Pallas Capital and Ares Management establish Pallas Funding Trust No. 2

Leading Australian specialist property lender Pallas Capital has established a new lending vehicle called Pallas Funding Trust No. 2 (PFT). PFT has entered into a senior funding facility with funds managed by Ares Management’s Alternative Credit strategy.

PFT will further expand Pallas Capital’s presence in the Australian Commercial Real Estate (CRE) debt market.

PFT has total funding of $500 million approved by its funding partners, which adds to the other existing funding sources available to the Pallas Group.

PFT intends to lend this money on a range of pre-development loans, residual stock loans and investment property loans. It will target medium sized CRE loan types and borrowers and expects that most of its loans will be between $2 – 25 million in total (previous institutional facilities managed by Pallas Capital focussed on loans of up to about $10 million in size).

Dan Gallen, the Chief Investment Officer of Pallas Capital, commented that, “This market segment remains underserviced as it falls between the very narrow lending focus of the major banks whilst many non-bank lenders prefer to focus on either very small CRE loans or conversely much larger loan exposures of over $50 million. We expect to increase lending volumes substantially given the majority of commercial properties have values up to about $35 million which is precisely where PFT will focus its lending business. In addition, the loan types that PFT has been designed to fund, such as value-add investment loans, residual stock and pre-development loans are the loan types the banks have relatively little appetite to fund.”

Mr. Gallen noted that Pallas Capital has operated institutional lending facilities since 2021 and has loaned about $850 million across over 170 loans through such facilities. In the process the company has established itself as a leader in the medium sized CRE loan segment.

Mr. Gallen concluded that, “Pallas Capital has successfully managed similar institutional facilities since 2021, which were well supported by borrowers due to our speed of execution, certainty of funding, commercial flexibility, and competitive interest rates. 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.”

Will Farrant, Partner at Ares Management, who focuses on Alternative Credit investing across APAC, also welcomed the introduction of PFT as a new lending vehicle in this space.

“We are delighted to complete this facility with Pallas Capital as part of Ares’ continuously growing Alternative Credit strategy in Asia and we look forward to supporting the further growth development of the company. 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.”

Pallas Capital is one of the fastest growing non-bank lenders in Australia, offering brokers and developers lending solutions that are tailored to their needs. It offers borrowers five core loan types, being acquisition, pre-development, construction, residual stock, and vacant land loans, along with the flexibility to negotiate LVRs and the required level of pre-sales for construction loans.

Pallas Capital manages funds for investing in commercial real estate loans secured against property assets with values between $1 – $50 million in major metropolitan areas. Wholesale investors are offered investment opportunities providing fixed or variable rate returns ranging from 9.05% p.a. in the Pallas Short Term Fund inclusive of BBSW (first mortgages), 13.79% for the High Yield Fund inclusive of BBSW (First and Second Mortgages) and up to 25% p.a. for preference equity investments. Pallas Capital’s loans are supported by robust due diligence on each borrower and the security property, a realistic and multi-faceted exit strategy, and active management of all loans by the Pallas Capital team throughout the term.

Pallas Capital and development manager Fortis comprise Pallas Group, a business that provides specialist investment, lending, and development solutions in the boutique property market in Australia.

For more information and details about the Pallas Funding Trust, visit

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