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Welltower (WELL) Prices Senior Unsecured Notes Worth $1.3B

Welltower Inc. WELL recently announced the pricing of $1.3 billion of multi-tranche senior unsecured notes. On a combined basis, this new issuance will bear a weighted average blended yield to maturity (YTM) of 4.4% on a weighted average term of 15.4 years.  

The notes are spread across three tranches. Senior unsecured notes worth $600 million are due in 2023 and carry a YTM of 3.95%. Debt securities worth $200 million carry yield of 4.25%. These notes are slated to mature in 2028.

Lastly, the $500-million longer-term notes are slated to mature in 2048. The debt obligation carries a YTM of 4.95%.

The offering, subject to fulfillment of customary closing conditions, is expected to close on Aug 16, 2018.

The company plans to utilize net proceeds of this offering to initially settle advances under a Term Loan facility set to mature in July 2020 and other loans under its primary credit facility. Thereafter, the remaining proceeds will be used for general corporate purposes, which may include investing in senior housing and other healthcare assets.

Remaining proceeds will be invested in short-term, interest-bearing, investment-grade securities. Further, investment in certificates of deposit or guaranteed obligations of the United States will be made.

The move provides flexibility to the company and helps meet its financial obligations in an efficient way. This is because the unsecured note issuance will result in a lower cost of capital for this real estate investment trust (REIT).

Also, since unsecured notes can be borrowed at lower rates, this new debt will result in lower funding cost. This is likely to boost Welltower’s financial flexibility which already enjoys a decent balance sheet and ample liquidity. Notably, it exited the June-end quarter with $215 million of cash and cash equivalents. In addition, as of Jun 30, 2018, the company had $2.5 billion of available borrowing capacity under its primary unsecured credit facility.

Welltower currently carries a Zacks Rank #3 (Hold).

Over the past six months, shares of the company have outperformed the industry it belongs to. In fact, its shares have rallied 14.8% compared with the industry’s gain of 8.2% during the same time frame.

Also, the Zacks Consensus Estimate for current-year funds from operations (FFO) per share has been revised marginally upward in a month’s time.

Stocks to Consider

A few better-ranked stocks from the real estate space are Outfront Media Inc. OUT, PS Business Parks, Inc. PSB and W. P. Carey Inc. WPC. While Outfront Media sports a Zacks Rank #1 (Strong Buy), PS Business Parks and W. P. Carey carry Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Outfront Media’s Zacks Consensus Estimate for 2018 FFO per share remained unchanged at $2.06 in the last 30 days.

PS Business Parks’ current-year FFO per share estimates inched up 0.3% to $6.39 over the last 30 days.

W. P. Carey’s FFO per share estimates for 2018 moved 5.8% north to $5.12 in 60 days’ time.

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