Welcome back to The Capital Issue. We are pleased to offer in this edition a guest article on federal environmental assessments, as well as a case study on the largest USDA funding obligation ever made to a Critical Access Hospital. This edition's Senior Living focus invites you to participate and share with your peers your ideas for helping elderly residents adjust to a property renovation. We hope this article and your subsequent postings stimulate conversation on this important topic.
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
If you are financing with federal money and this has not happened to you, it probably will: You find a beautiful site. The Phase I environmental is clean. It is in a desirable part of town, and construction starts in 30 days. Suddenly, someone from a government agency is asking questions and wants to rework everything from the way the buildings are oriented to the reinforcements in the showers. It seems like there are 50 issues they want to discuss. Actually, there are 68 ....
Picture a hospital executive saying to its investment banker, “We have a 56-year-old facility, less than $3 million in cash, and we need $25 million to replace our hospital. Did I mention that we cannot pledge a mortgage?”
Coping with changes in living spaces and daily routines can be particularly difficult for elderly residents. When a rehab-ready apartment or assisted living unit is also an established home, communication with both residents and contractors is key to smoothing the process as much as possible.
Affordable housing financings represent one of the more intricate financial and programmatic endeavors an owner or operator can pursue. Financial structures tend to combine many programs and options to create appropriate solutions. The challenge, then, is to understand the available options and the decision drivers that will affect eligibility for financing programs and the long-term cost of borrowing. It is the combination of these options that can create the most efficient borrowing structure to facilitate preservation while keeping tenant rents low.
Liability Driven Investing (LDI) has become one of the hottest portfolio optimization topics in the investment industry. A popular European investment model, its state-side interest has been driven by new rules requiring that pension plan sponsors recognize unfunded projected pension plan obligations directly on the balance sheet, rather than in the footnotes. Portfolio valuation, then, is reflected in the financial statements, as is the full volatility of the securities market, encouraging pension plan sponsors to invest so as to “smooth” the volatility of plan assets.