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Healthcare Realty (HR) Prices Offering of 3.25M Common Stock

Zacks Equity Research

Healthcare Realty Trust Incorporated HR recently announced its plans to raise fresh capital by issuing 3.25 million shares of common stock through a public offering. The company expects gross proceeds of $102.1 million. This is before deducting the estimated offering expenses and underwriting discounts, and before assuming exercise of underwriters' option.

Further, as part of the offering, Healthcare Realty will give underwriters a 30-day option to purchase up to an additional 487,500 shares.

The offering, subject to fulfillment of customary closing conditions, is expected to close on or around Mar 19.

The company plans to spend the proceeds for general corporate purposes, including targeted acquisition and development of outpatient healthcare facilities. This will be accretive for long-term growth. Further, remaining net proceeds will be used to repay borrowings under its unsecured credit facility, and/or to invest in interest bearing bank accounts, as well as readily-marketable, interest-bearing securities.

The common stock offering is a strategic fit as it boosts the company's financial flexibility and helps reduce financial obligations efficiently. Moreover, it provides ample scope for deploying capital in long-term growth opportunities and rewarding higher returns to stockholders, at the same time.

Shares of this Zacks #3 (Hold) Ranked company have outperformed its industry over the past six months, gaining 6% compared to the industry’s rally of 5.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Importantly, the company is leveraging on the soaring demand for medical office buildings (MOBs), which has largely fueled outpatient medical growth. The heightening popularity of MOBs and outpatient facilities can be tied to the fact that these are considered the safest healthcare realties. This is because MOBs are less vulnerable to reimbursement and regulation changes, and have predictable revenue streams compared with other healthcare real estate assets with similar exposure.

Going by statistics, the U.S. hospital and outpatient care center market is projected to grow from $1060 billion in 2016 to more than $1275 billion by 2020. While companies like While Healthcare Trust of America HTA and Physicians Realty Trust DOC have been benefiting from their existing MOB footprint, peers like HCP Inc. HCP and Ventas Inc. VTR are emphasizing on strategies to invest more in these healthcare assets.

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