BXP Completes Bay Colony Acquisition - Analyst Blog

Boston Properties Inc. (BXP), a real estate investment trust (REIT), has recently completed the acquisition of Bay Colony Corporate Center, an office park in Waltham, Massachusetts, for $185 million. The purchase price included approximately $41.1 million in cash and the assumption of $143.9 million in a senior mortgage loan that bears interest at a fixed rate of 6.53% per annum and matures in June 2012.

Spanning across 968,608 rentable square feet of office space, Bay Colony Corporate Center is a premier office park in suburban Boston and features a panoramic view of the Cambridge Reservoir, Waltham and downtown Boston from a towering hilltop. The property comprises four office buildings, each architecturally-distinct and having state-of-the-art facilities. Consequently, the property is expected 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 concentrates on a few select high-rent, high barrier-to-entry geographic markets which usually fare better in a faltering economy. Two of the largest markets of the company, New York and Washington DC are among the best of the office markets in the U.S.

Boston Properties 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, the company 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 #3 Rank, which translates into a short-term ‘Hold' rating and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral' rating and a Zacks #3 Rank for Vornado Realty Trust (VNO), a competitor of Boston Properties.

 
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