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 Significant Growth in Loan Originations for FY25

Pallas Capital has announced a remarkable milestone in its financial activities, reporting originations of $2.9 billion in new loans and investments for the financial year 2025. This impressive figure marks a 54% increase compared to the previous year’s performance and underscores Pallas’ growing presence in the lending market.

The total volume of transactions reached 316, indicating a strong demand for financing solutions, with the average deal size calculated at $9.3 million. Even though the overall loan origination numbers are promising, the firm’s lending activity did experience a slowdown during the second quarter of FY25, where fully drawn limits amounted to only $273 million.

Sector Challenges and The New Zealand Market

Alexis Holloway, the group executive and head of credit at Pallas, noted that the decline in lending activity was largely attributed to a softer lending environment in the commercial real estate sector. The current climate reflects an ongoing cautious approach among investors, particularly in Australia, as many buyers prefer to wait for signs of easing interest rates before committing to new projects.

Amidst these challenges, Pallas Capital saw a notable growth trajectory in New Zealand, where it finalized $98.5 million in loans over the quarter. In line with this expansion, the company also introduced a full suite of construction lending products tailored specifically for the New Zealand market. Out of the 87 loans settled during the quarter, 66 were first mortgages and 21 second mortgages, highlighting Pallas’ strong footing in the construction financing arena.

Strong Demand in Construction Lending

Construction loans represented a significant portion of the overall loans settled, making up nearly 45%. In total, loan repayments for the quarter reached $27.7 million, contributing to a grand total of $5.3 billion in repayments since the company’s inception, achieved across 750 transactions. Pallas Capital is proud to report that it has incurred no capital or interest losses on its loans, showcasing its robust risk management strategies.

Outlook on the Market

Investor sentiment in Australia remains prudent, with many holding back from making significant investments until interest rates show signs of dropping. Major banks forecast possible interest rate cuts between late 2025 and early 2026, which could revive interest in previously shelved projects as financial conditions improve.

In terms of asset classes, the outlook for CBD office properties, considered one of the most troubled categories, is predicted to improve due to a limited supply of new assets. However, mixed market conditions prevail in New Zealand, with high vacancy rates and diminished asset values observed in both CBD office and retail sectors. Notably, Christchurch has outperformed other cities like Auckland and Wellington in terms of market performance.

Growing Demand for Investment and Pre-development Loans

The demand for investment loans targeting stabilized assets, as well as pre-development loans for new sites, remains strong. This growth is largely motivated by conservative loan-to-value ratios from banks that continue to shape lending patterns. Moreover, residual stock loans, accounting for about 15% of second quarter settlements, are gaining traction as developers show increased confidence in selling their remaining stock.

Competition within the construction lending sector has intensified, influencing lending terms across the board. To maintain its competitive advantage, Pallas Capital has nearly doubled its originations team and accelerated its market expansion efforts, particularly within Christchurch and Adelaide.

Deeper Dive: News & Info About This Topic

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