Alfa Group decided to cancel the bond auction within the Hungarian NKP framework in Q1 due to increased interest rates
As the main reason for bond issuance was the need for a financing development pipeline, an alternative source of financing with attractive commercial terms was considered better. The Group decided to cancel the bond auction within the Hungarian NKP framework in Q1 due to increased interest rates.
Alfa Group is committed to be climate conscious. Accordingly the company has worked out guidelines to ensure that the real estate investments are environmentally friendly: use of renewable energy and energy saving solutions in the group’s office buildings, warehouses, logistic centers and residential buildings built recently.
Alfa Group started the process of issuing a green bond, by developing a green bond framework, which got positive feedback from the auditors. Green bond is an investment in the future for the company, guaranteeing that only investment that has a positive impact on the environment or climate is financed. Alfa Group wants to offer the opportunity to investors to join in this positive change, and protect our planet.
The process of issuing Alfa Group’s green bond was started in 2020, but the costs of bond service became higher than expected due to the recent base interest rate increase by the National Bank of Hungary. In comparison to the beginning of the process, the coupon that needs to be offered to investors was doubled. Additionally the required amortization seriously reduced the attractiveness of this source of financing, from the perspective of risk profile offered.
Considering the higher uncertainty in the market the company agreed internally to take a more conservative stance to focus on completion of the prepared pipeline projects.
In line with the original business plan for 2022, Alfa Group’s “2913 uptown” project in Kassák Street in the 13th district is completed, all units are sold and to be handed over to clients. The 1st phase of the new residential development in Haller Street, in the 9th district is under construction, funded by Bank Intesa. The Group managed to increase the percentage of sold apartments to 45% with above budgeted prices. The 2nd and 3rd phases of this development are planned to become part of AEH consolidation, and Alfa Group intends to proceed with construction of the two schemes.
While Alfa Group was working on its ongoing developments, received new offers and closed the negotiations over bank financing, offered in the structure of project finance for the financing of the development pipeline, by local and international banks, with the commercial parameters better than possible to be achieved from bond issuance.
Building a better future
Alfa Group is still committed to build a better future for our children, and continue to work on its green initiative with the previously founded methodology, audited by KPMG. From the group’s residential developments, one in the 13th district has been finished and handed over to buyers, while the first phase of the more than 600 flat containing development in the 9th district is underway. Both developments use renewable geothermal energy and many innovative solutions to realise the company’s climate conscious aspiration.
Alfa Group is ready to re-open the green bond issuance in the future in case of a better market environment
About Alfa Group
Alfa Group established its first entity in Hungary in November 1995. The Group has a highly successful business model and operates over 15 standing investments as of today being best in class in terms of energy efficiency. In the upcoming 5 years the development pipeline focuses on urban industrial and residential investments in Budapest.
The Group’s long-term commitment to sustainability are evidenced by its investmentsin green solutions in its real estate investments, eg. solar panels at Alfa Korzó retail center, producing 30% of its energy needs by renewable energy, or at Alfa HUB offices in Budapest involving tenants in the sustainable operations.
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ALFA GROUP INTERNATIONAL IS COMMITTED TO CLIMATE ACTION
Based on our Code of Conduct, our company aims to contribute to the transition to a carbon neutral economy. The Alfa Group’s green bond issuance is assessed by KPMG against both the Climate Bond Standard (CBS) and the Green Bond Principles (GBP) requirements.
We equip our buildings with solar energy technology and are constantly improving our renewable energy systems.
For example: Our Alpha Corsa commercial centre has generated nearly 50% of its electricity needs from solar energy.
We use geothermal heating in our new property developments. The 640 apartments in the Ha11er residential complex in District IX and 29 apartments in the 2913 UpTown residential complex in District XIII are also being built with geothermal heating. It is also used in the urban development project in District XVIII.
In the renovation of our office buildings and logistics centres, insulation, doors and windows will be upgraded to save heating and cooling energy.