Concern as two Hunter property funds fail

Administrators from tax and accountancy group Ernst & Young were called in on Thursday to Grant West Property and Grant Residential Property, which were set up in 2007 by Hunter and former HBOS banker Peter Cummings.

Hunter's investment vehicle West Coast Capital and HBOS launched Grant West to create a 1 billion fund to refurbish one and two bedroom flats in cities such as Glasgow, Edinburgh and Dundee, but it was worth only about 150m by the time it entered administration.

The housing market collapse hit the fund, slashing millions from the value of its properties and causing it to break a covenant on 70m of HBOS debt last year, when total liabilities outstripped assets by more than 18m.

A spokesman for Hunter confirmed the fund had gone into administration, but declined to provide any other details.

Ernst & Young released a statement saying administrators Fiona Taylor and Colin Dempster had been appointed to the funds. A spokesman for the firm refused to elaborate, saying it was too early to give more details.

"Both funds have proved susceptible to the effects of the property downturn. We are currently undertaking a full review of their portfolios, but all properties within continue to be fully serviced by property manager Grant Asset Management," Ernst & Young said in the statement.

It is understood Sigma Capital, in which Hunter has a stake, approached HBOS about buying the Grant West assets, but the mortgage bank rejected its offer.

Hunter and HBOS are said to have handed management of the fund to Scottish property entrepreneur Peter Grant, who runs Grant Asset Management, for about 460,000 a year, although his company was unaffected by the administration.

Auditor RSM Tenon warned of a "material uncertainty" regarding the future of Grant West.