In 2006, hedge-fund firm D.E. Shaw and developer SunCal Cos. intended to create a new town on 55,000 acres in Nevada, with residential, commercial and industrial areas.  The $250 million investment was never realized.   The nationwide real-estate slump left the project stuck on the drawing board.

Last month, lenders led by U.K. bank Barclays Plc foreclosed on the property.  [C-I Note:  Probably before the foreclosure moratorium kicked in.]   The 2 parties now have only a few weeks to come up with the money to pay off the lenders, or else the hedge-fund firm could see its $100 million investment wiped out.

According to the WSJournal, the deal is the largest potential loss facing D.E. Shaw in its wider, ill-fated move into real estate.  The firm had invested about $2 billion in real estate near or at the height of the market, according to people familiar with the matter.  It also realized profits from selling a number of properties such as 340 Madison Ave. in New York.  Its remaining $1 billion real-estate holdings have been marked down to the current market value of around $700 million. 

Good News for D.E. Shaw.  Real estate traditionally represents less than 5% of the firm's business.

Bad News for D.E. Shaw.   Known for its ability to move quickly and profitably in and out of many investments, thanks to quantitative trading strategies, the firm hasn't been as successful with its big bets on illiquid real-estate development.  [WSJournal, 10/13]