CapitaLand and Tong Eng secure green loans

Green loans have been gaining popularity among Singapore property developers building sustainability-related properties.

The latest to use such facilities is CapitaLand, which has obtained its first three green loans in India, totalling 17 billion rupees (S$307 million) from DBS Bank India and HSBC India.

They will finance the development of green-certified business parks in Chennai, Gurgaon and Pune.

Two of the three loans came from DBS - a 4.5-year 6.25 billion rupee loan to finance the first phase of International Tech Park Chennai, Radial Road, and a three-year 4.25 billion rupee loan for the first phase of International Tech Park Gurgaon. Both loans were structured in alignment with the Asia Pacific Loan Market Association's Green Loan Principles and are the first in India to be issued by a Singapore-based lender, DBS said yesterday.

HSBC has provided a four-year 6.5 billion rupee loan to finance the development of International Tech Park Pune, Kharadi.

DBS group head of institutional banking Tan Su Shan said the bank sees "immense potential" for growth in Asia's sustainable financing market as companies look to further their sustainability agenda through responsible financing practices.

"In becoming the first Singapore bank to finance green loans in India, we are also establishing Singapore as a regional sustainable financing hub," she said.

CapitaLand has a portfolio of more than 20 business and IT parks, industrial, lodging and logistics properties across seven Indian cities - Bangalore, Chennai, Goa, Gurgaon, Hyderabad, Mumbai and Pune.

Separately, OCBC Bank has provided a $71 million revolving green loan referencing the Singapore Overnight Rate Average (Sora) to local developer Tong Eng Group.

This is Singapore's first green loan referencing the Sora, OCBC and Tong Eng said yesterday. Proceeds will be used to refinance Tong Eng Building, which received the Building and Construction Authority (BCA) Green Mark Platinum re-certification last month.

The loan's interest rate will be calculated based on the three-month compounded Sora published by the Monetary Authority of Singapore plus an applicable margin.

Tong Eng will be informed on the first day of the loan and then on each rollover of the amount due at the end of an interest period.

OCBC and Tong Eng said this "compounding in-advance" method provides better visibility and therefore facilitates cash flow planning with regard to interest payments.

Tong Eng earned the BCA Green Mark Platinum Award by incorporating several green features in Tong Eng Building that resulted in energy savings. The developer also outfitted all the lifts with new motors, drives and controllers to improve their efficiency.

Tong Eng managing director Teo Tong Lim said: "Besides furthering our sustainability strategy, this loan is also an important step for us in transitioning our loan book to backward-looking rates - an inevitable shift that many businesses will have to undertake."

He added that beginning this process early has given the company a better understanding of the pricing of such loans and the operational changes that have to be made to prepare for the period after the cessation of the Swap Offer Rate.

Mr Linus Goh, OCBC's head of global commercial banking, said launching this loan with the refinancing for Tong Eng Building is a timely reminder that mature buildings can meet today's sustainability standards. The building has been a fixture in the Central Business District since the 1980s.

Tong Eng's green loan is OCBC's third Sora-based corporate loan. The first two were extended to CapitaLand in June and to Sembcorp Industries in October. The lender introduced the first Sora-based retail home loan in July.

OCBC has extended around $1.3 billion in corporate and retail loans referencing Sora, including close to $1 billion in Sora-based home loans.

THE BUSINESS TIMES

A version of this article appeared in the print edition of The Straits Times on November 19, 2020, with the headline 'CapitaLand and Tong Eng secure green loans'. Print Edition | Subscribe