Post-recession demand for new and expanded senior living services continues to increase, and Lancaster Pollard has updated its nonprofit senior living finance guide to accessing capital at a reasonable cost to reflect current trends.
The national investment banking, mortgage banking, and investment advisory firm, headquartered in Columbus, Ohio, recently released the updated “Financing Options for Nonprofit Senior Living Organizations” which contains insight pertaining to new construction, renovation, refinancing, and acquisitions.
“We continually update the guide so that the descriptions of the financing options are as accurate as possible,” said Lancaster Pollard CEO Tom Green. “Nonprofit long-term care providers want to provide quality of life for their residents as well as to increase marketability by updating and modernizing facilities to add amenities and services. This requires capital expenditures and these guides will aid nonprofit providers in understanding the complexities of financing in today’s economy.”
The current version of the guide highlights four trends seen in nonprofit senior living finance, including the return of tax-exempt, fixed-rate, unenhanced bonds, which Lancaster Pollard calls a “viable financing structure” for rated or stronger, non-investment grade providers as credit spreads have tightened.
Another trend is the use of taxable securities with FHA-backed mortgage insurance by nonprofit senior living providers. The typical interest rate advantage of tax-exempt bonds compared to taxable bonds has narrowed at many points along the yield curve, said Brendan Healy, a vice president at Lancaster Pollard and one of the authors of the guide.
“Bank qualified bonds and other private placements have virtually replaced the once-popular variable rate demand bond structure enhanced with bank letters of credit,” he said, citing Bloomberg stats when 2013’s letter of credit dollar volume (from January through April) is annualized, it’s about 70% less than 2012’s volume.
The use of combination structures is another trend, according to Healy, such as private placements combined with notes or FHA-insured bonds to accomplish objectives such as refunding and reducing variable interest rate exposure.
Other topics in the guide include integrating strategic plans and capital financing and risk management and the role it plays in an organization’s financial plan.
Written by Alyssa Gerace