Commercial real estate (CRE) investment manager Pallas Capital has acquired Melbourne-based real estate capital placement and advisory firm Gravitas Group. The settlement was completed earlier in February. The acquisition will support Pallas Capital’s aim to fulfil its projections of $500 million funds under management in 2020.
The merger forms part of parent company Pallas Group’s broader strategy to expand its Melbourne footprint and team. The business acquisition follows Pallas Group’s recent purchase of a 592sqm commercial corner site in South Melbourne for $8.55 million, with an estimated end value post development works of $38 million. The new site will have more than 3300sqm of NLA and will also see Pallas Group staff occupy the building.
Gravitas Group is a specialist real estate capital placement and advisory firm. Since its inception in June 2017, it has raised in excess of $75 million from wholesale investors for real estate debt and equity products. 98% of the capital was placed into CRE debt opportunities.
“We’re pleased to merge Gravitas Group with Pallas Capital. Pallas Capital has an exciting growth trajectory, established over the last three years, and we are delighted that the Gravitas investor base will be consolidated with our own existing network delivering increased financing capacity for our borrower clients. The firm’s extensive experience will prove to be a major asset and provide excellent strategic advice as our platform continues to grow, ” says Patrick Keenan, Chairman, Pallas Capital.
“Our primary focus is on the credit risk and development track record of our borrowers. We then assess the underlying demand for the development product, its price point and location, as these underpin the exit for our investors including the return of investor principal and interest. We have an in-house development team that allows us to speak the same language as our developer clients, to rigorously interrogate feasibility analyses and construction contracts, and assess and monitor the projects on an ongoing basis. It is this development expertise that sets us apart from other non-bank lenders,” says Dan Gallen, Director, Pallas Capital.
“We’re extremely pleased to merge our distribution capability with Pallas Capital’s investment origination and management platform. We see strong alignment in the depth and breadth of Pallas Capital’s investment product and our investor base. We’re motivated by the opportunity to focus on a product pipeline of c. $1.5bn that offers wholesale investors some of the strongest risk adjusted returns in the CRE capital markets today,” says Felicity Fowler, Founder and MD, Gravitas Group.
The Australian CRE debt industry has significantly evolved since 2014 when the Australian Prudential Regulatory Authority’s (APRA) macro-prudential regulatory measures drove the banking industry to reduce its real estate land acquisition and development loan exposures. At present, the weight of private capital moving into the non-bank sector continues to grow to fill a CRE funding gap estimated at $30 billion or more.
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