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Healthcare Realty Taps Debt Market With $300M Notes Offering

Healthcare Realty Trust Incorporated HR has tapped the debt market with a senior unsecured notes public offering with the principal amount of $300 million. The notes are priced at 99.189% of the principal amount and will likely raise net proceeds of $294.8 million.

The 2.05% senior unsecured notes are due in March 2031. The securities will yield 2.137% to maturity. Subject to customary closing norms, the offering is anticipated to close on Oct 2, 2020.

The company intends to allocate the net proceeds from the offering to redeem all of its outstanding 3.75% senior notes due 2023. Moreover, it expects funds to be used for other general corporate needs, including payments of the outstanding amount under its unsecured credit facility due 2023, its unsecured term loans due 2024 and 2026, and/or other mortgage notes payable.

In relation to its early extinguishment of the notes, Healthcare Realty Trust estimates a charge of $21.5 million in the fourth quarter. This includes $1.1 million of unamortized costs and discounts.

Notably, the company’s efforts to strengthen its liquidity in these testing times and tap the debt market amid a low interest-rate environment are strategic fits. Moreover, through the offering, the company can access to debt at a cheaper rate of 2.05% instead of 3.75% of the notes that will be redeemed.

Moreover, as of Jun 30, it had cash of $43.7 million and $700 million available on its revolver. Also, Healthcare Realty Trust’s financial policy approach underlines a disciplined debt and equity funding strategy.

In fact, the utilization of its at-the-market (ATM) equity program in the second quarter (for 1.1 million shares that generated $32.9 million in net proceeds) along with the notes offering indicates this consistent capital-sourcing policy.

However, the notes offering increases the company’s long-term financial obligation.

It carries a Zacks Rank of 3 (Hold) at present. Shares of the company have lost 14.1% compared with the industry’s decline of 10.1% over the past year.

 


Stocks to Consider

Alpine Income Property Trust, Inc.’s PINE funds from operations (FFO) per share estimates for 2020 have been revised 4.4% upward to $1.18 over the past month. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Duke Realty Corporation’s DRE Zacks Consensus Estimate for 2020 FFO per share has been revised 3.5% upward to $1.49 over the past two months. The company currently carries a Zacks Rank of 2.

Sabra Healthcare REIT, Inc.’s SBRA FFO per share estimates for the ongoing year have been revised 1.2% upward to $1.74 over the past month. The company currently carries a Zacks Rank of 2.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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