SA’s second-largest locally invested property company by asset size, Redefine Properties, has issued a R1bn sustainable green bond, the largest yet by a real estate investment trust (Reit) in SA. The move will see the company increase the use of solar energy at its SA properties.
The bond will enable the company to meet its environmental, social and governance (ESG) targets and become more attractive to investors, CEO Andrew Konig said on Wednesday.
Reits are listed landlords who are required to pay a minimum of 75% of their distributable income as a dividend each year.
Konig said the funds would be used to refinance coming bond maturities, which would enable Redefine to increase the use of solar energy at its SA properties.
This would reduce the greenhouse gas emissions created by Redefine and “significantly enhance water-efficiency solutions” for the group, which owns R63bn worth of local assets.
The issuance was launched through Redefine’s JSE-approved R30bn domestic medium-term note programme, raising a nominal R1bn three-year unsecured floating rate note that will mature on July 26 2024, Konig said.
“A number of institutions have subscribed to the bond, having recognised the importance of ESG,” he said.
Redefine has committed to the renewable energy, greenhouse gas emission and water-efficiency performance target date. Renewable energy now accounts for 5% of total energy consumption across Redefine’s SA portfolio.
“The outcome exceeded expectations and recognises Redefine’s improved balance sheet strength. It also bears testimony to the progress already made on the ESG front,” Konig said.
He said demand for green and sustainability bonds was on the rise from investors.
“Redefine as a business is embracing ESG principles in all aspects of what we do, and our new sustainability-linked bond is one of the steps we are taking to integrate ESG into our funding plan. We are extremely pleased with the result of the issuance and look forward to doing more as part of our transitioning efforts, together with all our stakeholders,” said Konig.
The renewable energy target will be achieved through an increase in solar energy installed measured in megawatt peak (MWp) with respect to the SA property assets, said COO Leon Kok.
The target is for a 3MWp increase at each of the target dates resulting in a cumulative 6MWp installation, or a 25% increase on baseline, according to Kok.
Water efficiency would be achieved through a reduction in water drawn from municipal and borehole sources measured in megalitres (ML), with the 2023 target being a 5.1% reduction from a baseline of 2,759ML, cumulatively 140ML.
“Good ESG policies could improve the case for investing in a property stock,” said Ecan Robins, portfolio fund manager at Old Mutual Investment Group.
“Reits are taking ESG seriously, which pleases fund managers. We won’t invest just because of good ESG. Rather it forms a part of the qualities a large well-managed Reit should have,” he said.
Ahmed Motara, senior analyst at Stanlib, said the possibility of linking Redefine’s cost of debt to ESG was welcomed.
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