Pallas Capital strikes back
The Double Bay private credit firm's rebuttal raises more questions than it answers.
In response to my article last month about the orgy of related-party lending between Sydney private credit manager Pallas Capital and the projects of its sibling developer Fortis, Pallas issued a rebuttal memo to its distribution team – being the modern-day equivalent of a door-to-door vacuum cleaner salesforce. This memo has subsequently found its way to various Pallas fund clients, and from them to yours truly.
For those who didn't read it or promptly forgot it, my piece revealed the sheer extent of Pallas' loans to Fortis property developments in four of Pallas' spiciest funds. Related-party loans comprised precisely 61 per cent of the total assets of those four funds. Pallas was coaxed to disclose this for the first time in April after the Australian Securities and Investments Commission expressed its pointed dissatisfaction with the related-party disclosures of private credit managers and set them higher expectations.
My piece also used two Fortis projects as case studies of dubious practices within the Pallas-Fortis industrial complex: a failed development in Mascot acquired by a Fortis-related development trust to avoid Pallas recording a loan default; and an office building in Double Bay where the extraordinary Pallas loan (150 per cent of the purchase price) was justified by a valuation linked to a way-above-market lease signed by a tenant company also owned by the Pallas-Fortis principals.
Joe Aston
Pallas Capital's response is well worth scrutinising. It labels me a journalist "at the sensationalist end of the spectrum," while my article, it claims, "grossly mischaracterises the true position" and "misrepresents a collection of selective facts". Yet it does not identify a single material fact in my article that was wrong, nor even a fact I selectively omitted. Instead, it disgorges a litany of irrelevant data points while entirely evading the primary issue of their conflicts of interest.
