Education Realty Trust Announces Stock Offering - Analyst Blog

Memphis, TN-based, Education Realty Trust, Inc. EDR recently announced an underwritten public stock offering of 19.8 million shares. Moreover, as part of the transaction, the real estate investment trust (REIT) intends to offer the underwriters an opportunity to buy an additional 2.97 million shares within 30 days of the offering.

The joint book running managers of the offering include Merrill Lynch – a subsidiary of Bank of America Corporation BAC, RBC Capital Markets – a part of Royal Bank of Canada RY and KeyBanc Capital Markets – a division of KeyCorp. KEY.

Though stock offering is a common method of fund raising for companies, there are pros and cons associated with the same. While the proceeds from the offering can be meaningfully utilized to boost the companies' business, stock offering can actually result in dilution of shares.

We believe this is what happened for Education Realty Trust. The company's after trade stock price movement slumped nearly 3% following the news release after the closing bell on Wednesday.

Nevertheless, the funds to be raised will support Education Realty Trust's long-term growth prospects. The company plans to utilize a portion of the net proceeds to finance the acquisition of The District on Apache at Arizona State University. The remaining fund will be used for general corporate needs or to lower the amounts outstanding under the company's unsecured revolving credit facility.

Education Realty Trust currently carries a Zacks Rank #3 (Hold).