Editor's Note: This story has been updated from the print version to correct the number of properties in which LTC has investments.
HCP Inc. and LTC Properties Inc., two local real estate investment trusts specializing in health care properties, went to the equity markets last week, riding continued investor appetite for a piece of the real estate recovery.
Long Beach-based HCP, which has a broad 672-property portfolio ranging from nursing homes to biotech research facilities, plans to use most of the net proceeds from its $1.1 billion stock sale to finish paying for a $6.1 billion acquisition of the real estate assets of Toledo, Ohio-based HCR ManorCare. HCR is a private equity-owned operator of nursing homes and rehabilitation hospitals that plans to lease back the properties it is selling.
The cash-and-stock deal, first announced in December, gave HCP the flexibility to switch the transaction to all cash if its stock rose above the roughly $33-per-share fixed price that HCR’s owners would have received. With HCP shares trading above $37 before the latest offering was announced March 22, the REIT opted to sell shares on the open market at a slightly discounted rate of $36.90. The REIT even added 6 million shares to the originally planned 24 million due to investor demand.
“I was surprised by the size of the initial deal and also by the increase because it seems like more than they’d need to close the ManorCare deal,” said James Milam, an analyst at New York-based Sandler O’Neill & Partners. “Either they have another deal in the works that they haven’t announced yet, or they are looking to pay down debt or have another use for the money.”
LTC, a significantly smaller and more narrowly focused REIT than HCP, stuck to its smaller 3.6 million-share offering that would less dilute existing shareholders.
LTC’s equity is more vulnerable to dilution. It has a market cap of roughly $720 million and less than 26.3 million shares outstanding, compared with HCP’s $2.7 billion market cap and more than 371 million shares.
The smaller REIT’s portfolio includes ownership or stakes in 89 skilled nursing properties, 103 assisted living properties, 12 other senior housing properties
It tends to do much smaller deals than HCP, adding only about $95 million worth of properties last year. So far this year, it acquired two properties in February and announced a four-property $52 million deal this month.
It plans to use its expected $104 million in net proceeds from the stock sale to pay down debt and redeem preferred stock, as well as for acquisitions. Its offering was priced at $27.25, 45 cents below its trading value March 22.
Staff reporter Deborah Crowe can be reached email@example.com or at (323) 549-5225, ext. 232.
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