Ares Joins Pallas for USD $326 Million Private Credit Property Fund

Ares Management Corp has teamed up with Sydney-based Pallas Capital for an A$500 million ($326 million) fund that will provide liquidity to commercial real estate firms who lack bank funding.

Dan Gallen, the Australian firm’s chief investment officer, said the new vehicle will provide asset-backed loans to mid-market borrowers. While the US asset manager is contributing the lion’s share of the money, Pallas said it is providing A$50 million.

“This is a classic marriage of international capital partnering with a reputable local partner,” Gallen told Bloomberg in an interview on Thursday. “We tap into a market where there’s unmet demand.”

The move underscores the boom underway in private credit, which has emerged as an alternative to lending by deposit-taking institutions who’ve been subject to tougher rules since the global financial.

Private credit assets under management in Australia hit a record of about A$188 billion in 2023, according to Ernst & Young LLP.

Growth is expected to continue, and a Bloomberg survey published earlier this week found respondents see opportunities in real estate.

Pallas Funding Trust No. 2, as the new vehicle is known, will make pre-development loans, investment property loans and residual stock loans. Pallas said they’ll typically range between A$2 million and A$25 million.

“It’s going to be deployed very quickly because we know there’s strong demand for the product,” Gallen said, adding the tenors would be 15 months to 18 months.

View article on Bloomberg