Hedge fund billionaire John Paulson has held a first close on his firm’s second real estate fund, PERE understands. The New York-based investment manager’s latest fund, Paulson Real Estate Fund II, has held a first closing of more than $330 million, according to sources.
The value-added vehicle is seeking some $400 million in equity commitments. Through Fund II, Paulson & Co plans to invest in residential land in the US, with a focus on the Southeast, Southwest and West. Representatives from Paulson declined to comment.
Paulson & Co.’s previous real estate vehicle, the Paulson Real Estate Recovery Fund, was launched in 2009 to target residential land development, commercial property and other distressed real estate in the US. The Real Estate Recovery Fund closed on $317 million in commitments in 2010.
Paulson’s first real estate fund was run by Michael Barr, a former managing director at Lehman Brothers Real Estate Partners. A report from the Financial Times stated that, in 2012, the Real Estate Recovery Fund was one of the few Paulson funds to achieve a gain, with a 20 percent return for the year.
Founded in 1994, Paulson & Co. has seen its assets under management plummet in the last two years due in part to a series of ill-timed money-losing bets. The firm currently has around $18 billion in assets, down significantly from approximately $38 billion in early 2011. Various media reports attribute the massive decline to such activities as an investment in Chinese timber firm Sino Forest Corp., which was accused by a research analyst of fraudulent accounting; a wager on gold that wiped out nearly $1 billion of Paulson's personal wealth in two days after the precious metal's value plummeted 13 percent; and buying shares in Citigroup and Bank of America that suffered losses, among others.