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Healthcare Realty (HR) Calls to Redeem Senior Notes Due 2021

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Healthcare Realty Trust Incorporated (HR - Free Report) has announced its plan to redeem $100 million of the $400 million outstanding 5.75% senior notes maturing in 2021, in line with the indenture of the notes.  

The senior notes are slated to be redeemed on Nov 1, 2017, for an aggregate amount of $113.4 million. The lump sum payment includes outstanding principal of $100 million, accrued interest (but not paid as on the redemption date) of $1.7 million and $11.7 million as a make-whole amount, in line with the provision stated in the indenture.

To pursue this redemption, the company intends to use funds which it previously raised on Aug 14 from the 8.3 million common share offering. Further, Healthcare Realty will use borrowings under its unsecured revolving credit facility for the redemption.

This redemption will enable the company to downsize its outstanding debt and save interest cost. The company estimates to deduct approximately $12.2 million from the outstanding borrowing for this early repayment of debt in fourth-quarter 2017. This amount also includes unamortized costs and discounts of around $0.5 million.
Payment of the redemption price and accrued interest will be made through the Branch Banking and Trust Company. Notes called for redemption must be surrendered to collect the price.

This move will help in deleveraging the company’s balance sheet and achieve an optimum capital structure. Healthcare Realty’s efficient capital management continues to support its ability to finance its growth pipeline.

Moreover, the stock has climbed 7.1% year to date, outperforming 4.1% growth registered by the industry.

Currently, the company carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the REIT space include Seritage Growth Properties , Sabra Healthcare REIT, Inc. (SBRA - Free Report) and Communications Sales & Leasing, Inc. (UNIT - Free Report) . While Seritage and Sabra Healthcare flaunt a Zacks Rank of 1 (Strong Buy), Communications Sales & Leasing carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Seritage’s 2017 funds from operations (FFO) per share estimates inched up 0.5% to $2.01 in the past 60 days.

Sabra Healthcare’s 2017 FFO per share estimates climbed 3% to $2.38 over the past month.

Communications Sales & Leasing’s 2017 FFO per share estimates climbed 14.4% to $2.54 in two months’ time.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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