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Fitch Rates Boston Properties, L.P.'s $700MM Sr. Unsecured Notes Due 2024 'BBB'; Outlook Stable

  Fitch Rates Boston Properties, L.P.'s $700MM Sr. Unsecured Notes Due 2024
  'BBB'; Outlook Stable

Business Wire

NEW YORK -- June 21, 2013

Fitch Ratings has assigned a credit rating of 'BBB' to the $700 million 3.80%
senior unsecured notes due Feb. 1, 2024 issued by Boston Properties, L.P., the
operating partnership of Boston Properties, Inc. (NYSE: BXP; collectively, the
company). The notes were issued at 99.694% of par to yield 3.835%.

The notes were issued at a 165 basis point spread to Treasuries and net
proceeds from the offering of $691.9 million will be used for general
corporate purposes including investment opportunities and debt reduction.

Fitch currently rates the company as follows:

Boston Properties, Inc.

--Issuer Default Rating (IDR) 'BBB';

--$200 million Preferred Stock 'BB+'.

Boston Properties, L.P.

--IDR 'BBB';

--$750 million unsecured revolving credit facility 'BBB';

--$5.4 billion senior unsecured notes 'BBB';

--$1.2 billion exchangeable senior unsecured notes 'BBB'.

The Rating Outlook is Stable.

KEY RATING DRIVERS

The ratings are supported by the company's superior asset quality, appropriate
leverage and fixed-charge coverage for the rating.

The ratings also reflect BXP's adequate liquidity position that is supported
by its large unrestricted cash balance, retained free cash flow, near full
availability under its $750 million revolving credit facility and its large
unencumbered pool of high quality assets in markets with excellent transaction
and financing liquidity characteristics.

Fitch expects that BXP will continue to have access to a wide range of capital
sources to help it meet its manageable debt maturity schedule and other
financial obligations.

The ratings are balanced by the company's moderately concentrated geographical
footprint and related exposure to finance, legal and government and defense
industry tenants. Execution and liquidity risk associated with the company's
development platform are also a credit concern.

SUPERIOR ASSET QUALITY

BXP owns a high-quality portfolio of predominantly class A office properties
located in supply-constrained central business district (CBD) markets. The
company's CBD properties compete for the highest profile tenants in their
regions and many are leading properties in their submarkets, and would likely
attract significant investor and lender interest, providing contingent
liquidity to the company.

APPROPRIATE LEVERAGE AND COVERAGE

BXP's net debt to recurring operating EBITDA for the trailing 12 months (TTM)
was 6.7x as of March 31, 2013. Leverage was 6.8x in 2012, 6.3x in 2011 and
7.6x in 2010. Fitch assumes that leverage will be unchanged following the
offering as Fitch expects proceeds to be used to repay outstanding unsecured
debt. Fixed-charge coverage was 2.2x for the TTM ended March 31, 2013,
compared to 2.1x in 2012, 2.2x in 2011 and 1.8x in 2010. The company's
leverage and fixed-charge coverage are appropriate for a 'BBB' rated office
REIT with BXP's large size and high asset quality.

LONG-TERM LEASES

The company's revenue is supported by long-term leases. The company's
in-service portfolio was 91.7% leased at March 31, 2013. BXP's lease profile
is strong relative to its office REIT peers, which ensures that the company is
not overly exposed to leasing risk at any given time, notwithstanding tenant
bankruptcies. Average annual lease expirations comprise less than 8% of
annualized base rent through 2022, with a maximum annual maturity of 13% in
2017. The company has historically been proactive in renewing tenants in
advance of lease maturities to minimize downtime and leasing costs, which
Fitch views as a risk adverse strategy that strengthens the credit by reducing
cash flow volatility.

ADEQUATE LIQUIDITY

The company maintains an adequate liquidity position pro forma the $700
million unsecured notes issuance. For the period April 1, 2013 to Dec. 31,
2014, the company's base case liquidity coverage ratio is 1.5x. BXP's
liquidity coverage would improve to 1.7x assuming the company refinances
maturing mortgages at 80% of current balances. The $746 million of
exchangeable notes that mature in Feb. 2014 represent the company's next
largest funding requirement.

Unfunded development commitments were the second largest use of capital at
$670 million, not including the Transbay Tower in San Francisco for which
Fitch anticipates the company will start below-grade construction in late
2013. BXP likely has some flexibility to defer spending if market conditions
weaken unexpectedly and materially. BXP's liquidity coverage ratio would
improve to 2.1x absent said expenditures. Fitch defines liquidity coverage as
sources of liquidity (unrestricted cash, availability under the company's
unsecured credit facility and expected retained cash flows from operating
activities after dividends) divided by uses of liquidity (pro rata debt
maturities, expected recurring capital expenditures and development costs).

BXP maintains a large unencumbered pool of 124 assets that comprised 66% of
NOI as of March 31, 2013. Fitch views the company's unencumbered asset base as
a strong source of contingent liquidity that supports its unsecured
obligations. Capitalizing annualized first quarter 2013 (1Q'13) cash NOI
generated by the unencumbered pool at a stressed capitalization rate of 7%
yields unencumbered asset coverage of approximately 2.1x, which is adequate
for the 'BBB' IDR.

WELL-LADDERED DEBT MATURITIES

BXP's debt maturities are generally well-laddered, with less than 10% of total
debt maturing in any given year through 2016. The company does have an
unusually large 17.2% of consolidated debt maturing in 2017 that increases to
24.2% of total debt maturing when including the $975 million of unconsolidated
JV debt maturing at BXP's pro-rata share. Fitch views these maturities as an
intermediate-term risk that is mitigated by the quality of the properties
securing these mortgages, which include 599 Lexington Avenue and 767 Fifth
Avenue (The GM Building) in Manhattan, and the John Hancock Tower in Boston.

SIGNIFICANT TENANT INDUSTRY CONCENTRATION

The company has elevated exposure to financial, legal and government related
tenants in its portfolio. Tenants in these segments represented approximately
28%, 25% and 6% of gross rent, respectively, for a combined total of 59% as of
March 31, 2013. Lower trading volumes and increased regulation are key issues
that are challenging financial services companies resulting in delayed leasing
decisions, at best, and, in many instances, led to reductions in space demand.
Legal tenants continue to optimize their space needs and are often shrinking
their office footprints when leases expire. Finally, the U.S. Government
(BXP's largest tenant at 6.4% of leased square feet) and related government
contractors are demanding less space due in large part to the impact
sequestration, particularly within the Washington D.C. metro area.

DEVELOPMENT RISK

Development is a key component of BXP's strategy and the company has
historically allowed its pipeline of projects under construction to become a
large percentage of its portfolio. For example, the total pipeline grew to
20.3% of total assets in 2Q'08, with the unfunded obligation representing 11%
of total assets. The total estimated investment of BXP's development pipeline
was $1.9 billion at March 31, 2013, which represented 10.1% of total assets
with the unfunded portion comprising a materially smaller 3.6% of total
assets. Fitch would view cautiously a pipeline that grows close to 20% of
total assets or approaching 10% of remaining funding, absent significant
pre-leasing.

PREFERRED STOCK NOTCHING

The two-notch differential between BXP's IDR and its preferred stock rating is
consistent with Fitch's criteria for corporate entities with an IDR of 'BBB'.
Based on Fitch's research on 'Treatment and Notching of Hybrids in
Nonfinancial Corporate and REIT Credit Analysis,' these preferred securities
are deeply subordinated and have loss absorption elements that would likely
result in poor recoveries in the event of a corporate default.

STABLE RATING OUTLOOK

The Stable Outlook reflects Fitch's expectations that fixed-charge coverage
and leverage will sustain at the current levels over the next 12-24 months.

RATING SENSITIVITIES

The following factors could result in positive momentum in the ratings and/or
Outlook:

--Fitch's expectation of fixed-charge coverage sustaining above 2.5x for
several consecutive quarters (coverage was 2.2x for the TTM ended March 31,
2013);

--Fitch's expectation of net debt to recurring operating EBITDA sustaining
below 5.5x (leverage was 6.7x as of March 31, 2013).

Conversely, the following factors may result in negative momentum in the
ratings and/or Outlook:

--Fitch's expectation of fixed-charge coverage sustaining below 1.7x;

--Fitch's expectation of net debt to recurring operating EBITDA sustaining
above 7.0x;

--A liquidity shortfall.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--Criteria for Rating U.S. Equity REITs and REOCs, Feb. 26, 2013

--Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit
Analysis, Dec. 13, 2012

--Recovery Ratings and Notching Criteria for REITs, Nov. 12, 2012

--Corporate Rating Methodology, Aug. 8, 2012

--Parent and Subsidiary Rating Linkage, Aug. 8, 2012

Applicable Criteria and Related Research:

Criteria for Rating U.S. Equity REITs and REOCs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=700091

Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit
Analysis

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696670

Recovery Ratings and Notching Criteria for Equity REITs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=693751

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=794265

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Contact:

Fitch Ratings
Primary Analyst
Stephen Boyd, CFA, +1 212-908-9153
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
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Associate Director
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