Some builders carving a niche for condos on LI
March 5, 1994

By Joe Catalano. Joe Catalano is a free-lance writer.

NEARLY 30 YEARS AGO, condominiums were introduced to Long Island. Since then, like models at a fashion show, they've gone through a lot of changes. Although the Island is still a bastion of single-family houses, there were more than 61,000 condo units here at last count - and the projects come in many sizes and shapes. Some, like the original condos in Valley Stream, have smallish, no-frills units aimed at persons who otherwise could not have become homeowners. At the other end of the spectrum are condos that are larger and more lavish than nearby houses - with pricetags that reflect it.

In recent years, the regional recession has battered the condo market. The recession appears to be lifting and Long Island home sales have picked up. But some builders who might have responded to a strengthening economy in the past by starting both single-family houses and condo projects are shying away from condos this time. They are wary of the glut of condos on the market, and lenders are reluctant to finance condo projects. However, other developers still believe in condos, and think a key to their resurgence is to adapt them to contemporary tastes. Some are trying to create the feel of a single-family house by building detached units. And many builders and real estate observers feel the future of condos lies in a return to their origin: affordable housing for first-time buyers and seniors.

That was the purpose of the first Long Island condos in 1965, said Morton L. Certilman, chairman of the Long Island Regional Planning Board. Condos could be produced more cheaply than single-family houses, Certilman said, because a builder could put as many as 20 attached units on an acre, while community zoning generally allowed no more than four or five houses per acre. But as demand for housing exploded in the mid-1980s, condos became more elaborate. Builders' "herd mentality" led them to try to outdo each other with larger and more luxurious units, lavish health clubs and golf courses, said Bob Havasy, a partner at Shelter Hills Associates, a builder in Flushing, Queens. In some areas, such as North Hills, prices for some units exceeded $1 million, Havasy said.

When the bubble burst in the late 1980s, sales dropped for all types of housing, and a number of developers went bankrupt. Many condo developments sat unfinished. "Developers overestimated the overall demand for condos," said Michael Dubb, a partner at The Beechwood Organization, a Williston Park builder. Those who did buy during the recession found that prices of all types of housing had fallen, and that in many cases they could afford single-family houses. And as land prices and interest rates dropped, builders discovered that the per-unit cost of building a condo, including common areas and infrastructure, often exceeded the cost of houses, said Elliot Monter, president of The Holiday Organization, a Westbury developer.

So what's the future of condos on Long Island? Certilman said the planning board thinks condos are well suited for roles in revitalizing the Island's ailing central business districts. Condos could be part of mixed-used buildings that include office space on lower floors, said Certilman, who is also senior partner in the East Meadow law firm Certilman Balin Adler & Hyman, which has represented many of the developers who built condo projects in Nassau and Suffolk. Condos might also be involved in deals to protect the Pine Barrens from overdevelopment, Certilman said. In exchange for giving up development rights in the Pine Barrens, a builder might be permitted to construct a large number of condos in other areas where zoning normally wouldn't permit such density, he said. Certilman said affordability is the key to condos' future, and many builders agree.

Despite lower home prices and attractive interest rates, some people still can't afford a single-family house, said Dominick Rosano, vice president of The Valmont Organization in Commack. In response, Valmont is building a 100-unit townhouse development in Riverhead, Mill Ponds Commons. Sales are scheduled to begin in April. Units have two bedrooms and a garage, and are priced from $88,490 to $93,690. "What's going to sell this [project out] is price," Rosano said. At Timber Ridge at Holtsville, 50 of 70 units have been sold in 18 months, said Peter Klein, executive vice president of Klein & Eversoll, the Commack-based builder. Prices of one-bedroom units start at $122,990, and two-bedroom units start at $142,990. Buyers are first-time purchasers, empty-nesters - older people who no longer need larger homes because their children have moved out - and divorcees who have remarried, he said.

Not all builders think that multi-family housing has to be low-priced to sell. Shelter Hills is planning an 82-unit project on the 80-acre former William Paley estate in North Hills. When sales at Stone Hill begin in six months, prices will start at more than $600,000. Shelter Hills' Havasy believes prospective buyers will like the project because 56 of the units will be free standing. Like single-family houses, they will have no shared walls with other units. Buyers will be paying about as much for these detached units as they paid for attached condos in the mid-1980s in North Hills, Havasy said. The other units will be semi-attached, which generally means that units share only one wall. Builders feel that detached units give buyers the best of two worlds: the privacy of a single-family dwelling and the convenience of having someone else cut the grass and shovel snow. Whatever the reason, buyers increasingly prefer stand-alone units, and builders are responding.
The Klar Organization, based in East Meadow, hopes to break ground next year on an all-detached project. And some developers are redesigning existing projects. The Colony in Holbrook, developed by the Holiday Organization, began as semi-attached housing. When the second phase went on sale last June, only detached models were available. Monter said 81 of the 89 units in the second phase have been sold. The last phase of 71 homes, which will go on sale in April, will also be detached. Alice and David Lockwood, who looked at a number of condo and townhouse developments before deciding to buy a $179,990 unit at The Colony, said the fact the unit was detached was a major influence. "It's like having a private house," but with someone else doing the maintenance, Alice said. The couple sold an attached townhouse in Roslyn a year ago and had been renting in Woodbury. Buoyed by the response at The Colony, Holiday is introducing detached models at The Hamlet in Commack and scrapping the semi-attached models.

Potential condo buyers are generally cautious, looking for good value and checking builders' records and reputations to make sure they have staying power. They are aware of projects that attracted only a handful of residents, who sometimes had to wait years for paved streets and a clubhouse. Failed developments soured many people on the condo market, Valmont's Rosano said. But Steven A. Klar, president of The Klar Organization, said some single-family projects also weren't completed. His company has taken over several foreclosed condo projects. After their units were redesigned and prices were lowered, these projects sold out even when the market was slowest, Klar said. Klein said many projects failed not because they were condos, but because they were ill-conceived. Some were too expensive for the area, or had poor designs and layouts.
One company that is leaning toward single-family projects is The Beechwood Organization. Dubb said lower prices and attractive interest rates have increased demand for single-family houses while decreasing it for condos. At the company's Beechwood at East Meadow project, 20 of the 33 single-family houses have been sold in six months, Dubb said. He doesn't think sales would have been as strong at a condo project. Beechwood wanted to build a 34-unit condo on City Island in the Bronx, but couldn't get financing. Instead, Beechwood is building a dozen two-family houses there. "For lenders, condo is a four-letter word," Havasy said. "There is a bias against condos," admitted John Coffey, Fleet Bank's group senior vice president in the commercial real estate division. He said lenders that make condo loans are starting to require that most units be sold before they are built, lessening the chances of
default.

One reason for lender reluctance is buyers' preference for single-family houses. In addition, it's costlier for a lender to "work out" a failed condo development than a single-family project, because the lender has to pay monthly common charges for the unsold units until a new developer is found. But Coffey said lenders also realize there's a need for affordable housing on Long Island. Fleet financed a condo project in Suffolk produced by the Long Island Housing Partnership, a nonprofit group that creates affordable housing.
Klein, of Commack-based builder Klein & Eversoll, said he's seen surveys by housing groups that say about 75 percent of Long Island buyers prefer single-family houses. But that leaves 25 percent who don't. "There will always be a future for condos on Long Island," he said.

Copyright 1994, Newsday Inc.
Joe Catalano, DETACHED VIEW Some builders carving a niche for condos on LI., 03-05-1994, pp 34.

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