Aviva Investors has hit its target for sustainable transition lending three years ahead of schedule thanks to its latest transaction.
The asset manager has sealed a 10-year, £227m loan with developer Romulus to refinance a London-wide portfolio including offices, hotels, leisure properties and shops. The borrowing rate will fall if Romulus hits agreed targets around the sustainability of the buildings.
Aviva Investors set a target of originating £1bn in sustainable transition real estate debt when it launched its Net Zero Pathway in late 2020, alongside the establishment of its own Sustainable Transition Loans Framework to identify suitable lending opportunities. The deal with Romulus means the asset manager has hit that target three years early.
Gregor Bamert, Aviva Investors’ head of real estate debt, told EG the team had been “pleasantly surprised” at how quickly deals had appeared on the radar.
“We looked [initially] at how much general new lending we thought might fall under the framework – and we thought somewhere between 20% and 25% of our lending would,” he said. “We set that target at a time when none of our lending was, so to go from zero to 20% to 25% seemed like a pretty ambitious target. As it happens, during the course of last year, around 50% of our lending came within the framework. That has given us the opportunity to think there is real potential here to push this further.”
Bamert and colleagues are now setting fresh targets for the business. The growth of the market has been aided by “a meeting of minds” between lenders and borrowers over putting sustainability at the heart of funding lines, Bamert said.
“When we set the £1bn target, this idea of taking an existing loan – which still had quite a few years to run – and do a complete rework of it was probably not where we saw the main focus,” he added. “But we think it’s a really exciting opportunity because the broader market trend is we need to address the transition [to net zero real estate], we need to address improving existing assets.”
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