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Allen & Overy advises ESR on Hong Kong’s first sustainability-linked loan for a brownfield data centre conversion project

Allen & Overy is advising ESR Group Limited (ESR), the largest real asset manager in Asia Pacific powered by the new economy, in connection with a HKD1.6 billion sustainability-linked loan (SLL).

It is the first SLL in Hong Kong for a brownfield data centre project. The SLL will be used to fund the conversion of a building in Kwai Chung, one of the major data centre clusters in Hong Kong, into the modern and sustainable ESR Kwai Chung Data Centre HK1.

The five-year secured, committed facility has a tiered incentive structure, where ESR will be entitled to an interest reduction when the project’s sustainability targets are achieved. ESR is targeting data centre tenants with strong sustainability credentials and is working with CLP Power Hong Kong Limited (CLP Power), the leading power company in Hong Kong, on enhancing sustainable features of the data centre. 

Allen & Overy has advised ESR throughout the transaction, from the acquisition to the post-acquisition bridge financing and the long-term financing. 

ESR is the third-largest listed real estate investment manager globally and has accessed approximately USD4 billion in sustainability-linked financing to date.

The Allen & Overy team is led by partner Roger Lui, with support from a core team of associates Zoe Lau, Hui Ling Yuen, Nicole Tang, trainee solicitor Hailey Zhang, and Peerpoint consultant Kylie Wong. 

Roger Lui commented: “This is a landmark transaction for ESR and the data centre sector in Hong Kong, showcasing ESR’s leadership in sustainable data centre financing and commitment to sustainability. We have supported ESR in respect of this asset from its acquisition to the limited recourse bridge financing that was put together in a little over two weeks, to now the limited recourse long-term sustainability linked financing. The data centre is being repurposed from a cold storage facility in an area of Hong Kong that is being redeveloped as a cluster for data centres. We are delighted to have been involved.”

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