Fitch Downgrades HRPT Properties Trust Ratings.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 17, 2000

Fitch has downgraded its ratings for the senior and subordinated debt of HRPT Properties Trust (NYSE:HRP). Ratings for HRPT's $738 million senior unsecured notes due 2002-2013 are lowered from 'BBB+' to 'BBB'. Fitch has also lowered its rating for HRPT's $204.9 million convertible subordinated debentures from 'BBB' to 'BBB-'. Both ratings are removed from Rating Watch Negative where they were placed on April 17, 2000, and assigned a Stable Rating Outlook.

HRPT is an externally-advised and externally-managed real estate investment trust (REIT) with the majority (89%) of its $3 billion portfolio centered in central business district (CBD) and suburban office properties. Notwithstanding stable returns from the core portfolio, a series of debt-financed acquisitions in late 1999 and reduced dividend income from a 49% equity interest in Senior Housing Properties Trust (an affiliated health care REIT) have contributed to lower financial protection measures. The Fitch rating downgrades also consider the company's potentially reduced access to now-recovering public equity markets stemming from HRPT's recent 38% dividend cut. HRPT's continued exposure to Senior Housing Properties Trust ($197 million equity investment as of June 30, 2000) and the potential strain on management resources were also contributing factors to the downgrade.

Despite these issues, senior unsecured noteholders continue to be well-supported by HRPT's solid investment portfolio of 194 properties aggregating 20 million square feet. The portfolio is well-leased at 98 percent average occupancy to over 900 tenants, approximately 53% of which are investment grade including nearly 19% of rents from Federal and State agencies. Additional stability is provided by an average remaining lease term of seven years, which compares favorably to other office REITs rated by Fitch. The portfolio is largely unencumbered, which provides HRPT with good debt refinancing options. As of June 30, 2000, historical cost of unencumbered properties was approximately 200% of total debt, with asset coverage increasing to 220% including equity investments.

Interest coverage remains adequate to support the revised Fitch ratings, although debt financed acquisitions in 1999 have reduced protection measures from historical levels. For the three months ended June 30, 2000, interest coverage from EBITDA was 2.7 times (x), and 2.5x excluding dividend income from Senior Housing Property Trust. This compares to historical coverage well above 4x through 1998, decreasing to 3.3x for 1999. Nine percent of HRPT's operating cash flow is derived from upstream dividends, resulting in limited remaining exposure to Senior Housing's nursing home portfolio.

In order to reduce borrowings on HRPT's $500 million unsecured bank credit facility (2002 expiration, approximately $334 million outstanding), HRPT plans to generate proceeds of approximately $500 million from sales of non-core assets and possible joint ventures over the next two years with proceeds used to repay debt. To date, the company has $77 million under contract or letter of intent, and is actively marketing a midtown Manhattan property with estimated proceeds of approximately $125 million. Depending on the amount of proceeds obtained, interest coverage ratios could improve into the 3x range, which would be more consistent with the company's peer group. The company has approximately $848 million of debt maturing through 2003. Although HRPT's asset disposition program should provide adequate liquidity for its near term maturities, liquidity shortfalls will likely be satisfied through mortgage financing effectively subordinating its long term bondholders. However, with only a nominal amount of secured debt on its balance sheet, HRPT has sufficient room for the use of secured debt without materially eroding the unencumbered asset base.

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for financial institutions, insurance, corporates, structured finance, sovereigns and public finance markets worldwide.