The non-bank lender, who specialise in CRE debt funding, will now be added to approved fund lists for investors, allowing them to more easily sell on debt, and empowering brokers to back Pallas on a long-term basis.
“The four-star rating is key, because moving up from the three and a half, three and three quarter rating jumps over the hurdle that says ‘recommended’ rather that ‘strong advice’,” said Craig Bannister, executive director, distribution at Pallas.
“This is that extra verification that SQM has done. It’s not just through the loans in the warehouse, because they change and are ongoing: with mortgages, they have to meet the criteria of 65% LVR criteria, are in Sydney and Melbourne and are for pre-development or residual stock loans.”
“SQM did a deep dive into Pallas and our credit processes: what’s the origination criteria, what are the credit checks that go on? The four-star rating goes to the processes that are put in place around the fund rather than just what the loans are, because the loans are standard generic criteria.”
“That’s where its an excellent rating to get first off. We’re very happy to start with it.”
The reaction to the ratings change within the sector has been instant, said Bannister.
“A few of the wealth planning groups that I have spoken to post-rating have said that it is fantastic because SQM is doing the legwork that they would have to do on us,” he explained.
“It takes a bit of the onus from people who have to ask if we’re reputable and if anyone has checked into what we are doing.”
“This type of rating does exactly that. That jump from 3.75 stars, which they call low investment grade, to four-star high investment grade is also about the terminology of being suitable for inclusion on most approved product lists.”
“Lower grades are ‘considered’ for approved product list inclusion, so that extra from ‘considered’ to ‘suitable’ is the little push that shows to someone from the outside that Pallas is ranked against other approved funds within a certain criteria.”