Nonbank lender Pallas Capital has deployed a sizable chunk of its new Morgan Stanley-backed lending vehicle, just weeks after clinching the investment, Green Street News can reveal.
Dan Gallen, Pallas’ chief investment officer, said around $70m of the $500m Pallas Funding Trust No. 5 has been loaned to developers to fund pre-development, residual stock and investment property deals.
Morgan Stanley provided the majority of the $500m vehicle early last month, with the rest funded by Pallas Capital’s family office and high-net-worth investors. The facility largely makes loans of $15m to $40m.
“We’ve only closed that fund a few weeks ago, so this shows a strong demand in the middle market segment that is currently underserved by other lenders,” Gallen said.
“The $10m to $15m market is heavily contested as well as the market above $40m. But the middle market is well supported by experienced sponsors, and it’s where we see the biggest opportunities.”
Borrowers include Brisbane-based property developer Panettiere Property Group, which is building a $1.5bn, three-tower development in Newstead, in inner Brisbane.
Pallas Capital provided the developer with pre-development funding to amalgamate 7,500 sq m of land on Longland Street, which took about five years.
The funding enabled the developer to gain development approval to build more than 1,000 apartments.
“The banks find this kind of property deal difficult to provide any kind of meaningful leverage on, so developers like Panettiere are using a nonbank funder like us who can provide some additional leverage and move quickly with them as they are consolidating those properties,” Gallen said.
“They will then pay us out as they roll into construction. The funding for that will be provided by a big-ticket lender; we’ve done our part.”
Gallen said several more deals are in the works that are slated to close by the end of the month.
“We’ve got several that are going through the approval process at the moment, and we hope to have another announcement in the next few weeks,” he said.
“We would hopefully get to a point where we’re upping that initial $500m commitment from Morgan Stanley, and we hope to do that by the end of the financial year.”
Pallas Capital closed nearly $3bn worth of transactions in financial year 2025 alone – and roughly $9.1bn since the firm’s inception in 2016.
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Disclaimer: General information only. Pallas Capital’s lending activities are limited to writing loans for business and/or investment purposes only. The consumer credit protections in the National Credit Code do not apply.