Leading Australian specialist property lender Pallas Capital has introduced the PFT Feeder Fund, in response to investor interest in the Pallas Funding Trust (PFT), a fast growing and diversified fund established in collaboration with Credit Suisse AG.
The PFT Feeder Fund allows wholesale investors to invest into PFT. PFT Feeder Fund is an open-ended fund with a minimum investment term of 12 months (after an initial minimum period ending on 1 November 2022). PFT is a diversified warehouse facility that invests only in registered first mortgages secured over premium real estate assets with each loan having a maximum LVR of 65% (or 70% in the case of investment loans). PFT must maintain a weighted average LVR across the fund of 66% or less.
Currently offering investors a 6.87% p.a. yield (6.5% plus BBSW) payable monthly in arrears, the PFT Feeder Fund will initially look to raise $150 million, with the capacity to increase the fund size as required. Pallas Capital is anticipating strong interest from its established investor network for this new offering.
Mark Spring, Executive Director, Pallas Capital, commented that, “A number of our investors are looking to reduce their risk profile, without making a significant sacrifice in terms of investment yield. The PFT Feeder Fund gives a direct exposure to PFT, our most conservative first mortgage fund, at an attractive rate of return. For example, PFT cannot make construction loans or ‘related party loans’ and must operate within many other limitations negotiated with Credit Suisse as the largest investor in PFT.”
He adds, “Our investors also appreciate that the PFT Feeder Fund pays a fixed margin (6.5% p.a.) over BBSW. Accordingly, the total return has already increased from 6.52% p.a. earlier this year to 6.87% p.a. currently. The rate of return will reset monthly as market rates in Australia are expected to move up in coming months.”
PFT is a lending vehicle that was established by Pallas Capital in November 2021. It has total funding of $588 million approved by its funding partners, Pallas Group and Credit Suisse. PFT lends money on a range of first mortgage pre-development loans, residual stock loans and investment property loans, with loan sizes ranging from $1 – $15 million. PFT assesses each loan according to robust and prudent lending criteria. PFT specifically caters to medium-sized CRE borrowers who are under-serviced by the major banks.
To date, PFT has deployed over $140 million across 25 loans. The loan book features a diverse mix of loan types including completed residential projects, future development sites and investment properties across locations in Sydney, Melbourne, Adelaide and Brisbane. The portfolio includes loans secured against an industrial property in Western Sydney, a recently completed apartment project in central Adelaide and a portfolio of
residential investment properties in New South Wales.
Pallas Capital is one of the fastest growing structured property investment arrangers in Australia, offering brokers and developers lending solutions that are tailored to their needs. It offers borrowers five core loan types that includes acquisition, construction, residual stock and vacant land loans, along with the flexibility to negotiate LVRs and the required level of pre-sales for construction loans.
The business manages funds for commercial real estate loans secured against non-specialised 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 5.5% p.a. in the Pallas Short Term Fund to 6.75% p.a. (first mortgages) and to 13% p.a. (preference equity). Pallas Capital’s loans are supported by detailed due diligence on each borrower, a realistic and multi-faceted exit strategy, and active management of all loans by the Pallas Capital team throughout the term.
Pallas Capital and developer Fortis form part of Pallas Group, a business that provides specialist investment, lending and development solutions in the boutique property market in Australia.
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