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
 Robert Morse, executive chairman of Bridge Investment Group, one of the major Opportunity Zone investors focusing on real estate.  (Bridge, Stanford)

Opportunity Zone investments got a boost in 2020

Opportunity Zone investments got a boost in 2020
333 Johnson Avenue with Royalton Capital’s Jin Lee, Sciame Construction's Frank Sciame and Normandy Real Estate Partners' Finn Wentworth (Royalton Capital, Sciame, Normandy)

Normandy sued by former partners for hiding Netflix deal

Normandy sued by former partners for hiding Netflix deal
Fabric co-founder, CEO Elram Goren (Getty, Elram Goren via LinkedIn)

Startup wants to bring “micro-warehouses” to vacant retail

Startup wants to bring “micro-warehouses” to vacant retail
Security around Trump Tower to be reduced after 45th POTUS leaves office. (Getty, The Trump Organization)

Fifth Avenue will look different after Trump leaves office

Fifth Avenue will look different after Trump leaves office
(Getty, iStock)

Booster shot: NYC real estate sees salvation in vaccine

Booster shot: NYC real estate sees salvation in vaccine
Before the pandemic, national tenants paid 94 percent of rent. (Getty)

Retail rent collections rebound to 90%

Retail rent collections rebound to 90%
Cindat Capital Management CEO Greg Peng and Hersha Hospitality Trust CEO Jay Shah with 51 Nassau Street (Google Maps)

7 Manhattan hotels head to auction block

7 Manhattan hotels head to auction block
As companies leave Silicon Valley, Austin, Texas is becoming a top destination. (Getty)

Silicon Valley exodus: Where’d everyone go?

Silicon Valley exodus: Where’d everyone go?
arrow_forward_ios

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

Loading...