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EPR Offers Shares to Reduce Debt

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In order to pay off its outstanding debts, the specialty real estate investment trust (REIT), EPR Properties (EPR - Free Report) priced the underwritten public offering of 3.6 million common shares. The offering is anticipated to close by Oct 23, subject to customary closing conditions.

In particular, EPR Properties expects to garner around $176.8 million in gross proceeds (before deducting underwriting discounts and estimated offering expenses) from the offering. The company plans to utilize the proceeds for paying off outstanding debt under its unsecured revolving credit facility, which was roughly $160.0 million as of Oct 16. The remaining net proceeds will be used for meeting other corporate needs.

KeyBanc Capital Markets – a subsidiary of KeyCorp. (KEY - Free Report) – and Citigroup, Inc. (C - Free Report) helped EPR Properties in the offering, acting as the underwriters. Although this public offering will result in share dilution for the company, the payment of debt is encouraging as it will reduce interest expenses.

Also, strategic investments will help EPR Properties enhance its portfolio quality. In relation to this, in the current month, the company acquired a Tannersville, Penn.-based asset – Camelback Mountain Resort – for about $70 million. The accretive buyout of the resort, which attracts around 900,000 visitors annually, bodes well for EPR Properties’ earnings going forward.

Significantly, EPR Properties has interests in assets in select market segments, with Entertainment, Recreation and Education being the primary segments. Its investment in these segments totals over $3.2 billion.

EPR Properties is scheduled to release its third-quarter 2013 results on Nov 5, 2013, after the closing bell. The Zacks Consensus Estimate for the third-quarter 2013 funds from operations (FFO) is currently pegged at 98 cents, reflecting a year-over-year increase of 4.68%.

However, EPR Properties currently carries a Zacks Rank #4 (Sell). A REIT that is performing better than EPR Properties is General Growth Properties, Inc (GGP - Free Report) , carrying a Zacks Rank #2 (Buy).

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

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