The Capital Issue

Summer 2010

Welcome back to The Capital Issue. We're seeing the capital markets opening back up slowly, and projects that had been temporarily shelved are now moving forward. This edition provides a basic introduction to an oft-misunderstood financing tool: the derivative. We also take a look at investment portfolio rebalancing, housing inspections and the intriguing concept of senior living households. Special thanks to guest author Mike Johns of QHR for insights into items hospitals should consider in an acquisition or affiliation. If you have any questions on these topics or would like us to visit in person to explain them, please don't hesitate to contact us.

Thomas R. Green, CEO

An Introduction to Caps, Floors, Collars and Swaptions
7/5/2010

An Introduction to Caps, Floors, Collars and Swaptions

Organizations seeking to stabilize cash flow, mitigate susceptibility to interest rate swings or otherwise structure a desired interest exposure should consider the variety of liability-hedging tools available to mitigate interest rate risk and volatility on existing debt. These tools - including caps, floors, collars, swaps and swaptions – are negotiated contracts that can provide fairly precise levels of interest rate control over a specified time period. Additional benefits include creating a more flexible financial structure, reducing borrowing costs, matching rate-sensitive assets and liabilities, and diversifying financial risks and/or increasing investment returns.

Considerations for Acquiring or Affiliating with Another Hospital
7/4/2010

Considerations for Acquiring or Affiliating with Another Hospital

The economic downturn and resulting restricted access to capital have caused many hospitals to consider a partner or other affiliation strategy. Declining volumes and the deteriorating payer mix, a result of high unemployment rates, are further forcing these discussions – as are the seemingly countless opportunities for capital rich hospitals to acquire struggling, undervalued hospitals.

fha
The Financial Viability of Building and Operating Household Projects
7/3/2010

The Financial Viability of Building and Operating Household Projects

Once considered an impractical fringe approach, senior living practitioners and other stakeholders now accept – if not embrace – the concepts of the household model. With the fundamental precept of emphasizing the dignity of the individual through resident-directed care in a home-like setting, most people can agree that the household model is a goal to which senior living organizations can aspire. But is it financially viable?

Improve your Physical Inspection Score
7/2/2010

Improve your Physical Inspection Score

The Real Estate Assessment Center (REAC) conducts approximately 20,000 physical inspections of projects owned, insured or subsidized by the Department of Housing and Urban Development each year. The U.S. Department of Agriculture and state housing finance agencies will require similar inspections for USDA and tax credit projects, respectively. By becoming more familiar with the inspection processes, affordable housing providers can significantly raise their inspection scores, maintain future financing mechanisms and identify possible repair items.

When and Why to Rebalance a Portfolio
7/1/2010

When and Why to Rebalance a Portfolio

The last issue of the Nonprofit Minute discussed the perils that can occur when investors unsuccessfully try to time the market (“The Math and Mentalities of Market Timing,” Spring 2010). Another way in which investors unknowingly time the market is through the lack of a disciplined portfolio rebalancing policy.