Market Extra: Office giant Boston Properties aims for new 12-year green bond financing

Boston Properties, one of the world’s biggest office landlords, is looking to raise fresh debt on Wednesday through a 12-year green bond financing.

The company owns and develops iconic real estate in major U.S. cities and beyond, including San Francisco’s Salesforce Tower, and expects to use proceeds from Wednesday’s financing to repay outstanding corporate debt coming due and to fund or refinance eligible U.S. green projects.

Price talk on the 12-year bond deal has been circulating in the area of 140 basis points above Treasurys, according to a person with direct knowledge of the dealings. It was rated Baa1 by Moody’s and BBB+ by S&P Global, putting it a few notches above speculative-grade or “junk bond” territory.

CreditSights analysts expect pricing to tighten to around 115 basis points above Treasurys
considering that its real estate peers Essex Property Trust Inc. ESS and Simon Property Group Inc. SPG have slightly shorter-dated corporate debt trading in the 100 basis points area.

The 12-year issuance helps Boston Properties

“build out its debt maturity schedule,” CreditSights’ team led by Jesse Rosenthal said, in a client note, adding that the real-estate developer already has “tapped the debt capital markets twice this year to issue new senior 2031s and 2023s,” in a client note.

The financing will mark Boston Properties’ third green bond overall and comes as corporate America rushes to issue hundreds of billions’ of dollars worth of debt in September, including more designed to finance projects with a lighter environmental footprint.

Read: Verizon raises another $1 billion to push more carbon off the grid, and will provide paperwork to prove it

Investor demand for such debt also has been soaring as the international community races to cut global emissions as the planet warms. With the buzz also has come increased scrutiny of responsible finance, including from the U.S. Securities and Exchange Commission, which seeks to hold companies and money managers to account when it comes to living up to their stated environmental, social and good governance (ESG) goals.

Boston Properties is best known for owning and developing office buildings, a segment that’s been under pressure in the past 18 months of pandemic.

See: Office building prices tumble in heart of big American cities

The CreditSights team said it views the landlord as “well-positioned to absorb any permanent demand impairment due to its high-quality portfolio of assets that should remain attractive for tenants regardless.”

The financing will be used by Boston Properties to fund or refinance eligible green projects in the U.S., but also potentially to redeem $1 billion of the company’s 3.85% corporate debt maturing in Feb. 2023.

This post was originally published on Market Watch

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