Boston Properties Closes New York City Property Refinance
Zacks Investment Research | Jun 07, 2017 09:30PM ET
Boston Properties, Inc. (NYSE:BXP) recently announced the completion of refinancing of 767 Fifth Avenue in New York City. The move provides flexibility and helps in meeting its financial obligations in an efficient way.
Particularly, the company revealed that its consolidated joint venture entity, in which it enjoys a 60% stake, and that owns the 767 Fifth Avenue property, General Motors (NYSE:GM) Building, accomplished the refinancing of around $1.6 billion of indebtedness secured by direct and indirect interests in 767 Fifth Avenue asset.
With a principal amount of $2.3 billion, the new mortgage financing bears interest at a fixed interest rate of 3.43% per annum. Its maturity is slated on Jun 9, 2027. Further, during the 10-year term, the loan entails interest-only payments and at maturity the total principal amount will be due.
Moreover, in Apr 2017, in consideration of the refinancing, forward-starting interest rate swap contracts with notional amounts totaling $450.0 million were terminated by the consolidated joint-venture entity and around $14.4 million was paid by it.
Following the extinguishment of the prevailing indebtedness on the property, Boston Properties plans to use part of its share of net proceeds for paying back the $310.0 million of borrowings outstanding under its $1.5 billion unsecured line of credit and for meeting other working capital needs. The move is a strategic fit and offers flexibility, given that the extinguished debt was scheduled to mature on Oct 7, 2017 and bore interest at a weighted-average rate of around 5.96% per annum, an effective GAAP interest rate of about 3.03% per annum.
Late in April, Boston Properties reported the first-quarter 2017 results. The company’s first-quarter 2017 funds from operations (“FFO”) per share of $1.48 missed the Zacks Consensus Estimate of $1.50. The quarter witnessed a decrease in rental revenues. The company exited the quarter with cash and cash equivalents of around $302.9 million.
Moving ahead, with properties located in select high-rent, high barrier-to-entry geographic markets, diversified tenant & industry base and financial flexibility, Boston Properties is well poised for growth. However, several big companies are choosing to resize their businesses and contain cost, which are adversely affecting the demand for office space. In addition, there is growth in supply of office space in the market. Also, rate hike adds to its woes.
Boston Properties currently has a Zacks Rank #3 (Hold).
Shares of Boston Properties underperformed the Zacks categorized Zacks Investment Research
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