MIAMI-Bulk buyers bet heavily on distressed condos, spendingnearly $2.1 billion on 9.7 million square feet of space in SouthFlorida since July 2008—but the early returns aren’t what manyhoped. About half of the more than 70 condo bulk transactions fordistressed units across South Florida are being resold toindividual buyers at an average rate of $51 per square foot. Sosays a new report from Condo Vultures.

"Bulk condo buyers are reselling units at an average premium of24%, which at first glance seems to fall in the range of everyinvestment group's expected return," says Peter Zalewski, aprincipal with the Bal Harbour, FL-based real estate consultancyCondo Vultures LLC. "The issue is, the $51 per square footaverage premium is a gross amount that does not factor in carryingcosts, real estate commissions, marketing fees, and any salesincentives. Once these additional costs are factored in, the netprofits are likely to erode for inferior properties."

According to recorded deeds in Miami-Dade, Broward and PalmBeach Counties, private equity groups and institutional investorsthat purchased distressed condos in packages of at least 10 unitsfor an average price of $215 per square foot during the last 30months are now reselling on a retail basis at an average price of$266 per square foot. To date, bulk buyers have already resold 25%of the nearly 7,900 newly constructed or converted condo unitsacquired in distressed transactions in the tri-county area sinceJuly 2008.