HCP Inc (HCP) recently announced the pricing of $450 million of 3.75% senior unsecured notes, scheduled to mature in 2019. The transaction is expected to generate net proceeds of approximately $443.7 million. HCP expects to utilize the proceeds to repay the debt under its revolving credit facility and for general corporate purposes. The offering is slated to close on January 23, 2012.
HCP has a conservative approach toward financial management given its active debt-to-equity management, coupled with efficient maintenance of multiple sources of liquidity like revolving credit facility, access to capital markets and secured debt providers, and divesture of assets. The financial flexibility enables the company to seize potential investment opportunities. At quarter end, the company had cash and cash equivalents of $44.9 million.
HCP reported FFO (funds from operations) of $259.6 million or 63 cents per share in the third quarter of 2011 compared with $96.1 million or 31 cents per share in the year-earlier quarter. Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
HCP is the leading medical REIT in the US with one of the largest and most diversified portfolios in the healthcare sector with exposure to all types of facilities. The product diversity of the company allows it to capitalize on opportunities in different markets based on individual market dynamics, and provides a hard-to-replicate competitive advantage over its peers.
HCP currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Health Care REIT, Inc. (HCN) holds a Zacks #2 Rank, which implies a short-term Buy rating.
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