Ares backs fund targeting Australian commercial real estate debt
Ares Management’s alternative credit division has backed a new fund from property lender Pallas Capital which targets Australian commercial real estate debt.
Pallas Funding Trust No.2 (PFT) has amassed total funding of AUS$500m (£256.69m) from funding partners including Ares.
It intends to lend the money on a range of pre-development loans, residual stock loans and investment property loans. It will seek out medium-sized opportunities in the commercial real estate space, and expects that most of its loans will be worth between AUS$2m and AUS$5m.
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“This market segment remains underserviced as it falls between the very narrow lending focus of the major banks whilst many non-bank lenders prefer to focus on either very small commercial real estate loans or conversely much larger loan exposures of over AUS$50m,” said Dan Gallen, chief investment officer at Pallas Capital.
“We expect to increase lending volumes substantially given the majority of commercial properties have values up to about AUS$35m which is precisely where PFT will focus its lending business.
“In addition, the loan types that PFT has been designed to fund, such as value-add investment loans, residual stock and pre-development loans are the loan types the banks have relatively little appetite to fund.”
Pallas Capital has been managing similar institutional facilities since 2021. Gallen said that the company was excited to expand the business with Ares as a funding partner.
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“We are delighted to complete this facility with Pallas Capital as part of Ares’ continuously growing alternative credit strategy in Asia and we look forward to supporting the further growth development of the company,” said Will Farrant, partner at Ares Management.
“We appreciate Pallas Capital’s professionalism and high credit underwriting standards, and we look forward to exploring new lending platforms with Pallas Capital together in the future.”
Pallas was founded in 2016 and specialises in managing funds for investing in commercial real estate loans secured against property assets with values between AUS$1m and AUS$50m in major metropolitan areas.
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