PROPERTY lender Pallas Capital and Credit Suisse have expanded their exposure in Australia’s commercial real estate (CRE) debt market with the launch of a new $530 million vehicle aimed at borrowers lacking liquidity who fall between established non-bank lenders and the banks.
The Pallas Funding Trust is in the process of negotiating with additional funding institutions to increase this funding. PFT will lend on range of pre-development products including residual stock loans and investment property loans.
Most loans by PFT will be between $1 – 10 million in size and will target medium sized CRE loan types and borrowers that lack liquidity as they fall between the lending focus of established non-bank lenders and the banks.
Pallas Capital chief investment officer Dan Gallen said this market segment, whilst under-serviced at present, features substantial lending volumes given that most commercial properties have a value in the range of $1 – $15 million.
“Although other non-bank lenders compete with PFT, generally these lenders are funded by retail or ‘high net worth’ investors. These investment flows can shrink quickly if sentiment deteriorates, as it did in the first COVID 19 lockdown in 2020.
“In this case a significant pool of CRE borrowers can be left without commercially attractive loan options. With Credit Suisse as a funding partner, PFT is protected from such pressures on liquidity and is well placed to continue lending through cycles that would sideline many of its competitors.” Gallen said.
PFT will not undertake construction loans.
Pallas Capital executive director Steve Lawrence said its book has grown in recent years at about 75% per annum, even though its cost of funding has been relatively high.
“We have achieved this by ‘speed to market’ and by offering loan terms that are flexible and commercially realistic.
“PFT will have the same turnaround times and flexibility, but a significantly lower cost of funding. By lending at lower rates to borrowers, we expect PFT will swiftly carve out a leading position in the CRE lending markets. I look forward to taking these loan opportunities to our established mortgage broker clients.” Lawrence said.