Wall Street Journal: D.E. Shaw Land Bet Proves a Quant's Quagmire, October 13, 2010


Known for its obsession with computer-driven investing, the New York company surprised many real-estate deal makers in late 2006 by teaming up with developer SunCal Cos. to buy the 55,000-acre property—twice the size of Boston—for $250 million.

The two companies planned to create a new town with residential, commercial and industrial areas. But 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. D.E. Shaw and SunCal have only a few weeks to come up with the money needed to pay off the lenders, or else the hedge-fund firm could see its roughly $100 million investment wiped out.

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 book is marked at around $700 million today, the people said.