Specialist property lender Leading Pallas Capital is extending its footprint across the Tasman, setting up its first lending platform in New Zealand’s commercial real estate debt market.
The lending vehicle, called Pallas NZ Funding Trust No. 1 (PFT NZ) has total funding of NZ$360mn approved by its funding partners, including global investment bank Credit Suisse.
Pallas Capital said since its launch a few days ago, PFT NZ had funded six loans with a total value of NZ$29m.
The Sydney-based non-bank lender said PFT NZ would lend this money on a range of pre-development loans, residual stock loans and investment property loans. It expected that most of its loans will be between NZ$2m and $NZ10m in total, although it was able to make larger loans where its credit criteria are met.
The company said it was targeting medium-sized CRE loan types and borrowers that lack liquidity as lending by both the banks and existing non-bank lenders had tightened.
PFT NZ was modelled on the successful Pallas Funding Trust No. 1 (PFT No. 1) launched in
November 2021, which was managed by Pallas Capital and majority funded by Credit Suisse. It lends funds to medium-sized SMEs in Australia.
PFT No. 1 was the fastest growing fund managed by Pallas Capital, having made a total of 72 loans with a total value of AU$320m.
“We are very excited to take our successful lending model into New Zealand, supported again by Credit Suisse,” Pallas Capital chief investment officer Dan Gallen (pictured above) said. “The CRE loans offered by our PFT vehicles provide crucial support to our SME borrowers at a time when loans from traditional banks, and other non-bank lenders, are harder to obtain and carry more onerous loan terms.”
Gallen said the market segment serviced by the PFT vehicles in Australia and New Zealand, whilst underserviced at present, generated substantial lending volumes, taking into account that most commercial properties have a value range of AU$1m to AU$15m.
“This is precisely where PFT No. 1 and PFT NZ focus their lending businesses,” he said. “We are confident that PFT NZ will emulate the success of PFT No. 1 as the lending team in our new Auckland office have long experience and deep relationships in the New Zealand CRE loan market.”
Gallen said while many other non-bank lenders competed with PFT, many of those lenders were funded by retail or high-net worth investors.
“These investment flows have contracted quickly as market sentiment has softened in recent months, as it did in the first COVID 19 lockdown.”
Pallas Capital is in an expansion phase. In November, the company acquired a new site in Manly with offices to be built by subsidiary property developer Fortis. This follows on from the launch of its Sydney headquarters – Pallas House in Double Bay in April 2021.
Will Farrant, the head of Securitised Products for APAC at Credit Suisse, said when it was launched last year PFT No 1 represented a new asset class for Credit Suisse in Australia.
“We looked for ways to expand how we can support Pallas Capital from the outset, and so are very pleased to now offer the same funding structure in New Zealand,” Farrant said. “We are confident of Pallas Capital’s future success and will continue to seek ways to do more with them going forward.”
Although PFT will not undertake construction loans, Pallas Capital said these would continue to be offered through the existing Pallas Capital lending business that was settling about AU$50 million per month of new construction loans.
