The Inside Network’s Income & Defensive Assets Symposium, held in Melbourne and Sydney, is an annual event designed to help wealth managers build defensive portfolios with resilient income streams. The symposium provided diverse perspectives on asset repositioning within the evolving income landscape, with a focus on the current and future state of private credit.
This year, Executive Director Craig Bannister, took to the stage in both cities to share his expertise on commercial real estate (CRE) debt. Here are some key takeaways from his fireside chat:
- Growth of private credit and CRE debt: The private credit sector is thriving in Australia but still lags behind the U.S. and Europe. CRE debt is emerging as a distinct asset class, rather than just an alternative investment. Australia’s stable real estate market continues to attract significant interest from foreign investors.
- CRE market conditions and projections: Material costs have stabilised, but labour costs remain challenging. With interest rates peaking and a transition to a moderating inflation cycle, the next 18 months are expected to be a period of growth for lenders and fewer external shocks impacting investment.
- Evolving capital sources: Capital availability is shifting from high-net-worth individuals and foreign investors to institutional money. A prime example of this trend is Pallas Capital’s recent $360 million refinancing deal with Westpac NZ.
- Expertise in development and construction finance: Pallas Capital excels in development and construction finance, with about 50% of our portfolio dedicated to this area. Our rigorous oversight, including project control group meetings and technical default management, ensures effective handling of challenges.
- Managing risk and transparency: Risk management strategies, such as pre-sales requirements and loan-to-value (LVR) ratios, were discussed. Craig emphasised the importance of transparency and expertise, highlighting Pallas Capital’s thorough evaluations and collaboration with development manager Fortis to navigate complex situations.
- Investment strategies and market demand: Demand for high-end residential housing, especially in inner-city areas, remains strong. Pallas Capital’s strategic focus on these areas allows us to select the best loans based on feasibility studies and market location.
- Navigating market risks: As inflationary pressures ease, end values are stabilising rather than declining. Pallas Capital’s proactive approach helps mitigate risks, ensuring stability and continued growth in our lending activities.
The Symposium was a valuable platform for sharing insights and exploring the evolving CRE debt landscape. We look forward to continuing these important discussions and adapting our strategies to the sector’s evolving demands.
Watch Craig’s IN Brief discussion below.
To discuss how the Pallas Senior Income Fund may align with your client’s portfolio requirements, please email wealth@pallasgroup.com.au
This information is intended to be general information only and not financial product advice. It does not consider any person’s investment objectives, financial situation or needs. For wholesale investors only.