Lloyds channels green funds to Glasgow

Lloyds Bank has provided its largest sustainable real estate loan yet for the new site of University of the West of Scotland’s campus at Hamilton International Technology Park. The three-year, £39.7m facility, which is the latest in the bank’s £1bn Green Lending Initiative for commercial real estate, offers a discount of 20 bps on the margin if UWS and developer, HFD Property Group, keep the “EcoCampus” site, south of Glasgow, carbon neutral. It is the third green loan Lloyds has issued after announcing the scheme in March. So far it has provided £71.7m of facilities to developments (see below). HFD, which was behind Scotland’s first EPC A-rated building at the Strathclyde Business Park, developed the 224,000 sq ft EcoCampus buildings as the UK’s first carbon-neutral speculative office. It takes all of its energy from a nearby windfarm and harvests rainwater for sanitary use. UWS chose the BREEAM “excellent” certified office space for its new campus last December. Stephen Lewis, managing director of HFD, said that although the green fund is an incentive, the company has been pursuing sustainability targets on its own. He said: “It’s more straightforward for us because our starting point is generally to deliver buildings that are sustainable, and then keep delivering the requirements of the green memorandum of understanding, even when there’s no green funding. “We are pleased that banks are beginning to recognise that there is a cost in delivering sustainable measures. Recognising that with an incentive is a good way to focus both our mind, as developers, and that of the occupiers.” Lloyds has said that an average four-year loan under the initiative could save 110,000 tonnes of carbon emissions – equivalent to the annual energy usage of more than 22,000 households. Richard MacDowel, relationship director of Lloyds Bank commercial real estate, said: “If you extrapolate that among all the UK lenders, then it starts to be a significant trend.” The campus is expected to open to students for the 2018 academic year. What is the Lloyds Green Lending Initiative? Lloyds has committed £1bn for loans to motivate developers to improve the green credentials of their buildings. The bank will set individual targets for borrowers depending on their circumstances – whether their projects are sustainable new-builds or existing assets that could be improved – but will ask the occupiers and the developers to work together to maintain or improve their green energy performance. Borrowers could see a discount of the 20 bps HFD received on their margins. What other GLI loans have been made? Trinova secured the first loan, a £17m debt facility for the £30m acquisition of Vulcan House in Sheffield, South Yorkshire. In order to qualify for the discount, the building had to keep its “excellent” BREEAM rating. South West developer HPH secured a five-year, £15m loan to increase the energy efficiency of its 25 assets. As part of the lending covenant, HPH’s portfolio of office, retail and industrial properties has to reduce its energy-intensive activities by 30% over seven years. Comment Richard MacDowel Relationship director, Lloyds Bank commercial real estate It has been interesting engaging with the banking community to see whether there can be some accepted norms around what a green loan might look like and getting feedback from other lenders as to what they might be looking at and how they might resolve the same sorts of issues. If it were just us, I don’t think we’d be making a great difference, but if the banking community can begin to build some consensus about green lending, then I think we will start to make headway. One could try to effect a change in the UK real estate sector by a carrot or a stick. The stick would be not to lend, but it is better to wield a carrot that helps to fund what is effectively a cost for our clients. As a lender, what can we do to support these kinds of investments? A margin discount would be the most acceptable incentive from a market point of view. Part of our challenge is that every situation is slightly different, so we have to tailor our covenants accordingly. • To send feedback, e-mail karl.tomusk@estatesgazette.com or tweet @ktomusk or @estatesgazette