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COVID-19 Health and safety update

Dan Gallen .

As you know, COVID-19 has created uncertainty globally and this has unsurprisingly been reflected in recent volatility in domestic and global financial markets. We wanted to provide you with some comfort on the steps we have taken and will continue to take in order to manage the risks within our unlisted property funds, both our single asset funds and our diversified Warehouse Funds.

Pallas Capital Investors

Pallas Capital observes an active investment management approach in each and every investment. As part of our asset management processes, we are continually assessing potential impacts to the investments that we are managing. We have been actively monitoring the COVID-19 situation and assessing the potential impact on our investment portfolio. Although we will continue to re-assess the situation, at present we do not see any impact of COVID-19 on the funds which we manage.

The credit team have methodically undertaken a review of Pallas’ portfolio in order to understand and quantify any impact of COVID-19 on the various projects. This included (and will continue to include) evaluating reports from the relevant Quantity Surveyor (QS) and Builder Principals, as well as a diverse range of reputable industry sources, with whom Pallas has strong relationships.

Pallas remains focussed on monitoring the labour market, the supply chain in relation to construction projects and any public health measures that may come into effect from a State and/or Federal Government level.

It is important to note that during periods of continued equity market stress, asset classes such as unlisted debt and equity property investments do not experience the same levels of volatility as equity markets.  Structured property investments, as an asset class, provides many benefits to a diversified investment portfolio, including that it is uncorrelated nature to other asset classes.

Conservative credit underwriting provides a buffer in each of our investments to withstand unforeseen events.  Sufficient interest times cover and other features such as interest paid in advance increase certainty and provide visibility on debt repayments. The recent RBA interest rate cut of 0.25% (reducing the official cash rate to 0.50%) and the stimulus package announced by Australian Government, show that these institutions are prepared to take active measures to support the economy.  The rate cut widens the spread between current property yields and the official cash rate.

Pallas will address this situation by continuing to adhere to its ethos of high-quality active management. As required, investors will receive specific updates and further commentary with respect to individual investments/projects.

Pallas will issue further investor communications with regarding COVID-19 as appropriate.

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