us who still remain hesitant to take public transit, sit in a crowded stadium, attend a church service, wedding or college graduation, or open or expand a dream business whether it is a restaurant, barber shop, senior living facility, charter school, mask distributor, ionizer manufacturer, entertainment venue, residential and commercial building contractor, home care provider, or reliable news source.

We join the hundreds of millions thrilled with every new report of students returning to classrooms, workers returning to offices, drivers back on toll roads, fans back in arenas, shoppers returning to brick and mortar stores, travelers booking flights and hotel rooms, seniors and their families once again scouting best places for retirement and care. The first quarter of 2021 has come to an end and the country yearns for what some call a return to normal, with hopes fueled by the widespread COVID-19 vaccinations. But the Google searches for “normal” which spiked highest last April, ebbed then rose once more with the start of the new school year and again over Thanksgiving, have since fallen off.  With no disrespect to our veterans and the sacrifices that they and their families  have made in time of war, this Pandemic has cost our nation in dollar terms far more than World War II and it has a death toll now counting greater than that of WWII, Korea and Vietnam combined.  Our aspirations for having control over our lives once again have escalated but we are still unsure about how persistently vicious this coronavirus and its variants could be.  After 14 months of the unthinkable, we are adjusting to a new normal, perhaps and hopefully on its way to a becoming better one. As the poet Maya Angelou once so aptly put it, “If you are always trying to be normal, you will never know how amazing you can be.”

In Washington, where no day is ever normal, and the cherry blossoms have peaked early this year, intelligence agencies are scouring for details of the new 25-year, $400 billion China-Iran pact. Among other threats, our military is monitoring the three Russian nuclear submarines putting on a show in the Arctic. Immigration and border patrol agents are overwhelmed with the migrant surge on the Mexican border. Health officials are studying whether new vaccines or treatments will be needed to counteract new variants in countries with low vaccination rates, if booster shots will be required in four or six months, how much value to place in the recent World Health Organization study on the origins of Covid-19. Labor and Commerce officials are exploring the implications of various policies for mandating vaccinations for certain employees, for requiring proof of vaccinations for certain activities. Education officials are addressing the myriad of issues related to in-person versus virtual instruction. NASA is focused on the Mars rover searching for signs of past life and its potential for habitation.

On Wall Street, throughout this Pandemic and indeed for the past 13 years, most normal days have involved rallies for stock and bond investors. Many are being rattled by the prospect of inflation linked to federal stimulus that may exceed $8 trillion by the end of the year if another $3 trillion of major infrastructure proposals are adopted. In response, Treasury yields have risen alongside the belief that the Federal Reserve will step in to raise rates well in advance of the 2024 target reflected in its latest dot plots. As if we have not had enough of new entries in the U.S. record books, we have just seen one of the largest margin calls of all time. Archegos Capital Management is a family office that has been employing total return swaps to amass huge stakes in major companies without having to disclose them to regulators. Archegos (Greek for “one who leads the way”) has leveraged trading partnerships with major banks including Nomura Holdings Inc., Morgan Stanley, Deutsche Bank AG and Credit Suisse Group AG, all of whom have had to liquidate huge chunks of shares in block trades at many fire sale prices. The first quarter results of these banks are now being impacted to the tune of $5 to $10 billion.

In the wake of years-long risky high yield trading and huge IPO and SPAC investment by those in desperate search of positive real yield and returns, traditional risk management tools developed in Manhattan, London, Zurich and Tokyo appear no longer appear to prevail. With respect to risk to the global supply chain, last disrupted by the shutdowns in the airline industry, the world has truly been shaken by the sight of hundreds and hundreds of ships laden with cargo blocked from entry into the Suez Canal by just one beached container vessel, the Ever Given. In the context of data privacy, hackers have reduced and revealed the little that apparently remains.

At this writing, with two days to go until the close of the first quarter in the financial markets, stocks are up across board since the start of the year. The Dow is up over 8%, the S&P 500 more than 5%, the Nasdaq over 1% and the Russell 2000 well over 9%.  Oil prices at $61.56 have gained 27% while gold is down 9.6% to $1,713 per ounce and silver is down 6% to $24.75. Bitcoin has doubled in value to $57,610. In the bond markets, yields in short maturities have been stable: over the past three months, the 2-year Treasury has increased only 2 basis points to 0.14% while the tax-exempt AAA municipal general obligation bond yield has remained flat at 0.14%. The comparable Baa rated corporate bond yield has fallen 5 basis points to 1.73%. The 10-year and 30-year Treasury benchmark yields have, however, risen by more than 76 basis points to 1.70% and 2.40%, respectively. 10-year Baa corporate yields are up 61 basis points to 3.26%.  Municipals have outperformed their taxable counterparts by the most of any quarter since 2009, although intermediate and long-term yields have increased by more than 34 basis points since January: the 10-year AAA muni currently yields 1.10% and the 30-year yields 1.73%. Returns in the general municipal market are expected to be in the range of negative 0.3% for the quarter, while Treasuries will end the quarter down 4.2%. High yield municipal bond returns are among the fixed income leaders, with index returns in the range of 2.11% year-to-date.

Investor demand for tax-exempt securities has been magnified by tax chatter in Washington. The Biden Administration is proposing some of the largest tax increases since 1942 and this is enhancing the perceived value of munis, even at these still relatively low historic yields.  There are also several other favorable conditions prevailing for muni buyers. Investors have added $26.1 billion to muni bond funds and ETFs so far this year, reflecting retail demand for every available tax-advantaged dollar. History also shows that the muni market does well during the first 100 days of a Democratic president’s first 100 days in office. In addition, supply has been suppressed as state, local and nonprofit borrowers have awaited news of agreement on the extent of stimulus funds for more than six months. Now that federal funding has reduced the need for some deficit borrowing, volume could decline for several months to come.  On top of all this, the IRS has delayed the 2020 tax filing deadline to May, which forestalls the need for some of the usual seasonal sales for another month.

This is a week in which many around the world celebrate very precious holidays. We at HJ Sims wish you and your families happy and healthy celebrations. Your HJ Sims representatives look forward to sharing the best of these moments and, based upon your investment goals and sensible risk parameters, helping you to try and improve results you have come to see as normal in your portfolios. We appreciate all that you have endured and managed during this past year and stand alongside you as you look to move forward with your investment and borrowing plans.  We are dedicated to working for you and, as always, aim for amazing.

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Aging Redefined

How old "we feel" is changing our expectations about retirement

The world is preparing to welcome a new generational powerhouse in that of “seniors” and those considered of “retirement age.” A transition is occurring, establishing the largest projected population of retirees and senior citizens in human history. This trend can be attributed to various factors, including the reduced physical demands of many jobs today, advancements in healthcare, a greater focus on healthy living, and technological advances, which are expanding global lifespans and the median age of adults.

Dr. Joseph Coughlin, Director of the MIT AgeLab, (also keynote speaker of this year’s HJ Sims Annual Late Winter Conference), discusses the trends of aging and longevity. Drawing upon his extensive and varied experience in academia and advising global firms, Dr. Coughlin shares insight gained from his position as instructor in MIT’s Department of Urban Studies and Planning and Sloan School’s Advanced Management Program. Dr. Coughlin is also the author of The Longevity Economy: Inside the World’s Fastest Growing, Most Misunderstood Market.

 

Dr. Coughlin cites the leading indicators of the pattern of retirees and consequent implications for product and service providers in countries throughout the world.

 

  • In Germany: the country is recognizing the trending population of older adults and creating an anti-aging beer
  • In Japan: the sale of adult diapers has surpassed those sold for infants
  • In the U.S.: an adult turns the age of 75 every seven seconds and 13% of all online dating services are being utilized by persons aged 65+ and older

With the population aging as whole, in the U.S., the baby boomers will redefine the standards of retirement. These standards are being driven by educated consumers and corporations recognizing the demand of this growing population with expectations and wants that differ markedly from prior generations. If combined into an aggregate economy, the “aging population” would create the world’s third largest driver of global spending. Furthermore, adults above the age of sixty have the highest concentration of wealth in the world, and are living longer now.

 

Not only are adults living longer, they are staying active. A growing majority of these aging adults are the baby boomers who grew up in a counter-culture era soaked in rebellion and quasi-revolution. Dr. Coughlin amusingly quotes the musician Jimmy Buffet describing baby boomers as, “the people our parents warned us about.” This “warning” is being increasingly heeded by consumers and producers. The stereotypical parent of a baby boomer was polite, hardworking, patient and easily appeased, explains Dr. Coughlin. These generational qualities helped shape many of the current products and services for seniors.

 

For context, Dr. Coughlin draws a parallel to product offerings, between the two age groups, using coffee, as an example. The current population in their mid-70’s and older most likely had two options for coffee growing-up: decaffeinated and caffeinated. The younger generation has experienced a multitude of options from which to choose: frappuccinos, lattes, espressos and even white chocolate caramel macchiatos served hot, warm, chilled and iced. “They (baby boomers] are creating a new generational gap, a gap of expectations,” exclaims Dr. Coughlin. That gap is what will drive innovation and pave the way for what Coughlin defines as the Longevity Economy.

 

Dr. Coughlin notes that, in fact, even the word “retirement” has changed meaning throughout time. Originated as a word to describe the stage when a person ran out of “vital life” and ability to perform physical labor, retirement meant one could no longer function as a member of the working economy and likely would result in a person falling victim to poverty. The modern definition of retirement could not be further from its root of origin. Today, people will live almost one third of their adult lives as retirees. With this extended period of time, Dr. Coughlin characterizes retirement as having four phases:

 

  • Ambiguity: Should one keep working or not?
  • Big Decisions: Does one downsize, move or travel?
  • Complexity: Should decisions like housing, healthcare, etc. be  managed by a third party?
  • End of life: When does one begin preparing for the final chapter of life?

As it relates to the first three phases, observed trends indicate that when aging or retired baby boomers move-out of their current homes, they are often down-sizing into smaller townhomes or apartments in the community-at-large or in “active adult” communities. A meaningful component is also relocating, whether to warmer/more hospitable climates, locales that offer amenities of interest and to be closer to children/grandchildren, which may include smaller communal towns throughout the country.

 

A key desire among retirees is for a sense of community. This latter observation is coupled with the fact that advancing technology enables aging adults to remain in their homes longer. Dr. Coughlin cites numerous technologies; for example, utensils that indicate nutritional value of the food people consume, mirrors that can measure blood pressure, and, even a toilet that can gauge nutrient deficiencies. All of these tools possess the capability to upload information to a healthcare database for use by a product/services provider. Brands like Amazon, Walgreens, Best Buy and Walmart are developing in-home platforms for aging seniors that will likely enable adults to remain in their current homes for a longer period of time.

 

To conclude, the experience of retirement, like the approaching baby boomers, will not conform to the past. The notion of retirement or aging, as we have known it, has taken on a new definition with today’s more active and demanding adult consumer.

 

On your own terms

At HJ Sims, we recognize that retirement is neither traditional, nor is it dictated by a calendar or specific age – it’s a mindset, a second-act and an opportunity for a new journey. You are more interested in pursuing passions and creating a lifestyle to match your mindset. This is about your personal growth, identity, freedom and flexibility. Whether your investment goal is to save for milestones or retirement, our wealth experts take our entirement® approach, looking at your entire wealth picture, along with your lifestyle goals and needs. We work tirelessly to construct a portfolio that helps to enrich your life and the lives of your family members for years to come.

 

It’s your adventure: Planning for your journey should be exciting, freeing and empowering. Contact an HJ Sims’ Financial Professional today.  

Market Commentary: Galloping in on a White Horse

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by Gayl Mileszko

It is said that the difference between a good lawyer and a bad lawyer is that a bad lawyer can let a case drag out for several years while a good lawyer can make it last even longer. This is just one of the dozens of jokes we tell about attorneys. But it is no laughing matter when we have been hurt or wronged and need to hire the best legal mind to represent us. In the wake of the Pandemic, hundreds and hundreds of claims have been filed in state and federal courts against airlines, cruise lines, fitness chains, hospitals, colleges, insurers, and nursing homes, among others, challenging decisions made by companies, institutions and government officials during the crisis. These cases reflect much of the devastation, loss, and hardship suffered by individuals, families, employees, patients, residents, citizens, and consumers. They remind us of the steep economic toll that the coronavirus has taken, and that it is still rising.

Hunton Andrews Kurth is just one firm tracking cases and complaints related to the Pandemic. At last count, there were 9,521 in the U.S. Some ask for corrective actions, others seek monetary damages. There are family members who accuse senior care facility managers of failing to protect their residents and public health departments for failing to properly monitor the facilities they regulate. There are nurses suing the hospitals, cashiers suing grocers, ticket takers suing railways where they work for failing to provide proper protective equipment. Concert-goers and frequent flyers and cruisers are seeking cash refunds, students want tuition refunds, prisoners are seeking release, laid off workers are chasing unpaid wages, hospitals are suing patients for outstanding medical debt, restaurants are trying to have their business interruption insurance claims paid. Landlords, wedding reception venues and others are testing force majeure and other legal concepts alongside workplace class actions on compensation and discrimination. No doubt new standards if not precedents will be set in the months, perhaps years, to come.

To forestall waves of action, a number of states have imposed various immunity measures for certain health care providers. Discussion of liability shields or protections for businesses has been underway in Washington for the first time since Y2K. Financial markets have been provided with a form of loss prevention shield for more than a dozen years now. The Federal Reserve has stepped in to protect, if not sustain, and propel markets in every way imaginable with dozens of heretofore unheard-of programs. Starting with tools first brought out in 2008 and new ones devised within days of the 2020 Pandemic’s declaration, the Fed has shielded the so-called free market from itself and kept the global markets afloat as well. Since March of 2009, there has been intermittent volatility, sometimes very pronounced, but the Dow is up 330 percent, the S&P 500 is up 394 percent, the Russell 200 has gained 436 percent, and the Nasdaq has gained 436 percent. Gold prices are up 89% to $1,740, and silver prices have doubled to $25.73. The 2-year Treasury yield has fallen 82% to 0.14%. The 10-year is down 37% to 1.69% and the 30-year has fallen 32% to 2.39%. The 10-year Baa corporate bond yield has dropped 409 basis points to 3.25%. In the tax-exempt market. The 2-year AAA general obligation bond benchmark yield has fallen more than 80% to 0.19%. The 10- and 30-year yields are down 63% to 1.16% and 1.79%, respectively.

This week, the Fed chair and Secretary of the Treasury appear together before the House Financial Services Committee and Senate Banking Committee to discuss the government’s response to the Pandemic plus the fear du jour – inflation – and explain why the Treasury and central bank have to keep galloping in on a white horse to save markets that were meant to be driven by supply and demand, not controlled by central authorities. Our economy is widely expected to surge in the next few months as a result of the nation’s extraordinary vaccination campaign and the multi-trillions of federal stimulus funds. Inflation, as calculated by the PCE (personal consumption expenditures) index will be 2.4% at the end of 2021 according to the Fed’s median forecast. But the Administration is planning another package of relief that could add another $3 trillion to the deficit. There could be some offsetting tax hikes proposed simultaneously or separately. Markets have suddenly turned aflutter over the prospect of big jumps in consumer prices, China’s new posture, the Fed’s decision to end regulatory capital relief for banks, and the resiliency of a Treasury market which will see $183 billion of new sales this week alone.

Municipal bonds have reacted with somewhat of a yawn to most of the goings on in Treasuries and the stock market. The Fed’s plan to keep short term rates as low as possible until 2023 and continue buying $120 billion of corporate and mortgage-backed bonds every month came as no surprise to the tax-exempt market, which has been fueled by all the Democratic leadership talk of tax increases, continued inflows into bond funds and ETFs, and light supply. High yield issuance, the center of most demand, has been paltry. Last week, buyers scooped up $1.25 billion of State of Illinois general obligation bonds at the lowest end of the investment grade scale at Baa3/BBB-/BBB-. The huge demand for bonds from the Land of Lincoln elevated prices to the point that buyers could only register a 2.75% maximum yield which came on term maturities in 2046. Among other higher yielding new issues, the Government of Guam sold $58 million of Ba1 rated refunding bonds due in 2040 with a 2.66% yield. Brooks Academies of Texas borrowed $42.9 million through the Arlington Higher Education Finance Corporation, including non-rated 2051 term bonds priced with a 5% coupon to yield 4.20%; Royal School System came 3 days earlier with a $9.9 million deal due in 2051 with a 6% yield. Oak Creek Charter School of Bonita Springs in Florida sold $17.8 million of non-rated revenue bonds structured with a 2055 term maturity that priced at par to yield 5.125%. As always, we encourage you to contact your HJ Sims representative for our latest views on pricing and our secondary market offerings.

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Market Commentary: Go For It and Dream

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by Gayl Mileszko

Alena Wicker is one of several thousand applicants who just received the life-altering news of her acceptance to college. What makes her stand out is that she graduated from high school at the age of 12 and, for the past 8 years, has had the goal of becoming a NASA engineer. She is pursuing a double major in astronomical and planetary science and chemistry and, if all goes well, her dream will come true when she turns 16. Alena, who begins her studies this summer at Arizona State University. is not the youngest person ever to enroll in and graduate from college. That record is held by Michael Kearney, also homeschooled, who was accepted at the University of South Alabama at the age of eight, graduated in 1994 with a bachelor’s degree in Anthropology at the age of 10, and taught college courses while earning masters degrees in chemistry and computer science by the age of 18. But Alena says she is proof that the stars are the limit if you put your mind to it. In an inspiring message for a pandemic-weary world, she reminds us that: “It doesn’t matter what your age or what you’re planning to do. Go for it, dream, then accomplish it.”

Arizona State University is also the site of another dream come true during COVID-19. After more than five years of planning and 500 laborers on a site that broke ground in February 2018, a new $252 million non-profit intergenerational living and lifelong learning life plan community for older adults opened to its first residents on December 28 just before the start of the spring semester.  Mirabella at ASU was built by bonds on land in the heart of downtown Tempe owned by the university and features 246 independent living units, 52 health care units, an indoor pool, wellness center, physical therapy gym, theater, art museum, lecture hall, salon, spa, dog park, valet parking and four restaurants. It is 20 stories tall with environmentally friendly features and overlooks the Tempe Butte and South Mountain, providing new homes for those with an average age of 76 who are being challenged to become “master learners” by taking one of 117 classes and having full access to the university library, faculty seminars, sporting events, and all the amenities available on the nearby campus. So far fifteen percent of residents have signed on to become mentors for some of the 70,000 students on the largest of ASU’s five campuses. Although other retirement communities with ties to Oberlin College, Stanford University, Berry College, the University of Florida and the University of Michigan, or those planned by universities such as SUNY Purchase, may argue, ASU President Michael Crow dubbed Mirabella at ASU “the world’s coolest dorm.”

Big dreams and bright futures for college frosh, lifelong learning retirees, and millions of others have by no means been quashed by the COVID-19 pandemic. The CNN/Moody’s Analytics “Back-to-Normal” Index currently registers at 83% but hopes and expectations across the country are much higher as vaccinations now total 111 million and the $1.9 trillion stimulus was just signed into law by President Biden. The American Rescue Plan comes on the heels of the $900 billion December aid package and included $40 billion for public and private institutions of higher education, with at least half going toward emergency grants for students, $8.5 billion for rural hospitals, $8 billion for airports, $14 billion for airline payroll support, $30 billion to mass transit, $350 billion in state and local government aid, $1,400 per person stimulus checks for eligible individuals and families, $242 billion of supplemental unemployment insurance through September, and $5 billion for small business. As reflected by the party-line vote, many stimulus provisions were not without controversy. Democrats dubbed it the “largest anti-poverty measure in a generation” while Republicans called the bill a “blue state bailout” and “slush fund that has nothing to do with COVID”, estimating that only 7% of the funding in the bill was directed to fighting the coronavirus through public health spending, and arguing that the excessive spending puts the economy in serious danger of overheating. Moody’s estimates that the Plan could add up to 7 million jobs.

Financial markets have taken a sunnier view of the hundreds of billions that continue to rain down on America and, like much of the country, appear to be betting on a huge post-pandemic boom. The markets long ago assumed passage of another two trillion stimulus without much concern for the details as economic data continues to reflect a recovering economy with only slight inflation and a very upbeat consumer profile. The stock market was jittery again last week in response to a fourth week of rising Treasury yields but closed with the Dow at record highs. Volatility as measured by the CBOE VIX has fallen 28% this month to 20.03. U.S. Treasuries continued their selloff, and auctions for $120 billion of 3-, 10- and 30-year bonds met with some mixed investor demand. Midway through March, the 2-year Treasury yield at 0.15% is up 3 basis points, the 10-year yield at 1.60% is up 20 basis points, and the 30-year at 2.36% is up 21 basis points.

Amid astonishing levels of corporate bond issuance, demand has not tapered off. Last week alone saw $53.5 billion of investment grade corporate issuance and $15.6 billion of high yield corporate sales. Investors did pull $5.33 billion from high yield corporate funds last week but added $1.1 billion to municipal bond funds. There was a fairly heavy new issue muni calendar at $10 billion yet municipal bond prices ended higher as the massive stimulus was seen as supporting sectors across the board, reducing fears of deteriorating credits and the likelihood of increasing defaults. Talk in Washington of the Administration’s plans for tax and infrastructure measures also served to buoy the outlook for tax-exempts. So far this month, AAA general obligation muni benchmarks are down across the board: the 2-year at 0.09% is down 10 basis points, the 10-year at 1.02% is down 12 basis points, and the 30-year at 1.65% is down 15 basis points. This week’s calendar is expected to exceed $10 billion but, once again, with very little in the way of yield offered to income-seeking investors who are reliant on their financial advisors and brokers to patiently sift through secondary market offerings for gems.

The markets remain highly sensitive to Federal Reserve announcements, what is said and not said, and how the statements are phrased. The greatest fears are of rate hikes and inflation coming too soon and too fast. Some traders fear a drop in liquidity if the Fed starts to taper its $120 billion per month bond-buying program now that nine of the emergency lending programs have expired and three more will end on March 31. Without much else to focus on for now, investors clung onto every word, pause and tone in Wednesday’s press conference. Housing starts, building permits, new and existing home sales data, several fourth quarter earnings releases and IPO activity are also drivers for a week where some dream, others accomplish, and a few—as always at this time of year—caution “Beware the Ides of March”.

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Market Commentary: Miracle Vaccines Pave the Road to Recovery

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by Gayl Mileszko

Albert Martin Gitchell was a 28-year-old self-employed butcher living in Ree Heights, South Dakota who was drafted into the U.S. Army as a cook and stationed at Camp Funston, a military reservation of 54,000 troops in Fort Riley, Kansas during World War I. On March 11, 1918, he woke up complaining of a bad cold with a sore throat, headache and muscular pains. He was hospitalized with a 104 degree fever and became the first documented case of the Spanish Flu in the U.S. By noon that day, 107 of Private Gitchell’s fellow soldiers were also admitted for treatment. Within three weeks, more than 1,100 were sick enough to require hospitalization and thousands more were sick in barricades.

By April of 1920, more soldiers had died from the 1918 flu than were killed in battle during the war. Conditions including global troop movements, overcrowding, and poor hygiene helped to spread the flu in waves as it mutated. By the time the pandemic ended in 1921, there were 500 million cases and 50 million deaths worldwide with an extraordinarily high mortality in healthy people in the 20- to 40-year age group. The average life expectancy in America plummeted by a dozen years as there was no vaccine to protect against influenza infection and no antibiotics to treat secondary bacterial infections. Microscopes were unable to see something as incredibly small as a virus until the 1930s. The first licensed flu vaccine and mechanical ventilator did not appear in America until the 1940s. Over the course of the deadly 1918 pandemic, 675,000 Americans perished. The 1918 virus in fact remained the seasonal flu strain until 1958 and it was not until 90 years later, in 2008, that researchers announced what made it so deadly: a group of three genes enabled the virus to weaken a victim’s bronchial tubes and lungs and clear the way for bacterial pneumonia.

One Hundred Years Later, Another Deadly Pandemic

One hundred years after the Fort Riley admission, an unnamed 35-year old man entered an urgent care clinic in Snohomish County, Washington with a four-day history of cough and fever after his return from a family visit to Wuhan, China. He was the first confirmed U.S. case of the novel coronavirus. Hospitalized with viral pneumonia, he was placed in an isolation pod, treated with supplemental oxygen, and put on Remdesivir. Like Private Gitchell a century before, he was lucky and survived. Five days after the experimental treatment, he was discharged. But within two weeks, the first COVID fatality occurred in Santa Clara, California. Twelve months later, more than 28.8 million U.S. cases have been confirmed and more than 523,000 have died. Americans have lost one year of average life expectancy as a result of this virus that has reached around the globe faster than any pandemic in history. And despite all the advances in intensive care, antiviral drugs, and global surveillance over time, the most effective measures have remained the same as in 1918: social isolation, masks, sanitation, quarantines and good nursing care.

Unprecedented Speed of Vaccine Development

Vaccine development is a long, complex process that often takes ten to twelve years of public and private investment and is characterized by a failure rate as high as 93%. The mumps vaccine held the previous record at four short years. But, after 30 years and untold billions of spending, there is still not an AIDS vaccine effective enough to be licensed. So, the speed with which researchers and pharmaceutical companies have responded to the 2019 Pandemic is unprecedented and nothing short of miraculous. As of this writing, 92.1 million vaccines have already been administered. Daily hospitalizations have declined by 74% from the high on January 5. Daily deaths have declined 87% from the high on April 15 and 84% from the most recent peak on February 12.

Lifting Restrictions One Long Year Later

The Centers for Disease Control announced this week that people who were fully vaccinated two weeks ago can now meet safely indoors in small groups without masks. They can dine indoors, hug unvaccinated grandchildren and visit with others who have no pre-existing conditions. Officials still recommend against large events and travel. They still advise wearing masks and social distancing in public spaces, but some states such as Texas, Wyoming and Mississippi, and some companies like Albertsons’s have removed the mask mandate. The White House now says that all American adults will be able to get a vaccination by the end of May and 69% of the public intends to get a vaccine – or already has.

Long-Term Care Facilities

Most attention is, of course, still focused on COVID’s impact on long term care facilities. These include some 28,900 assisted living communities and 15,600 nursing homes with a combined 2.7 million licensed beds, 5 million residents and 1.5 million workers. The COVID Tracking Project reports 1.3 million cases and 174,474 deaths have been reported in 33,639 of these locations as of March 4, 2021. COVID has had an estimated $15 billion impact on senior living communities but this is a needs-based industry and the increasing needs of our aging population will continue to drive its recovery and growth. A recent survey of prospective residents and their adult children by ASHA found that the appeal of senior living communities has actually increased. Since vaccinations began in December, the great news is that there has been a 90% drop in COVID cases in these facilities from 30,000 per week to 3,000, according to the American Health Care Association (AHCA). 80% to 90% of long-term care residents have taken the vaccine in the past three months and many providers are now reporting zero cases. The concern is with staff acceptance, which is still averaging only about 40%. But AHCA and LeadingAge have set a target of June 30 for having 75% of care-providing staff vaccinated.

Vaccine Hesitancy

In 2019, the World Health Organization named vaccine hesitancy – a reluctance or refusal to vaccinate – as one of the ten biggest health threats facing the world. Although the vast majority of Americans (81% according to a recent Pew Research Survey) continue to view the coronavirus outbreak as a major threat to the economy, the Census Bureau reports that 23% will either probably or definitely not get vaccinated. Several of the factors involved include complacency, inconvenience, fear, and lack of confidence. Some believe that natural immunity is more effective than a vaccine, others are worried about safety given the limited amount of research conducted, particularly on pregnant women and women of childbearing years. The U.S. Conference of Catholic Bishops questions one vaccine’s moral permissibility, saying it was developed, tested and produced using abortion-derived cell lines. Quite a few among those we know worry about side effects, tolerability, and long-term effects on immune systems. There are millions who do not get vaccines in general, do not think they need it, are afraid that personal information collected will be used for immigration-related purposes, or have been alarmed by past mistakes in the medical care system. Researchers point out that human evolution has hard-wired us for laziness, so some of us simply don’t want to look into the science, navigate confusing websites, or wait in line.

Issues with Vaccine Mandates

In order to provide safe conditions for customers, safe working environments, reduce illness and hospitalization-related workforce shortages, and return to normal operating practices, employers are reviewing rulings and guidance from the Occupational Safety and Health Administration and the Equal Employment Opportunity Commission. While awaiting availability as well as more data from the FDA and CDC on the efficacy and duration of immunity for the three vaccines currently available, most companies are encouraging but not mandating vaccinations or proof of vaccination as a condition of employment. There is a legal question as to whether an employer can mandate a vaccination that only has the FDA’s emergency use authorization. But to incentivize individuals and groups to take the vaccine, some companies are requiring an educational session to inform decision-making, offering cash bonuses, holding raffles or giveaways. McDonald’s is providing four hours of paid time and Trader Joe’s is giving two hours’ worth of pay. Target offers $15 each way for staff who use Lyft to get to their appointments. Other employers are lessening PPE requirements or eliminating daily temperature checks for those receiving full doses. 

Some companies like Atria Senior Living decided to make vaccinations a mandatory condition of employment for its 11,000 workers. Quite a few other enterprises see a competitive advantage in being able to claim that all employees have been vaccinated and may try to adopt a compulsory inoculation requirement. But collective bargaining agreements may mean negotiations with unions are necessary. And under the Americans with Disabilities Act, workers who do not want to be vaccinated for medical reasons can request an exemption; employers would have to provide reasonable accommodation, such as allowing the employee to work remotely. In addition, if taking the vaccine is a violation of a “sincerely held” religious belief, these workers would also potentially be able to opt out Under Title VII of the Civil Rights Act of 1964. 

Liability

If an employer does choose to mandate the COVID vaccine, experts say that a company is not generally liable should an employee develop side effects from a vaccine; any claims would likely be routed through worker’s compensation programs and treated as an on-the-job injury. Immunity laws and orders offering certain protection from lawsuits arising from the pandemic vary widely by state. Provisions may apply to injuries, deaths, care decisions, and/or property damage, may apply only during the declared emergency, and generally make exceptions for gross negligence and willful misconduct.

Impact on the Municipal Bond Market

A recent study by the Federal Reserve Bank of St. Lois found that the COVID-19 pandemic has affected the U.S. municipal bond market on several different fronts. Demand for municipal bonds had been steady and strong for years as investors sought to meet safety, income and after-tax return goals but perceived risk spiked and a wave of selling began once the pandemic was declared. Bids were disconnected from the fundamental value of many bonds. Prices suffered their biggest weekly decline in 33 years. Yields increased sharply in March of 2020 until the Fed announced that it would accept bonds as collateral for certain loans and established a Municipal Liquidity Facility. Increased expenditures including unemployment aid and health services, along with a decrease in revenue associated with the extension of tax filing deadlines, had an immediate impact on states but most had built up large reserves as a result of ten years of economic growth.

After a period of considerable stress across all sectors in the primary and secondary markets, investors came to realize the essentiality of services such as water, power, and sewer, the value of stable revenue streams, and the difference between full faith and credit pledges versus unsecured corporate bond pledges as bankruptcies began to mount. But high-risk issuers including health care facilities, senior living facilities, sports and entertainment complexes, public transit, and college dormitories were hard hit as were communities reliant upon tourism. Federal relief packages and talk of more aid helped to buoy the market. Debt sales began increasing again in June 2020 as concerns over credit fundamentals eased and the liquidity crisis resulting from huge outflows from mutual and exchange-traded funds ended. Revenue disruptions persist in certain sectors including airports, toll roads and senior care facilities but these are expected to be temporary.

The Muni Market Today

Demand continues to outpace tax-exempt supply, fundamentals remain generally strong, and more federal stimulus is on the way to bolster state, city, airport, school, college and public transit finances. But the size of the latest proposed aid package, along with strong economic data, have raised concerns for inflation, which in turn has produced fresh volatility in stock and bond markets.  Many of the sectors experiencing the greatest stress one year ago, including life care and student housing, are still struggling. Bloomberg Intelligence reports that nine credits with par value of $595 million have become distressed so far this year versus four at this time last year with par value of $171 million. Twelve bonds with par value of $842 million have defaulted in 2021 while the first two months of 2020 saw only $73 million of defaults.  Nevertheless, the vast majority of bonds in the $3.9 trillion muni market are paying on time and in full. Rates are still near historic lows, so borrowers continue to enter the market with new money and refunding issues. Investors have added $24.1 billion to municipal bond mutual funds and ETFs bringing asset totals to $956 billion. The new Administration and Democratic House and Senate bring the potential for tax policy changes; the mere talk of hikes increases the value of tax-exempt securities.

The 2-year AAA municipal general obligation bond yield at 0.13% is 6 basis points lower than where it began the month of March, 1 basis point below where it started the year, and 50 basis points below where it stood one year ago.  The 10-year benchmark yield at 1.11% is 3 basis points lower in March, 30 basis points higher than where it stood at the new year, and 15 basis points above the yield on March 5, 2020. The 30-year yield at 1.76% has fallen 4 basis points this month but is 37 basis points higher on the year and 20 basis points higher than where it stood last year at this time. Municipals have outperformed Treasury counterparts so far in March, year-to-date and over the past year. High yield municipals are returning 1.69% so far this year, leading all fixed income performance with the exception of convertible bonds.

Last week, HJ Sims brought a $102.1 million non-rated deal for Fountaingate Gardens to construct 129 independent living entrance fee units adjacent to the campus of Gurwin Healthcare System on Long Island. Bonds were issued through the Town of Huntington Development Corporation in New York and structured with three term maturities with a maximum yield of 5.375% in 2056. We believe that this is only the second new senior living construction project to come to market since December of 2019 and the strong market reception reflected investor support for this essential service sector. Among other high yield transactions, the Indiana Finance Authority sold $88.8 million of Caa2/B- rated bonds due in 2026 for United States Steel priced at par to yield 4.125%. The South Carolina Jobs-Economic Development Authority issued $17.1 million of non-rated bonds for Horse Creek Academy in Aiken that featured 2055 term bonds priced at par to yield 5.00%. The Public Finance Authority sold $13.6 million of non-rated bonds due in 2051 for Discovery Charter School in Bahama, North Carolina that priced at par to yield 5.50%.

We at HJ Sims understand that this virus is going to be with us for a very long time, even after the pandemic phase passes, and that the life we knew in 2019 will not return in the same form. But today we are heartened by the pace of vaccinations, the dramatic drops in case counts, hospitalizations and deaths, the positive economic trends, the daily announcements of school, restaurant, life care community and stadium re-openings, the recognition of the need for critical infrastructure improvements, the introduction of fantastic new technologies to make our lives safer, the number of non-profits and for-profits reaching out for advice on refinancings for savings and new projects in line with long-term plans that address coming demographic changes. We encourage all readers to take the time to become better informed on the available vaccines and treatments, on how to help build a collective defense against the virus, and on how to encourage family, friends, colleagues and staff to do the same. We thank all the unsung heroes among our readership and, as always, invite information exchanges with our HJ Sims representatives.

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Market Commentary: Angels of the Battlefield

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by Gayl Mileszko

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

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

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

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

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

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

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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

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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.

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Market Commentary: Hero With A Million Faces

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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 | [email protected]

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 |  [email protected], Curtis King: 603.219.3158 |  [email protected] or Ryan Snow: 843.870.4081 | [email protected]

 

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.

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