Research Update: Government Properties Income Trust Outlook Revised To Stable On Proposed Merger; 'BBB-' Ratings Affirmed

Newton, Mass.-based Government Properties Income Trust (GOV) announced a definitive merger agreement with Select Income REIT (BBB-/Stable/--) to form an office REIT with approximately $6 billion in undepreciated assets. We project leverage in the low- to mid-7x area when the transaction closes, but expect leverage to improve to the high- to mid-6x area by year-end 2019, which incorporates future asset sales. We revised our outlook to stable from negative on our improved assessment of the combined portfolio, and affirmed the 'BBB-' issuer credit rating on GOV. The stable outlook reflects our view that, following the merger, GOV will successfully merge with Select Income REIT and achieve lower debt leverage through asset sales, with debt-to-EBITDA improving to the high- to mid-6x

...+ Newton, Mass.-based Government Properties Income Trust (GOV) announced a definitive merger agreement with Select Income REIT (###-/Stable/--) to form an office REIT with approximately $6 billion in undepreciated assets. + We project leverage in the low- to mid-7x area when the transaction closes, but expect leverage to improve to the high- to mid-6x area by year-end 2019, which incorporates future asset sales. + We revised our outlook to stable from negative on our improved assessment of the combined portfolio, and affirmed the '###-' issuer credit rating on GOV. + The stable outlook reflects our view that, following the merger, GOV will successfully merge with Select Income REIT and achieve lower debt leverage through asset sales, with debt-to-EBITDA improving to the high- to mid-6x area by year-end 2019....

Research Update