Pallas Preference Equity - Bowen Terrace, New Farm

Brisbane, QLD

Top-up Coupon Rate

17.5% p.a.

Minimum

$50,000

Term

To Nov 2028

Executive Summary

An investment in Preference Units in the Bowen Terrace Capital Trust, funding the development of two luxury residential buildings at 424 Bowen Terrace, New Farm, one of Brisbane's premium residential suburbs, approximately 2km northeast of Brisbane's CBD. The net proceeds of the issue are loaned to the Developer under the Trust Loan to undertake a proposed 101 residence project with about 15,108 sqm of Net Saleable Area and an adopted completed value of about $404.8 million including GST, subject to approval of the Developer's amended development application. Offered to wholesale and sophisticated investors only under an Information Memorandum dated March 2026. An investment in the Issuer is speculative and subject to investment risk, including possible delays in repayment and loss of income and principal invested.

Investment Highlights

Top-up Coupon of 17.5% per year or part thereof, without compounding, for Preference Units issued after the date of the Information Memorandum unless otherwise determined by the Issuer prior to issue. It is calculated on the Subscribed Amount over the Investment Term and paid on the Redemption Date. Payment of the Coupon, if applicable, and the Top-up Coupon is not guaranteed by the Guarantors.
Any Coupons are payable quarterly at a rate notified by the Issuer prior to issue, and during the term of the Project are dependent on the ability of the Issuer Trustee to obtain further funding. Payment of any Coupon is not guaranteed by the Guarantors.
The Guarantors have unconditionally and jointly and severally guaranteed repayment of the Subscribed Amount in relation to each Preference Unit, upon the redemption of each such Unit. Payment of the Coupon, if applicable, and the Top-up Coupon is not guaranteed by the Guarantors. The Guarantors are family trusts associated with Dan Gallen, Charles Mellick and Patrick Keenan, and are the ultimate beneficial owners of a majority of the Pallas Group. Their financial strength, and their ability to generate liquid assets when required, will vary over time.
Preference Units are supported by the Trust Loan, an unsecured debt of the Developer. This loan will rank behind all secured debts of the Developer including the Construction Loan and, except as stated in Section 5.2 of the Information Memorandum, ahead of all ordinary units in the Developer for distributions of both income and capital, to the extent required to facilitate payments under the Trust Loan sufficient to fund full payment of the Redemption Amount to holders of the Preference Units.
The Project comprises two luxury residential buildings over a common basement at 424 Bowen Terrace, New Farm, a proposed 101 residences with approximately 15,108 sqm of Net Saleable Area and 244 parking bays, designed by DKO Architecture.
The First Development Application, for 78 residences, was approved by Brisbane City Council in April 2026.
The Developer intends to lodge an amended application for the larger 101 residence scheme. Fortis expects the new development application to be approved around January 2027, although there is no certainty that it will be approved.
The Developer estimates an average sale price of about $4.0 million per residence in the proposed 101 residence scheme. Renders shown are artist impressions and are illustrative only.
The Developer has adopted a total value for the completed Buildings of $404.8 million including GST, supported by a Valuation Report from M3 Valuers dated 19 February 2026, subject to the assumption that the change application for 101 apartments is approved. That Valuation Report is for internal purposes only. It is not for first mortgage purposes, and no person other than Fortis, as instructing party, may rely on it.
New Farm is one of Brisbane's premium residential suburbs, known for its vibrant community atmosphere, leafy streets and proximity to the Brisbane River, close to the James Street precinct, Howard Smith Wharves, New Farm Park and the Brisbane CBD.
All Preference Units must be redeemed by the Maturity Date of 30 November 2028, which the Issuer Trustee may defer by up to 12 months in the event of delays to the Project.
By way of illustration, the Investment Term for Preference Units issued in March 2026 and redeemed in August 2028 would be about 29 months.
An investment in the Issuer is illiquid and there will not be a formal secondary market in Units.
Unit Holders may elect to have some or all of their Preference Units redeemed prior to completion of the Project by giving at least 6 months prior written notice, which may not be given in the first 12 months, so the minimum initial investment period is 18 months. Redemption on or before completion is conditional on the Issuer Trustee having sufficient funds to make that redemption without prejudice to the conduct of the Project or to the Issuer.
Some or all of the Preference Units may also be redeemed at any time if the Issuer exercises its right of early redemption.
Illustrative Funding Table, depending on the actual financial parameters and outcome of the Project: total development costs of about $311.4 million, funded by about $37.1 million of Ordinary and Preference equity and about $274.4 million of Construction Loans. The Developer may not be able to secure all of the funding required in order to complete the Project and meet its other obligations set out in the Information Memorandum, including a failure to obtain the Construction Loan on commercially acceptable terms or at all.
The Project costs include an uplift of $47.4 million in the valuation of the Property over the purchase price of about $44.6 million. The Developer will make a capital distribution, or loan, to the Guarantors representing this uplift, typically paid prior to the redemption of Preference and Ordinary Units.
Until construction of the Building commences, the Issuer will not issue Preference Units having a total Subscribed Amount exceeding 85.0% of the total net realisable value of the Residences as shown in the most recent Feasibility Analysis of the Developer, minus the total of monies owed by the Developer and secured on the Property. That maximum may be increased to 90.0% once construction of the Building has commenced.
Pallas Group fees include a Fortis Acquisition Fee of 3.5% of the Property value, an Arrangement Fee of 3.0% of monies subscribed, Fortis development management and project management fees of $100,000 and $16,500 per month respectively, and a Fortis Performance Fee equal to 30% of the Development Profit. Fortis has agreed to waive that Performance Fee, referred to in the Previous IM, if and to the extent necessary to assist the Issuer in meeting its financial obligations in relation to Preference or Ordinary Units.
The Arranger will also charge a market standard loan establishment fee, or advisory or arrangement fee, for any loans it manages or arranges.
Issued by the Bowen Terrace Capital Trust, an unregistered unit trust. Investors are not entitled to cooling off rights. The Minimum Investment is $50,000, although the Issuer may accept lesser amounts in its absolute discretion.
Issuer Trustee: Pallas Funds Pty. Limited, holder of AFS Licence 473475. Arranger: Pallas Capital Pty. Limited, authorised representative of Pallas Funds. Fortis, a member of the Pallas Group, is development manager of the Project.
The Developer, the Guarantors, Fortis and the Arranger are related parties of the Issuer, and the Trust Loan is being made to a Developer which is controlled, managed, serviced and/or operated by the Arranger and/or its related entities. One risk with related party transactions is that they might not be assessed, structured or managed, including by enforcement if appropriate, with the same rigour as equivalent transactions with unrelated third parties. Related party transactions are stated to be effected at market rates or at no charge, and in accordance with the Corporations Act.

Source: Preference Equity, Bowen Terrace, New Farm Information Memorandum (March 2026).

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