Make way for the "androgynous" multi-family housing development in which the "sex" of the property -- for sale or for rent -- won't be known until six months prior to the marketing phase begins.

With the glut of unsold condominiums on the market, and the extended period it takes to win approvals and develop multi-family projects, more and more builders are waiting until the last possible moment to declare their properties a rental or a condo.

In most places, it's legal to go through the approval process without informing the zoning board which way the property will turn out.

As long as the local authorities know the size and number of the units, it usually makes little difference to them, according to Ronald Terwilliger of Trammel Crow Residential, which is just one of many developers that are waiting as long as possible these days before declaring its intentions.

But the "either/or" multi-family project does require a certain amount of faith, comfort and patience on the part of construction lenders and equity investors.

When the property is sold as condominiums, construction lenders typically are paid in bits and pieces as buyers close on their individual units. But when units are rented, construction loans usually are not paid back until the entire property is sold or refinanced.

Investors, who share in the profits as each unit is closed when the property is a for-sale condo, also must wait for their upside returns if the developer decides to make the place is a rental.

But in either case, giving developers the ability to "go either way" amounts to the "better part of valor," Terwilliger said at the National Association of Home Builders' Multifamily Pillars of the Industry conference in Hollywood, FL, earlier this month.

To give itself total flexibility in the face of the unknowns that lie ahead, Trammel Crow tries to stay within a certain footprint that appeals to both buyers and renters. For example, unit sizes range from 850 to 1,150 square feet, and the unit mix is usually one-third one-bedroom units and two-thirds' two-bedroom units.

"Since it takes long and longer these days to get a property entitled, it's better to wait as long as possible" to decide whether to market it for-rent or for-sale, Terwilliger said. "Otherwise, you can get buried" by changes in the market that could not be foreseen when the entitlement process began.

The long-time developer said it often takes four or five years for builders to gain the necessary approvals to start construction, and a lot can change during that time. He also said that in some cases, developers spend more money in legal fees than they have invested in the land by the time they can turn the first spade full of dirt.

Trammel Crow invests early on in the approval process in a set of condominium documents that spell out the rules and regulations under which owners agree to live by. But just in case the decision is to rent the apartments instead of sell them, the condo documents also allow for just such a contingency, and provide for the return of deposits put up by would-be buyers.

In markets like California, where developers must secure a condo map in order for multi-family units to be sold on an individual basis, the company obtains the map in advance just to be on the safe side.

Trammel Crow, which expects to start more than 15,000 market-rate rental units this year, isn't the only multi-family developer going the "either-or" route, though it may be the largest. Another is the Forest City Residential Group, which comprises the multi-family residential ownership, development, management and financial activities of Forest City Enterprises, Cleveland, Ohio.

"We're not smart enough to figure out what the market will be next year, let alone four years from now," said Ronald Ratner, who heads Forest City's residential division, which builds mainly urban properties with as many as 6,000 units.

"We prefer to do our projects as rentals in order to build values. But we make the decision of whether to be a rental or a condo on a project-by-project basis, and we wait as long as we can before we have to choose."

Post Properties, Atlanta, is yet another major apartment developer which is putting off the rent or sell decision to the last possible moment. "We will switch depending on the market," said Executive Vice President Thomas Senkbeil.

Post doesn't ever intend to abandon the for-sale sector. But with the huge inventory of unsold condos hanging over the market, Senkbeil said he doesn't think condos will ever again represent more than 25 percent of the company's offerings.

Published: April 25, 2007

Use of this article without permission is a violation of federal copyright laws.