ING Capital LLC has closed a $33MM Green Incentive loan, a new sustainable finance product, with apartment developer and manager LMC, a wholly-owned subsidiary of Lennar Corporation. The loan is secured by The Maddox, a newly-built and recently-stabilized multifamily apartment community in Katy, Texas outside of Houston.
The Green Incentive Loan is structured in line with the Green Loan Principles issued by the Loan Market Association (LMA), the Loan Syndications and Trading Association (LSTA) and the Asia Pacific Loan Market Association (APLMA). It is unique in that it contains financial incentives for LMC to pursue a green certification for the property. The incentives, which can differ from transaction to transaction, for The Maddox include: a reduction in interest margin upon the borrower’s commitment toward initiating a green certification process for the asset, an additional reduction in interest margin upon the borrower obtaining green certification in line with best market practices and an earnout of loan proceeds upon the borrower obtaining green certification, which exclusively reimbursed the Borrower for the costs associated with the certification requirements.
“Sustainability is a priority for LMC and collaborations with organizations like ING allows us to expand our current ESG initiatives to lower building emissions and deliver green living experiences to our residents,” said Christina Langrall, vice president of investments for LMC. “We are proud to work with ING and will leverage the proceeds from this loan to enhance The Maddox with healthy and environmentally responsible practices as we pursue the National Green Building Standard (NGBS) Silver certification.”
ING developed this sustainable finance product to incentivize building owners to invest in green projects and help them to meet their own sustainability goals. ING believes that this Green Incentive Loan is one of the first, if not the first time that a U.S. balance sheet lender has structured a green loan which includes a clear financial incentive for borrowers to upgrade and improve the sustainability of their real estate assets. Although similar facilities with financial incentives have been provided at the corporate or fund levels, the inclusion of financial incentives combined with green use of proceeds at the asset level is unique, the company said.
“We are excited to have partnered with one of our key clients LMC on this new, innovative loan structure,” said Craig Bender, ING’s head of commercial real estate financing in the Americas. “Providing financial incentives to our clients to improve the sustainability of their assets is consistent with ING’s core belief that it has a responsibility to steer its loan book towards meeting the Paris Agreement’s climate change goals. If at the same time we can also help our clients achieve their own sustainability goals it is truly a win-win proposition.”