Newsday
Hammering Away /
Long Island home builders are expanding into other states.
Feburary 29 1996

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

SITES as different as hurricane-devastated South Florida and the snow-covered slopes of Colorado have attracted one local home builder in search of more business or greener pastures away from Long Island. Many Long Island builders, seeking to grow, or at least keep their companies busy, have considered going West - and North and South - often when sales of their local properties slowed or stagnated in recent years. Some have found rewarding new markets, while others discovered the grass is not necessarily greener beyond the Hudson. Still others, feeling safest on the turf they know best, are staying put. The slow market was the initial reason Beechwood Organization of Williston Park first ventured off Long Island to build 40 houses in Homestead, Fla., in August, 1992. After Hurricane Andrew devasted the southern part of the state, Beechwood's two partners, Leslie Lerner and Michael Dubb, found all the work they wanted there. Buoyed by that success and seeking to diversify their business, the pair in 1993 and 1994 bought and sold land in Vail, Colo., an area where they spend a lot of free time skiing. Noticing Vail's appreciating home values, they tried developing last year. To date, half of 12 townhouse units in Beechwood's The Overlook have been sold, for $499,000 to $699,000.

The company is also building one custom home in nearby Avon. Beechwood continues to develop on Long Island and in New York City. In its 13 years, it has built more than 1,200 units in the region. It is currently selling homes in Oceanside and has sold 40 of the 70 two-family homes in the Bronx development called Beechwood at Baychester. But plans also include more Colorado projects, Lerner said. For the Kapson Group, founded in 1932, it wasn't until the mid-'80s, when the third generation of the Kaplan family took control of the company, that building elsewhere was explored. The Woodbury-based company both builds and operates adult homes and assisted living residences. The latter is for seniors who need some help to get along, but not extensive nursing home care. "We felt we needed to look at other areas," said Wayne Kaplan, one of three brothers heading the company. "If we had just stayed here, the company would have stagnated." Kapson operates five Long Island adult homes. The newest, called Senior Quarters, opened last week in East Northport. A sixth is under construction in Lynbrook.

For its first off-Island project, it stayed close to home, choosing Stamford, Conn. But before building anything, "we did a whole lot of homework," Kaplan said. The project opened in 1989 and is considered a success. Since then, the company has built senior residences in suburban Philadelphia, New Jersey, Delaware, Westchester and further upstate. It claims to be the nation's fourth-largest provider of assisted living housing. The Emmy Building Co. had quite a different experience. "I thought I had so much know-how," said Edward Flax, president of the Hauppauge company founded in the mid-1960s. Emmy Building tried two off-Island projects. But despite market studies, both projects failed.Emmy's first venture was 20 homes in rural Putnam County. Things were going well on Long Island, so in 1987, Emmy decided to become "a multi-location company," Flax said. "But crops grew faster than sales." After selling only five homes, Emmy sold the project for a loss to another developer in 1990. Undaunted, Emmy tried again in 1991 in Hagerstown, in the northwest corner of Maryland. Long Island's housing market was depressed, as were other areas of the country. Flax's research led him to believe Hagerstown would recover quicker than Long Island. It didn't. "Even compared to Long Island's sluggish economy at that time, Hagerstown was slower," Flax said. Only six of the 35 homes planned were built. In 1993, Emmy again sold at a loss to another developer. When it set out on these projects, one thing Flax thought he'd escape was the lengthy approval process Long Island developers often complain about. But in both areas, "the regulatory bodies were no better and there was as much red tape," Emmy said. Other developers who have built elsewhere reported similar experiences. To succeed off the Island requires setting up shop for the long term, Flax said. Even though his company's partners alternated two-week stays in the other areas they were interested in, it wasn't adequate for
picking the right project or developing the proper way to sell it, he said. "As you expand, you need a support staff in the new area," Kaplan said. Kapson has grown from just family to 600 employees, about half of
them hired in new markets off the Island.

Meanwhile, Emmy Building has no plans to leave home again. The company recently sold out a 55-home development in Holbrook and is selling the last of 32 homes in Selden. A new 19-home project, Crystal Brook Estates, just opened in Selden. "We are doing more business on Long Island than ever before," Flax said. Had the company concentrated all its efforts on Long Island, instead of devoting time to the failed projects, it would have done a lot better overall, he said. "Staying put" is Lennard Axinn's anthem for his firm, the Lennard Axinn Co. in Jericho. This decision evolved partly from his 14-year tenure as president of his uncle's firm, the Donald Axinn Co. In 1973, Donald Axinn Co., which mainly builds commercial properties, thought it was important to diversify to other areas to keep growing, Lennard Axinn said. It started close to home, building warehouses in northern New Jersey. Having succeeded with those, the firm built one office building a year in New Jersey during the 1980s. It also built a 350-unit condominium in North Miami Beach in 1985. But when Leonard Axinn went out on his own three years ago, he realized the commercial market was saturated. While his firm manages his uncle's commercial properties, its new projects are all residential and on Long Island. There's LaColline, consisting of nine luxury homes in Mill Neck, and two developments under the Island Estates banner, including a 140-home project in South Shoreham.

While there are plenty of residential development opportunities in New Jersey, Axinn knows Long Island land and home values best. When offered property here, he can quickly reject or accept it. Elsewhere
requires research, he said. Another developer has never ventured off the Island. "In 23 years of business, there were two or three times we gave developing elsewhere serious thought," said Charles Mancini, vice president of the Park Ridge Organization in Ronkonkoma. The company has built thousands of homes and condos, all of them on Long Island. Development is complicated enough without "going to another person's market and thinking you can do better," he said. Financing is one issue, Mancini said. If a project gets into trouble and sales lag, interest costs can eat all the profit and then some, he said. Homeworks Modular Homes, a small Ronkonkoma company which has delivered over 300 modular homes in 11 years, only goes elsewhere when a unit is presold, said company president Jeffrey West. Long Islanders who are relocating occasionally hire Homeworks to build a modular home on land the buyers have bought. Instead of using a local company that is unknown to them, they use Homeworks because they are familiar with its reputation, West said. The company has also built homes for other developers, in upstate New York and elsewhere, West said. But Homeworks was paid for each home and didn't have to worry about sales or marketing. The company has not developed on its own elsewhere because "there are always unplanned surprises," West said.

For Beechwood, surprises with its Vail project are coming from higher-than-expected construction costs, Lerner said. On Long Island, Beechwood does the subcontracting. In Vail, the company hired a general
contractor to oversee the project and subcontract the work out. This allows Lerner to go to Vail just once a month. But it adds another layer of expense. In addition, some of the subcontracting costs are higher than expected, Lerner said. When the project sells out - hopefully next year - Beechwood should make a profit, Lerner said. It may be less than expected, but since this is the company's first effort in the area, Lerner said, he's pleased. The company should benefit from its experience when it moves on to its next Colorado project, and profit margins should be better, he said.

For Developers, It's a Two-Way Street JUST AS Long Island developers sometimes try other markets, builders from around the country periodically turn to Nassau and Suffolk. Take Toll Brothers, the Huntingdon, Pa., company that built 1,825 homes in 15 states last year. "We wanted to get our feet wet and see how Long Island would treat us," said Brian Kelly, Toll Brothers' project manager for Lattingtown Ponds, a development on the Lattingtown-Glen Cove border. The previous developer of the site went bust, having sold few of the 56 townhouses planned for the condo community. Before purchasing the project in 1994, Toll Brothers conducted an extensive market analysis, Kelly said. Company representatives visited other Long Island projects, looking at the product, the buyers they attracted, and the profit margins. They also estimated how fast Lattingtown Ponds could sell out. Toll Brothers likes to get in and out of a development as fast as possible, Kelly said. "One of the biggest reasons we went ahead was the project's location on the Gold Coast," Kelly said. "We thought this would be a good starting point to make our presence known on Long Island." Thirty units have sold since they were first offered in January, 1994. The company, pleased with sales, anticipates a sell-out by year's end, Kelly said, and Toll Brothers is looking for more projects
on Long Island.

Copyright 1996, Newsday Inc.
Joe Catalano, Hammering Away / Long Island home builders are expanding into other states. SIDEBAR: For Developers, It's a Two-Way Street (see end of text)., 03-29-1996, pp D01.


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