ING Group U.S. subsidiary ING Capital announced today the closing of a $33 million Green Incentive Loan with homebuilding company Lennar Corporation subsidiary LMC, with unique asset-level attributes aimed at promoting improved property sustainability.
The loan is secured by The Maddox, a newly built and recently stabilized high-quality multifamily apartment community in Katy, Texas outside of Houston. According to ING, the loan includes incentives for LMC to pursue a green certification for the property. These 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 Borrower obtaining green certification, which exclusively reimbursed the Borrower for the costs associated with the certification requirements.
Buildings and real estate are significant contributors to the global climate challenge, accounting for approximately 40% of carbon emissions, according to the International Energy Agency and UN Environment Programme. They are also among the hardest to sources of emissions to replace, given their long-term nature.
Christina Langrall, VP of Investments for LMC, said:
“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. 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.”
As demand for sustainability linked loans and securities grows, banks are increasingly developing innovative forms of the sustainable finance tools to meet the needs of various industries and sectors. ING stated that it developed its new Green Incentive Loan to incentivize building owners to invest in green projects and help them to meet their own sustainability goals. The company believes that the instrument is one of the first, if not the first time that a US 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.
Craig Bender, ING’s Head of Commercial Real Estate Financing in the Americas, said:
“ING hopes to offer the Green Incentive Loan to more of our clients in the US over the coming months. We are already in advanced discussions with a client who is interested in this structure for a large construction loan in the New York area.”