Hedge-fund manager John Paulson, who made billions wagering against subprime mortgages, has started to profit from a U.S. housing bet that took longer to ripen: owning land.

After acquiring about 35,000 lots since 2009, Paulson & Co. shifted toward selling last year and is accelerating its disposition pace, according to Michael Barr, who manages the firm’s real estate. Paulson’s funds had invested $770 million, mostly in lots bought out of bankruptcies or other distressed sales, and acquired two dozen communities in Arizona, California, Colorado, Florida and Nevada.

“The whole thesis here was that land was the best way to play the housing recovery, and that thesis seems to be playing out,” Barr said in a telephone interview from New York. “In a downturn, land is the hardest-hit real estate asset. Then, in the recovery phase of the cycle, as home prices appreciate, land values appreciate more.”

Paulson -- whose lot holdings put the firm almost on par with the 10th-largest U.S. homebuilder -- is planning to slowly sell parcels in some projects where prices have rebounded sharply, while holding on to other properties. He’s joining other large land buyers who are selling into a housing market constrained by lot shortages after almost a decade of anemic construction.

Builders replenishing land holdings are finding that prices for finished lots across the U.S. jumped 57 percent since the bottom in 2009, according to data from John Burns Real Estate Consulting. In some hard-hit markets where distressed properties lured investors, values have more than doubled in the past six years.

Earlier Sellers

Paulson is starting to sell relatively late compared with other firms that bought land after the crash, and price gains are now moderating. His firm’s real estate funds have 10 years to return principal to investors after closing, according to a report prepared for California’s Contra Costa County Employees’ Retirement Association, which invested with Paulson.

“Their competitive advantage is their longer-term horizon,” said John Burns, a housing consultant based in Irvine, California, who has done work for Paulson. “They were able to bid on land that most people thought would take a long time to recover, so there were very few bids on it.”

Angelo Gordon & Co., a New York-based firm with $27 billion under management, has sold or optioned about 80 percent of the 14,000 lots it acquired from 2008 to 2012, according to Louis Friedel, vice president of real estate acquisitions. Starwood Land Ventures, a unit of Barry Sternlicht’s Starwood Capital Group, has sold about half of the 20,000 lots it acquired since 2007 in California, Florida, Arizona and Colorado, Chief Executive Officer Mike Moser said.

Land ‘Convexity’