Investor Demand Increases Health Care REIT Public Offering

Health Care REIT has expanded the size of its offering from 9 million shares to 10.5 million.

Responding to what it says is investor demand, Health Care REIT has increased the size of its public offering from 9 million shares to 10.5 million. Shares are priced at $43.75 apiece, with estimated gross proceeds from the offering approximately $437.5 million.

The REIT plans to use net proceedings from the offering for general corporate purposes, including healthcare investments as well as senior housing properties. The offering is also being held to pay down debt, which makes the increased investor interest an even better sign for the company.

Bank of America, Merrill Lynch and UBS Investment Bank were joint book-running managers.

The offering comes just a few months after Health Care REIT struck a major partnership with independent- and assisted-housing owner-operator Merrill Gardens L.L.C.. The partnership, which is valued at $817 million, comprises 38 properties in affluent, high-barrier-to-entry markets in California and Washington – a 13-property Health Care REIT portfolio valued at $307 million and a $510 million group of 25 Merrill Gardens properties. The portfolio accounts for an aggregate 4,388 units and has an average occupancy level of 92 percent. Health Care REIT CEO George Chapman told CPE at the time that the seniors housing market had had a down cycle along with the downturn, but the firm decided the time was right for the partnership given positive economic indicators.

It seems Health Care REIT is banking on a predicted post-recession growth spurt for seniors housing – and it may be right on target. The Baby Boomer influence is expected to increase the call for housing, though Merrill Gardens president Bill Pettit told CPE that that influence is still 15 years into the future. Near-term growth, he said, will stem from deferrals and long-term expansion will come from the absolute growth of the seniors population. If investor interest in Health Care REIT is any indication, that expansion may prove significant.