Funding trust hits $250m milestone in short sprint

Non-bank lender Pallas Capital has seen a spike in demand for its latest fund as developers look to fill the void left by traditional banks, which are easing back on exposure to commercial property financing.

Although individual banks have differing policies on lending, the consensus is that the growth of commercial real estate loan books with the major banks is stalling amid tighter lending restrictions and their apparent lack of appetite for the business.

Pallas Capital executive director Steve Lawrence said the latest of its vehicles, the Pallas Funding Trust, was launched in November 2021 and was the fastest-growing Pallas Capital funding vehicle, having already written $250 million of loans.

Lawrence said the trust was predominantly funded by Credit Suisse AG and had been a major beneficiary of recent market shifts.

“In July we refinanced an existing loan in favour of developer Luxcon Group secured over its waterfront property in Port Melbourne, which was the third such deal with the borrower,” he said.

“With funding from the trust and another Pallas vehicle, we increased the overall loan-to-value ratio (LVR) from 60 per cent to 70 per cent, giving our borrower additional time to obtain planning consent for its proposed $84 million mixed-use development on the site.”

Will Farrant, head of securitised products for APAC at Credit Suisse, said the Pallas trust represented a new asset class for Credit Suisse in Australia, and “we have been very pleased to see the strong but disciplined growth that Pallas have delivered”.

He said Credit Suisse was working on an expansion path with Pallas, adding that passing the $250 million marker was a “significant achievement” at a time when lending restrictions were tightening.

Pallas Capital is the parent company of private real estate financier and investment manager Pallas Capital and has a current loan book of $1.37 billion across 169 loans.