The National Housing Finance and Investment Corporation (NHFIC) has today finalised its first sustainability bond at $343 million, with the issuance more than two times oversubscribed.
The funds raised from this bond will directly support the delivery of over 1,100 new homes across Melbourne, as part of NHFIC’s involvement in a Community Housing Limited (CHL)-driven Building Communities consortium.
NHFIC has provided funding of around $400 million in loans and grants through the consortium (including $51 million from the National Housing Infrastructure Facility to accelerate critical infrastructure). The funds raised from this bond will support the delivery of around 600 social homes, 450 affordable and private rental homes and 50 supported disability accommodation across sites in Brighton, Flemington and Prahran.
The AAA-rated, Government-guaranteed bond is NHFIC’s first sustainability bond and its longest tenor bond. It will pass on the benefits of strong investor demand by providing a fixed rate of 2.335 per cent for 15-year interest only loans to CHL, saving the community housing provider approximately $50 million in interest payments and providing a return to CHL of around $200 million over the 40-year life of the project. These funds are available to be reinvested into more social and affordable housing.
NHFIC has a strong track record as an issuer of social bonds, having issued three social bonds since the inaugural transaction in March 2019. NHFIC’s Sustainability Bond Framework aligns with International Capital Market Association’s (ICMA) Social Bond Principles (SBPs), Green Bond Principles (GBPs) and Sustainability Bond Guidelines (SBGs).
NHFIC CEO Nathan Dal Bon said NHFIC’s first sustainable bond brought together the not-for-profit, public, private and industry sectors to support and deliver more social and affordable housing.
“With a 15-year term, it’s also our longest tenor bond to date and brings the total value of NHFIC's social bonds issued to over $1.5 billion since the corporation was established. It is another key milestone in NHFIC’s objective to build a new asset class focused on supporting subsidised housing,” Mr Dal Bon said.
“This sustainability bond has drawn strong interest from both the local and international investment community (12 international investors out of 30 total), including Australian super funds, sovereign wealth funds and off-shore ethical investment funds.”
CHL’s Managing Director Steve Bevington said: “The partnership with NHFIC is central to the delivery and sustainability of the Program and the savings on holding costs mean that we will be able to provide an additional 100 homes within the overall 1,110-unit project to those in need of long term social, affordable and market housing than would be the case through other available financing approaches.”
Tessa Dann, Director, Sustainable Finance at ANZ said: “As an experienced issuer of Social Bonds and now with this Sustainability Bond issuance, NHFIC has set an exemplary standard for best practice by evolving their approach with the expansion of their Framework. With this Sustainability Bond issuance, investors have an opportunity to support inclusive and essential social housing that is coupled with positive environmental outcomes.
Cbus Super CEO Justin Arter said: “Cbus Super has long been an advocate for NHFIC financing being used to support new construction of social and affordable housing and has invested in all three bond issuances made by NHFIC to date. We are delighted to see the NHFIC funding will be supporting the construction of 1100 new dwellings in Victoria.”
Truong Le, Head of Debt Capital Markets at Commonwealth Bank said: “This tenor has brought welcomed duration diversity for investors, where A$ high grade supply has generally centred on shorter tenors which receive RBA quantitative easing programme support. Most importantly, NHFIC has been able to achieve effective term funding to help the CHL consortium deliver new social and affordable homes across Melbourne.”
Tetris Capital Principal Ryan Slocombe said: “We deliberately designed our consortium to combine the expertise and equity of a leading not-for-profit housing services agency, CHL, with specialists in design, Citta, and construction, Icon, to produce long-term sustainable benefits for both residents and communities. This is the biggest project of its kind and it simply wouldn’t have been possible without the backing and expertise of NHFIC.
“One of the great results has been sector-leading environmental initiatives that benefit the community and lower the cost of living to residents.”
NHFIC acknowledges and thanks the Joint Lead Managers ANZ, CBA, Deutsche Bank, UBS and Westpac in helping NHFIC deliver its first sustainable bond issuance.