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July 6, 2009
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BXP's BBB Credit Rating Reasserted by Fitch
Fitch Ratings, the global credit rating firm, has reaffirmed the credit rating of Boston Properties, Inc. (BXP), a real estate investment trust (REIT), as BBB. The BBB-rating denotes a relatively strong credit quality with low default risk and adequate capacity to meet current financial commitments.
With a diverse portfolio of Class A office, industrial and hotel properties, BXP is a leading REIT in the US. The majority of the company's income comes from office properties. Strategically, BXP concentrates on a few select high-rent geographic markets and its properties are located primarily in central business districts (CBDs). About 77.1% of the company's Net Operating Income (NOI) in the first quarter of 2009 was generated in CBDs.
While reaffirming BXP's 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. Debt-to-market-cap at quarter's end was about 60%. Interest coverage at quarter end was 3.46x and the company was adequately covering all major debt compliance tests. In addition, the FAD payout ratio was 74.76% at the end of first quarter of 2009.
The company currently has $885 million available under its lines of credit which have been extended until 2011. About $273 million of debt is maturing in 2009, and an additional $272 million is maturing in 2010. The company has a large encumbered pool of approximately 100 properties with more than $650 million of annualized GAAP NOI, which provides it with an opportunity to raise additional debt. Furthermore, BXP announced a dividend cut in the second quarter to $0.50 per share from $0.68, and expects to save $100 million per year.
In June 2009, BXP received net proceeds of approximately $842 million from the issuance of new equity. Subsequent to the quarter, the company has also obtained a construction financing of $215 million collateralized by its Russia Wharf development project (an 846,000 mixed-use project) in Boston, Massachusetts. The company still 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 continue our Hold Rating of BXP.
Read the full analyst report on "BXP"
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