Singaporean sovereign wealth fund GIC has backed the future of sustainable offices, committing as the anchor investor in a $700 million “green” debt facility being used to fund the construction of the 39-storey Parkline Place office tower in central Sydney.
The loan has been issued to project owners Oxford Properties Group, Investa and Mitsubishi Estate through Gresham Property’s recently closed construction debt fund, GPF No. 8, which has raised more than $1.4 billion.
Gresham Property believes at $700 million it is Australia’s largest single-source construction debt facility.
“We’re not aware of any larger single-lender loan in Australia,” said Mike Burley, joint managing director of Gresham Property.
Fellow joint managing director Ami Simon said the facility qualified as a “green loan” because of the environmental credentials of Parkline Place, which has adopted a 5.5-star NABERS Energy Commitment Agreement.
But there are no environmental construction performance hurdles embedded in the loan that would affect its terms, such as interest rates, either as a penalty or reward.
“As a construction loan, it’s very hard to have performance criteria attached to it,” Mr Simon said.
“It’s a lot harder for construction [compared with existing buildings] because the performance of the building only happens post-completion when we’ve been repaid.”
He added: “The loan itself complies with the globally recognised guidelines for green loans, the Green Loan Principles, and reflects the Green Financing Framework adopted by Oxford and Investa.”
Sustainability becomes a priority
Green Loan Principals include borrowers maintaining reports on deployment of proceeds including qualitative performance indicators and quantitative performance measures.
Lee Kok Sun, GIC chief investment officer of real estate, said the investment giant was increasingly looking for environmentally sustainable projects in which to invest.
“As a long-term investor, sustainability is integral to GIC’s mandate and continues to be a key priority for us,” Mr Lee said.
“In real estate, we find that tenants globally have an increasing preference for environmentally sustainable buildings.
“We are confident that the design of Parkline Place caters to modern tenant demands and will generate resilient returns in the long run.”
Green or sustainable loans are on the rise. Three weeks ago, Charter Hall announced it had sourced a $500 million sustainability-linked loan for the Charter Hall Office Trust (CHOT) through MUFG Bank and Sumitomo Mitsui Banking Corporation.
It directly links CHOT’s financing costs to its performance against agreed environmental, social and governance objectives, “delivering a financial benefit should it meet or exceed” the agreed criteria.
“This is an outstanding outcome for CHOT and reflects investor demand for high-quality assets that deliver environmental and social value, alongside financial outcomes to our funds and broader business,” said Carmel Hourigan, Charter Hall office chief executive.
In September, data centre operator AirTrunk took out a $2 billion loan linking its power use to the interest rate paid.
AirTrunk founder Robin Khuda last week told delegates at the Australian Financial Review Property Summit he believed that in two or three years companies which had not embraced sustainability were “not going to be able to raise capital, full stop”.
Construction of Parkline Place has started and is expected to be finished in 2024.