Accolade
Media
Pallas Capital commences commercial real estate lending with first office in Sydney
2016
Solutions-focused Pallas Capital champions brokers
In the world of commercial real estate finance, the ability to find a solution “where others simply can’t” is something Pallas Capital’s Jason Arnold prides himself on.
As brokers and their developer-clients face into the headwinds of higher interest rates and spiralling development costs, non-bank financiers like Pallas Capital provide crucial solutions for clients for whom traditional construction finance has become increasingly inaccessible and restrictive.
Arnold is passionate about the ability of non-bank lending solutions to structure and settle complex transactions that might otherwise be passed over by traditional financial institutions.
For the past two decades, he’s had a front-row seat to the ins and outs of a sector that’s increasingly changing the face of commercial real estate
finance. Now, in his capacity as group executive of origination at one of the fastest-growing non-bank lenders in its asset class, he’s got an expert’s view on how non-bank lending is meeting the moment.
MPA recently sat down with Arnold to discuss how his background fuels his passion for bespoke client solutions and how he plans to harness the power of Pallas Capital’s unique funding structure to drive better outcomes for brokers and their clients in the increasingly complex commercial real estate market.
“It’s been a tough market for anyone in the commercial real estate game for the last 24 months,” Arnold says. “Increasing construction and development costs, rising interest rates and holding costs and the lack of bank funding have made it tough. Borrowers have had to either find more equity or find alternative solutions.”
In this challenging environment, Pallas Capital’s non-bank approach has proven to be a valuable lifeline for many developers and investors. The lender’s commercial real estate product is built around access to significant institutional funding lines, enabling Pallas to offer clients a large product range covering both construction and non-construction products.
Pallas clients typically have access to a range of solutions across commercial investment, land finance, pre-development finance and residual stock finance. At the project level, that translates to market-leading flexibility and improved turnaround times, Arnold says.
“If you’re a developer and you acquire a site, we can provide a funding solution. We can then support that client whilst they get a development permit. Once they have that permit, we can switch that client from our pre-development loan into a construction loan.
“Once construction is finished, we then have the ability to roll that construction loan into our residual stock loan.”
It all amounts to what Arnold views as one of Pallas Capital’s key strengths – the ability to support brokers and their developer clients throughout the entire project life cycle regardless of the prevailing bank sector lending conditions.
“We’re there every step of the way with the developer, and we take the broker on that journey. We provide that support right through the life cycle of a development.”
For Arnold, who learnt about the importance of long-term relationship-building early in his career, these product features naturally align with his approach to business. It’s also something he believes has helped set Pallas Capital apart in an industry often characterised by transactional relationships.
“Great relationships built over a long period of time was what allowed me to move into my own business and start my own broking firm,” he says, reflecting on his early-career transition from credit analyst into origination and then, eventually, to small business owner.
With 80% of Pallas Capital’s business coming from third party channels, supporting and educating brokers is a top priority for Arnold and his team. He says it’s not just a business necessity for him but a way to give back to the broker community, which was so much a part of his formative career and remains a highly valued network.
“We love our brokers,” Arnold says. “Many are experienced, but when they need more knowledge, our team is happy to provide the education and training to help them serve their clients better.”
This commitment extends beyond product knowledge. Pallas Capital has strong relationships with industry groups, such as Loan Market Group, which help expand its reach. “Through Loan Market Group’s professional
development days and webinars, we teach brokers about non-bank lending and our products,” Arnold explains.
Pallas Capital is expanding across Australia and New Zealand with offices in Melbourne, Sydney, Brisbane and Auckland to better support brokers on the ground.
“We need to educate our broker market,” Arnold emphasises. “We offer training in commercial finance, including construction, cost-on-end-value ratios, senior debt and mezzanine debt, along with preferential equity options for existing clients.”
Spotlight
Reflecting on the early days of his career, Arnold credits some valuable mentors with helping him to understand the commercial finance industry and also, importantly, introducing him to and educating him on the possibilities offered by the non-bank sector.
“It was predicated upon having great mentors, a lot of learnings, and having strong relationships built over a long period of time. Those relationships were not only with clients but with lenders, aggregators and consultants.”
They were learnings he leveraged a decade later when he launched his own broking firm serving clients in commercial finance and structured finance.
“The learnings I had in the non-bank sector proved to be very valuable for providing bespoke solutions to my clients at the time, where the broking market probably wasn’t as sophisticated in that non-bank or structured finance market.
“I’m very fortunate [to have had] those early mentors. They taught me not only about the finance industry but, more importantly, about commercial finance and the non-bank sector. Their guidance was invaluable in shaping my understanding of the market dynamics and client needs.”
Pallas Capital specialises in the origination and investment management of real estate debt and equity products, providing borrowers with reliable and competitive funding for their property investment and development needs. It offers financial investments in these loans to its investors, providing strong returns to its investor base through a range of risk-adjusted, property-backed debt and equity investment opportunities. Pallas Capital has built a strong track record and investment book since its inception in 2016, with funds under management having grown at 100% plus per annum over the past four years and discretionary funding mandates sitting at $1.4 Billion and growing quickly.
Company Profile
665
No. of transactions arranged
$4.6bn
Total value of transactions arranged
$1.34bn
FY24 originations
$2bn
Value of current investment book
>150
No. of staff (Brisbane, Sydney, Melbourne, Auckland)
Bio
Spotlight
Milestones
Media
Accolades
Company Profile
Years of Experience
>20
Career highlight
Relationships built within the industry with clients, brokers, aggregators, lenders and consultants
Surprising fact
Initially wanted to be a physiotherapist
Jason Arnold
Group executive – origination at Pallas Capital
Jason Arnold reveals Pallas Capital’s innovative approach to broker support and how it is setting a new standard for client relationships in what can be a fickle lending landscape
Read on
“We’re there every step of the way with the developer, and we take the broker on that journey. We provide that support right through the life cycle of a development”
Jason Arnold,
Pallas Capital
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Accolades
Media
Milestones
2011
2012
2015
2016
2021
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2012
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2015
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2016
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2021
Company Profile
Years of Experience
>20
Career highlight
Relationships built within the industry with clients, brokers, aggregators, lenders and consultants
Surprising fact
Initially wanted to be a physiotherapist
Karen Adams
President and CEO at Fundserv
Before becoming CEO of Fundserv, Karen Adams held a variety of leadership roles around the world – and she learned that listening and understanding are key to both providing service and developing talent
Read on
Share
Share
Accolades
Media
Company Profile
Years of Experience
>20
Career highlight
Relationships built within the industry with clients, brokers, aggregators, lenders and consultants
Surprising fact
Initially wanted to be a physiotherapist
Karen Adams
President and CEO at Fundserv
Before becoming CEO of Fundserv, Karen Adams held a variety of leadership roles around the world – and she learned that listening and understanding are key to both providing service and developing talent
Read on
IN Partnership with
In Partnership with
In Partnership with
2016
2020
2021
2022
2024
Pallas Capital commences commercial real estate lending with first office in Sydney
2016
Pallas opens its Melbourne office
2020
Pallas launches Pallas Funding Trust No. 1, a $588 million facility funded by Credit Suisse and others
2021
Pallas opens its Brisbane and Auckland offices. Launches Pallas Funding Trust NZ Fund, an NZ$360 million first mortgage warehouse facility funded by UBS and others
2022
Pallas launches Pallas Funding Trust No. 2, a $500 million first mortgage warehouse facility funded by Ares Management Corporation and others
2024
Milestones
Early-career learnings endure today
Empowering brokers to navigate commercial real estate debt
Published 26 Aug 2024
Find out more
Find out more
Find out more
Find out more
“The trend of increasing non-bank exposure is here to stay. The team and myself are always willing to help”
Jason Arnold,
Pallas Capital
MPA Top 10
Commercial Broker 2024 (8th year in a row)
As the commercial real estate market continues to evolve, Arnold sees a bright future for non-bank lenders like Pallas Capital.
Between now and 2025, the market share of non-bank lenders (NBLs) is expected to grow significantly. NBLs, which accounted for approximately $18 billion in 2020, are forecast to reach $56 billion by 2025, representing a compound annual growth rate of 25%. This growth will likely see non-bank lenders increase their market share from 5% to 10%. Despite this expansion, in Australia they will still lag behind regions such as Europe and the USA, where they represent about 35% and 50% of all property exposures, respectively.
Arnold points to several trends that he believes will shape the industry in the coming years, potentially leading to a more permanent shift in the market.
“There is a larger presence for non-bank lenders now, and there is a lot more flexibility in terms of presales, pre-leases and ICR covenants,” he says. “The cost of capital in the non-bank space is coming down, and the flexibility that is there does provide great solutions for brokers and their clients.” He cites the way Pallas calculates the required income-to-service interest as an example of product features that are much more flexible than those offered by the banking sector.
Arnold’s view is that Pallas Capital will always support brokers regardless of the economic conditions. Spreading the word about the benefits of Pallas products in the broking market and finding great solutions for brokers and their clients remains his focus.
“What I would suggest is to reach out to one of our many relationship managers and originators that can help you structure a transaction that suits your needs not only in the short term but also in the longer term. The trend of increasing non-bank exposure is here to stay. The team and myself are always willing to help.”
Future is bright for non-bank sector finance
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