“PFT will have the same turnaround times and flexibility, but a significantly lower cost of funding. By lending at lower rates to borrowers, we expect PFT will swiftly carve out a leading position in the CRE lending markets.”
PFT will significantly bolster Pallas Capital’s growing presence in the Australian commercial real estate (CRE) debt market.
PFT has total funding of $530 million approved by its funding partners, Pallas Group and Credit Suisse. It is in the process of negotiating with additional funding institutions to increase this funding.
PFT will make its first loans in the week commencing 15 November 2021 and will deploy its remaining funding over coming months.
PFT intends to lend this money on a range of pre-development loans, residual stock loans and investment property loans. Pallas Capital anticipates that most loans by PFT will be between $1 – 10 million in size. It will target medium sized CRE loan types and borrowers that lack liquidity as they fall between the lending focus of established non-bank lenders and the banks.
Dan Gallen, Chief Investment Officer, Pallas Capital, commented that, “This market segment, whilst under-serviced at present, features substantial lending volumes given that most commercial properties have a value in the range of $1 – $15 million. PFT has been designed to focus its lending business in this borrower segment. In addition, the loan types that PFT funds, such as value-add investment loans, residual stock and pre-development loans are the loan types the banks have limited appetite to fund.”
He adds, “Although other non-bank lenders compete with PFT, generally these lenders are funded by retail or ‘high net worth’ investors. These investment flows can shrink quickly if sentiment deteriorates, as it did in the first COVID 19 lockdown in 2020. In this case a significant pool of CRE borrowers can be left without commercially attractive loan options.
With Credit Suisse as a funding partner, PFT is protected from such pressures on liquidity and is well placed to continue lending through cycles that would sideline many of its competitors.’’
Steve Lawrence, Executive Director of Lending at Pallas Capital, also welcomed the introduction of PFT as a significant new lender in this space. “Pallas Capital’s loan book has grown in recent years at about 75% per annum, even though our cost of funding has been relatively high. We have achieved this by ‘speed to market’ and by offering loan terms that are flexible and commercially realistic.”
He adds, “PFT will have the same turnaround times and flexibility, but a significantly lower cost of funding. By lending at lower rates to borrowers, we expect PFT will swiftly carve out a leading position in the CRE lending markets. I look forward to taking these loan opportunities to our established mortgage broker clients.”
Although PFT will not undertake construction loans, these will continue to be offered through the existing Pallas Capital lending business that is currently settling about $50 million per month in new construction loans.
Since its inception in December 2016, Pallas Capital has settled 181 loans and other funding structures with a total value exceeding $1.2 billion. With 81 loans having been repaid, it has a current loan book of $808 million across 100 transactions.
Credit Suisse is an established warehouse provider and capital markets intermediary around the world. It has a track record of providing warehouse funding to loan originators servicing illiquid and under-serviced sectors of the Australian economy and developing capital markets funding for those asset types.
For more information and details about the Pallas Funding Trust, visit pallascapital.com.au
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