Senior Housing Properties Trust (SNH), a real estate investment trust (REIT) which primarily owns private pay senior living communities and medical office buildings across the U.S., has recently announced its decision to issue 6.5 million shares to repay its debt. The company will also grant the underwriters an option to purchase an additional 1.0 million shares to cover any over-allotments.
Jefferies & Company, Inc., the principal operating subsidiary of Jefferies Group, Inc. (JEF); UBS Investment Bank, the investment banking division of UBS AG (UBS); and Citigroup, Inc. (C), a global financial services company, are acting as joint book-running managers for the public offering.
Senior Housing Properties intends to utilize the proceeds from the secondary offering to repay debt under its revolving credit facility. Earlier in the month, the company replaced its existing $550 million unsecured revolving credit facility, scheduled to mature in December 2011, with a new $750 million credit facility. The new credit facility is scheduled to mature in June 2015 and includes an accordion feature to extend the maturity date by a year. In addition, the new facility also includes a feature under which the maximum borrowing capacity could be increased to $1.5 billion.
Senior Housing Properties has one of the most diversified portfolios in the healthcare sector with exposure to nearly all types of facilities. The company leases some of its owned healthcare related and senior housing facilities to third-party operators under “triple net” leases, under which the tenant pays all taxes, insurance, and maintenance for the properties, in addition to rent.
Healthcare is relatively immune to the economic problems faced by office, retail and apartment companies. Consumers will continue to spend on healthcare while cutting out discretionary purchases. The healthcare industry is also the single largest industry in the U.S., based on Gross Domestic Product (GDP). Consequently, healthcare REITs like Senior Housing Properties are well-poised to continue their bull run in the long term.
We presently have a ‘Neutral’ rating on Senior Housing Properties, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ recommendation indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.
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