Leading Australian specialist property lender Pallas Capital has established a new lending vehicle with Credit Suisse, called Pallas NZ Funding Trust No. 1 (PFT NZ). PFT NZ is Pallas Capital’s first lending vehicle in New Zealand’s commercial real estate (CRE) debt market.
PFT NZ has total funding of NZ$360 million approved by its funding partners, including Credit Suisse. Since its launch a few days ago, PFT NZ has funded six loans with a total value of NZ$29 million.
PFT NZ intends to lend this money on a range of pre-development loans, residual stock loans and investment property loans. It expects that most of its loans will be between NZ$2 – 10 million in total, although it is able to make larger loans where its credit criteria are met. It will target medium sized CRE loan types and borrowers that lack liquidity as lending by both the banks and existing non-bank lenders tightens.
PFT NZ is modelled on the successful Pallas Funding Trust No. 1 (PFT No. 1) launched in November 2021. PFT No. 1 is managed by Pallas Capital and majority funded by Credit Suisse and lends to medium sized SMEs in Australia.
PFT No. 1 is the fastest growing fund managed by Pallas Capital, having now made a total of 72 loans with a total value of AU$320 million.
Dan Gallen, the Chief Investment Officer of Pallas Capital, commented that, “We are very excited to take our successful lending model into New Zealand, supported again by Credit Suisse. The CRE loans offered by our PFT vehicles provide crucial support to our SME borrowers at a time when loans from traditional banks, and other non-bank lenders, are harder to obtain and carry more onerous loan terms.”
He adds, “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. 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.”
Mr. Gallen noted that, although other non-bank lenders compete with PFT, many of these lenders are funded by retail or high net worth investors. These investment flows have contracted quickly as market sentiment has softened in recent months, as it did in the first COVID 19 lockdown.
Will Farrant, the head of Securitised Products for APAC at Credit Suisse, commented, “When it was launched last year PFT No.1 represented a new asset class for Credit Suisse in Australia. 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.”
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 AU$50 million per month of new construction loans.
Since its inception in December 2016, Pallas Capital has settled 331 loans and other funding structures with a total value exceeding AU$2.4 billion. With 150 loans having been repaid, it has a current loan book of AU$1.5 billion across 185 transactions.
Pallas Capital and developer Fortis comprise Pallas Group, a business that provides specialist investment, lending and development solutions in the boutique property market in Australia.
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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