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CBRE Investment Management, on behalf of a fund managed by the firm, has become the latest real estate company to issue a green bond, with its third green Eurobond debt offering senior unsecured notes for €750M.
However, despite the rise in sustainability-based lending, there has been a marked slowdown in green bonds issued in the European and U.S. markets since peaking in 2021, with a steep fall-off in North America seeing 2023 hit a six-year low among REITs.
CBRE IM’s issuance marks the first return of the fund to the public debt market since 2021, and the green bond has a maturity of 10 years at 4.75%, rated BBB+ by S&P.
“The fund is set up to benefit from a wide variety of debt sources, but we clearly prefer the public bond market because of its ticket size and ease of use,” CBRE IM fund Chief Financial Officer Mark Pennington said in a statement.
Earlier this year European listed developer, owner and manager of industrial and logistics real estate CTP announced the placement of a €750M green bond with a six-year maturity, also with a 4.75% fixed coupon. The issuance, which marked CTP’s return to the Eurobond market, saw strong demand from investors and was oversubscribed 5.5 times, the company said.
The importance of green bonds has grown over the past few years, according to the European Public Real Estate Association, supporting the expansion of sustainable investments and becoming an attractive vehicle for issuers and investors.
The listed real estate industry has become a key player in this process, and from December 2013 to November 2023, a combination of those listed on the FTSE EPRA NAREIT Developed Europe Index and EPRA members issued a total of €48.5B across 249 green bonds. The most green bonds issued by listed property companies were in 2021.
However, green bond issues fell below €5B in 2023 for the first time in five years, while offerings by U.S. REITs fell to a six-year low in 2023, with only three green bond issuances totalling $1.6B, according to an S&P Global Market Intelligence analysis, representing just 3.6% of total bond proceeds for the year, the smallest proportion since 2018.
Like Europe, U.S. green bonds peaked in 2021 at $14.4B, or 18.2% of the total bond proceeds that year.
In 2023, office REIT Boston Properties completed the largest green bond offering at $750M. Another REIT, Alexandria Real Estate Equities, raised $500M through a green bond offer, while shopping centre REIT Federal Realty Investment Trust closed a $350M green bond offering.
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