Fitch Affirms Boston Properties; Maintains Stable Outlook.

NEW YORK -- Fitch Ratings has affirmed the existing ratings on Boston Properties, Limited Partnership (BXP). The rating action applies to the following securities:

--$605 million unsecured credit facility 'BBB';

--$1.475 billion senior unsecured notes 'BBB'.

The Rating Outlook is Stable.

The ratings are supported by the overall quality of BXP's portfolio of assets, the long and distinguished track record of management, solid coverage and leverage metrics for the rating category, a strong leasing profile with a high quality tenant roster and a long average lease term, a manageable lease expiration schedule, a sizable unencumbered asset pool, appropriate financial flexibility, and demonstrated access to multiple forms of capital on favorable terms.

The company has consistently outperformed its competitors in its markets over a significant period of time as measured by both rents and occupancy. BXP has maintained strong occupancy levels in its portfolio throughout the latest economic cycle, reaching 93.8% in the in-service portfolio at Dec. 31, 2005. The company is currently experiencing improved supply/demand dynamics in many of its submarkets. For the first time in several years, the company has reported market rents are slightly higher overall than the rents in its current portfolio.

While some of its office peers have struggled with coverage deterioration during the most recent office market downturn, BXP was able to modestly improve its coverage ratios within a range that is solid for the rating category. Interest coverage, as measured by recurring EBITDA over total interest expense (including capitalized interest), was 2.9 times (x) in 2005, up from to 2.8x in 2004 and 2.6x in 2003. Fixed charge coverage, as measured by recurring EBITDA less capital expenditures to total interest expense plus preferred dividends, was 2.3x in 2005, compared to 2.2x in 2004 and 2.2x in 2003. The company was able to improve these ratios despite significant declines in market rents in some of its markets, most notably in San Francisco and Boston.

BXP continues to maintain a strong leasing profile. The company has a large tenant base with exposure spread across several diverse industries. While the top five tenants account for approximately 16% of total square footage, the average remaining lease term for these tenants is roughly 10 years. The average lease term in the portfolio is one of the strongest in the industry at approximately 7.3 years. BXP's lease expiration schedule is relatively light, with fewer than 10% of base rents expiring in any given year. This should help the company maintain appropriate coverage levels for the rating category in future periods.

Fitch also notes that the company's leverage has declined materially since 2002. As of Dec. 31, 2005, total debt to undepreciated book capital was 49.5%, down from 57.4% at Dec. 31, 2002. While Fitch views this as a credit positive, management has publicly indicated that it expects to increase leverage over time.

The company has demonstrated repeated access to numerous forms of capital, including the secured and unsecured debt markets as well as sources of both public and private equity. The company has significant availability under its unsecured credit facility, with $313 million of available capacity as of Dec. 31, 2005. This facility matures in October 2007.

While secured debt remains a significant portion of its capital structure, the company maintains a pool of 69 unencumbered assets representing $3.58 billion of undepreciated book capital. Fitch calculated BXP's unencumbered asset coverage to be approximately 2.35x at Dec. 31, 2005, which is ample for the rating category. Fitch notes that 38% of the company's NOI is generated by the unencumbered pool, which is up from 23% at the time of its initial unsecured note offering in 2002.

The company's portion of variable-rate debt to total debt was 18% as of Dec. 31, 2005, which Fitch views as acceptable. This primarily represents financing on projects currently under construction or recently completed.

Credit concerns include the significant geographic and asset concentrations within the portfolio. The company operates in five markets, while 40% of 2005 NOI was generated from six assets in Midtown Manhattan. Additionally, approximately 30% of the gross book value of the unencumbered portfolio comes from one asset, although Fitch notes that the asset is located in a prime market and has a very strong tenant roster with long-term leases in place. These concentrations increase the risk that a market downturn or asset specific event could jeopardize a material portion of the cash flows generated by the company.

Fitch is also concerned that BXP's risk-adjusted capital ratio is fairly weak at 0.92x at Dec. 31, 2005. This indicates that the company is modestly undercapitalized at the 'BBB' level on a risk-adjusted basis. This is largely driven by both the significant amount of secured debt in the portfolio as well as the company's development pipeline.

The company also has significant debt maturities in 2008; 26% of its outstanding debt comes due that year, which includes several sizable balloon payments on outstanding mortgages. While the company has maintained strong access to capital, particularly in the current environment, this represents fairly significant refinancing risk.

The company has indicated its continued focus on value creation through development. However, the company has maintained a disciplined approach, obtaining significant pre-leasing on projects prior to initiation. The company currently has four projects in various stages of development, representing a total expected investment from the company of roughly $200 million. While the company typically utilizes construction financing to fund these development projects, Fitch believes that BXP has adequate capacity from internal sources to fully fund these development projects as necessary.

Additionally, the company has publicly announced it is holding discussions regarding a possible sale of two of its core assets in New York City. The company has indicated a range of potential uses for these proceeds should either of these sales close. Fitch believes that a return of capital to shareholders would likely reduce interest and fixed charge coverage and increase leverage. While Fitch is comfortable with the plans that management has articulated to date, a large return of capital to shareholders would materially reduce BXP's balance sheet flexibility at the current rating level.

Boston Properties is a $9.7 billion (total undepreciated book capital) equity real estate investment trust that acquires, develops, and manages high quality office space in five markets. Headquartered in Boston, MA, the company's portfolio consists of 117 office and office/technical properties, two hotels, and two retail properties, representing approximately 42 million net rentable square feet. Additionally, the company owns or controls 527 acres of land that can support approximately 9.2 million square feet of development. During 2005, 40% of NOI was generated in Midtown Manhattan, 23% in Greater Boston, 19% in the Washington D.C. Area, 14% in San Francisco, and 4% in Princeton/East Brunswick, NJ.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.