Beacon Properties Rtgs Asgnd by S&P; Outst Rtgs Afrmd.NEW YORK--(BUSINESS WIRE)--S&P CreditWire 9/9/97--Standard & Poor's today assigned its preliminary triple-`B' rating to Boston, Mass.-based Beacon Properties, L.P.'s (the operating partnership of Beacon Properties Corp., a real estate investment trust) $500 million shelf registration of debt securities. Also, a triple-`B' rating was assigned to the company's shelf drawdowns of $150 million senior unsecured notes due 2002 and $150 million senior unsecured notes due 2007. In addition, Standard & Poor's assigned its preliminary triple-`B'-minus rating to Beacon Properties Corp.'s $700 million equity shelf. The corporate credit rating of both entities was affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. at triple-`B'. The preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. rating of Beacon Properties Corp. was affirmed at triple-`B'-minus. The ratings outlook is positive. Proceeds of the notes will be used to pay down amounts drawn under the company's credit facility, to acquire properties, and for general corporate and working capital purposes. Ratings reflect Beacon's experienced management team, seasoned track record, and strong financial flexibility. These strengths are offset by concerns regarding the aggressive growth strategy that the company is pursuing, the possibility of additional new market risk, and the limited seasoning of assets of Beacon's post-growth portfolio. The new market concern has been somewhat mitigated, as the company has been staffing its regional offices with individuals who provide local market expertise. Beacon is an equity UPREIT which owns an 18.8 million square foot portfolio of class A office properties and other commercial properties located in major metropolitan areas, including Boston, Atlanta, Chicago, Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. , Silicon Valley, and Washington D.C./Northern Virginia. Beacon has been a public company for three years, but has a 51-year operating history. The trust has grown dramatically since January 1997, adding about $900 million of real estate assets in existing markets. The company appears to have built an appropriate infrastructure of systems and personnel to manage the integration of its acquisitions to date. Beacon entered four new markets in 1996, but in two of these markets (Atlanta and Chicago), the company had prior experience as a construction manager and/or property manager. Also mitigating some growth and integration concerns is Beacon's demonstrated ability to thus far retain management of acquired properties. The trust's current portfolio includes 116 income-producing properties. However, due to Beacon's aggressive acquisition strategy, the size and geographic dispersion dispersion, in chemistry dispersion, in chemistry, mixture in which fine particles of one substance are scattered throughout another substance. A dispersion is classed as a suspension, colloid, or solution. of the trust's portfolio likely would continue to evolve over the next few years. Beacon's properties are generally well occupied (97%), well located, and offer high-quality services to attract and retain a roster of quality tenants. As below-market rate leases in place roll to market rents, the company's portfolio is poised to benefit from the current "landlord's" market in the office sector, which is currently in the recovery stage. Beacon's lease rollover A graphic element in an application or on a Web page that changes its color or shape when the pointer is moved (rolled) over it. See JavaScript rollover. See also n-key rollover. exposure is manageable, with average annual expirations of 9% over the next three years, and about 15% in 2000 and 2001. Beacon is dominant in the Boston metropolitan area (about 42% of net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. ) and has reached a critical mass (at least two million square feet) in three additional markets, resulting in limited geographic concentration. In addition, the company's growth has resulted in a well diversified roster of over 1,200 tenants. Financial measures are solid, with pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma debt-to-book capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. of 31%, which is conservative for the rating category. Pro forma debt service coverage, which includes moderate annual principal amortization, is strong at over 3 times (x). Pro forma fixed-charge coverage fixed-charge coverage The number of times that a firm's operating income exceeds its fixed payments. Fixed-charge coverage is a measure of a firm's ability to meet contractually fixed payments, with high coverage indicating significant flexibility for making (including the preferred dividend preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) ) is over 2.5x. With all fixed-rate debt and a conservative financial profile, debt service coverage is expected to remain in the 3x range, and fixed-charge coverage in the 2.5x range. A moderate dividend payout on a funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. (71% for first half 1997) basis enhances internal liquidity. Financial flexibility is strong, with about 50% of the portfolio unencumbered Unencumbered Property that is not subject to any creditor claims or liens. Notes: For example, if a house is owned free and clear (meaning the owner owes no mortgage to anyone), it is unencumbered. (net operating income basis) and a $350 million unsecured revolver revolver: see small arms. revolver Pistol with a revolving cylinder that provides multishot action. Some early versions, known as pepperboxes, had several barrels, but as early as the 17th century pistols were being made with a revolving chamber to . The trust has demonstrated its ability to access the capital markets, and Standard & Poor's expects the company to be able to continue to access the capital markets to finance its growth. OUTLOOK: POSITIVE Beacon's conservative financial policy is coupled with a more aggressive operating strategy, and the trust is expected to continue to grow aggressively over the next few years through property acquisitions in both existing and new markets. Future ratings improvement will depend upon the trust's ability to successfully integrate the company's growth opportunities while maintaining a conservative financial profile. It is expected that minimum debt service coverage of around 3.0x and fixed-charge coverage above 2.5x will be maintained. ---CreditWire CONTACT: Elizabeth Campbell Elizabeth Pfohl Campbell (December 2, 1902 - January 9, 2004) is one of the first and most prominent public television pioneers in the United States. Campbell also served as a teacher, college administrator, as a notable school board member for Arlington Public Schools, and as the , 212/208-8807 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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