Ziegler Capital Markets on Recent Economic Concerns

By Richard Shank

Ziegler Capital Markets issued a summary statement detailing the impact that the economic downturn and turmoil in the capital markets have had on senior living clients.

The U.S. House and Senate recently passed a $700 billion financial bailout of the capital market. During the legislative process and afterward, global stock exchanges have experienced a highly volatile climate. The DOW Jones Industrial Average has dipped below 10,000 points for the first time in nearly a decade. Similarly, European and Asian markets are experiencing steep declines. These declines are coming on the heels of a capital freeze on commercial paper, business-to-business loans, the municipal bond market, and uncertainty in the personal loan segment of the market.

Zeigler Capital Markets’ analysis suggests that senior living resident operators should expect this volatility to lessen once the new liquidity from the bailout and a series of steps by the Federal Reserve Bank work through the primary markets. The short-term market has seen some interest rate relief and they expect other segments of the capital market to adjust accordingly.

Long-term rates for senior living borrowers will most likely remain near the 15-year average. This means the historic lows of the past year have reversed course and are trending upward toward the average. Despite this leveling out of borrowing rates, the oversupply of housing, continued pressure on long-term borrowing, and job losses are creating increased uncertainty within the market.

Zeigler recommends that each senior living provider assess their unique market position along with their capital advisors in order to strategically navigate these troubled markets.

Source: Zeigler Capital Markets Press Release (October 2008).

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