Health Care REIT Secondary: When The Large Want To Get Larger (HCN)

Some large REITs have ambitions to grow even larger.  News is out that Health Care REIT, Inc. (NYSE: HCN) sold some 18,000,000 shares of its common stock at $53.50 per share to raise gross proceeds of $963 million or up to $1.1 billion if the overallotment option is exercised.

As far as the use of funds, Health Care REIT intends to use the proceeds from this secondary offering “to repay advances under its unsecured lines of credit, to repay other outstanding indebtedness and for general corporate purposes, including investing in health care and seniors housing properties.”

Where this story gets interesting is that the REIT still has a 5.3% dividend yield and some investors worry that REITs can use secondary offerings to maintain their dividends.

BofA Merrill Lynch, Deutsche Bank Securities, J.P. Morgan, UBS Investment Bank and Wells Fargo Securities acted as joint book-running managers for the offering. The company has granted the underwriters an option to purchase up to an additional 2,700,000 shares during the next 30 days to cover over-allotments, if any.

Before the effects of this offering, the market cap is listed on Yahoo! Finance as being $10.4 billion at $54.19 where the stock closed on Tuesday.  This was a $57.00 stock just last week and the 52-week trading range is $41.03 to $57.66.