Ascott Residence Trust (ART) has issued its first sustainability-linked bond of S$200 million under its newly established Sustainability-Linked Finance Framework. ART is the first hospitality trust globally to issue a sustainability-linked bond. ART is also the first listed real estate trust in Singapore to issue a sustainability-linked bond.
ARTâ€™s sustainability-linked bond is issued pursuant to its S$2 billion Multicurrency Debt Issuance Programme and proceeds from the bond issuance will be used to refinance ARTâ€™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 â€˜greeniumâ€™ 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.
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 Limited and Ascott Business Trust Management Pte. Ltd. (the Managers of ART) said: â€œSustainability is core to everything we do at ART. Aligning our financing needs with our sustainability efforts to build a greener portfolio demonstrates ARTâ€™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 ARTâ€™s senior management team as well as operations and technical department experts. As of 31 December 2021, 33% of ARTâ€™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.â€
ARTâ€™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 United Nationsâ€™ Sustainable Development Goals. ART has engaged Moodyâ€™s ESG Solutions to provide a Second-Party Opinion (SPO) on ARTâ€™s Sustainability-Linked Finance Framework. According to Moodyâ€™s ESG Solutions, â€œARTâ€™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.â€
Fitch Ratings had assigned a â€˜BBB-â€™ long-term issuer default rating, with stable outlook to ART. The rating reflects the growing diversification of ARTâ€™s property portfolio towards longer-stay assets, such as student accommodation and rental housing, in the medium term. This improves its business-risk profile and boosts income stability as global travel demand gradually resumes. ART remains resilient due to good portfolio diversification across asset classes and geographies. ARTâ€™s sustainability-linked bond is also rated â€˜BBB-â€™ by Fitch. DBS Bank Ltd. is the sole sustainable finance advisor, lead manager and bookrunner for the transaction.
ARTâ€™s sustainability achievements and commitment
ART is aligned with and actively contributes to the targets set out under CapitaLandâ€™s 2030 Sustainability Master Plan. The strategic blueprint outlines the Groupâ€™s efforts towards building a resilient and resource-efficient real estate portfolio, enabling thriving and future-adaptive communities, and accelerating sustainability innovation and collaboration. These include working towards achieving the reduction targets for carbon emissions, energy and water consumption and waste generation, as well as an increased use of renewable energy.
ARTâ€™s leadership in sustainability has been recognised by international benchmarks. In October 2021, ART was named â€˜Global Sector Leader – Hotelâ€™ in the Global Real Estate Sustainability Benchmark (GRESB) and ranked first in the Singapore Governance and Transparency Index within the REITs and Business Trusts category.
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, ARTâ€™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.