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Health and Healthcare

Deep Discount for Health Care REIT Secondary Offering

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By Jon C. Ogg Published
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Health Care REIT Inc. (NYSE: HCN) has joined the waves of companies looking to raise capital after strong share price gains. The senior living and health care properties real estate investment trust has sold 15.5 million shares of common stock at $63.75 per share, and the company has granted the underwriters an overallotment option to purchase up to an additional 2,325,000 shares. This is a substantial discount when you consider that the closing price was $66.49 and that the shares were just at $68 this past Monday.

What stands out here is that HCN will be raising gross proceeds from the offering of roughly $988 million from the face value of the sale, or about $1.1 billion if the overallotment option is exercised in full. The company’s market cap was $20.5 billion as of Thursday’s close. Another issue is that Health Care REIT’s dividend yield is now close to 5% again, since its shares have sold off.

Another boost here is that the share sale proceeds are going to the company. HCN said in the filing that it intends to use the capital raised to repay advances under its primary unsecured credit facility. It also plans to use the capital for general corporate purposes, which it specified as saying could be used to invest in health care and seniors housing properties.

Goldman Sachs, RBC Capital Markets, Bank of America Merrill Lynch, Citigroup, Deutsche Bank, J.P. Morgan and Morgan Stanley were all listed as the joint book-running managers for the secondary offering.

Health Care REIT shares were indicated down about 3% and trading around $64.40 in the premarket. Its 52-week trading range is $52.43 to $68.36, and the consensus price target is $66.04.

READ ALSO: 5 Top Hospital Stocks to Buy Getting a Boost From the Affordable Care Act

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.

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