A large London housing association has completed a new loan agreement that will reduce the cost of borrowing if the landlord meets targets related to the energy efficiency of its existing stock.
Peabody has signed a deal with NatWest that renews an existing tranche of funding, extending the term to 10 years and increasing the funds available from £17.5m to £70m.
The cost of borrowing will be reduced if Peabody meets targets that focus on improving the average SAP rating, which indicate how energy efficient a property is, within its stock.
Peabody will also work to meet targets around the number of electric vehicle charging points on its estates.
These objectives are linked to Peabody’s new sustainability strategy, which sets out the 67,000-home landlord’s ambition to be net zero in new and existing homes by 2050 and in day-to-day business activities by 2030.
The strategy includes plans to improve the sustainability of existing homes and electrifying the more than 200 vehicles owned by Peabody.
Peabody also plans to double the number of electric charging points on estates for both employees and residents by 2025.
The agreement with NatWest incorporates the conversion from London Inter-Bank Offered Rate (LIBOR) to Sterling Overnight Index Average (SONIA) for all of Peabody’s £280m loan facility with the bank.
The Bank of England and Financial Conduct Authority have recommended that firms remove their reliance on LIBOR in all new business and legacy contracts where feasible by the end of this year, due to LIBOR’s vulnerability to manipulation.
Anthony Marriott, Peabody’s director of treasury and corporate finance, said: “Peabody has made great strides over the past 12 months in assessing our environmental performance and setting out a strategy to improve on a range of sustainable criteria. Aligning our social purpose and sustainability strategy with our funding costs for the future makes good business sense and we are delighted that we can continue and extend our strong relationship with NatWest through this agreement.”
Hedley Hadfield, director of housing finance at NatWest, said: “NatWest is delighted to have been able to support Peabody with the provision of £70m of funding. We want our customers and wider communities to succeed. Increasing social housing so that more people can have an affordable and safe place to call home is a key part of that.
“Providing a sustainability-linked loan is an excellent way for the bank to help Peabody with its priority of improving the environmental sustainability of their homes and encouraging the increased usage of electric vehicles by their customers and partners by providing additional conveniently placed charging points. Having two separate objectives is something we are starting to see more of in the social housing sector, ensuring that any benefits we can pass on to borrowers is maximised.
“The funding for Peabody forms part of NatWest’s commitment to support the housing association sector with £3bn of new funding by the end of 2022.”
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