Back to top

Image: Shutterstock

Boston Properties (BXP) Closes $1.2B Term Loan, Ups Liquidity

Read MoreHide Full Article

Boston Properties, Inc.’s (BXP - Free Report) operating partnership, Boston Properties Limited Partnership (“BPLP”), recently closed a new $1.2 billion unsecured term loan facility. The move boosts the company’s liquidity position and financial flexibility.

The loan matures in May 2024 and can be prolonged by exercising one 12-month extension subject to the satisfaction of customary conditions.

In addition, BPLP, at its discretion, can utilize the accordion feature of the term loan facility and increase total commitments under the facility up to an additional $300 million in aggregate principal amount, subject to the satisfaction of customary conditions. It should be carried out in a manner such that the total principal amount does not exceed $1.5 billion.

At present, the term loan bears interest at a variable rate equating to the adjusted Term secured overnight financing rate (SOFR) plus 0.85% per annum.

Moreover, part of the proceeds was used to repay BPLP’s $730 million term loan scheduled to mature in May 2023. This resulted in additional proceeds of nearly $466 million available for general corporate purposes.

Per Mike LaBelle, EVP, CFO & Treasurer of BXP, “This facility enhances our already strong liquidity as we continue our strategic focus on growing BXP’s portfolio of premier workplaces, including the commencement of our two fully leased life science developments in Cambridge, MA, creating value over the long term for our clients and shareholders.”

Boston Properties has been enhancing its portfolio quality through repositioning initiatives through acquisitions and the development of properties in core markets, and shedding properties in non-core markets.

Also, amid strong demand from life-science tenants, it is converting numerous straight office buildings to office labs in its suburban portfolio, especially its Kendall Center project, which is one of the leading preferred locations for life-science clients in the world.

Per the latest NAREIT REITworld presentation, as of Nov 10, 2022, the company had $1.6 billion of active office development (company’s share) and active life sciences development and redevelopments worth $772 million (company’s share), which seems encouraging.

With added balance-sheet strength and ample financial flexibility, the company is well-positioned to capitalize on long-term growth opportunities. As of Sep 30, 2022, BXP had nearly $2.3 billion of liquidity.

Nonetheless, a choppy office market environment is likely to soften demand for the company’s properties, hurting leasing volume in the near term.

Also, elevated supply in certain markets is likely to intensify competition, limiting its ability to attract and retain tenants at relatively higher rents. Rising interest rates add to the company’s woes.

Boston Properties carries a Zacks Rank #4 (Sell) at present.

Its shares have lost 7.7% over the past three months against the industry’s growth of 9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research
Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks from the REIT sector are VICI Properties (VICI - Free Report) , Stag Industrial (STAG - Free Report) and Equity Commonwealth (EQC - Free Report) .

The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92. VICI carries a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for Stag Industrial’s 2022 FFO per share is pegged at $2.21. STAG currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for Equity Commonwealth’s 2022 FFO per share stands at 33 cents. EQC sports a Zacks Rank #1 currently.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

Published in