Senior Notes from Boston Properties - Analyst Blog

Boston Properties Inc. (BXP), a leading real estate investment trust (REIT), has recently completed a debt offering of $850 million aggregate principal amount of 4.125% senior unsecured notes due 2021 to raise cash and repay debt.

The debt offering is managed by J.P. Morgan Securities LLC – the investment banking arm of JPMorgan Chase & Co. (JPM); Citigroup Global Markets Inc. – the brokerage and securities arm of Citigroup Inc. (C); Morgan Stanley & Co. Incorporated – the investment banking division of Morgan Stanley (MS); and Deutsche Bank Securities Inc. – the U.S. investment banking and securities arm of Deutsche Bank AG (DB).

The company raised net proceeds of approximately $836.9 million from the offer, which were used to redeem $700 million of its 6.25% senior notes due 2013 and repay other short-term debt. Earlier during the current quarter, Boston Properties utilized available cash to repay two mortgage loans secured by office properties in Reston, Virginia. The company also extended the maturity of its $1.0 billion unsecured revolving credit facility to August 2011. The strategic moves are aimed at increasing the liquidity of the company and strengthening its balance sheet.

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 maintain our ‘Neutral' recommendation on Boston Properties, which presently has a Zacks #3 Rank translating 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.

 
BOSTON PPTYS (BXP): Free Stock Analysis Report
 
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