Welcome back to The Capital Issue. The recent movement of the financial markets has created borrowing opportunities in several sectors. Bill Wilson highlights community hospital borrowing conditions in this edition. We also are pleased to introduce a new program for senior living owners that allows them to take advantage of current market factors to extract equity from their projects. Guest author James H. Levine shares his perspectives on successful HUD closings, and our own Carl Wagner has attempted to clarify some of the many Congressional issues that will come up this year in affordable housing. For those of you with investment portfolios to manage, we offer the Nonprofit Minute's suggestions on investment guidelines, particularly relevant in the current markets.
As always, we welcome your suggestions for content. Additionally, we are considering offering The Capital Issue as a hard copy newsletter.
Thomas R. Green, CEO
Federal borrowing programs administered by the U.S. Department of Housing and Urban Development (HUD) offer some of the most efficient capital available for long-term financing. The process for accessing these low interest rates and long amortizations, however, has several steps that often make the process longer than that of traditional financing. These steps must be completed by various parties, with great attention to detail, from application through closing.
With many community and rural hospitals replacing Hill-Burton-era facilities, Lancaster Pollard recently held a Webinar examining the state of the capital markets for these projects in the Midwest. Several key trends are driving the flow of capital to these facilities. The financial condition of these hospitals is strengthening, and the overall interest rate environment for health care providers remains low. These trends are influencing the cost of capital across the country and creating an excellent borrowing environment for community and rural facilities, a sector often overlooked in analyses examining either only large systems or only Critical Access Hospitals.
Rural rental housing demand remains high, but the supply, particularly of new housing, has decreased. This is in large part due to reduced federal housing assistance. The public and private sectors must collaborate to develop programs that reduce strain on the federal government and continue to produce ample affordable rural housing. A forest of congressional legislation is being proposed related to the affordable multi-family housing industry. Let’s look at a few of the important trees.
An investment policy statement is an integral part of a well-disciplined, well-documented investment strategy. The investment policy statement (IPS) provides the “roadmap” for managing the organizations’ assets. It establishes long-term objectives, assigns responsibility, promotes adherence to the objectives, and defines the management process while providing guidance through ever-changing market cycles.