Does Boston Have Enough In its Capital Project Fund to Ensure Noah is able to Safeguard BXP?
- Strategeriest
- Apr 4, 2021
- 2 min read
Good morning,
With Noah’s community impact, and Boston’s Capital Projects Fund still at 143M, down from 297M in 2019. I am betting it does, and I will be taking a position in, EQR and BXP this week as inflation hedges.
I am assuming most of the reduction in Boston's Capital Project Fund was for the 70-million-dollar park in front of their budget office, that could have been built by any reasonable developer for a fraction of that. However, despite halving their endowment in one year, they can still issue municipal bonds from the fund. Hopefully, there will be enough left to float any poor investments made by BXP.
My hypothesis is, both REITs are heavily subsidized by government spending, and their current tenants are more likely to be able to handle the upcoming tax increases being imposed in the United States than their small business competitors.
For BXP:
Their largest tenant is Salesforce. In San Francisco, I expect demand is down in the office space market due to COVID, but their balance sheet seems more than stable. I have concerns regarding
Arnold & Porter Kaye Scholer, as I have never dealt with them professionally or known anyone who has worked for them. I would assume as such, they are politically connected and will be fine. Their third largest tenant is the US Government. I do not see them cutting back on spending anytime soon.
Most of their other tenants are large conglomerates that were utilizing tax reduction strategies that allowed them to pay under 21% in Federal taxes prior to the last tax decrease. I expect the increased tax rate will not affect their occupancy much.
For EQR:
If you look at the price support EQR’s Investments have received in Chicago from Chicago’s Low-Income Housing Trust Fund and the recent precipitous drop in Chicago’s Crime rate. I see no reason why Boston cannot finance its Noah Fund with its Capital Project Fund without violating the SEC laws it needs to adhere to, to continue to issue municipal bonds. However, I am hesitant that the appreciation of the value of their Chicago Investments may be limited by the new Rent Control Bill being legislated.
If EQR looks like it is underperforming its peers. I will cash out of the position and reinvest later.
Also, of concern is that both of tickers seem to be lagging their Index after Biden won the Democrat Nomination. With the Former Mayor of Boston being in the Biden Administration. I would have assumed BPX would have an edge in the upcoming Infrastructure bonanza.
I guess we will just have to settle for our 70-million-dollar five-acre park.
Warmest Regards,
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