An ailing economy isn't typically a recipe for business success, but don't tell that to Norman Radow, president and CEO of Radco Cos. based in Atlanta. His consulting services business — which focuses on problem real estate projects — is booming. Radco provides workout services, valuations, exit scenarios, and manages litigation and receiverships for real estate projects that run into trouble. Business volume for the company has tripled to more than $1 billion in the last 12 months, based on project value.
Radow formed Radco to purchase the Grand, a 53-story mixed-use development in Midtown Atlanta in 1994. The deal entailed buying the asset out of bankruptcy from a foreign entity and then redeveloping it as a Four Seasons Hotel. The project set Radco on a path to providing an alternative plan of action for struggling real estate. About two-thirds of Radco's revenues stem from consulting activities.
Radow officially launched Radco Development in January 2007 to take advantage of the downturn in the housing market and to differentiate between Radco Cos.' expertise as a property developer and its troubleshooting activities. NREI recently spoke to Radow about what it means to be a turnaround specialist in today's environment.
NREI: What opportunities do you see for Radco Development?
Radow: We have been the workout department for small Wall Street lenders, negotiating with borrowers, managing legal issues for them so that they can have an off-balance-sheet workout and real estate owned (REO) department. We actually prepare business plans and execute on a plan ‘B’ for real estate that has been taken back by financial institutions. These types of projects have included land, multifamily and condo projects that went bust.
NREI: Many residential borrowers turn in their keys to lenders when they get into trouble. Will troubled commercial borrowers follow suit?
Radow: I think you have seen some of that. The banks don't know what to do, so they haven't accepted the keys or done workouts because they will have to reckon them on their balance sheets. That's prevented the market from absorbing this excess inventory and restoring ourselves to normalcy.
NREI: In which markets are you seeing the greatest uptick in business?
Radow: We are picking up a lot of business in Las Vegas, Washington and California. Las Vegas has probably the highest foreclosure rate in the country. Short sales and REO properties are a major factor there. It's taking down values on otherwise good assets. It will require some more time to vet out Florida before we see more business there.
NREI: Could you give an example of one of Radco's turnaround projects?
Radow: We took over a 1,279-unit condo conversion project in Woodland Hills, Los Angeles. We had about 600 units left to sell. We renamed it from the ‘Metropolitan’ to the ‘Met’, made it a little more hip, changed the marketing, made all the messages consistent. We also embraced the existing condo owners and worked with them every step of the way.