Moody's eyes PS Business for downgrade

Moody's Investors Service said it placed on review for downgrade the ratings of PS Business Parks, Inc. (PSB), including its Baa2 preferred stock rating and the (P)Baa1 senior unsecured shelf rating of its main operating subsidiary, PS Business Parks, LP.

The review for downgrade follows the announcement the REIT agreed to be acquired by affiliates of Blackstone Real Estate in a deal valued at about $7.6 billion, the agency said.

“The review for downgrade reflects the likelihood that PSB's credit profile will deteriorate under Blackstone's ownership, with the potential for meaningfully higher leverage and secured debt levels that could result in a multi-notch downgrade of the REIT's ratings, including crossing over to non-investment grade territory, upon transaction close,” Moody’s said in a press release.

PSB's board approved the offer, and it is expected to close in third quarter of 2022, subject to final approval by the REIT's shareholders and other customary closing conditions.

Moody's said it will focus on PSB's post-closing capital structure and portfolio strategy, and the quality of assets and cash flows that will stay within its operating entity and provide credit support to its preferred stock that is expected to remain outstanding.

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