Green bond issuance by US real estate investment trusts has moderated in 2023 as interest rates continue to rise and the cost of debt becomes more expensive.
S&P Global Market Intelligence identified just three green bond issuances from Jan. 1 to May 30, totaling $1.6 billion in gross proceeds.
Boston Properties completes largest YTD offering
Office REIT Boston Properties Inc. completed the largest green bond offering thus far in 2023, at $750 million on May 4, and set to mature in January 2034. The bonds included a coupon rate of 6.5%, 3.2 percentage points higher than the comparable US Treasury note.
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Another office REIT, Alexandria Real Estate Equities Inc., raised $500 million through its green bond offering on Feb. 2. The notes mature in April 2035 and include a 4.75% coupon rate.
Shopping center REIT Federal Realty Investment Trust rounded out the top three, completing its 5.375% green bond offering on April 10, totaling $350 million.
2023 green bond notes represent 6.1% of total REIT bonds
The $1.6 billion of green bond issuance accounted for 6.1% of the total bond issuance by US REITs year to date, the lowest proportion since green bonds started ramping up in usage in 2018. Since then, green bond usage by US REITs has continually increased, with more REITs utilizing the debt structure as a means of reaching a new investor base focused more on issues related to environmental, social and governance.
Total proceeds from green bond notes peaked in 2021 at $11.97 billion, or 15.5% of the total bond proceeds for the year. While 2022 followed as a slow year for bond issuance overall, green bonds represented an all-time high of 18.2% of the total proceeds. Large green bond issuers for the year included industrial REIT Prologis Inc. and datacenter REIT Equinix Inc.
