Moody's rates Government Properties debt Baa3

Moody's Investors Service said it assigned a Baa3 rating to the proposed senior debt being issued by Government Properties Income Trust. The outlook is stable.

The proceeds will be used to repay the $150 million remaining of the $500 million term loan entered into in July as well as to reduce the outstanding borrowings on its $550 million line of credit. The agency said this debt financing, combined with the recent equity offering, effectively completes the company’s permanent financing for its purchase of a stake in Select Income REIT for $689mm.

Government Properties’ Baa3 rating reflects the real estate investment trust’s focus on properties occupied by federal and state government tenants, strong tenant credit quality, reasonable leverage, strong fixed charge coverage and large unencumbered asset pool, Moody’s said.

The REIT’s key credit challenges include its modest size and some geographic and asset concentration, the agency said.

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