First vulture fund circles home repossession market

Mark mark at
Mon Apr 21 21:27:48 BST 2008

News item taken from a pretty good website I just came across

First vulture fund circles home repossession market
By David Campbell
22 April 2008

About £100 million in City funding is being sought to back the launch of
the UK’s first vulture fund to specialise in repossessed residential

Property group Assetz is negotiating with property fund managers to back
the scheme, and was sourcing repossessed properties at a rate of around
200 a month through bridging finance specialists, private clients and
other agencies, said chief executive Stuart Law.

A spokesman for the FSA said that any business dealing with homeowners at
such a sensitive time could expect to be closely monitored under
principles-based rules. Distressed sub-prime sellers unable to re-finance
were emerging across all property types he added, with the typical
purchasing price around 15% to 20% below recent market value.

Law said these people would need to sell to someone. ‘If they sell to us
they will know that we are FSA-regulated and are bound by due diligence,’
he said. ‘We are seeing some of the dynamics that have been seen in the
commercial property market and unlike sale and leaseback schemes we will
be accountable to sellers.’

Target pricing would produce a rental yield of between 6.5% and 7.5% over
the long term, he added, and would offer a risk-diversified portfolio by
location and asset type.

Repossessions are expected to rise to near 40,000 this year, 45% more than
the 2007 total of 27,100. Assuming an average price of £180,000 this would
produce a potential asset pool worth more than £7 billion pounds.

While prices are expected to fall over the next two years, a margin of 15%
to 20% below recent market value would probably represent the pricing
floor, said Capital Economics property economist Calvin Davidson.

‘That does represent decent value. We expect a lot of house prices to fall
beyond that but as a national average there would be support for prices at
that level,’ said Davidson.

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