PROPERTY FIRST TO DO VULTURE FUND

INVESTMENT ADVISOR - SEPTEMBER 1st 2008 

Property First Asset Management has become the latest house to launch a vulture fund to take advantage of the beleaguered property market. Closed-end vehicle UK Property Recovery No.4, which launched last week, aims to raise up to £1.8m to acquire both residential and commercial property that has been repossessed or is in threat of repossession, from banks, liquidators and professional introducers. Other companies that have launched vulture funds to take advantage of the turbulent market over the last few months include property specialist, Assetz.

According to Property First's acquisitions team, the current market presents the best buying opportunity in UK property for the last 40 years. It is currently working with banks, building societies and professional agents to find potential openings and take unused assets off there hands. The fund is aimed at high net worth individuals and SIPP clients, with the minimum investment level set at £20,000.The primary objective is capital growth and income.

While the targeted acquisitions will mainly be located in the North West and the Midlands, the fund is open to acquire property anywhere in the country. Gavin Haynes, investment director at Bristol-based IFA Whitechurch-Securities, said: "Vulture Funds are certainly a specialist area and require a lot of due diligence, but it does make sense at the moment. With all the distressed selling, people will look to take advantage of this." Matt Staines, Senior Partner at Property First, said: "At the moment we are taking a medium-term view with the property market and think it will get worse before it gets better, so now is the perfect time to take advantage of that."

"Most investors do realise that property markets are cyclical. The current phase has been brought about by sub-prime lending in the US and a sudden correction in UK market values. This has led to a crisis in the banking system, which in turn has led to difficulties in obtaining higher loan-to-value mortgages," he continued.

There is no doubt we are in a falling market - and who knows how far the market will fall. Our view is that this is probably the very worst time for a bank or building society to hold a portfolio of repossessed property. Therefore they must sell in order to crystallise a loss and then take steps to strengthen their balance sheet."