Health Care REIT Inc. (HCN), a leading health care real estate investment trust (REIT) that operates senior housing and health care real estate, has recently completed its secondary offering of 13.8 million common shares at $58.75 each, including 1.8 million shares sold to underwriters to cover the over-allotment options.
Health Care REIT raised approximately $1.1 billion of gross proceeds from the offer. The company intends to utilize the proceeds to repay debt under its unsecured line of credit and other outstanding debt.
BofA Merrill Lynch, the investment banking and wealth management division of Bank of America Corporation (BAC); Morgan Stanley (MS) – a global financial services firm; Barclays Capital Inc., the investment banking division of Barclays PLC (BCS); J.P. Morgan Securities LLC, the investment banking division of JPMorgan Chase & Co. (JPM); UBS Investment Bank, the investment banking division of UBS AG (UBS); and Wells Fargo Securities, part of Wells Fargo & Company (WFC) acted as joint book-running managers for the offering.
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 revenues and operator coverage ratios. Consequently, we maintain our ‘Neutral’ recommendation on Health Care REIT, which currently has a Zacks #3 Rank that indicates a short-term ‘Hold’ rating.
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