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Financing Options For Nonprofit Senior Living Organizations

December 18, 2012

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Written By: Kassem K. Matt And Gerald M. Swiacki, Lancaster Pollard & Co.

America’s
aging population is expected to create a demand for new and expanded services
in our nation’s senior living communities, as the senior citizen population is
expected to grow from six million to 20 million by the year 2050. Baby Boomers,
who will be the next generation to utilize such communities, are expected to
look for communities that will enhance their quality of life as they continue to
remain active throughout their elderly years. Long-term care providers have
recently adapted to changes in payer models and are continually seeking methods
to increase their marketability by adding amenities such as libraries, pools
and walking paths, and by extending service lines. Therefore, the need to
access capital to meet these changing demands is as important now as it will be
in the future.

Today’s
new long-term care residents are generally older, have higher acuity levels,
and have a greater need for dementia and memory care units. More residents are
also seeking community-like settings, putting pressure on organizations to
transform their traditional institutional environments into this increasingly
popular model of care. Providers also face the continuous need to enhance
technology by adopting electronic health records and adding features such as
motion detectors and health monitoring devices as well as wireless service for
tech-savvy residents. Repurposing or repositioning communities and modernizing
physical plants and technology will require capital expenditures.

This
paper is designed to demystify several long-term financing options for
nonprofit senior living providers and describe the advantages and disadvantages
of each to help their organizations fulfill their missions and operate in
perpetuity. First, as a necessary preamble to the discussion of various
financing options, this paper outlines the relationship between a provider’s
strategic plan for future operations and its financial plan. Then, capital funding options are discussed. Each option is a viable financing vehicle in
normal market conditions. However during a major economic downturn, such as the
one that began in 2008, providers are more challenged to find cost-effective
and term-favorable funding solutions. In such risk-averse markets government
agency loan programs, like FHA mortgage insurance, may be a compelling funding
alternative as other finance options are temporarily sidelined or their
effectiveness is temporarily diminished. In these times advice and perspective
from your trusted advisor is of the greatest value.

Further,
an organization has the opportunity to issue debt on its own, or with
commercial or agency credit enhancement, and each option is detailed in this
paper. Therefore, the paper also explains how nonprofit senior living
organizations are perceived by the capital markets. Part II outlines specific
long-term debt financing options, and Part III rounds out the financing
structure discussion by highlighting the critical role financial risk
management plays in an organization’s financial plan. Finally, several appendices provide technical
insights.

Funding
a nonprofit senior living organization’s growth through the most appropriate
financing methods helps ensure the proper maintenance of its capital structure.
A strong capital structure is at the foundation of an organization’s credit
strength and, as such, is critical to its ability to optimally fund
organizational growth, generate operating income, and deliver enhanced
services.

The
text above is the introduction to the white paper. Download the full document: Financing Options For Nonprofit Senior Living Organizations to learn about this important issue.

Lancaster Pollard & Co. underwrites debt
securities for seniors housing and care providers and is a registered
broker/dealer with the Securities and Exchange Commission (SEC) and a member in
good standing of the Financial Industry Regulatory Authority (FINRA), Municipal
Securities Rulemaking Board (MSRB) and Securities Investor Protection
Corporation (SIPC). Lancaster Pollard Mortgage Company provides additional
capital financing options by providing access to mortgage insurance and
government agency programs, including Fannie Mae, the Federal Housing
Administration (FHA/HUD), Government National Mortgage Association (GNMA) and
is a Multifamily Accelerated Process (MAP) lender.

Lancaster
Pollard Investment Advisory Group is an independent, SEC-registered investment
advisor that exclusively helps nonprofit organizations optimally position and
maintain their investment portfolio to last the life of their mission by
managing total financial risk, rather than just investment-associated risk.