Agility is the key to success in multifamily market.

Looking back over The Hudson Companies' 2002 confirms one of the great truisms of real estate: A nimble strategy is always rewarded.

The flexibility to respond to market factors continues to be one of the surest ways to develop a successful project. Hudson's ability to simultaneously develop projects in different market and income segments has always been key to our successes.

In 2002, the multifamily market in New York City faced a rare situation: The softest rental market in memory, combined with the lowest interest rates in 40 years. It was under these conditions that Hudson's Marais, a 107-unit apartment building on West 23rd Street in West Chelsea, neared completion. The building was conceived for a pre-9/11 New York City -- high ticket, luxury rentals in a hip, emerging, arts neighborhood. In fact, the building itself is named for the well-known Parisian arts district, Le Marais.

It became obvious to us, however, that the conditions under which we began developing the Marais no longer existed when we were set to lop off in December 2001. So, in an unorthodox play, we shifted the building's profile to a coop property, making only modest construction changes such as adding a few, higher-end finishes. To appeal to the market, we also decided to structure the coop with condo-like rules.

The smaller size of the apartments, intended for the rental market, contributed to their affordability. While the average comparable apartment is approximately $788/SF, the Marais is priced at about $650/SF. Low maintenance charges -- running about $1/SF -- are subsidized by rental income from the 4,000 SF of rental retail space on the ground floor. The building's land lease arrangement also passes on savings to its shareholders since there is no upfront cost of land to be recovered in the purchase price.

The tremendous demand for well-priced, for-sale housing, along with low interest rates, resulted in strong demand for the building's units, which range from studios to two-bedroom apartments. First-time buyers and savvy shoppers alike quickly spotted the benefits offered by the Marais, including the location, the condo-style rules, and the value. In fact, within the first six weeks of the attorney general's approval, approximately half of the units were in contract. Closings began in early 2003.

In 2003, Hudson's challenge will be to continue to find well-priced land. We believe opportunity still exists in the middle-income segment and for deals financed by Liberty Bonds, HDC, and HFA programs, and that there are great opportunities for development along the New York City waterfront and in Middle Manhattan (14th -30th Streets, east to west).

Looking farther into the future, we see containing the escalation of hard costs as a challenge to making projects work. Hudson will continue to use CAPSYS, New York City's only modular home factory, as a cost-effective method of construction for many of our lower-density projects.

The industry-wide wild cards will be the prospects for additional acts of terrorism, and the resolution of the standoff with Iraq. Crime rates, the overall national economy and the success of the Bloomberg administration will also be factors determining the shape of 2003. One example is Bloomberg's ability to streamline the approval and permitting process at the Building Department, which continues to stymie development with costly delays.

At Hudson, our success stories reflect our strategy of diversity. We've launched such successful projects as Southtown on Roosevelt Island, which represents one of the largest, single residential development to move forward in New York City in decades. We are also building low-rise projects such as Bayview Homes in the Rockaways and Atlantic Center in downtown Brooklyn. New York Magazine recently named Hudson East, our East Village property, "one of the city's most sought-after buildings."

Currently, Hudson has six buildings in construction. They represent a wide range of sectors, including affordable housing, pre-sold buildings, market rate coops, and market rate rental products. Hudson's diversity is also illustrated by our list of development partners, including Catholic Charities, Related Companies and the US Department of Defense, which recently selected Hudson to develop housing for the US Army at Fort Hamilton.