Ares Management signs $450 million facility with non-bank lender

Under the terms, Ares will become a funding partner for the Pallas Funding Trust No. 2, which will lend to borrowers in the commercial real estate sector. Pallas chief investment officer Dan Gallen has allocated an extra $50 million from the firm’s other vehicles to stand alongside the $450 million facility from Ares.

The new facility’s individual cheque sizes are expected to range from $2 million to $25 million – double the $10 million upper limit Pallas has had on its previous institutionally funded lending vehicles.

The mandate is to hunt for pockets of opportunity in pre-development loans, residual stock loans and investment property loans, that traditional banks and other rival non-bank lenders have overlooked.

“[We have] successfully managed similar institutional facilities since 2021… We are excited to expand this business with Ares as a funding partner. Taking this wider lending mandate to market allows us to target larger loan sizes and a wider range of loan solutions to better meet demand from our borrower and broker partners,” Gallen said, adding majority commercial properties were valued at less than $35 million.

Ares’ investment is out of its Alternative Credit business. It is led locally by Will Farrant, previously Credit Suisse’s head of asset finance for Asia-Pacific, who joined Ares as a partner late last year.

“We are delighted to complete this facility with Pallas Capital as part of Ares’ continuously growing Alternative Credit strategy in Asia… We appreciate Pallas Capital’s professionalism and high credit underwriting standards, and we look forward to exploring new lending platforms with Pallas Capital together in the future,” Farrant said.

Pallas has run institutional facilities since 2021, writing $850 million across 170 loans. The firm, as a whole, has settled $3.8 billion worth of loans, of which about $2.1 billion have been repaid. In all, that’s 554 loans.

View article in the Australian Financial Review