P3 enters Europe’s growing green real estate bond market

The logistics property company has made its bond market debut, issuing €1bn of notes in line with its new green financing framework.

P3 Logistics Parks, the European industrial property investor and developer, has become the latest real estate organisation to raise finance in Europe’s increasingly popular green bond market.

P3 Group has issued €1 billion of green bonds as part of a recently launched euro medium-term note programme, which complies with a green financing framework adopted by the company in December.

Two tranches of bonds have been issued – one with a four-year tenor, carrying a 0.875 percent fixed coupon, and the other with a seven-year tenor and a 1.625 percent coupon. They will be listed on the official list of the Luxembourg Stock Exchange.

P3 said the net proceeds will be used to finance, or refinance, new or existing ‘green’ properties. The company obtained an external opinion on its green framework from ESG research and rating organisation Sustainalytics to confirm that it aligns with the International Capital Market Association’s Green Bond Principles.

“Our focus remains on growing profitably and sustainably, which is why we launched our green financing framework at the end of 2021 to support the issuance of green bonds,” commented Frank Pörschke, chief executive of P3 Logistic Parks. “Together with the support of our shareholder, GIC, we plan to continue our dynamic growth journey in the coming years, partly funded by possible repeat issuances in the bond market,” he added.

Ben Helsing, P3’s group treasurer and head of debt investor relations, explained that the bond issue serves to increase the company’s liquidity, diversify its sources of debt finance and extends its average debt maturities.

“To ensure substantial and flexible liquidity for the group, we signed a €750 million revolving credit facility with our banking group in December 2021,” he said. “Logistics real estate continues to exhibit strong fundamentals with favourable long-term supply and demand trends. These factors, together with P3’s robust credit metrics and our strong shareholder, enabled us to receive a BBB credit rating from S&P with stable outlook.”

He added: “With P3‘s recent financing transactions, we have created a strong capital markets-facing funding platform to access the bond markets to refinance future debt maturities and fund further growth of the portfolio at attractive terms.”

Market watchers say the pandemic has provided a renewed impetus for property companies to issue bonds, with green bonds particularly popular. According to Berlin-based Scope Ratings, €22 billion of the circa €60 billion of bonds issued in Europe by real estate companies in 2021 to 6 August was through green, social or sustainability-linked bonds. That 36 percent share was up significantly on the 19 percent for the whole of 2020.

During 2021, for example, AXA IM Alts, the real assets investment management business of French insurer AXA, raised finance for some of its flagship property funds via the green bond market. In November, its European logistics fund, AXA Logistics Europe, priced an €800 million green bond featuring a green finance framework, which it said was four times oversubscribed. Also during 2021, the company raised €1 billion of finance for its core real estate fund across two separate green bond issues in June and October.

Speaking after the November bond issue, Timothé Rauly, global chief investment officer and head of fund management at AXA IM Alts, said the shift in financing strategy to unsecured debt would allow the repayment of existing mortgage loans, which would be a “positive change in the long-term capital structure of the fund, allowing for further growth and continued market leading returns”.

CBRE Investment Management is another real estate manager that has raised finance via the green bond market in the last 12 months. Speaking to Real Estate Capital Europe in August 2021, Duco Mook, head of treasury and debt financing, said that by bringing to the market a bond under a green financing framework, borrowers can attract a wider pool of investors.

“There are certain institutional investors that would prefer to allocate to green or sustainable bonds than to ‘brown’ bonds. Although it is hard to quantify a discount in pricing, when structuring our green bond, our adviser told us that a sustainable bond with a convincing green framework for investors could lead to a potential discount of 5 to 7 basis points,” he said.