Radco Launching Loan Workout Platform For Struggling Multifamily Owners, Lenders

Norman Radow is dusting off his 2009 playbook. 

His multifamily developer and investment firm, The Radco Cos., has launched a third-party platform to turn around struggling apartments for lenders and equity owners staring down the potential for steep losses, Radow said on a Bisnow panel last week. 

“We just rolled out our workout platform, our turnaround platform, for these lenders and equity shops who want new performance,” Radow said during a Feb. 18 event at Westside Warehouse.

Radco Property Solutions launched in January, a similar effort to Radco's business during the Great Recession when the firm helped work out and sell properties held by Lehman Brothers after its collapse.

That process, largely untying tranches of debt that complicated and held up asset sales, ended in 2012 and Radco returned to focusing on apartment investments. But with interest rates still elevated and distress levels on the rise, the time is right to jump back in, Radow said. 

“What we’re finding is that many lenders and equity shops, they know their properties are in distress, they know their sponsors need to get replaced, but they’re not ready to sell the assets at a loss,” Radow told Bisnow in a post-event interview.

“So they’re looking for a way to create value at the properties, claw back that value … and give them time for the markets to heal so they can recoup more of their investment.”

Elevated interest rates have wreaked havoc on all commercial real estate,  especially the apartment market. Delinquent multifamily loans jumped 75% between 2023 and 2024, according to Trepp. Roughly 13% of all CMBS loans tied to multifamily properties were in some form of distress at the end of January, according to Cred IQ. 

Jamestown Chief Investment Officer Tim Perry said at the event that over the course of 35 years of interest rates largely falling, “it wasn't that hard” to generate returns on real estate.

“Now, since 2022, we've really had to be smart,” said. “We had to look at the bottom line, how we grow our revenue, how we've got a lot of discipline where to spend money.”

After one of the longest growth cycles in history, many of the executives at lending and investment firms have never experienced a commercial real estate market in distress.

For Jamestown's younger employees, this is new and frightening ground, Perry said.

“This was sort of their first recession. There was a whole group that thought, ‘Trees do go to the sky and rates will always be low,’” Perry said. “Whether it’s investors or lenders or whatever, [in the] last few years, it’s really matured a generation of business that didn’t have those battle wounds yet, those scars to show.”

Radow said the lack of CRE recession experience provides opportunities for veteran firms like his to step in and steer troubled assets to safety. But the landscape compared to past downturns is quite different. 

“Interest rates go sky high. Rents just collapsed. Occupancies go wide. Then you can't evict people, delinquencies are sky high, numbers no one's ever seen before. Insurance rates are quadrupled,” he said. “No one has seen these issues.”

Steve Baile, chief operating officer of Selig Enterprises, said capital has a habit of getting “frothy” when interest rates are low, funding new developments without really considering if there’s is a fundamental need, as it did during the subprime crisis.

“When that stuff starts to happen, you start to see stuff in places that shouldn't be built,” Baile said. “That means the capital is outweighing demand, and someone's going to bust.”

He said he still isn't sure how the current cycle compares after a historic run of construction.

“I know that low interest rates can breathe life into a very poorly conceived project. I also know how interest rates can suck the life out of a very good project,” Baile said. “And we're seeing both of those things happen.”