Will Health Care REIT's Share Offering Boost Liquidity?

Health Care REIT, Inc. HCN is projected to reap around $988 million (or $1.1 billion, if underwriters' option is fully exercised) in proceeds from the recently declared common shares offering. The company priced the 15.5 million offering at $63.75 per share. Also, this healthcare real estate investment trust (REIT) provided underwriters a 30-day option to buy additional common shares of up to 2.3 million.

The company plans to use the generated proceeds for paying off advances under its main unsecured credit facility as well as meet investment needs in health care and seniors housing assets. A consortium of financial institutions such as – JPMorgan Chase & Co. JPM, The Goldman Sachs Group, Inc. GS and Citigroup Inc. C – assisted Health Care REIT in this public offering.

The offering is a strategic fit as it would reduce interest expenses and strengthen the liquidity position of Health Care REIT. However, the dilutive effect of this offering on the shares cannot be avoided. Nevertheless, increased financial flexibility will help Health Care REIT to make strategic investments and enhance its portfolio quality.

In this context, last month, the company declared major buyouts of Gracewell Health Care business with Sunrise Senior Living (read: Health Care REIT Buys Gracewell Assets, Extends Sunrise Ties); and HealthLease Properties REIT (Health Care REIT to Acquire HealthLease for $950 Million). Also, most recently, the company stated its projected acquisition pipeline of around $1.7 billion of properties for the second half of 2014. We believe that such strategic portfolio acquisitions would serve as growth drivers for Health Care REIT.

Health Care REIT currently carries a Zacks Rank #3 (Hold).