Toll Brothers plays defense as NYC’s luxury market falters

Homebuilder opts for JV, shedding $320M equity requirement at 121 East 22nd Street

New York /
Feb.February 22, 2017 05:40 PM

With New York City’s luxury market going sideways, national homebuilder Toll Brothers is playing an increasingly aggressive game of defense.

The company — which slashed prices last year at 400 Park Avenue South and 1110 Park Avenue — is reducing its equity stake in new projects through joint-venture partnerships and offering to pay transfer and mansion taxes for buyers who sign contracts by Feb. 26.

“We are being cautious… We haven’t bought land in New York City in a couple years now, and we’ve also moved into some JVs,” CEO Doug Yearley said Wednesday during a first quarter earnings call. “We are well positioned to absorb what’s going on in New York.”

The moves resulted in a mixed bag during the first quarter of fiscal 2017.

The company’s City Living division, which operates primarily in the New York metropolitan area, saw a steep drop in the number of contracts signed during the quarter — 50 — compared to the 83 inked during the same quarter of 2016. And while revenue generated by wholly-owned buildings plummeted to $17.9 million from $137 million, income from joint-venture projects jumped to $235.3 million from $153 million.

Overall, Pennsylvania-based Toll Brothers TRData LogoTINY generated $920.7 million in revenue during the first quarter, down less than 1 percent from $928.6 million in the first quarter last year. Net income was $70.4 million, down 3.8 percent year-over-year from $73.2 million.

In December, Toll Brothers reduced its equity stake in a 133-unit condo project at 121 East 22nd Street, when it brought on Gemdale Properties. On Wednesday, Yearley said the company’s equity stake in that project is now $30 million, down from $350 million.

Toll Brothers recently launched sales at 121 East 22nd, where prices range from $1.2 million to $10.5 million, and 10 units are in contract so far, the company said.

Last week, the company rolled out incentives at three buildings — 100 Barrow Street, 55 West 17th Street and the Sutton at 959 First Avenue — where it will cover the buyer’s transfer and mansion taxes. “Even with our increased incentives, our gross margins have exceeded company averages,” Yearley said Wednesday.

Meanwhile, performance in New Jersey “has been hot,” Yearley said. “We are in no way giving up on the tri-state. If you have land in the right location, we think you can do very well.”


Related Articles

arrow_forward_ios
CBRE's Emma Giamartino and Bob Sulentic (CBRE, iStock)
Flush with cash, CBRE is ready to spend
Flush with cash, CBRE is ready to spend
GCP CEO Alan Yang (Getty, GCP)
GLP raises $2.3B for logistics property fund
GLP raises $2.3B for logistics property fund
Alphabet CEO Sundar Pichai and Twitter CEO Jack Dorsey (Getty)
Twitter, Google latest big companies to delay office returns
Twitter, Google latest big companies to delay office returns
Durst Organization CEO Douglas Durst (Getty)
Durst to fire unvaccinated corporate employees Sept. 6
Durst to fire unvaccinated corporate employees Sept. 6
Converting offices to lab spaces comes with challenges, as some spaces need specific ventilation and upgraded electrical facilities (Getty)
Conversions from offices to life science labs booming
Conversions from offices to life science labs booming
132 West 14th Street and KPG’s co-founders Rod Kritsberg and Gregory Kraut (Avison Young, KPG)
KPG signs long-term ground lease for 57K sf at 132 West 14th Street
KPG signs long-term ground lease for 57K sf at 132 West 14th Street
Paramount Group lost $16 million last quarter
Paramount Group posts $16M quarterly loss
Paramount Group posts $16M quarterly loss
Commercial property sales outpace pre-pandemic figures in Q2
Commercial property sales outpace pre-pandemic figures in Q2
Commercial property sales outpace pre-pandemic figures in Q2
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...