Healthcare Realty Trust Inc. (HR), a real estate investment trust (:REIT), recently disclosed the pricing of senior unsecured notes worth $250 million. The 3.75% senior unsecured notes, which are due 2023, were priced at 99.179% of the principal amount. This capital infusion move is expected to auger well for the company’s financial flexibility, repay debt and meet near-term obligations.
Particularly, the proceeds generated from this notes offering, Healthcare Realty plans to finance the redemption of its 5.125% senior unsecured notes maturing Apr 1, 2014. In this connection, the company has already made an announcement regarding its intention to redeem the notes on Apr 18, 2013 at a redemption price equal to an aggregate of $277.3 million. Healthcare Realty anticipates recording a one-time charge of approximately $12.3 million in the second-quarter of 2013 for early extinguishment of debt.
In addition to financing the notes redemption, Healthcare Realty plans to use funds generated for reducing its borrowings under its unsecured credit facility due Apr 14, 2017 and meet general corporate needs.
For the notes offering, which is expected to close on Mar 26, 2013, J.P. Morgan Securities LLC – a unit of JPMorgan Chase & Co. (JPM), Wells Fargo Securities LLC of Wells Fargo & Company (WFC), and Credit Agricole Securities (USA) Inc. served as Joint Book-Running Managers. A number of companies acted as Senior Co-Managers while U.S. Bancorp Investments Inc. of U.S. Bancorp (USB) and a host of other firms served as Co-Managers for the offering.
Notably, as of Dec 31, 2012, Healthcare Realty had $6.8 million of cash and cash equivalents. Subsequent to the quarter-end, the company sold 1.6 million of common shares under its at-the-market equity offering program (‘ATM’) for roughly $39.7 million. The net proceeds were utilized for funding its acquisitions.
Going forward, we believe that Healthcare Realty is well-positioned with a low risk, highly stable portfolio of physician-oriented medical office buildings as well as clinical and surgical outpatient real estate properties.
Also, the company has almost completed the strategic shift away from a single-tenant/Master Lease model to a multi-tenant operating model, thereby reducing concentration risk and augmenting its probability. This along with the company’s ongoing opportunistic acquisitions, are expected to provide significant upside potential to the stock going forward.
The capital infusion moves are a strategic fit as they help increase Healthcare Realty’s flexibility and position it favorably to pursue investment opportunities and acquisitions, which will go a long way in enhancing its top-line growth.
Healthcare Realty currently holds a Zacks Rank #3 (Hold).
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