Case Study

Critical Assurance Resulted in Favorable Sustainable Financing

SUMMARY/OVERVIEW

How BDO Supported a REIT in Reaching Sustainable Loan Compliance

Sustainability-linked loans can offer significant opportunities for favorable financing terms to entities that meet the lending criteria, including requirements related to Leadership in Energy and Environmental Design (LEED) certification. Lenders may tie interest rates or other loan conditions to the achievement of measurable sustainability goals related to the entity’s property portfolio.

These loans also introduce complex compliance requirements including annual reporting, third-party assurance, and comprehensive documentation. Lenders typically require borrowers to provide credible, third-party assured data to maintain eligibility for any preferred loan terms. One real estate investment trust (REIT) reached out to BDO for assistance in complying with its lender’s limited assurance review and annual reporting requirements.

Key Takeaways

Helped ensure our client’s access to sustainable finance

Received the preferable interest rate for the loan 

Implemented a process for future limited assurance reviews

Environmental building.
The Challenge

The Drive to Meet Specific Loan Requirements

Our client, a REIT that owns and operates outpatient medical facilities, secured a multi-year sustainability-linked loan to fund the growth of its business. The lender could offer a lower interest rate if a percentage of the REIT’s properties remained LEED-certified or certified under an equivalent green building standard. However, to fulfill the lender’s annual reporting requirements, the REIT needed to provide data that had undergone third-party assurance and confirmed that its real estate portfolio met criteria for LEED building coverage. 

Environmental building.
The Approach

Taking a Long-term Approach to Loan Compliance

The client asked for assistance with understanding how to achieve and maintain compliance with its sustainable financing. 

  1. BDO’s team of industry professionals reviewed the loan terms and determined the appropriate scope of the required assurance procedures.

  2. Collaboration between the client and our team resulted in the development of a report for the lender that could be replicated in subsequent years.

  3. We also provided the limited assurance that confirmed that the real estate portfolio met the specified criteria.

Employees in office.
The Results

Planning for Continued Success

Assistance from BDO’s experienced professionals resulted in several key benefits for the client, including the following:

  • Development of a report for the lender that facilitated a preferable interest rate on the loan.

  • Limited assurance provided to the lender, confirming that critical goals had been met.

  • A better understanding of the required assurance procedures.

Additionally, the client implemented a repeatable process to help ensure efficient limited assurance reviews in subsequent years.

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