HONG Kong-listed real asset manager ESR Group has secured a five-year syndicated sustainability-linked term loan and revolving credit facilities (SLL) amounting to US$2.5 billion.
The move brings such loans taken out by the group to 11 for close to US$7 billion in total.
On Thursday (Dec 12), ESR said the US$2.5 billion SLL represents its largest to date, adding that the transaction is also the biggest of its kind within South-east Asia’s real estate space this year.
Under the latest SLL’s structure, interest rates will be reduced based on two key performance indicators (KPI) as ESR increases its installed solar power capacity, as well as improves its sustainability certifications.
This will enable ESR to achieve lower borrowing costs as the group uses the loan proceeds for general corporate purposes, working capital and existing debt refinancing, it said.
One KPI is based on annual increases in ESR’s total solar power capacity from completed, directly managed properties.
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The other is according to year-on-year improvements in the percentage of ESR’s completed and directly managed properties that have achieved “high” sustainability certifications and ratings, as set out in the group’s annual environmental, social and corporate governance (ESG) report’s data summary.
Examples for the second KPI include a minimum “gold” certification in Leadership in Energy and Environmental Design, and a five-star rating in the National Australian Built Environment Rating System.
The US$2.5 billion SLL was led and arranged by Mizuho Bank, MUFG, OCBC, UOB and the Singapore branches of HSBC and CIMB.
Ivan Lim, group chief financial officer of ESR, said the group’s loan was therefore well supported by a core, yet diverse, group of lenders with deep knowledge of the real estate sector.
“Liquidity garnered from the market bears testament to our market leadership and our capability in securing competitively priced financing from the syndicated loan market. It also reflects our unwavering commitment to ESG,” he said.
As part of its targets, the group aims to set up 1,000 megawatts of solar power capacity on the rooftop of its assets, while also attaining sustainable building certifications and ratings for 50 per cent of its portfolio by 2030.
Moody’s Investors Service provided a second-party opinion on the KPIs and sustainability performance targets (SPTs) for the SLL, which ESR noted to align with the Loan Market Association, the Loan Syndications and Trading Association, and the Asia Pacific Loan Market Association’s Sustainability-Linked Loan Principles 2023.
Comprising an independent assessment of the SPTs’ consistency with ESR’s sustainability strategy, the opinion considered these as “overall ambitious” against business-as-usual, industry peers’ targets, and industry standards.
“This SLL will support ESR as we align ambitious sustainability goals with financial outcomes,” added Lim.
