Natixis Investment Managers International finances sustainable buildings in Nordics

Natixis IM International Private Debt has provided financing to a provider of modular buildings which house hospitals, schools and daycare centres.

The loan, provided by Natixis IM International Private Debt, will enable the Nordic-based company to speed up rollout of its buildings in a fast-growing sector.

The sector is in huge demand because in enables local authorities to increase capacity in essential services in weeks or months, rather than years in the case of traditional building construction.

Celine Tercier, Head of Infrastructure Finance at Natixis IM International Private Debt, says: “This sector has been popular in the Nordics for decades. Changing demographics mean the sector has great potential future value and is set to grow significantly over the long term.”

Modular buildings provide flexibility to add or remove capacity as local populations grow or fall. Many traditional buildings in essential services are old and require updating: modular units cost considerably less than replacing or adding traditional buildings. Amid an ageing population they also offer the possibility to add daycare and residential capacity as it is required.

“It’s a great deal for us as a social infrastructure investment,” says Tercier. “To find opportunities in a declining subsector in terms of transaction volume in a developed country, with a risk-return profile that fits is not always easy.”

The transaction is unusual in that the term of the loan is just five years compared with 10 or even 20 years for some infrastructure projects. Some deals involve long construction periods, so it takes time to put all an investor’s committed capital to work. In addition, the maturity can be very long – up to 20-25 years and the pricing at the low end of the infra spectrum.

“With this deal, the opposite is true,” says Tercier. “There is no construction period, your money is at work from Day One and investors get their money back quickly, and has a very attractive return”

Natixis IM International Private Debt’s loan pays 300bps above Euribor floored at 0, an above-average yield in infrastructure, reflecting the fact that the deal is in a niche subsector in which few infrastructure investors are equipped to play.

The deal has a strong ESG element, given that the borrower has its own ESG governance committee, uses only renewable energy, and is an active recycler of materials. It builds its modules using wood sourced from local and sustainably-managed forests and reuses panels from modular buildings that have been decommissioned. It this participates to 6 UN Sustainable Development Goals among which n° 4 Ensure inclusive and equitable quality education, n° 9 Build resilient infrastructure and n° 12 Ensure sustainable consumption and productiion patterns

Tercier comments: “The company is focused on circular economy and energy consumption reduction. That is a key plank of our approach.”

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