Boston Properties to Acquire Asset – Analyst Blog

Boston Properties Inc. (BXP), a real estate investment trust (REIT), has recently announced its plans to acquire 510 Madison Avenue, a newly-constructed 350,000 square feet Class-A office property in New York City, for approximately $280.5 million. The company entered into a purchase and sale agreement with an affiliate of Harry Macklowe for the acquisition of the property.

 

Under the terms of the agreement, Boston Properties would pay a purchase price equal to the aggregate principal and accrued interest on the property’s existing senior mortgage loan and senior mezzanine loan. The transaction is expected to close by September 2010.

 

The property is located in a premier market of the Plaza District of midtown Manhattan and includes state-of-the-art facilities. Consequently, the property is well poised to attract the highest quality tenants at a premium rent.

 

Boston Properties owns and develops one of the largest Class-A office, industrial, and hotel properties in the U.S. The company has one of the best balance sheets in the sector with manageable near-term debt maturities and adequate liquidity to take advantage of distressed selling as asset values of office and retail properties continue to drop.

 

However, fundamentals are declining in many of the company’s office markets as corporate expansion continues to slow. In addition, Boston Properties has a large development pipeline, which increases operational risks in the current credit-constrained market, exposing it to rising construction costs, entitlement delays, and lease-up risk.

 

We currently have a Neutral recommendation on Boston Properties with a Zacks #2 Rank, which translates into a short-term Buy rating and indicates that the stock is expected to perform well above the overall U.S. equity market for the next 13 months.