EXPERT OPINION: A Conversation with Bill Sims

Bill Sims

 

 

 

 

 

 

 

 

 

 

 

 

Bill Sims,
CEO,
Herbert J. Sims

In this "Expert Opinion" interview, Bill Sims talks about the state of the tax-exempt bond market for seniors housing providers and a new bond isue for CCRC expansion in Connecticut.  

  

 

 

 

 

 

 

 

 

 

 

 

 


Listen now     Read the transcript

Mr. Sims is nationally known for his expertise in the senior living industry, where he has overseen the financing of hundreds of projects since he joined the firm in 1973. His expertise also includes mergers and acquisitions as well as the restructuring and refinancing of distressed properties. In addition to working with investment banking clients, Mr. Sims oversees the firm's retail and institutional distribution of securities. He has been a guest speaker at dozens of investment seminars and is the author of numerous articles.

Over the past 30 years he has lived through the ups and downs of various segments of the industry and has valuable insight into the planning for future success of senior living providers.  He serves on the Board of Directors and is Treasurer of a non-profit senior living company.   Mr. Sims was honored by Aging in America Inc. in 2005 for his contributions to senior housing.
Prior to joining Herbert J. Sims & Co., Inc., Mr. Sims worked in the bond department of Merrill Lynch where he served as a liaison between the branch offices nationwide and the underwriting and trading departments in New York City.
Mr. Sims graduated from the Hotchkiss School and received his Bachelor of Arts degree from Yale University. He attended the Stanford University Graduate School of Business and earned his Masters of Business Administration degree from New York University.

Contact Information:
William B. Sims
Chief Executive Officer
Herbert J. Sims
Southport, CT
(203) 418-9001
wsims@hjsims.com

Read the interview transcript:

Steve Monroe:
I'm here with Bill Sims, CEO of Herbert J. Sims, at the AAHSA conference here in Chicago.  Bill, the tax-exempt market has picked up quite a bit in the last few months.  What's happened?  What's really changed out there to get investors back in?

Bill Sims:
Well, a couple things, Steve.  First of all, beginning last January, the tax-free bond funds every week received more money than was taken out.  So it had positive inflows every week from January 1 through the end of September.  And the money just kept building up and building up.  As US government rates stayed low and as the fear of taxes have gone higher, people are looking for more and more returns.  They're putting their money into tax-free bond funds, and particularly beginning in the summer, more and more money was going into high-yield tax-free bond funds so they could get more money.  In turn, the high-yield bond funds are going to buy more senior living high-yield tax-free bonds.

Steve Monroe:
And senior living is usually considered to be high yield?

Bill Sims:
Sure.

Steve Monroe:
Unless it has credit enhancement.

Bill Sims:
Yeah.  And most senior living bonds on their own are Triple B rated or non-rated.

Steve Monroe:
And is it better in today's market to go without enhancement and be high yield, or is it cheaper to go with the enhancement?

Bill Sims:
Well, it's always cheaper, Steve, to go with enhancement, but the problem has been that the banks are still very restricted in what they do.  So obtaining the enhancement is just too difficult for most borrowers at this point.

Steve Monroe:
And everyone's talking about tax rates going up next year with health care reform and all the deficits going on at the federal and state level.  Do you see this demand for tax-exempt bonds and high-yield bonds going up?

Bill Sims:
I sure do, Steve.  The demand is going up for several reasons.  First, during the fourth quarter of 2008 meltdown, the people in the Baby Boomer generation who thought they had retirement set aside, all of a sudden found out that maybe they didn't, given the equity market’s decline.  They've been burned now in 2000 with the NASDAQ and the high-tech stuff.  They were burned in '08 with basically everything.  And now they're saying, "I don't have that much time left before I want to retire.  I want to make sure my money's there.  I want to make sure I have an income."  That argues for bonds.  High taxes argues for tax-free bonds.  So that's why all fixed income is getting inflows compared to equity, and that's why tax-free bonds are getting more inflows, just because of higher taxes coming down the pike.

Steve Monroe:
And talking about tax-free bonds, you are about to price an $88 million bond issue for the Whitney Center in Connecticut.  Can you tell me a little bit about that offering and what it's going to do?

Bill Sims:
Sure.  It's an $88 million tax-free bond issue, tax free in Connecticut as well as federally.  It's a terrific community that's been in existence about 30 years.  It has full occupancy.  They're expanding.  They're building about 80 more units.  They're also putting in all new common facilities because they're 30 years old.  They have to refresh them.  The numbers on it are very good.  They're projected at 491 days cash on hand and cover their debt service by two times.  So it's just a terrific investment.

Steve Monroe:
So is the $88 million bond, is that something more of the bond funds will be buying, or will there be some retail interest?

Bill Sims:
Well, Steve, because we're involved, we heavily believe in retail, and so we would expect the distribution to be broad among the bond funds as well as our own retail individual accounts.

Steve Monroe:
And the fourth quarter is looking up on just the whole bond financing market for you?

Bill Sims:
It sure is.  We think we're going to close in the fourth quarter about seven or eight bond issues.

Steve Monroe:
Oh, great.  How is 2010 looking?

Bill Sims:
I don't know.  I'm still trying to get 2009 done.  I'll deal with '10 on January 2.

Steve Monroe:
All right, that's fair enough.  Thanks for spending some time with us today.