Allied Properties REIT Issues $450M Green Bond

Allied Properties Real Estate Investment Trust has announced the issuance of a $450 million green bond through a private placement across Canada. The senior unsecured debentures, designated as Series K, will bear an annual interest rate of 4.808% and are set to mature on February 24, 2029. This issuance aligns with Allied’s Green Financing Framework, reinforcing the company’s commitment to sustainability and responsible financial management.

The funds raised through this green bond will primarily be allocated to finance or refinance Eligible Green Projects. One of the key uses of the proceeds is the repayment of the $250 million construction loan for 19 Duncan Street in Toronto. This project has been designed to achieve LEED Gold certification, underscoring Allied’s dedication to environmentally responsible development. The remaining $200 million will be used to refinance Series C unsecured debentures, which are set to mature on April 21, 2025.

Allied’s decision to issue green bonds is a strategic move that supports both its sustainability objectives and its broader financial goals. By replacing existing debt with this new issuance, the company aims to reduce its reliance on variable-rate debt, thereby enhancing financial stability. Additionally, this transaction will increase the proportion of unencumbered properties in Allied’s portfolio from 83% to 87%, further strengthening its balance sheet and providing greater financial flexibility.

The market response to this green bond issuance has been strong, with several leading financial institutions participating in the offering. The debentures were sold at par and are co-led by Scotiabank, RBC Capital Markets, and CIBC Capital Markets. BMO Capital Markets and TD Securities are also participating in the deal. Subject to customary closing conditions, the transaction is expected to close on February 24, 2025.

In terms of credit ratings, the securities have been assigned a BBB rating with a Negative trend by Morningstar DBRS. These debentures rank equally with Allied’s other unsecured debts, ensuring that investors receive the same level of security as with previous issuances. Importantly, while Allied has outlined its intended use of proceeds, the company has clarified that failure to allocate the funds as planned will not constitute an Event of Default under the Series K Indenture.

Beyond its financial implications, this green bond issuance reflects a broader trend in sustainable finance. Companies worldwide are increasingly turning to green bonds to fund environmentally responsible projects while maintaining financial discipline. Allied’s move aligns with this trend, reinforcing its position as a leader in sustainable real estate development.

However, legal restrictions apply to this issuance. The debentures have not been registered under the U.S. Securities Act of 1933, meaning they are not available for sale in the United States. Despite this limitation, the offering is expected to attract significant interest from Canadian institutional investors seeking exposure to sustainable investments.

Allied’s green bond issuance comes amid growing interest in ESG (Environmental, Social, and Governance) investing, where institutional investors prioritize companies with strong sustainability commitments. By aligning its financing strategy with sustainability goals, Allied not only secures capital for key projects but also enhances its reputation among investors focused on responsible investment practices.

As global markets continue to evolve, the demand for green bonds is expected to rise. Allied’s decision to tap into this market demonstrates its proactive approach to balancing financial performance with environmental responsibility. With the successful execution of this transaction, the company strengthens its position as a key player in Canada’s real estate investment sector while reinforcing its long-term commitment to sustainable development.

The announcement of this issuance follows broader industry trends, including the recent launch of green bond trading on the London Stock Exchange by Qatar. Such developments highlight the increasing role of green finance in shaping the future of global capital markets. As more companies and governments recognize the benefits of sustainable financing, green bonds are likely to become an even more significant component of the investment landscape.

For Allied, this issuance represents a critical step in its ongoing financial and sustainability strategy. By securing long-term funding at a fixed interest rate, the company mitigates risks associated with interest rate fluctuations while ensuring continued progress toward its environmental objectives. The focus on LEED-certified projects and responsible debt management positions Allied as a leader in sustainable real estate financing, setting a benchmark for other companies in the industry.

With the expected closing of the transaction in early 2025, Allied is poised to benefit from improved financial stability and increased investor confidence. As the green bond market continues to grow, this move underscores the company’s foresight in leveraging sustainable finance to achieve both business and environmental goals.