Health Care REIT Inc. (HCN), a real estate investment trust (REIT) that operates senior housing and health care real estate, has recently announced plans to offer 10.0 million common shares at $43.75 each to raise cash. The company had earlier announced its offer of 9 million shares. Health Care REIT will also grant the underwriters an option to purchase an additional 1.5 million shares to cover any over-allotments.
BofA Merrill Lynch, the investment banking and wealth management division of Bank of America Corporation (BAC); J.P. Morgan Securities LLC, the investment banking division of JPMorgan Chase & Co. (JPM); and UBS Investment Bank, the investment banking division of UBS AG (UBS) are acting as joint book-running managers for the offering.
Health Care REIT expects to raise gross proceeds of approximately $503.1 million from the offer, including the full execution of the underwriters’ over-allotment option. The company intends to utilize the proceeds for acquisitions due to distressed selling by property owners who are unable to refinance their assets.
Health Care REIT invests across the full spectrum of senior housing and healthcare real estate properties. Headquartered in Toledo, Ohio, the company also provides an extensive array of property management and development services.
Founded in 1970, the company was the first REIT to invest exclusively in healthcare facilities. Health Care REIT provides senior housing operators and healthcare systems with a single source for facility planning, design and turn-key development, property management, and monetization or expansion of existing real estate.
However, deep cuts in Medicare have been proposed over the next five years by reducing or freezing payments to skilled nursing facilities, hospitals, and other healthcare providers. With a large portion of revenues being determined by government payout rates, forces beyond the company’s control could negatively affect revenue and operator coverage ratios. Consequently, we maintain our Neutral rating on Health Care REIT, which currently has a Zacks #3 Rank that indicates a short-term Hold rating.
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