The Capital Issue

April-May 2013

So far this year, the economic forecast can be compared to the variable spring weather—a mixed bag of good and not-so-welcomed news.

The economy began showing positive signs of growth in the first quarter of 2013. There were increases seen in manufacturing output, home sales and automobile purchases. Additionally, single family home prices have increased and the Dow Jones Industrial Average hit an all-time high, with year-to-date gains of over 11%.

However, weak job gains in March took some momentum from the improving economy and caused the biggest weekly decline in share prices so far this year. Moreover, some analysts warn that federal spending cuts have just begun and could slow employment growth in the months ahead.

But there are reasons to be cautiously optimistic. Low interest rates as a result of continued quantitative easing from the Federal Reserve have contributed to the financing activity and reduction of interest expenses for market participants. This should continue in the near future. Lower unemployment and the wealth effect of a stock market recovery have removed some of the malaise that dominated headlines coming out of the market meltdown just a few years ago. Market optimism can be self-fulfilling.

This edition of The Capital Issue features a mix of topics as well. The lead article discusses steps providers can take to manage construction project costs. Recent financings highlight how smaller hospitals can access capital for big projects. A discussion about nonprofit and for-profit stereotypes provides a better understanding of both segments of senior living providers. We also take a look at HUD’s plan to allow more flexibility in leveraging financing sources to renovate affordable housing stock. Lastly, The Fiduciary Focus explains the oversight necessary to assess an investment manager’s performance.

If you have any questions about the articles, I encourage you to reach out to the authors for more information.

Tom Green, CEO

Managing Costs: The 411 on Organizing Your Construction Project
4/16/2013

Managing Costs: The 411 on Organizing Your Construction Project

You remember the time, back in the day before 2008 when the construction pipeline was flush with major renovations and new construction for both senior living and health care providers?

Access: How Small and Midsize Hospitals Are Obtaining Low Cost Capital
The For-Profit Versus Nonprofit Conundrum
4/14/2013

The For-Profit Versus Nonprofit Conundrum

The senior living industry offers an interesting opportunity to observe both for-profit and nonprofit organizations.

A RAD Plan To Preserve Affordable Housing
4/13/2013

A RAD Plan To Preserve Affordable Housing

The preservation and improvement of the nation’s affordable rental housing stock is a goal perennially at the forefront of the affordable housing industry. According to recent HUD estimates, the public housing supply has a backlog of at least $25.6 billion in unmet capital needs. In this era of sequesters, budget cuts and austerity, it can be extremely difficult to find the funding necessary to meet those needs. Enter the U.S. Department of Housing and Urban Development’s (HUD) budget-neutral Rental Assistance Demonstration (RAD) program.

The Long Goodbye: The Decision To Terminate an Investment Manager
4/12/2013

The Long Goodbye: The Decision To Terminate an Investment Manager

Due diligence and investment manager review are critical to hiring an investment manager. Much has been written about the important aspects of finding the best investment manager for the needs of the portfolio. The same filters may be used to terminate an existing relationship.