GOV Secondary: 7% Government Dividend Goes On Sale

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Government Properties Income Trust (NYSE: GOV) may be offering new shareholders another chance to get in. The government-property management REIT announced on Monday that it has commenced a public offering of 7,000,000 common shares. Based upon the current discount to the closing bell, the offering would raise close to $170 million. The market capitalization at the close was $1.15 billion.

The real estate investment trust said that it plans to use the net proceeds of this offering to repay amounts outstanding under its revolving credit facility and for general business purposes. Those general purposes were said to include potential acquisitions.

The joint book-running managers were listed as Morgan Stanley, BofA Merrill Lynch and RBC Capital Markets. The co-lead managers for this public secondary offering are Citigroup, Jefferies and UBS Investment Bank. It is contemplated that the underwriters will also be granted a 30-day option to purchase up to an additional 1,050,000 common shares, although we do not use the over-allotment option shares in calculating that $170 million projected amount.

We would note that this REIT is one of the few that still yield close to 7%. That being said, the REIT closed at $24.35 and hit a high of $24.67 today which is only 20-cents shy of the 52-week high. Government Properties Income Trust is down 3.5% at $23.68 after the news of the offering. Thomson Reuters lists a consensus price target of $22.50 on this one, but that price target may be lifted after the analysts get to cover this one after the offering.

JON C. OGG

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