%1

Even as Puerto Rico’s tourism industry has fallen victim to the island’s struggling economy — the famed San Juan Beach Hotel filed for bankruptcy in March — some Wall Street firms see an opportunity in the turmoil, reports the New York Times Deal Book Blog. One of Puerto Rico’s biggest cheerleaders, John A. Paulson, the billionaire hedge fund manager, is investing $20 million for the San Juan Beach Hotel, and this week, Fundamental Advisors, another Wall Street investment firm, bought the iconic El San Juan Resort and Casino for $71 million from Blackstone. Paulson & Company, Mr. Paulson’s $20 billion hedge fund, has agreed to renovate the San Juan Beach Hotel and turn it into an “ultraluxury boutique hotel” over the next few months, the Puerto Rico Department of Commerce and Economic Development said. Both Wall Street firms are betting that Puerto Rico will eventually recover from its economic morass. They were originally among a group of multibillion-dollar hedge funds and private equity funds that took an interest in Puerto Rico. Some placed bets on the island’s real estate. Others loaded up on the debts of the central government and its ailing electric utility, Puerto Rico Electric Power Authority. That was when Puerto Rico was the hottest trade in the hedge fund world. Since then, things have taken a turn for the worse. “Puerto Rico is certainly in a trough,” Laurence Gottlieb, chief executive of Fundamental, said. But Fundamental, a longtime investor in Puerto Rico, had been seeking an opportunity to buy a hotel like the El San Juan for some time, Mr. Gottlieb said. The firm is now eyeing additional opportunities in Puerto Rico, and plans to make bets in other sectors, like infrastructure and health care, on the island. “Attracting savvy investors like Paulson and growing the tourism sector are important components of the administration’s economic development plan,” Alberto Bacó Bagué, secretary of commerce and economic development, said in a statement on Thursday.