No one has ever said that Developer Jeff Burum isn't an astute businessman, and his latest venture definitely shows that he is exactly that.

Burum, Co-Managing Partner of the Colonies Partners, L.P., recently formed Diversified Pacific Opportunity Fund, a private equity fund designed to achieve long-term gains by capitalizing on the sagging Southern California real estate sector.

It was announced yesterday that the fund has jumped in and purchased a package of loans from Diversified Builders Services, Inc., a wholly-owned subsidiary of ailing PFF Bancorp, headquartered in Rancho Cucamonga. PFF has been rocked in recent quarters by a slew of bad real estate loans, which has placed the company in the sights of regulator Office of Thrift Supervision (OTS). The purchase price of the loans disclosed by the PFF is $13,262,379. In addition, PFF announced it has set aside additional loan loss reserves of $48 million to offset the discounted value of the loans sold to Diversified Pacific, indicating a substantial profit potential for the funds investors.

Any defaults on the loans purchased will give control of the underlying asset to Diversifed Pacific, or the loans are repaid. Either way, a substantial gain is realized due to the discounted purchase price paid.

The investors in Diversified Pacific Opportunity Fund should be handsomely rewarded. It seems the reported value of the collateral of the property securing the twenty loans purchased is over $100 million.

Burum is a nationally recognized expert on affordable housing.