Link REIT Secures $12B Sustainability-Linked Loan From 16 Banks

Hong Kong-listed Link REIT has obtained a $12 billion sustainability-linked loan (SLL) in a deal touted by the trust’s manager as the biggest ever for a green credit facility in Asia’s real estate sector.

Link REIT signed with 16 banks to secure the financing, including Bank of China (Hong Kong), DBS, ICBC, OCBC and Bank of America, Link Asset Management said Tuesday in a release.

Under the agreement, Asia’s largest REIT will enjoy interest rate cuts tied to performance targets such as working with tenants to develop green leases, engaging contractors and other service providers to hire locally as a means to promote upward social mobility, and upgrading Link’s net zero strategy to the standard of the Science Based Targets initiative.

“The SLL is governed by Link’s new Sustainable Finance Framework, which requires all our sustainability-linked finance transactions to include at a minimum, one target under each of the ESG aspects,” said George Hongchoy, chief executive of the manager. “As our Vision 2025 sets out ambitious medium-term goals that comprehensively address ESG impacts on sustainability across all our operations, sustainability-linked financing is the natural step to ensure that ongoing investment in sustainability initiatives helps us to extend our track record of strong ESG performance.”

Incentivising Change

The loan facility consists of four tranches, including a four-year $3 billion revolving credit and $3 billion term loan and a five-year $3 billion revolving credit and $3 billion term loan.

The proceeds will be used as general working capital and for corporate funding purposes, which could include debt refinancing, acquisitions, asset enhancement projects and social initiatives, a Link representative told Mingtiandi. The trust had total liabilities, including net assets attributable to unitholders, of HK$54.8 billion ($7 billion) as of 30 June last year, with more than HK$2 billion in cash on hand.

The green credit deal attracted eight international, regional and local banks as mandated lead arrangers and bookrunners and an additional eight banks as participants. HSBC acted as the sustainability advisor of the facility.

“Sustainability-linked loans are an effective way to incentivise positive change and to further align a company’s financing strategy with its sustainability goals,” said Jonathan Drew, HSBC’s managing director for ESG solutions in global banking. “Link has set out ambitious and comprehensive targets covering ESG impacts in its updated SFF, as it continues its leadership in the development of Hong Kong’s green and sustainable finance markets.”

In the Mood to Spend

The disclosure of the massive borrowing comes after Link struck deals in the last four months to acquire close to $1.7 billion worth of assets at home and overseas.

In early November, the REIT announced that it would purchase stakes in three Sydney retail assets from Singapore’s GIC for $394 million. Less than a week later, Link said it was buying a pair of car facilities in Hong Kong and 75 percent stakes in a pair of distribution centres in the Guangdong provincial cities of Dongguan and Foshan for a combined $865 million.

Then in February, the REIT revealed plans to spend $428 million on a 49.9 percent stake in a portfolio of office assets in Sydney and Melbourne held by Oxford Properties’ Investa Gateway Office venture. In announcing that deal, which is expected to close before the end of June, Link REIT said it would fund the acquisition through internal cash resources and debt facilities.

In a sign of the trust’s shift beyond its traditional mainstay of Hong Kong retail, Link put its Stanley Plaza shopping centre up for sale last month. The waterfront mall in the upscale Stanley area of southern Hong Kong Island had a valuation of HK$1.415 billion ($180 million) as of 30 September 2021, accounting for 0.7 percent of the REIT’s gross asset value of more than HK$200 billion at that date.