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Healthcare Realty to Reap $79M

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Healthcare Realty Trust Incorporated (HR), a real estate investment trust, expects to raise around $79.2 million as gross proceeds from its public offering of 3 million common shares. This will help increase its liquidity.

In particular, the capital raised through this offering would be utilized for financing the purchase of healthcare facilities, debt payment and for meeting other corporate needs. Though the stock offering will lead to share dilution, the debt repaying move will reduce interest expenses. In addition, stepped-up acquisition activities would help expand the company’s overall property portfolio, which will go a long way in enhancing its top line.

The sole book-running manager for the offering is J.P.Morgan – a part of JPMorgan Chase & Co. (JPM).  The offering is expected to be closed on or about Jul 19, 2013, subject to customary closing conditions.

Notably, as of Mar 31, 2013, Healthcare Realty had $94.2 million of cash and cash equivalents, compared with $6.8 million at the end of the prior quarter. During first-quarter 2013, the company raised $39.7 million through its at-the-market equity program for funding recent 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.

In addition, 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. This along with the company’s ongoing opportunistic acquisitions, are expected to provide significant upside potential to the stock going forward.

Two other REITs which have recently announced a public offering include Gladstone Commercial Corp. (GOOD) and Chatham Lodging Trust (CLDT).

Healthcare Realty is scheduled to report its second-quarter results after the market closes on Jul 30, 2013. The Zacks Consensus Estimate for FFO (funds from operations) per share for the upcoming quarter is pegged at 29 cents per share.

Healthcare Realty currently holds a Zacks Rank #3 (Hold).

Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.

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