New York (HedgeCo.net) – New York-based real estate hedge fund The Half Moon group has launched The Half Moon REO Fund, LP. The new fund focuses on financing a strategic network of joint venture partners who are experts in the “bulk purchase” and “quick resale” of large portfolios of foreclosed residential properties from banks, government agencies, and other institutions at deep discounts to market.

With the number of homes now foreclosed at the highest level in U.S. history, hedge funds and other alternative investors are specializing in bulk purchases of REO properties. An “REO,” or real estate owned property, is one that has been foreclosed. The Half Moon REO Fund is structured to take advantage of the discounts available.

The Half Moon REO Fund seeks to identify the best and the brightest of those who are currently operating in this market, and have established strategic relationships with seasoned professionals who have successful track records in buying and selling “bulk” packages.

“We also own a financial stake in RebuildUS.com, a ‘virtual marketplace’ where bulk buyers will be able to sell to each other as well as directly to the public.” Stephen E. Speiser, founder and managing director of the Half Moon group, said. “James ‘Odell’ Barnes, popularly known as the ‘Foreclosure King’ is one of the largest buyers of foreclosed homes in the country, and is both one of our ‘strategic partners’ and a founding investor in RebuildUS.com. The launch of the website is scheduled for February 2010. We believe RebuildUS.com will become a major new distribution pipeline for the Half Moon REO Fund.”

Half Moon has also established relationships with joint venture partners that are experienced in both Bulk/Wholesale and Bulk/Retail strategies. In addition, Half Moon is actively pursuing relationships with other groups who will be able to execute on similar REO platforms.

“Recognizing an opportunity, we have structured an investment process that takes advantage of the historic discounts available and, while making money for our investors, we are also helping to put vacant, foreclosed properties back into the hands of deserving homebuyers and provide a desperately needed ‘free-market’ solution to our nation’s housing crisis.” Speiser said regarding their unique fund structure.

“Our quick-sale process embraces a two-pronged approach:” Speiser explained.

1. Bulk/Wholesale Strategy. Under this investment strategy large pools of REO properties are purchased from banks and/or governmental agencies, and are broken into smaller packages for immediate resale at a small mark-up through an existing (and expanding) network of “bulk buyers.” This investment opportunity exists primarily in “secondary markets” where there is a large supply of product available at a relatively low price point. The enormous size of the inventories being held by banks and governmental agencies in these markets are placing pressure on banks to liquidate their portfolios at deep discounts of 10¢ – 20¢ on the dollar. This investment strategy has a proven ability to turn capital within 30-days, thereby allowing capital to be reinvested monthly.

2. Bulk/Retail Strategy. This involves the quick resale of “higher-end” homes directly to individual homebuyers at below-market prices, but at a large markup relative to Half Moon’s cost basis. The homes targeted for acquisition are limited to properties with little to no physical repair issues and are purchased “in bulk” at discounts of 50% – 65% of “quick sale” value. “Quick sale value” is defined as the price at which a home would sell within 30 days of being listed, and is typically 10% below the price of the next lowest comparable property for sale on the market. Under this investment strategy, REO portfolios are typically sold in 3 – 5 months on average, which allows equity capital to be reinvested 2- to 3- times a year.

“Having multiple platforms allows us to achieve geographic and strategic diversification as well as giving us more options to keep capital at work.” Speiser concluded.

Alex Akesson
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