New details on DE Shaw’s failed real estate venture in New Mexico shed some light on why the fund had to lay off so many employees two weeks ago (at least 150).
Last week, we found out that DE Shaw’s layoffs hit the hedge fund’s real estate division harder than any other.
Now, the Wall Street Journal has details on the deal that probably caused those layoffs – a failed New Mexico community that DE Shaw planned in 2006 with SunCal Cos, a developer.
According to the Wall Street Journal, DE Shaw and SunCal bought a 55,000-acre property—twice the size of Boston—in New Mexico for $250 million. They wanted to create a new town with residential, commercial and industrial areas.
Then the financial crisis struck, the firms abandoned the project, Barclays foreclosed on the property last month, and now D.E. Shaw and SunCal have only a few weeks to come up with the money needed to pay off the lenders, says the WSJ.
DE Shaw apparently owes about $150 million.
This news is pretty embarrassing for the huge, secretive quant fund. They ventured out of their area of expertise only to get stuck investing in the worst real estate bubble in recent history.