- Pallas Funding Trust has been established by specialist property lender Pallas Capital
- Will bolster Pallas Capital’s growing presence in the Australian CRE debt market
- PFT is in the process of negotiating for more funding to add to its $530 million
Pallas Funding Trust (PFT) has been established by Australian specialist property lender Pallas Capital, starting off with $530 million in total funding.
The new lending vehicle will bolster Pallas Capital’s growing presence in the Australian commercial real estate (CRE) debt market.
PFT’s current total funding was approved by its funding partners Pallas Group and Credit Suisse, and is in the process of negotiating with additional institutions to increase the funding.
PFT said it intends to lend this money on a range of pre-development loans, residual stock loans and investment property loans, with the first loans made this week.
Pallas Capital anticipates most loans by PFT will be between $1 and $10 million in size, targeting medium sized CRE loan types and borrowers that lack liquidity as they fall between the lending focus of established non-bank lenders and the banks.
Pallas Capital chief investment officer Dan Gallen said, “this market segment, whilst under-serviced at present, features substantial lending volumes given that most commercial properties have a value in the range of $1 to $15 million. PFT has been designed to focus its lending business in this borrower segment.”
In addition, the loan types that PFT funds, such as value-add investment loans, residual stock, and pre-development loans are the loan types the banks have limited appetite to fund, according to Pallas Capital.
“Although other non-bank lenders compete with PFT, generally these lenders are funded by retail or ‘high net worth’ investors. These investment flows can shrink quickly if sentiment deteriorates, as it did in the first COVID-19 lockdown in 2020. In this case a significant pool of CRE borrowers can be left without commercially attractive loan options.”
Pallas Capital chief investment officer Dan Gallen
With Credit Suisse as a funding partner, PFT said it is protected from such pressures on liquidity and is well placed to continue lending through cycles that would sideline many of its competitors.
Pallas Capital executive director of lending Steve Lawrence said, “Pallas Capital’s loan book has grown in recent years at about 75% per annum, even though our cost of funding has been relatively high. We have achieved this by ‘speed to market’ and by offering loan terms that are flexible and commercially realistic.
“PFT will have the same turnaround times and flexibility but a significantly lower cost of funding. BY lending at lower rates to borrowers, we expect PFT will swiftly carve out a leading position in the CRE lending markets.
Although PFT will not undertake construction loans, these will continue to be offered through the existing Pallas Capital lending business that is currently settling about $50 million per month in new construction loans.
Since its beginning in December 2016, Pallas Capital has settled 181 loans and other funding structures with a total value exceeding $1.2 billion.
With 81 loans repaid, it has a current loan book of $808 million across 100 transactions.