Jan. 14 (Bloomberg) -- While U.S. Treasury Secretary Henry Paulson jokes about the unknown fate of his fortune after a year of financial turmoil, he may not lose sleep over investing in a Georgia island that is a sanctuary for rare birds.

Paulson and his wife, Wendy, paid $32.65 million to accrue a majority stake in Little St. Simons Island since 2003, county records show. Property values in the area have risen about 10 percent in five years, said Ann McCann of Sea Palms Realty Inc.

The island has five cabins that rent for $600 to $1,200 a night. Occupancy remains about 70 percent, even with the recession, said Joel Meyer, general manager. U.S. hotel occupancy fell 5.6 percent in the fourth quarter to 49.6 percent, according to Smith Travel Research in Hendersonville, Tennessee.

Little St. Simons, off Georgia’s coast about 60 miles (100 kilometers) south of Savannah, is accessible only by boat. It gives visitors solitude and the opportunity to spot rare birds including roseate spoonbills, eagles, painted buntings and oystercatchers.

“It’s heaven on earth,” said Byron Brown, 57, an Atlanta advertising executive who with a group of friends has rented the entire island for visits of several days during the past 15 years. “It’s the most peaceful, serene place I’ve ever been to. How do you put a price tag on that?”

A full-island rental costs $8,000 a night. Only 30 guests can be accommodated, so the cabins often sell out months in advance, Meyer said. The business about breaks even, with rental revenue covering the cost of year-round staffing, he said. No new development is allowed on the 10,500-acre (4,200-hectare) island, which is designated an “important bird area” by the National Audubon Society.

“The owners want it to be a place where people can come to experience and learn about nature,” he said.

Shrinking a Fortune

Ethics rules forced Paulson to put most of his assets in a blind trust more than two years ago.

“You know the old joke about how you make a small fortune?” Paulson said after giving a speech Jan. 7 at the Washington Economic Club. “Give a large fortune to a person in a blind trust.”

Paulson, formerly chairman of Goldman Sachs Group Inc., had a $485 million stake in the investment firm before he was sworn in as Treasury secretary in July 2006, according to a divestiture notice when he sold the shares.

The Paulsons are birders and conservationists. Paulson was chairman of the Nature Conservancy, a charity devoted to protection of plants and animals, from 2004 to 2006. His wife is on the board of the Cornell Lab of Ornithology, a bird conservation group, and has led bird-watching walks in New York and Washington. Both declined to comment.

Frozen Assessment

Little St. Simons has a conservation easement that reduces taxes in exchange for not developing the land, which locks the assessed value at $3.75 million for 10 years, said Bobby Gerhardt, Glynn County appraiser.

Even with the real-estate crunch, property values are rising in areas near Little St. Simons. In Savannah, the average home appreciated 13 percent to $174,500 in the past year, while U.S. home prices slid 10 percent, according to Seattle-based real- estate tracking firm Zillow.com

The Paulsons own three-fourths of Little St. Simons through Whimbrel LLC, a holding company named for a migrating shorebird. Paulson’s disclosure forms for 2007 valued his half-interest in Whimbrel at $5 million to $25 million, and his wife owns the other half.

Pencil Maker

The rest of the island belongs to descendents of Philip Berolzheimer, an Eagle Pencil Co. executive who bought the land almost a century ago.

Land on nearby Cumberland Island was purchased in the 1880s by Thomas Carnegie, younger brother of steel magnate and philanthropist Andrew Carnegie. He built several mansions on the property, according to the U.S. National Parks Service, which now owns most of the island.

Accommodations on Little St. Simons are rustic, with large fireplaces in each cabin and no televisions. Baskets of bug- repellent spray abound, and mobile phone service is spotty. Staff members, including six full-time naturalists, compost kitchen scraps in worm bins near the organic garden where arugula and figs are grown. Bars of glycerin soap double as shampoo.

Entertainment includes stargazing and nighttime nature hikes. Instead of a guest sign-in book, there is a log of “notable avian sightings.”

Looking for Birds

Last January, Wendy Paulson let guests participate in doing a bird count, said Kathy Nuss, a retired accountant from Louisville, Kentucky, who has been coming to the island for 20 years.

“Time stops, and you can count birds for a few hours if you want to,” said Nuss, 63, who was rewarded when she spotted a roseate spoonbill, a rare pink bird often mistaken for a flamingo.

Jimmy Carter vacationed on the island after being elected U.S. president in 1976, and Georgia Governor Sonny Perdue has visited. Little St. Simons was voted the No. 1 resort in the continental U.S. by Conde Nast Traveler magazine last year.

The Paulsons visit several times a year without fanfare, said Bill Tipton, director of the Brunswick-Golden Isles Visitors Bureau, which includes the island.

“That’s one of the appeals for the type of folks who come to Little St. Simons,” Tipton said. “You just blend in, no matter who you are, on a 10,000-acre island that’s mostly birds and trees.”

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

Last Updated: January 14, 2009 00:01 EST