8/8/2011 08:29:43 AM

In Real Estate Battle, Paulson Beats Singapore SWF Over Control of Luxury Hotels

Hedge fund Paulson & Co. has won a US court battle with the Government of Singapore Investment Corp. (GIC) over a group of luxury hotels which were originally part of the holdings of Morgan Stanley Real Estate Fund (MSREF).

(August 8, 2011) -- US hedge fund Paulson & Co. is the victor in a court battle with the Government of Singapore Investment Corp (GIC) over control of a group of luxury hotels, according to the Financial Times.

Since early this year, the Singapore sovereign wealth fund has been aiming to gain control of the group of hotels. In February, the GIC offered $1.5 billion for a group of bankrupt resorts owned by investors that included the hedge fund.

The Paulson group assumed control over the properties following Morgan Stanley's inability to pay back loans it took from a range of lenders including the Paulson group and GIC. The five resorts, which include Grand Wailea Resort Hotel & Spa in Maui, Hawaii, and the Doral Golf Resort & Spa in Miami, have a combined $2.2 billion in consolidated assets and $1.5 billion of secured debt. The resorts filed for bankruptcy on February 1.

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“Paulson and his group stand to make windfall profits,” one lawyer familiar with the case told the FT.

Paulson's urge to keep control of the resorts from GIC -- ranked as the world’s seventh-largest state investment company by the Sovereign Wealth Fund Institute -- signals renewed confidence in real estate investments and heightened faith in a rebound in travel demand following the recession, exemplified by a recent Preqin survey of alternative investment consultants that revealed that investors are looking to embrace riskier private real estate opportunities.

The real estate win for the Paulson hedge fund follows less optimistic news. Last month, the Advantage Plus Fund, John Paulson’s flagship, lost 11% in June as a result of huge losses with Chinese forestry company Sino-Forest.

The Chinese firm has been accused of overstating its timberland holdings and production. The firm dropped about 73% from its closing price on June 1. Paulson & Co. subsequently sold the entire stake in Sino-Forest as of June 17.

To contact the aiCIO editor of this story: Paula Vasan at pvasan@assetinternational.com; 646-308-2742