Goldman Sachs refinances Pallas Capital’s $500m facility

As part of the deal, Pallas has drawn down $280 million from Goldman Sachs to pay NYSE-listed Ares Management Corporation, which signed up as a funder to PFT2 in February, and will retain a $180 million position. The remaining $40 million is from a handful of other investors.

PFT2 is Pallas’ flagship facility, which has funded 175 loans worth $918 million since its launch in December 2021. It targets small borrowers in NSW and Victoria, with recent deals including a $17.85 million two-year loan at 70 per cent loan-to-value ratio to reposition a shopping centre in Mornington, where Pallas would be paid once the borrower has spruced up the property, brought in new tenants, and refinanced with a major bank.

The facility has also helped Pallas bankroll residual stock and pre-development loans. The typical borrower is a medium-sized entity seeking $2 million to $20 million and at a stage where the big banks won’t lend to them. It is writing loans to the tune of $60 million a month, and bringing in Goldman was a step towards diversifying funding sources, according to the company.

“The financing facility to Pallas Capital represents continued innovation and growth of our structured credit financing business in Australia and across the Asia Pacific region,” said Goldman Sachs Asia Pacific head of mortgages and structured products Nicola Dondi.

In July, Pallas lured Westpac NZ to refinance a $NZ400 million facility focused on Kiwi small-to-medium enterprise borrowers in the vein of the PFT2.

“While some other non-bank lenders offer similar CRE loan products, many of these lenders are primarily funded by retail or ‘high net worth’ investors, whose investment flows can be volatile,” Pallas chief investment officer Dan Gallen said regarding the Goldman Sachs facility.

“This volatility can make it challenging for them to consistently compete with lenders like Pallas Capital, which is backed by available institutional capital,” he said.