SNH Mulls Equity Offer - Analyst Blog
June 28 2011 - 10:15AM
Zacks
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.
CITIGROUP INC (C): Free Stock Analysis Report
JEFFERIES GP-NW (JEF): Free Stock Analysis Report
SENIOR HOUSING (SNH): Free Stock Analysis Report
UBS AG (UBS): Free Stock Analysis Report
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