Boston Properties, one of the world’s biggest office landlords, raised $850 million in 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.
The 12-year bond deal priced at a spread of 115 basis points above Treasurys to yield 2.45%, according to a person with direct knowledge of the dealings.
That was inside of earlier talk in the area of 140 basis points above Treasurys, signaling demand for the bonds from investors. Spreads are the level bond investors are paid above a risk-free benchmark to offset default risks. The bond deal 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 pointed out that real estate peers Essex Property Trust Inc.
and Simon Property Group Inc.
had slightly shorter-dated corporate debt trading in the 100-basis-points area.
Boston Properties said it owns 28.1 million square feet of green building projects, 96% of which have been certified at the top Gold and Platinum LEED certification levels, in a statement about the debt deal.
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.”
Shares of Boston Properties rose 0.9% Wednesday, adding to their 17.8% climb on the year. Gains for the commercial landlord only slightly lagged the S&P 500 index’s
19.3% rise this year.
The financing marks Boston Properties’ fourth 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 lighter environmental footprints.
Investor demand for such debt 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 the pandemic.
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 February 2023.