Zacks_Analysts' Blog : Senior Housing to Offer Shares - Analyst Blog

Senior Housing Properties Trust (SNH), a real estate investment trust (REIT) which primarily owns private pay senior living communities and medical office buildings (MOBs) across the U.S., has recently announced its decision to offer 8 million common shares at $21.00 each to raise cash and increase liquidity. The company will also grant the underwriters an option to purchase an additional 1.2 million shares to cover any over-allotments.

BofA Merrill Lynch, the investment banking and wealth management division of Bank of America Corporation (BAC), Jefferies & Company, Inc., the principal operating subsidiary of Jefferies Group, Inc. (JEF), 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 primarily to repay debt under its revolving credit facility. The company also plans to use the remainder of the proceeds from the equity offer to acquire assets from distressed sales by owners who could not refinance their properties.

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 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 #2 Rank that translates into a short-term ‘Buy’ recommendation.