American Homes 4 Rent Inks $1.25B ESG-Linked Revolving Credit Facility

Sustainability-linked bonds and loans are growing in popularity as they link financing terms to investor-favored ESG targets.

American Homes 4 Rent has closed a $1.25 billion, sustainability-linked revolving credit facility.

The facility amends the firm’s existing $800 million revolving credit facility, and marks the latest move by a REIT to secure lower borrowing costs by touting ESG commitments. It has an initial maturity date of April 15, 2025, which can be extended for up to one year through two six-month options.

“We are pleased to announce the closing of our upsized credit facility which reflects our continued strategic focus on outsized external growth as well as dedication to sustainability and sound ESG principles,” Chris Lau, American Homes 4 Rent’s CFO said in a statement.

Sustainability-linked bonds and loans are growing in popularity as they link financing terms to investor-favored ESG targets like cutting carbon emissions, for example.  Private equity is increasingly focused on the sector, and issuers are also seeing significant financial benefits from ESG offerings, with many seeing pricing increases of up to 20 basis points,  according to a recent JD Supra analysis.

Earlier this spring, Duke Realty Corp. closed a refinancing of a $1.2 billion revolving credit facility that included a reduction in borrowing costs if certain sustainability linked metrics are achieved each year, dropping the REIT’s borrowing costs by 10 basis points from its prior facility. And in March, cold storage player Lineage inked its first $2.8 billion revolving credit facility and sustainability-linked loan with three ESG initiatives. 

The trend is not simply limited to CRE: consumer goods company General Mills also stepped into the fray earlier this month with a renewal of a five-year $2.7 billion revolving credit facility including pricing tied to environmental impact metrics. The company is the first US consumer packaged goods company to take that step, and will be measured on progress in reducing greenhouse gas emissions in owned operations and using renewable electricity for global operations.