Revolving bank facility
06 February 2020
GPE signs innovative £450 million ESG-linked Revolving Credit Facility
The Group signed a £450 million ESG-linked unsecured revolving credit facility (“RCF”) at a headline margin of 90 basis points over LIBOR with a group of five existing relationship banks on 31 January 2020. The facility has an initial five-year term which may be extended to a maximum of seven years at GPE’s request, subject to bank consent.
This innovative facility, the first to be issued by a UK REIT, incorporates three ESG-linked KPIs which align with our ambitious sustainability strategy, including our participation in the Better Buildings Partnership Climate Change Commitment which we signed in late 2019. These KPIs include annual pre-agreed targets and are based on:
- Supporting our target to decarbonise our existing buildings by reducing our portfolio energy intensity by 40% by 2030;
- Supporting our target to build net zero carbon new buildings from 2030 by reducing the embodied carbon of our new build developments and major refurbishments; and
- Providing better quality urban greening measures by increasing the biodiversity net gain across our portfolio.
These targets will further incentivise the Group to accelerate the decarbonisation of our business and will support continued behavioural change within the Group and across our supply chain.
We will measure performance against each KPI annually. A margin decrease or increase of up to 2.5 basis points will be applied to the headline margin on the basis of this performance. All margin adjustments will be given by GPE to registered charities focused on environmental initiatives.
The first KPI performance measurement date was 31 March 2021 and our results far exceeded expectations demonstrating the impact of linking sustainability performance to financial metrics. Firstly, our embodied carbon KPI where against a 10% target, we delivered an average reduction of 35% at design stage across our developments 2 Aldermanbury Square and 50 Finsbury Square due to the fantastic efforts of our development team. Secondly, our biodiversity KPI (5% target) where we delivered a 62% net gain, driven in particular by Hanover Square. Finally, our energy intensity reduced by 14% KPI (target 8%), albeit this was affected by lower levels of occupation during the pandemic.
This facility is fully available for general corporate purposes, includes our standard unsecured financial covenants (see below) and is an amendment and extension of the Group’s £450 million RCF signed in October 2018.
The financial covenants in respect of this facility are as follows:
- The ratio of Consolidated Net Borrowings to Consolidated Shareholders’ Funds must not exceed 1.25:1
- The ratio of Unencumbered Asset Value to Consolidated Unsecured Borrowings must not be less than 1.66:1
- The ratio of Consolidated Profits Before Interest and Tax to Consolidated Net Interest must not be less than 1.35:1
The headline margin payable on the facility depends on a ratchet mechanism based on the ratio of Consolidated Net Borrowings to Consolidated Shareholders’ Funds. The margin ratchet is 90 - 150 basis points (over LIBOR).
The participating banks are Santander, NatWest, Wells Fargo, Lloyds Bank plc and Bank of China. Santander acted as the Sustainability Co-ordinator.