This article is from the Australian Property Journal archive
COMMERCIAL real estate investment manager Pallas Capital raised over $55 million of new commitments from wealthy investors over May and June, setting a new benchmark for its inflow of investor funds despite the pandemic.
New investor commitments were allocated across new and existing first mortgage investment products across Sydney and Melbourne.
These included a $20 million land facility in upmarket Vaucluse and new investor commitments of $5 million into a $20.45 million residential construction facility in harbourside location Double Bay.
In Melbourne, $12 million of new commitments have been allocated for a $33.4 million residential construction facility in Chadstone, $3 million for a $9.6 million boutique office construction facility in Richmond, $4 million for a $13.1 million boutique residential construction facility in Toorak, and for a $3.75 million land facility in Brighton.
Funds predominantly from came from Pallas Capital’s high net worth and family office investor base. The group returned $45 million to investors from maturing loan repayments during this period, Pallas Group chairman, Patrick Keenan said.
“This has stood in sharp contrast to other, more volatile asset classes, and we have seen an increase in investor commitments as a result.
“In recent months, this asset class has demonstrated its superior defensive qualities, and continues to provide its investors with high yield, fixed income returns.
“The pandemic has reduced liquidity in our lending markets. This has led to what we believe will be a short-term increase in funding costs to borrowers for development and project finance.”
Investors have enjoyed an additional 100 to 200 basis points on their debt investments as compared with the pre-COVID period. Dan Gallen, executive director and chief investment officer of Pallas Capital, said family offices in particular are back in this space “in a big way due to the premium yields and capital protection”.
“We’ve seen loan to value ratios for senior debt reduce from around 65% to 60% overnight and stretch senior/mezzanine positions similarly contract from 75% LVRs to 70% and below.
“We’re also witnessing a flight to quality in the market.”
Pallas estimates the weight of private capital moving into the non-bank sector will swell to $56 billion or more by March 2025, filling a commercial real estate funding gap.
