Credit Suisse bankrolls property lender Pallas Capital’s NZ push

Pallas has lined up $NZ360 million ($340 million) of funding for the Pallas NZ Funding Trust 1 from Credit Suisse, which is tipping in $NZ300 million alongside a few others.

It’s a smaller investment than the half-billion odd warehouse that Credit Suisse provided for the Pallas Funding Trust 1 (PFT 1) in November 2021.

But it’s still a vote of confidence, especially against the macroeconomic backdrop, for Pallas Capital’s first lending vehicle in Kiwi commercial real estate debt market.

And Pallas is wasting no time in getting the ball rolling, having already written six loans to the tune of $NZ29 million ($27.4 million) within days of its launch.

Similar to PFT 1, the newly launched vehicle plans to cut cheques between $NZ2 million and $NZ10 million (with some room to go higher) to medium-sized borrowers for pre-development, residual stock, investment properties and the like. It’s all non-construction loans.

Most of its borrowers are developers, but it will also lend against residential property if the borrower needs the money for a commercial use such as starting a business. The fund’s an evergreen one with no fixed term, and Pallas may look to securitise it later or alternatively, try to find a new facility.

The Australia version’s written 72 loans so far, totalling $320 million. For the Kiwi one, the firm’s aiming for 70 to 80 loans of 18 months to three years each. Returns for investors investing behind Credit Suisse were expected to be about 10 per cent a year.

Pallas Capital reckons traditional banks and other non-bank lenders will tighten liquidity and lending terms for small-to-medium sized CRE market and both its PFT funds could fill the gap. More so, if high-net-worth and even retail investors stop plying into non-bank lenders’ funds.

“The market segment serviced by the PFT vehicles in Australia and New Zealand, whilst underserviced at present, generates substantial lending volumes given that most commercial properties have a value range of AU$1 – AU$15 million,” Pallas’s chief investment officer Dan Gallen said.

“This is precisely where PFT No. 1 and PFT NZ focus their lending businesses. We are confident that PFT NZ will emulate the success of PFT No. 1 as the lending team in our new Auckland office have long experience and deep relationships in the New Zealand CRE loan market.”

Pallas has lent more than $2.4 billion across 331 transactions since December 2016. Of this, 150 have been repaid leaving it with a book value of $1.5 billion across 185 deals. It also does construction loans, but they sit outside the PFT funds.

Credit Suisse’s head of securitised products for Asia Pacific, Will Farrant, said the PFT 1 represented a new asset class for Credit Suisse in Australia when it was launched in late 2021.

“We looked for ways to expand how we can support Pallas Capital from the outset, and so are very pleased to now offer the same funding structure in New Zealand. We are confident of Pallas Capital’s future success and will continue to seek ways to do more with them going forward,” Farrant said.

View article on Australian Financial Review