In April, Norman Radow turned down a chance to buy more than 100 unsold condominiums at about a third less than the prices they were listed for during the height of the condo boom.

Why? Even at that price, he thought they were too expensive.

Radow is making a business out of buying blocks of unsold condominiums at projects in serious financial trouble. The president of Atlanta-based Radco Cos. expects banks in particular to offer condominiums at deep discounts at foreclosure sales.

“There are going to be a lot of units sold on courthouse steps,” agreed leading condo watcher Jack McCabe, president of McCabe Research and Consulting, based in Deerfield Beach, Fla.

Many properties are already in trouble. For example, back in December 2005, Cervera Development paid $33.6 million, or roughly $210,000 a unit, for the 153 new garden apartments at Palm Estates at Vero Beach. By this April, only about 20 condominiums had been sold, and Cervera put more than 130 unsold units on the market with no minimum sales price, though the “insider number” started at about $185,000 per unit, then dropped to $165,000, which is probably just enough to cover the construction loan on the property, Radow said.

These one- to four-bedroom condos were offered to individual buyers at prices ranging from $159,000 to $374,900 apiece.

But Radow is only willing to pay what he thinks the complex is worth as a fragmented rental property: $148,000 a unit. Forget about the price Cervera still hopes to get for the condominiums: Radco’s price is below what the converter paid for the property 18 months ago, and probably wouldn’t even pay the loan that Cervera took out to buy the property.

Hunting for deals

Radow and McCabe hope to catch these properties as their prices fall this summer, in part by identifying lenders who financed condominium conversions. For example, Regions Bank, based in Memphis, Tenn., originally financed the purchase and conversion of Palm Estates.

Radco is looking for condominium properties like Palm Estates at which some individual sales have closed, but which still have large blocks of unsold condominiums.

At some properties, condo developers or lenders placed escape clauses in sales documents that require a certain percentage of sales, often 20 percent, to close before any sales became final. If things go wrong, individual condo sales contracts can be dissolved, leaving the entire property with a single owner, so that it can be sold as if it were a conventional apartment complex. Radco is avoiding deals such as these.

“I’m looking for the deal that institutional buyers would shy away from,” Radow said. Despite the difficulty, he knows that it is possible to turn a condominium property with many different owners back into a conventional apartment property with a single ownership structure, because in the late 1990s, he accomplished just that.

Radow converted the Fountains at Peachtree, a distressed condominium project in Atlanta, back into a rental building, buying one unit at a time until he owned all 80 condominiums and could turn them back into rental apartments.

Unlike the Palm Estates, where Radco would have owned a majority of the units, at the Fountains Radow started with just two apartments. But he also had a clear idea of the increased value the whole community would have once he gained control of it: The Fountains had a 6,000-square-foot parking lot ripe for development by someone who could gain control of the property.

Radow understood that most of the residents at the Fountains wanted improvements made to their building that they probably would not be willing to pay for. So he kept his eventual plan to purchase the building a secret, joined the condominium association, and got himself elected president. Radow proposed a plan for new windows, a new heating system, and thicker walls, all to be paid for by fees to the residents. All but three residents eventually came to Radow and sold their units to him at market prices. The last three later sold for a slight premium.

Many condominium owners at fractured projects may be in a similar position, especially if they bought their condominiums as investments and did not intend to live in them.

“It’s an opportunity for an entrepreneur,” Radow said. However, this strategy carries a lot of risk, especially if the block of unsold condominiums is purchased at high prices that cannot be supported by market rents.

Radow will also do everything he can to avoid lawsuits from his fellow condominium owners. “You’ve got to manage your homeowners, either to buy them out or keep them happy enough not to sue you.”

Once Radow has a majority of the votes on the condominium association, he can vote to decertify the condominium. The remaining owners will then become tenants-in-common along with him, each party owning shares of the whole property, and Radow can buy these individuals out.

“They may fight you about value, or they may sue you about representations made by the prior owner,” Radow said. “There may be a couple of years of litigation.”

Or, rather than fighting, Radow could simply leave a handful of condo owners in place. “After a certain point I can just run it as a rental with them there,” he said.

Radow is still looking for properties where he can try this strategy, and he still has an eye cocked toward Palm Estates. According to Kevin Judd, the broker and senior vice president at Apartment Realty Advisors who handled the original sale of the property, the block of 130 condos at Palm Estates still has not sold.