article in the australian

THE first of the vulture funds are emerging, with a Sydney-based manager planning to launch a $75 million "opportunistic" trust aimed at Chinese investors.

"We have begun our pre-launch marketing in China to assess the interest in such a fund," AIMS Funds Management director of funds management Mark Thorpe-Apps said.

He said the plan was to invest in both Australian direct property and listed property trusts. "The fund will also be looking to invest in real estate debt," he said.

Mr Thorpe-Apps said the timing of the Australian opportunity fund launch would depend on the level of interest, but he expected it to come to fruition within six months. "We already have the structure in place," he said.

AIMS intends to step up its investment in the property sector in coming months, having made a surprise appearance last week in the register of the listed MacarthurCook. It bought a parcel of shares held by Ascalon Capital Managers, owned by St George Bank and Kaplan Equity, for $428,000, or at just 10c a unit.

The aspiring Sydney fund manager is now the single-largest shareholder in MacarthurCook, with a 15.8 per cent stake.

"We'd like to be involved with the management," Mr Thorpe-Apps said.

AIMS would seek a seat on the MacarthurCook board.

He said AIMS would like to work with MacarthurCook in developing further its funds management platform. MacarthurCook runs three listed funds on the ASX and four other funds offshore: two funds on the American stock exchange and an industrial property and property securities fund on the Singapore stock exchange.

"We see Singapore as a hub for the region and it offers a great opportunity to launch China funds," Mr Thorpe-Apps said.

He said AIMS wanted to develop a funds management business in Australia, but preferred buying into an existing business rather than establishing a business from scratch. MacarthurCook thwarted a hostile $31 million bid (at $1.35 a unit) from AMP Capital Investors in June by issuing a $4million placement to IOOF, giving it a stake of less than 13 per cent.

AMP Capital Investors was said to have planned to back its portfolio of industrial assets in Singapore into MacarthurCook's listed vehicle in Singapore.

MacarthurCook has $1.3 billion of funds under management, including direct industrial assets in Singapore, Australia and Japan, valued at $800 million.

Yesterday, the little-known Pentagon Property group announced it held 19.99 per cent in Trafalgar Corporate Group. Pentagon's director, Tony Pitt, said: "We see more value in the listed sector than in direct property. There will be a lot of consolidation in the sector down the track and getting a foothold in some of these trusts is a good strategic investment."

Another opportunistic investor, South African financier Nathan Kirsh, owns 27.4 per cent of Abacus Property Group after its $211.4 million capital raising.

Mr Kirsh has made similar acquisitions in Britain, taking a 20 per cent stake in listed London developer Minerva.

Jonathan Kriska, property and banking analyst with Patersons Securities, expects the Kirsh Group to seek an Abacus board seat in the near future.

Mr Kriska believes Mr Kirsh may eventually take Abacus private.

Melbourne's APN Property Group recently launched its APN A-REITs Property Securities Fund to invest in the stocks it believes have been oversold. APN's deputy chief investment officer, Michael Doble, shies from the description of an "opportunistic" fund, insisting the fund looks for "secure, low-risk income" from the sector.

"It is possible to create a portfolio of stocks which own good-quality, income-producing assets and which are producing yields in the 10 to 12 per cent range," Mr Doble said.

There were some stocks buried in the wreckage of the market crash that offered exceptional yields and value, he said.

He said a lot of "uninformed" people were making a mistake in writing off the sector. The new unlisted, open-ended APN fund has made a modest start, raising $1.5million since it was launched.

Adviser Edge's head of property research, Louis Christopher, said A-REITs fell into two baskets.

The lowly geared, such as Bunnings Warehouse Trust, Colonial First State Retail Property Trust and Commonwealth Property Office Fund, are the survivors.

Then there were the heavily discounted A-REITs, including Valad Property Group now trading at 4c a unit, he said.

Valad was a trust priced for bankruptcy, he said. "In the worse-case scenario, Valad net asset value will be 30c a unit," Mr Christopher said. Valad's book net tangible asset value is 51c.

Opportunistic investor Orbis Australia, which has about $400 million to invest in heavily discounted shares, is the single-largest shareholder in Valad, holding 6.23 per cent. It is also the largest investor in ING Real Estate and Community Living Fund (with just under 15 per cent), ING Entertainment Fund (17.9 per cent) and Centro Retail Trust (with a 16.6 per cent holding). It is the second-largest shareholder in Ale Property Group (11.5 per cent), Macquarie DDR Trust (6.11 per cent, behind the US group DDR) and Galileo Japan Trust (7.52 per cent).