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Investing in the future

Sustainable construction projects

Helaba likes to finance projects that are ecologically and socially, as well as financially sustainable – particularly in the education sector. This sometimes involves entering into partnerships with private or partially private companies. But why are the Landesbank’s financing models so attractive to municipal authorities? A project to build an ultra-modern childcare facility in Kassel provides the answer.

The “Cradle to Cradle” principle

Nordshausen, a district in the south-west of Kassel, is among the most rural areas of the city. The church and tithe barn of its central monastery, built almost 800 years ago, have been preserved to this day. Nearby, on “Am Klosterhof”, is a plot of land densely covered in trees. It is here, between the trees and beside the ancient walls, where the ultra-modern, very special childcare facility will be built.

As mayor Christian Geselle explains, “It will be what is known as a “physical education childcare facility”.

“It will be what is known as a “physical education childcare facility”. All the rooms and corridors are designed with play in mind, and close attention will be paid to nutrition, with groups cooking and eating together.”

Christian Geselle

But that isn’t all. Great emphasis is also placed on ecological sustainability, according to Geselle, whose avowed mission it is to improve the education infrastructure in his city of Kassel. Almost all of the trees on the plot are set to be preserved, with the new building itself satisfying the most stringent ecological requirements.

The wooden structure is to be built in keeping with the “Cradle to Cradle” principle, a philosophy based on the safe and potentially infinite circulation of materials. “The building will also boast optimum energy efficiency, featuring a heat pump, ventilation with heat recovery and a green roof,” adds Geselle.

Future attendees at the ground-breaking ceremony with mayor Geselle
Future attendees at the ground-breaking ceremony with mayor Geselle
Image source: Harry Soremski

In urgent need of repair

Many would like to see new childcare facilities such as the one in Kassel-Nordshausen built more often. In general, Germany still has far too few institutions of this kind. Kassel aims to redress the balance as quickly as possible – and that goes for schools as well as kindergartens.

At the instigation of the mayor, the city has launched a construction and renovation offensive. And the great and the good of Kassel are relying on one particular model: “We’re talking about a public-public partnership,” explains Geselle. pro and SKI (Stadt Kassel Immobilien GmbH & Co KG) are the companies entrusted with project planning and construction.

The ambitious schemes can thus be financed and implemented within a reasonable time scale, in a similar way to the well-known public-private partnerships, according to Geselle. The only difference is that “the companies are under municipal control”.

“Helaba is owned by the Savings Banks and Giro Association Hesse-Thuringia, so is also in municipal hands, and is familiar with the challenges of the public sector thanks to its long-standing experience.”

Christian Geselle

Christian Geselle, Mayor of the City of Kassel
Christian Geselle, Mayor of the City of Kassel
Image source: Christian Malsch, Stadt Kassel

Expedient for the municipal authority, good for the Bank

SKI turned to Helaba when it came to financing the new development. Geselle regards the Bank as a reliable partner for the City of Kassel: “Helaba is owned by the Savings Banks and Giro Association Hesse-Thuringia, so is also in municipal hands, and is familiar with the challenges of the public sector thanks to its long-standing experience.”

Dr. Ulrich Pähler readily concurs with this assessment. The Head of Helaba’s Asset Finance division is responsible for the financing of the Nordshausen childcare facility. “We already have many similar financing arrangements in place when it comes to infrastructure projects – in Hanover, Nuremberg and Vienna, as well as in the UK and Ireland,” he says. 

“We already have many similar financing arrangements in place when it comes to infrastructure projects – in Hanover, Nuremberg and Vienna, as well as in the UK and Ireland.”

Dr. Ulrich Pähler

“You could say that we have an extremely good knowledge of this sector.” Pähler goes on to explain why Helaba is such a welcome partner for the financing of infrastructure projects: “One of Helaba’s strengths is that it is always able to put very long-term – and hence extremely affordable – financing arrangements in place for public-sector projects.” Loan terms can cover 30 years or more. “Some other banks just can’t compete with that.”

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The financing model

There is a simple reason for this: before granting a loan to a company, a bank will always try to assess the associated risk. How likely is the borrower to pay off the debt? The bigger the default risk, the higher the interest rates.

However, the default risk for public infrastructure such as childcare facilities or museums is negligible, since the tenant is the municipality – the City of Kassel, in the case of Nordshausen. And the municipality undertakes to pay the rent in any event, even if a building is unoccupied. If it is unable to pay, the federal state steps in, with the federal government taking its place should the need arise.

Helaba has granted the City of Kassel a 30-year loan against rent receivables at a low fixed interest rate. This is also worthwhile for the municipality, which only has small monthly interest and redemption payments.

11.000

children already benefit from social infrastructure developed with support from Helaba via financing projects in schools and childcare facilities.

More than just a business model

But there is more than just a business model behind the financing of public-sector educational facilities, as far as Helaba is concerned. “For us, it’s also about values, says Dr. Hans-Georg Napp, Head of the Public Sector division at Helaba. Sustainability, whether economic, ecological or social, plays a crucial role for the Bank.

“We look carefully at what the loans we grant are to be used for.” Helaba is committed to granting loans for specific educational purposes. “Education in itself is sustainable in the sense that it has a major influence on the future of society,” says Napp.

“Education in itself is sustainable in the sense that it has a major influence on the future of society.”

Hans-Georg Napp

The City of Kassel definitely fits the bill with projects such as the Nordshausen childcare facility. “It is in keeping with our aspirations and enables us to improve our own record when it comes to sustainability.”

Dr. Hans-Georg Napp, Head of the Public Sector division
Dr. Hans-Georg Napp,
Head of the Public Sector division

In partnership for the long term

Another important aspect for Helaba and Hans-Georg Napp is that the Bank is able to offer a long-term partnership. “For me, a culture of partnership and sustainability are two sides of the same coin,” says Napp. 

Long-term partnerships in the education sector are currently facing particular challenges. Innumerable kindergarten and school buildings are in an inadequate state of repair with poor energy ratings, and municipal authorities are having to cope with an investment backlog that in some cases has built up over decades.  Staying power is of the essence here, and Helaba’s financing model is geared towards long-term benefit.

At the same time, the partnership with partially private property developers brings additional private expertise into the mix, resulting in a different approach from that traditionally found in the public sector. This applies both to new buildings such as the Nordshausen childcare facility and to the renovation of existing properties.

“For me, a culture of partnership and sustainability are two sides of the same coin.”

Hans-Georg Napp

“In the past, public authorities failed to take an holistic approach. If a school had to be renovated, this was done in stages depending on budgetary constraints,” says Napp. “The sanitary facilities were renovated first, followed by the windows, and then the roof. Once the full list had been attended to, it was time to start from the beginning again.”

In sustainable projects the focus is on optimisation, which is easier to achieve with private or partially private property developers, according to the Head of Division: “They take care to utilise development funds and synergies efficiently. Sometimes they even devise an entire programme on this basis, allowing them to exploit economies of scale too.”

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No flash in the pan

And that is precisely what mayor Christian Geselle is aiming for. The Nordshausen childcare facility will not be the last sustainable project to be tackled in a public-public partnership. Helaba also has a good chance of playing an important role in subsequent projects in Kassel’s education landscape. That’s good news for Hans-Georg Napp: “I’m pleased that projects of this kind aren’t just a flash in the pan and that we can support developments like this in the longer term.”

The city is in the process of creating a modern education infrastructure, which Helaba is helping to finance. “Of course, we’re making money too,” says Napp. “But it’s even more satisfying to do so when there is a sustainable objective.”

How the sustainably designed “physical education childcare facility” in the Nordshausen district of Kassel will look.
How the sustainably designed “physical education childcare facility” in the Nordshausen district of Kassel will look.

Current projects in the area of sustainability

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