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HR Amends Credit Facility

Zacks Equity Research

Healthcare Realty Trust Inc. (HR) has inked an amendment for its $700 million unsecured revolving credit facility.  The move will help the company lower its cost of capital as well as extend the maturities.

In particular, Healthcare Realty’s amendment to the revolving credit facility will lower the pricing of the facility to 1.40% over LIBOR, with a 0.30% facility fee, from 1.50% over LIBOR, with a 0.35% facility fee.    

Moreover, the maturity date of the facility gets extended to Apr 14, 2017, from Oct 14, 2015. This may be further extended, as per the company’s choice until Apr 14, 2018 but for a fee equal to 0.15% of the total commitments.  

The facility involves a consortium of 15 banks with Wells Fargo Securities, LLC – a unit of  Wells Fargo & Company (WFC) and J.P. Morgan Securities LLC, of JPMorgan Chase & Co. (JPM), as Joint Lead Arrangers and Joint Bookrunners.

The move is a strategic fit and provides Healthcare Realty adequate financial flexibility. Moreover, this real estate investment trust has a well-diversified tenant base, with the bulk of its tenants in various outpatient specialties that have distinct demand and revenue sources.

As a result, the company has a steady revenue stream, minimizing Medicare and Medicaid reimbursement risks, unlike that of the senior housing facilities, where tenants historically have a larger private pay component.

Healthcare Realty is scheduled to release its fourth-quarter 2012 results on Feb 20, 2013. The Zacks Consensus Estimate for the fourth-quarter FFO (fund from operations) is currently pegged at 31 cents per share.

The company currently holds a Zacks Rank #3 (Hold). However, another REIT stock that is performing better and is worth a look is Terreno Realty Corp. (TRNO), carrying a Zacks Rank #1 (Strong Buy).

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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