P3 issued €1bn of Green Bonds in January 2022 to high demand on the Luxembourg Stock Exchange. Ben Helsing, Group Treasurer and Head of Debt Investor Relations, shares how P3’s successful debut on the Bond market benefits both investors and customers.
What was behind the choice to issue Green Bonds in January?
“We are on a sustainability journey and this is a great way to align our environmental goals with our funding activities. It incentivises us and offers bond investors the chance to invest in sustainability. The proceeds of the issue are used to finance and refinance existing and new green buildings, projects and investments, so making our warehouses even more environmentally friendly, and through that, to contribute to decarbonisation.
“We have strong growth ambitions and the bond markets are a natural source of funding for a firm of our size. Issuing Green Bonds unites our green goals and growth ambitions. The practical reason for doing the issuance in January is that it was the earliest available opportunity after having just received a BBB credit rating from Standard & Poor’s (S&P) and established an EMTN (Euro Medium-Term Note) programme.
What was the response of Bond investors?
“Within hours, we were oversubscribed to the tune of €1.7bn of orders from around 160 high quality investors. That’s a very good level, especially for a debut issuer. Usually you grow your investor base over time, but for this we had high interest straight away.
“We are very happy with this outcome, especially because the markets were very busy at the time, so there was some uncertainty about what the appetite would be like. We are happy we got this kind of response from investors.
“I believe we are in a sweet spot of what investors like; very stable, recurring cash flows, low credit risk and a strong owner who supports our independent growth ambitions. We have more financing to do, and we will be a repeat issuer going forward. We’re just starting this journey with bond investors.
How do P3’s Green Bonds contribute to the environmental goals of investors and customers?
“Our customers are putting more effort into environmental, social and governance (ESG) and into sustainable assets. Our Green Bonds complement this focus because they are issued under our Green Financing Framework, which has been approved by Sustainalytics, the leading Second Opinion Provider for validating such frameworks. It’s a public document which stipulates how we invest the proceeds.
“Our ambition is to make our buildings more ‘green’ and sustainable, for instance by investing in energy efficiency or renewable energy production, like solar panels on roofs or by adding insulation.
“A green building eligible to be financed or refinanced with green financing is, according to our Green Financing Framework, one with a BREEAM rating of ‘very good’ or better. This is the benchmark, and this is what makes our financing green.”
Why do you think P3’s Green Bonds were popular with bond investors?
There are several reasons. The logistics sector is very resilient with growth potential and a favourable upward trend outlook. Meanwhile, our portfolio is high quality and very diversified; our high-quality warehouses attract very large, highly rated institutional investment-grade tenants, such as Amazon.
We also have scale; we’re around the third biggest asset owner in continental Europe, with a portfolio of €7.5bn in asset value, across 11 countries. We also have a strong commitment to sustainability in line with our customers’ commitment to this. We’re targeting 75% of our portfolio to have a minimum BREEAM rating of ‘very good’ by the end of 2022.
We enjoy robust credit metrics and a strong balance sheet, and S&P have assigned a BBB credit rating with stable outlook, which is a real stamp of approval. At the start of this year our loan to value was 45%, which is healthy. Finally, our shareholder is very strong and well capitalised, and supports our independent growth ambitions.