Paulson Real-Estate Fund Booming As Firm Struggles

Dec 6 2012 | 12:12pm ET

Things aren't all bad at Paulson & Co.

The $19 billion New York hedge fund is well on its way to its second-straight year of double-digit losses for its flagship hedge funds. But its three-year-old Real Estate Recovery Fund could hardly be doing better, it told clients yesterday at its annual meeting.

The $300 million fund has roughly doubled in value since its launch, an executive told the gathering. A private equity fund, Real Estate Recovery has most of its money in raw land on the cheap and sells it to developers. The fund also invests in hotels, The Wall Street Journal reports.

At the same meeting, firm founder John Paulson lauded real-estate opportunities in areas such as Arizona, California and Florida, all of which were hit hard by the real estate downturn. Arizona and Florida are home to two of the fund's most recent success stories: interest in a large plot in Phoenix a year earlier than it expected, and the sale of some lots in Tampa for twice what the fund is paid.

"We can sell today at a premium but it is not our goal to make a small premium," Paulson said. "The value of land is starting to rise more rapidly."

Paulson real-estate chief Michael Barr added that the firm feels "very good about exceeding" its 24% target returns.


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