The managing partner of New York City-based Stonehenge Partners, Ofer Yardeni, joined with a group of seven residential developers last week at a plenary on residential development. In the discussion, Mr. Yardeni, the owner of more than 10 residential apartment properties including the Ritz Plaza on West 48th Street, said, “You all have to be crazy to be a developer of new residential properties.”

He continued, “It takes many years, coupled with the high costs of land and associated costs of development, including the negotiation with the local authorities. I prefer to buy an established rental building, nurture the property, increase the rent rolls, and maintain ownership of the property for many years.” The risks associated with development, market uncertainty in the future, and the fact that profit, which may be derived from the project for the sale on the condominium units, will be taxed as ordinary income as opposed to capital gains, reinforces why Mr. Yardeni would never chance the risk of development, he added.

The seven developers who joined Mr. Yardeni included the president of The Related Companies, which developed the Time Warner Center, Jeff Blau; the president of Levine Builders, Jeffrey Levine; the CEO of The Moinian Organization, Joseph Moinian; the executive vice president at the Albanese Organization, Chris Albanese; the chairman of The Briarwood Organization, Vincent Riso; the managing director of the Lefrak Organization, Jamie Lefrak, and the president of Belfonti Associates, Michael Belfonti. All of these organizations are building new residential rental and condominium developments in the region. The general consensus of the group is that, due to the record price for land, the only option is to develop the property as residential condominiums.

“It took four years to build the project, but today more than 90% of the residential condominiums on the top of the Time Warner Center have been sold,” Mr. Blau said. The average price for a condominium is $2,500 a square foot, he added. The project is a great success; the sales at shops at Time Warner Center are averaging close to $1,300 a square foot, a sales volume higher even than the Forum Shops at Las Vegas’s Caesar Place.

* * *

None of the developers disagreed when asked whether they could have developed a new residential tower without tax abatements. Every new residential rental or condominium project from 14th Street to 96th Street has taken advantage of purchasing from the city a Negotiable Certificate Program, or 421-a, through which tax credits are generated by the construction of low-income housing in other city neighborhoods. This program provides real-estate-tax exemption and abatements to newly constructed units. Mr. Levine said it is impossible to sell a condominium without credits from the program.

“We have taken advantage of 80/20 financing for two of our Eighth Avenue residential towers,” said Mr. Moinian. This allows the rental tower to have a phase-in of real estate taxes for up to 20 years. The 80/20 program enables a developer to keep 20% of the units for low-income tenants, who earn no more than 80% of the area’s median income, or about $62,400. The remaining 80% of the units are rented at market rates. More than 3,000 individuals applied for the lottery of about 50 affordable units in Mr. Moinian’s development, The Marc, on West 54th Street and Eighth Avenue.

Messrs. Albanese, Moinian, and Blau all said they would have had difficulty developing residential rental towers in Lower Manhattan and Battery Park City without the use of Liberty bonds. The first residential Liberty Bonds were provided for the Albanese Organization’s environmentally green building, The Solaire, in Battery Park City. The Related Companies and the Albanese Organization have been approved for Liberty Bond financing for two new rental buildings planned for Battery Park City.

* * *

“Lack of transportation and one of the highest crime rates in the city have been impediments to new residential developments in the Arverne section of Far Rockaway,” said Vincent Riso. “We are building more than 100 two-family homes less than a block from the water in the Rockaway, ranging from $350,000 to $450,000.” State Senator Malcolm Smith told The New York Sun, “The Rockaways are the Hamptons West, the same ocean and beautiful beaches.” Mr. Riso added that “we are able to build these homes and sell at these reasonable prices since we obtain the land from the city at a cost of $1.” A variety of city programs have helped the Related Companies, Levine Builders, and Riso’s Briarwood Organization acquire land at the low cost of $1. The Cornerstone Program allowed Mr. Levine and his partners Alan and Stuart Suna to pay $1 for the land to develop the Renaissance Plaza, including 241 residential limited-equity cooperative apartments and 70,000 square feet of retail space at the corner of 116th Street and Malcolm X Boulevard.

Mr. LeFrak’s organization developed the commercial office buildings and residential towers called Newport Center in Jersey City. He said, “Due to our lower costs, we can offer one-bedroom units for $1,800, significantly lower than the rent for a unit in Manhattan. It is much easier, land costs and related costs of development are much less expensive in Jersey City.” He added, “The community, the labor unions, and the local government agency are user-friendly.”

Mr. Blau and Mr. Levine both said they acquired land four or five years ago when land was cheaper. They added that current land prices in the boroughs would make it nearly impossible to build a rental tower. And Mr. Albanese said Nassau County suffers from a shortage of housing yet he says the limited amount of available land makes it difficult to fill the need.

“Williamsburg, Red Hook, Long Island City will be developed into residential rental and condominium units over the next decade. We are planning nine new residential condominiums in Roosevelt Island,” said Mr. Blau.

All the panelists were surprised to learn that the initial prices of the units on the Island (which is considered part of Manhattan) will start at approximately $200,000, or $400 a square foot, which is approximately the present cost for a buildable foot in Manhattan. “We acquired the rights a number of years ago, at low prices on Roosevelt Island, and we are going to pass through the benefits to the purchasers,” he added. Roosevelt Island has probably the best views of Manhattan and is only one subway stop to Manhattan.

* * *

There is a great deal of money available for any developer seeking financing for a residential development. A number of institutions are providing financing to individuals who are inexperienced in constructing residential towers. The availability of financing for inexperienced builders, however, may have a negative effect.

Developers are not crazy. Being a real estate developer in New York City requires patience. Rezoning of manufacturing and other neighborhoods into residential takes many years. The combination of working with government agencies and unions and managing the high cost of construction has resulted in the failure to produce housing for many people working in Manhattan.

The high cost of buying an apartment has resulted in people moving to New Jersey and Long Island. The administrations of Mayor Giuliani and Mayor Bloomberg have helped, yet we continue to desperately need housing in New York City. Affordable and market-rate housing is a necessity for both low- and middle-income families. Unfortunately, many individuals are spending close to 50% of their income for housing.

Mr. Stoler is a television broadcaster and vice president with First American Title Insurance Company of New York. He can be reached at mstoler@nysun.com.