The First Green European CMBS Loan Has Gone Into Default

A €189M (£162M, $173.5M) loan secured against a Paris office complex and then sold to investors as green bonds has gone into default. 

A notice to investors that bought bonds in the River Green Finance 2020 securitisation says the loan was not repaid on 15 January and had gone into default. The 2020 securitisation was the first “green CMBS” in European real estate.

The loan was originally issued by Goldman Sachs and is secured against River Quest, a 692K SF office campus in suburban Paris owned by London-based pan-European investor LRC.

The property was valued at €343M when the loan was underwritten and the securitisation undertaken. That figure has since dropped to €307M, according to an October report from loan servicer Mount Street, representing a loan-to-value ratio of 62%. 

The occupancy of the building is 98%, but one of the tenants is in negotiations about whether it will remain. Another is on a rolling short-term lease, the report says. 

The green element of the securitisation said the bonds needed to comply with the International Capital Market Association's green bond principles, much of which is related to the disclosure of sustainability data. Specifics for this deal included retaining a certain BREEAM certification. A June analysis by consultant Sustainalytics showed that the loan and building had hit the necessary criteria. 

The notice to bondholders said there was an option to extend the loan by a year, but the borrower and servicer had decided that a consensual long-term restructuring was the better option. 

To that end, the loan has been transferred to special servicing with a three-month agreement not to foreclose on the property.