Fitch Reasserts BXP Credit Ratings – Analyst Blog

With a diverse portfolio of Class A office, industrial, and hotel properties, Boston Properties is a leading REIT in the U.S. The majority of the company’s income comes from office properties. Strategically, Boston Properties concentrates on a few select high-rent geographic markets located primarily in central business districts (CBDs). About 76% of the company’s Net Operating Income (NOI) in the first quarter of 2010 was generated in CBDs.

 

While reaffirming Boston Properties’ credit rating, Fitch has considered its high quality asset portfolio, solid past operating performance, strong liquidity, adequate debt service coverage, manageable debt maturity schedule, and its ability to access capital from varied sources. The company has one of the best balance sheets in the sector. Total debt to total market cap at quarter end was 40.2%. Interest coverage at quarter-end was 2.8x and the company was adequately covered all major debt compliance tests.

 

As of March 31, 2010, Boston Properties had $1.2 billion of cash and cash equivalents, and $990.5 million available under its lines of credit. About $315.4 million of debt will mature in the remainder of 2010, and another $606.3 million in 2011. The company has a large unencumbered pool of approximately 100 properties with more than $650 million of annualized GAAP NOI, which provides it with an opportunity to raise additional debt.

 

In April 2010, Boston Properties had announced an offering of $700 million of 5.625% senior unsecured notes due November 15, 2020. The company expects to raise net proceeds of approximately $693.5 million from the offering, which would be primarily used to reduce debt and for general corporate purposes.

 

Boston Properties has the ability to tap finances in the current credit-constrained market due to its strong relationships with lenders, high quality assets, and stable financial condition. This gives us enough confidence to retain our Neutral rating for Boston Properties with a Zacks #3 Rank, which translates into a short-term “Hold” recommendation.