Healthcare: Cogdell Spencer hikes offering to 20M shares

Healthcare: Cogdell Spencer hikes offering to 20M shares

Cogdell Spencer Inc. shares hit a 52-week low of $3.60 per share Wednesday morning as the company announced it was increasing the size of its public offering by 11 percent to 20 million shares.

The Charlotte-based real estate investment trust priced the offering at $3.50 per share. It says it will use the $66.8 million in proceeds to fund a $50 million repayment on a loan held by its Erdman subsidiary, reduce borrowings and provide working capital. Cogdell Spencer closed on its purchase of Marshall Erdman & Associates Inc., a Wisconsin designer and builder of health-care facilities throughout the United States, in March 2008.

The company’s shares, which have traded between $3.89 and $19.95 over the last year, closed at $4.33 Tuesday. They dropped nearly 20 percent in after-market trading, following the company’s announcement that it would cut its dividend to 11 cents per share from 22.5 cents and sell 18 million common shares in a public offering.

The company’s stock closed at $3.65 per share Wednesday.

As of early May, Cogdell Spencer had 19 million common shares registered with the public, says Frank Spencer, chief executive. The company had a total of 27.5 million outstanding shares and operating partnership units, which can be tendered for shares or cash after a period of time.

Spencer says the company decided on the $3.50 per share price for the stock offering early Wednesday morning after the offering’s book runners took bids and orders.

He says Cogdell Spencer increased the size of its offering to 20 million shares to raise more capital.

“It’s a real vote of confidence” in the company, Spencer says. “The infusion of capital allows us to reduce debt on our balance sheet and gives us the ability to implement our business plan of fully integrating services for health-care real estate.”

Cogdell Spencer’s dividend reduction to 11 cents per share will remain in effect for the rest of the year. The company says it wants to maintain financial flexibility in light of the current state of the capital markets. It also cites the increased number of shares of common stock expected to be outstanding after it completes the public offering. The expected dividend payments are based on the assumed size of the offering and are subject to change, the company says.

Cogdell Spencer has extended an option to the underwriters to purchase up to an additional 3 million shares in the offering, up from 2.7 million shares on Tuesday. If they exercise their options, Cogdell Spencer will raise a total of $76.8 million.

David Lubar, one of the company’s directors, purchased 1 million shares of common stock in the offering. Those shares weren’t subject to a discount.

Cogdell Spencer (NYSE:CSA) invests in specialty office buildings for the medical profession, including medical offices, ambulatory surgery and diagnostic centers.

Charlotte Business Journal – by Roberta Fuchs


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