“Balmain boys don’t cry,” former New South Wales Premier Neville Wran once famously remarked.

Commercial real-estate-debt manager Balmain Funds, which started in the inner-west Sydney suburb in 1979, is not tearfully pleading for $500 million from superannuation funds.

Its planned five-year closed-end fund will lend money to industrial, retail and commercial property investor and developers in Australian metropolitan areas.

Balmain is betting that superannuation funds will want the long-term income stream generated from property debt, which comprises 7.8 per cent of Australia’s gross domestic product.

Australia’s commercial real-estate-debt market has an annual turnover of $100 billion per year. The total size of the market is about $500 billion.

Stephen Tunley, chief executive of Balmain Funds, and Michael Holm, executive chairman, have targeted as many as 50 superannuation funds. They hope to launch the fund in September.

“We will have a predictable cash flow from investing in a granular portfolio of commercial-mortgage loans,” says Holm.

Such lending will give investors a net return of as much as 4 per cent over the 90-day bank-bill rate.

Holm says loans to many small borrowers often produce better returns than lending to a few, large property projects.

Small borrowers provide personal guarantees. Such loans tend to have higher margins and a lower given loss rate in the event of a default, says Holm.

A typical Balmain portfolio of $250 million in loans may have as many as 100 loans. The number of property lenders has decreased in Australia to 50 from 15 in 2008.

Balmain has 60 staff in commercial-loan origination and 40 staff who specialise in credit and asset management.

The company has $600 million in retail funds under management.

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