Ascott Residence Trust Issues Sustainability-Linked Bond of SGD 200 Million

(22 April 2022, 11:49 +07)  Ascott Residence Trust (ART) has issued its first sustainability-linked bond of S$200 million (approximately US$147 million) under a newly established sustainability-linked finance framework.

The bond is issued pursuant to its S$2 billion multicurrency debt issuance programme and proceeds from the bond issuance will be used to refinance ART’s existing borrowings. With a fixed coupon rate of 3.63% per annum, paid semi-annually in arrears, the five-year sustainability-linked bond will mature in April 2027.

ART has achieved a ‘greenium’ through the issuance of the sustainability-linked bond and committed to a sustainability performance target (SPT) of greening 50% of its total portfolio by the end of 2025.

The properties must achieve a regional, national or internationally recognised green building standard or certification by a recognised third-party by the SPT observation date.

lyf one north singapore

The deal was met with strong demand from institutional investors and was about 2.2 times oversubscribed. The bond issue was eventually upsized from S$150 million to S$200 million, and the final orderbook closed at S$335 million with orders from across 47 accounts. In terms of investor distribution, 79% of the bond was allocated to institutional accounts and 21% to private banking accounts.

ART has concurrently entered into a cross-currency interest rate swap transaction to swap the Singapore dollar-denominated coupon payments of the bond into Japanese Yen at a fixed interest rate of 1.043% per annum.

Ms Beh Siew Kim, Chief Executive Officer of Ascott Residence Trust Management and Ascott Business Trust Management (the Managers of ART) said, “Sustainability is core to everything we do at ART. Aligning our financing needs with our sustainability efforts to build a greener portfolio demonstrates ART’s focus on responsible growth. Our global sustainability strategy centres on improving energy efficiency through technology or engineering solutions, as well as increasing the use of renewable energy. Our efforts are also guided by a sustainability committee comprising members from ART’s senior management team as well as operations and technical department experts. As of 31 December 2021, 33% of ART’s portfolio is green-certified and we target to green the rest of our portfolio by 2030. We continue to work with our operators and lessees to green our properties globally, and contribute to the environmental and social well being of the communities we operate in.”

ART’s Sustainability-Linked finance framework facilitates the future issuance of sustainability linked bonds and loans tied to its environmental, social and governance (ESG) objectives including selected the United Nations’ Sustainable Development Goals.

ART has engaged Moody’s ESG Solutions to provide a Second-Party Opinion (SPO) on ART’s Sustainability-Linked Finance Framework.

According to Moody’s ESG Solutions, “ART’s key performance indicators are clearly defined, measurable and demonstrate a robust level of ambition compared to peers in the hospitality sector. Its Sustainability-Linked Finance Framework has clearly disclosed its strategies to achieve its SPTs and are credible.”

Fitch Ratings had assigned a ‘BBB-’ long-term issuer default rating, with stable outlook to ART. The rating reflects the growing diversification of ART’s property portfolio towards longer-stay assets, such as student accommodation and rental housing, in the medium term. ART’s sustainability-linked bond is also rated ‘BBB-’ by Fitch.

DBS Bank Ltd. is the sole sustainable finance advisor, lead manager and bookrunner for the transaction.

In January 2021, ART was the first hospitality trust in Singapore to secure a green loan. Proceeds from the loan were used to finance lyf one-north Singapore (pictured), ART’s maiden development project. The newly opened coliving property is fitted with green, energy-efficient and smart building features and is certified with Green Mark GoldPLUS by the Building and Construction Authority of Singapore.