Barry Sternlicht, the “Foreclosed” Real Estate Bargain Hunter

THE Paramount Bay condominium is a 47-story steel-and-glass cadaver in Miami.

Conceived at the height of the real estate boom as another ultraluxury tower in a city that would soon be choking on them,

it looms unfinished and unoccupied on Biscayne Bay.

THE Paramount Bay condominium is a 47-story steel-and-glass cadaver in Miami.

Conceived at the height of the real estate boom as another ultraluxury tower in a city that would soon be choking on them,

it looms unfinished and unoccupied on Biscayne Bay.

The lobby is like a mortuary. There are no chandeliers on the three-story ceiling, no paintings on the walls.

And there is nobody at the front desk to greet visitors. The only sound is the eerie gurgle of a 40-foot waterfall.

None of this deters Barry Sternlicht, the real estate investor who owns the building.

“The bones,” he says, gesturing around the room. “The bones are extraordinary!”

Mr. Sternlicht plans to transform Paramount Bay into a haven for wealthy buyers who will one day want to live here.

But he concedes that the building’s entrance needs work.

“This looks like an abandoned property,” he says. “We have to make it look like it’s alive.”

The pool area lacks something, too.

“It needs a concept,” he says, wrinkling his brow.

He’s not yet sure what that will be. But he knows this much: The bamboo trees adorning the entrance have to go.

“We should put some wisteria or some vines over there,” he says.

Then it’s up to one of the top floors to admire the sweeping views from an empty unit.

“Look at this,” he says, pointing out the landmarks in the distance: South Beach, Key Biscayne and the downtown Miami skyline.

“Someone is going to want to live here — someday.”

Perhaps such brio is a prerequisite for an investor wading into the worst real estate wipeout in generations.

Indeed, Mr. Sternlicht, 49, has been one of the downturn’s busiest buyers.

In the last year and a half, his private equity firm, Starwood Capital, has raised more than $3 billion.

He has bought land in Florida and ski lodges in Colorado.

He created a real estate finance company, Starwood Property Trust,

which he took public last August in a successful initial public offering.

And he recently ended an aggressive but unsuccessful run at Extended Stay Hotels, which was being auctioned off in bankruptcy court.

But his highest-profile deal has been the acquisition of the $4.5 billion real estate loan portfolio of Corus Bankshares,

the nation’s largest condominium construction lender until it failed last September because it had financed too many projects like Paramount Bay.

The following month, Mr. Sternlicht and a group of investors — including TPG Capital, WLR LeFrak and Perry Capital —

won the loans in an auction run by the Federal Deposit Insurance Corporation,

paying $554 million for 40 percent of the package, valuing the debt at 60 cents on the dollar.

The F.D.I.C. holds the remaining 60 percent.

Mr. Sternlicht hopes to foreclose on many of Corus’s errant borrowers, restyle their buildings and sell units for a significant profit once the real estate market recovers.

He says he and his investors can afford to wait until then because the F.D.I.C. has provided them with $1.4 billion in zero-coupon financing

and an additional $1 billion in low-cost loans that can be used to complete unfinished projects.

There’s an upside for the F.D.I.C. too, Mr. Sternlicht says: it will recover the full value of the Corus portfolio by working with him.

“They are going to make a couple of billion,” he says. “If they sold it outright, they would have lost money.”

If all goes as planned, Mr. Sternlicht says, he and his investors are also positioned to do rather well themselves.

SOME are skeptical of Mr. Sternlicht’s projections.

While real estate prices are no longer in free fall, a recovery still looks far away.

Condo prices have plummeted since the 2006 peak, according to the National Association of Realtors — 43 percent in Miami and 55 percent in Las Vegas.

In Los Angeles, they are off by 44 percent from their high three years ago, according to this extensive article from the New York Times.

Then there’s that $554 million price that the Sternlicht group ponied up to snare its portion of the Corus portfolio — it was 20 percent higher than its two closest competitors.

“Everybody in the industry thinks Sternlicht overpaid,” says Peter Zalewski, founder of Condo Vultures, a real estate brokerage and consulting firm in Bal Harbour, Fla.

Nothing bothers Mr. Sternlicht more than the suggestion that he overpaid.

“If I had to bid for it again, I’d pay more today,” he says.

But Linus Wilson, a finance professor at the University of Louisiana, Lafayette, who has studied the F.D.I.C.’s real estate sales,

says he thinks the price Mr. Sternlicht paid for Corus will hobble his returns.

Mr. Wilson points out that 59 percent of the loans on Corus’s books were no longer performing before the bank failed in September, meaning that they were generating virtually no income.

Corus described another $558 million in the portfolio as “problem loans” that were near default.

Mr. Wilson argues that if Mr. Sternlicht doesn’t sell condos right away, he may have trouble making his first loan payment of $150 million that comes due in October 2011.

“It is far from guaranteed that he and his investors will make money on this transaction,” Mr. Wilson says.

And before Mr. Sternlicht can even change the lobby furniture and the landscaping at many of these Corus-financed projects,

his investor group has to prevail in a slew of foreclosure proceedings against developers who have defaulted on their loans.