Pallas Capital Reports Surge in New Loans

News Summary

Pallas Capital has announced a remarkable increase in its lending activities, reporting $2.9 billion in new loans for the financial year. This signifies a 54% growth from the prior fiscal year. The surge includes 316 transactions, with significant contributions from New Zealand’s construction lending market. Despite a slowdown in some areas, Pallas Capital’s proactive strategies and expanded offerings have positioned it strongly amid a cautious outlook from investors and ongoing market challenges.

Pallas Capital Reports $2.9 Billion in New Loans for FY25, Marking 54% Growth

Pallas Capital has announced a significant achievement for the 2025 financial year, originating $2.9 billion in new loans and investments. This figure represents a substantial 54% increase compared to the previous financial year, indicating a robust performance in the lending sector.

Volume of Transactions and Average Deal Size

The total volume of new loans involved 316 transactions, with an average deal size of $9.3 million. While the initial numbers reflect a positive trend, the lending activity saw a slowdown in the second quarter of FY25, with only $273 million in fully drawn limits during that period.

Decline in Lending Environment

The decline in lending activity for the second quarter has been attributed to a softer lending environment particularly impacting the commercial real estate sector. This situation has led to a cautious approach from investors, who are currently holding off on new projects.

Growth in New Zealand

Pallas Capital noted that growth in loans was notably stronger in New Zealand. The firm settled $98.5 million in loans during the quarter, reflecting a proactive approach in launching a full suite of construction lending products tailored for the New Zealand market.

Of the 87 loans settled during the quarter, 66 were first mortgages while 21 were second mortgages. Notably, construction loans made up nearly 45% of all loans settled, highlighting the firm’s focus on this sector.

Loan Repayments and Financial Performance

In terms of loan repayments, Pallas Capital reported $27.7 million for the quarter. Overall, the total repayments since the inception of loans across 750 transactions have reached a substantial $5.3 billion. Adding to their positive outlook, Pallas reported no capital or interest losses on any of their loans.

Investor Sentiment and Future Predictions

The sentiment among investors in Australia remains cautious, with many waiting for interest rates to ease before proceeding with new projects. Major banks are predicting several potential interest rate cuts between late 2025 and early 2026. Such cuts could reactivate projects that may have been suspended due to financial constraints.

Despite the current challenges, there is an outlook for improvement, particularly in CBD office properties, which have been viewed as the most troubled asset class. The expected improvement is largely due to limited new supply in the market.

Mixed Market Conditions in New Zealand

Conditions in New Zealand present a mixed picture; high vacancy rates and reduced asset values are affecting CBD office and retail properties. However, cities such as Christchurch have outperformed both Auckland and Wellington in terms of market performance, showcasing regional disparities.

Demand for Specific Loan Types

There has been a strong demand for investment loans targeting stabilized assets and pre-development loans for new sites. This demand is driven by conservative loan-to-value ratios offered by banks. Additionally, residual stock loans are gaining popularity, accounting for approximately 15% of Q2 settlements, as developers grow more confident in selling their remaining stock.

Increased Competition and Expansion Efforts

The construction lending sector is highly competitive, significantly impacting lending terms as banks and financial institutions vie for clientele. To bolster their market presence and meet increasing demand, Pallas Capital has nearly doubled its origination team and is focusing on enhanced market presence particularly in regions like Christchurch and Adelaide.

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Additional Resources

• Pallas Capital Reports Surge in New Loans for FY25
• Goldman Sachs Hires Apollo Real Estate Executive
• JLL Australasia Property Market Guide
• Samuel Green Rejoins Goldman Sachs
• Wikipedia: Real Estate in New Zealand