Blacksmith vulture fund may take off later in year

Blacksmith, the shelved real estate vulture fund, might be re-launched later this year.

Peter Wall, a director, said he hoped the business would be in a position to announce a new capital-raising venture by the third quarter of this year.

The fund was to be the only public offer to specialise in taking advantage of the big commercial real estate downturn and Wall said about $5 million had been raised.

People were keen on the concept, he said. But he was this week writing to about 60 investors, telling them money would be returned in full.

The fund was seeking $25 million to $50 million to buy distressed properties, indicating that an attractive 12 per cent could be returned annually once the business had been operating for a time.

Blacksmith would hunt for mortgagee sales and offer low prices but then gear up properties with debt and change them by either refurbishing or repositioning them in the market, fully leasing them and getting better incomes.

The fund will gear up its properties, borrowing up to a maximum of 45 per cent and pay the manager a base fee of 0.75 per cent.

When shareholders are paid will depend on how the fund's properties perform.

But Blacksmith met market criticism from a number of quarters over lack of contributions from directors and high fee structures.

Most vocal were Shareholders Association chairman Bruce Sheppard and executives at Milford Asset Management who said Blacksmith's fee and organisational structures were inappropriate.

If the business does relaunch, it is expected to charge a flat fee based on the value of assets under management and not pass on a large range of other fees which were in the original offer.