Proving that there's an appetite for Florida real estate again and that at least one savvy hedge fund manager might think the market is bottoming, albeit at low prices, there was a bidding battle for bankrupt home builder TOUSA's Florida assets Jan. 22.

Starwood Land was forced to up its bid on the 5,499 home lots and 36 model homes by $20 million to win the auction for the property of TOUSA's defunct Engle Homes brand. It agreed to pay $81 million, roughly $14,730 a lot, not including the model homes for the properties, said John Sussberg, an attorney for TOUSA.

Sussberg said the auction had two other bidders, including a business entity backed by hedge fund manager John Paulson, who made tens if not hundreds of billions betting that the housing bubble would pop in 2004 and 2005 by buying credit-default swaps.

Starwood, a Bradenton, Fla.-based real estate development company, had been the stalking horse bidder on the assets, setting a bottom price of $61 million that other bidders had to best by at least $1.83 million, 3% more than the stalking horse price, as a "break up" fee to Starwood, plus as much as $250,000 more in expenses.

A judge is scheduled to rule on the sale Friday, exactly two years since the Hollywood, Fla.-based company filed for Chapter 11 bankruptcy.

The last two years have been eventful for TOUSA, to say the very least.

Last spring, TOUSA stopped building houses and started marketing its land, abandoning the possibility that it would build itself out of bankruptcy. At first, TOUSA executives expected to sell off the land piecemeal, community by community, but after Starwood expressed interest in buying the bunch, executives decided it made more sense to move the land fast than to wait for better offers on the individual assets.

Originally, in addition to Starwood, four other entities made offers on substantially all the unstarted lots in Florida, according to the bankruptcy file. But Starwood was chosen as the stalking horse bidder.

TOUSA is saddled with huge debt and substantial lawsuits from investors who alleged the company pushed itself into bankruptcy by taking out a loan to absorb a joint venture just eight months before filing.

A ruling in that lawsuit has the potential to upend bankruptcy tradition of putting shareholders' interests behind secured creditors.

Judge John K. Olson of the U.S. Bankruptcy Court's Southern District of Florida ruled in October that lenders "did not act in good faith and were grossly negligent" when they loaned money to TOUSA to pay off an earlier loan that the company took on to buy Transeastern, a Florida-based land developer, in August 2005.

He said a group of investors syndicated by Citicorp should have known that the company was already insolvent when it loaned TOUSA roughly $500 million in 2007 to pay off an earlier loan made by a Deutsche Bank-led investor syndicate, which had loaned TOUSA money in 2005 to buy the Transeastern company's land assets in a joint venture. TOUSA was behind in loan payments to Deutsche Bank, which had sued the company and demanded repayment.

Olson ruled that the Citicorp loan made to pay off Deutsche Bank's earlier loan was a fraudulent conveyance of the company's assets and ordered the Deutsche Bank syndicate to "disgorge" roughly $483 million to a special account. Citicorp's loan to TOUSA was wiped out, and it was ordered to pay interest and professional fees.

The drama won't end with the sale of these assets. Sussberg said the company still has land in the western United States it has yet to sell.In addition, what is thought to be more than a thousand lawsuits were filed by TOUSA and its subsidiaries against its former vendors and other creditors over the last few days asking that a judge require them to return any payments the company made to them in the 90 days before the company filed for bankruptcy. The argument is that the payments were "preferential," favoring those creditors over others. If the money is collected, it would be put into a collective pot to be divided among the creditors in a manner that a judge determines.

Attorneys representing the creditors could not be immediately reached for comment on the new lawsuits.