Fitch Affirms Colonial Properties' Sr. Unsecured Debt at 'BBB-'; Outlook Stable

Business Wire, April 1, 2008

NEW YORK -- Fitch Ratings has affirmed the following ratings of Colonial Properties Trust (NYSE: CLP; 'the company') and its operating partnership, Colonial Realty Limited Partnership (CRLP) as follows:

Colonial Properties Trust

--Issuer Default Rating (IDR) at 'BBB-';

--$125.0 million of preferred stock at 'BB+';

Colonial Realty Limited Partnership

--IDR at 'BBB-';

--$675.0 million unsecured credit facility at 'BBB-';

--$1.5 billion of senior unsecured notes at 'BBB-';

--$45.0 million of unsecured medium term notes at 'BBB-'

--$100.0 million of preferred stock at 'BB+'.

The Rating Outlook is Stable.

The rating affirmations center on the company's successful transition towards primarily owning multifamily properties throughout the Sunbelt region of the United States. Of the company's 108 stabilized and consolidated multifamily, office and retail properties, 104 were unencumbered from mortgages as of Dec. 31, 2007, a credit strength incorporated into CLP's bond ratings. However, the company has an interest in a total of 200 properties (including 20 multifamily communities, 46 office properties and 26 retail properties partially-owned through unconsolidated joint venture entities), and the unconsolidated property portfolio was entirely encumbered as of December 31, 2007. However, CLP's consolidated unencumbered asset coverage of unsecured debt level of 2.1 times (x) as of Dec. 31, 2007, is appropriate for the 'BBB-' rating level.

The ratings further reflect CLP's balance sheet and liquidity position. The company's capital level on a risk-adjusted basis remains adequate for the rating category, while CLP's 2007 debt-to-EBITDA ratio of 8.1x is also good when compared to that of other multifamily-focused REITs. Additionally, in January 2008, CLP increased its borrowing capacity under its line of credit to $675.0 million from $500.0 million, a prudent shift strengthening CLP's liquidity given that during the past several months, the real estate debt capital markets have remained inhospitable to virtually all issuers.

The affirmations recognize certain credit concerns, including declining fixed-charge coverage ratios, a high Funds From Operations (FFO) payout ratio, and material impairments incurred in 2007 associated with CLP's residential-for-sale business.

Fitch notes that CLP's same-property NOI in the company's multifamily portfolio grew 5.2% in 2007 and that occupancy levels in the 95%-96% range in the multifamily segment are solid. However, Fitch calculates CLP's fixed charge coverage ratio at 1.3x in 2007, 1.3x in 2006 and 1.4x in 2005, and notes that a ratio of 1.5x would be more consistent with the 'BBB-' IDR.

A decline in FFO payout ratios to below 100.0% would also serve to benefit CLP's credit ratings, as Fitch calculates the 2007 FFO payout ratio as 167.7%. In addition, any further impairments associated with CLP's existing residential-for-sale business would decrease the company's earnings power, but would not affect the company's ratings.

The Stable Rating Outlook reflects Fitch's view that CLP's development pipeline is modest considering the overall size of the Company's balance sheet. Furthermore, Colonial's unencumbered asset coverage, unencumbered net operating income to total net operating income, and overall leverage ratios are expected to remain appropriate for the 'BBB-' rating level during 2008 and 2009, despite the current uncertainty and inactivity within the real estate capital markets.

Colonial is a self-administered equity REIT headquartered in Birmingham, AL. As of December 31, 2007, the company had $3.5 billion in undepreciated book assets and $1.5 billion in undepreciated book equity. As of December 31, 2007, CLP's activities include full or partial ownership of a portfolio of 200 properties, located in Alabama, Arizona, California, Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee, Texas, and Virginia, development of new properties, acquisition of existing properties, build-to-suit development, and the provision of management, leasing, and brokerage services for commercial real estate.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.