Tritax EuroBox EUR500m ‘Dark Green’ bond issuance six-times oversubscribed
Pan-European logistics real estate investor Tritax EuroBox’s recent maiden EUR500 million green bond issuance slashed its cost of debt and was over six-times oversubscribed, securing the lowest coupon ever for a BBB-debut real estate issuer in euros.
The UK-listed logistics investor tapped into huge demand for sustainable investments, combined with exposure to the EU’s fast expanding and supply-constrained logistics warehouse market, driven by the e-commerce boom. The bonds also vaulted into the EU’s ‘dark green’ SFDR Article 9 category of impact investments.
Nick Preston, Fund Manager at Tritax EuroBox, says: “We were confident that we would meet our financing targets with Tritax EuroBox’s first green bond issuance, but didn’t anticipate the sheer strength of the investor appetite for corporate bonds with impeccable sustainability credentials, that are also underpinned by one of the few sectors that has boomed during the pandemic.
“This issuance follows the successful equity raise in March 2021, and together allows us to pursue our ambitious sustainability strategy, significantly cut our average cost of debt, and places us in pole position to deploy into our extensive pipeline of logistics developments, and extensions of existing assets, in some of Europe’s most supply-constrained markets, such as Germany, Italy, France Belgium and Netherlands. There are very few operators in European logistics real estate that have access to this level of pipeline and even less in the solidly green sustainable ‘big boxes’ that represent the industry’s route to a net zero-carbon future.”
Tritax EuroBox’s unsecured five-year green bonds mature in 2026 and have a coupon of 0.95 per cent, significantly below its previous average cost of debt of 2.3 per cent as at the end of March this year. As well as securing a record low coupon for a debut BBB real estate issuer, the syndicated debt was also the lowest ever coupon for a maiden issuance in the sector for a five-year maturity.
Bond issuance classified as dark green product under EU’s SFDR ‘Article 9’ classification
Tritax EuroBox has developed a Green Finance Framework in alignment with market benchmark Green Bond and Green Loan Principles and the ESG targets for its underlying logistics portfolio are aligned with UN sustainable development goals (SDGs) 8, 11, 13 and 15. These encompass creating a positive net-positive impact across the portfolio through healthy and sustainable buildings; achieving net zero carbon assets by 2030 and enhancing biodiversity and the wellbeing of all stakeholders.
By establishing measurable sustainable goals for the proceeds of the green bond issuance, it is classified as a ‘dark green’ investment, as defined in Article 9 of the EU’s Sustainable Financial Disclosure Regulation (SFDR) that applies to European institutional investors. SFDR is part of the EU’s ‘Green Deal’ Sustainable Finance Action Plan to redirect capital flows towards sustainable investments and achieve a net carbon neutral European economy by 2050.
Burgeoning investor demand has spurred a surge in supply of green corporate debt. The total global primary issuance of sustainable bonds across sectors has soared in the past few years and exceeded the USD1.5 trillion mark in 2020.1 So far in 2021, around USD325 billion in green bonds have been issued worldwide, compared with USD124 billion for the same period of last year.
Tritax EuroBox is at the centre of a hugely favourable demand-supply imbalance in the European logistics real estate markets that is leading to prolonged rental growth and capital value rises, according to a recent equities research report on the stock from analysts QuotedData: ‘Tritax EuroBox – Full Throttle’.
The surge in occupier demand is coming on two principal fronts – the growth of online retailing and the need for increased supply chain resilience laid bare by the global dislocations evident during the Covid-19 pandemic. The Centre for Retail Research has concluded that online retail sales as a percentage of total sales across Europe increased on average to 16.2 per cent in 2020, from 12 per cent in 2019, and while this may slip back as stores return to normal business, consumer behavioural changes have been established and will endure.
Once fully deployed, Tritax EuroBox’s pan-European portfolio will have a gross asset value of over EUR1.3 billion compared with just EUR478 million at the end of 2018, the QuotedData report concludes.