The Real Deal New York

Toll Brothers says NYC sales are “Steady Eddie” in 2017

In NYC, if you're at $2K psf in a good location, "you're going to do pretty darn well"
By E.B. Solomont | December 05, 2017 04:00PM

David Von Spreckelsen, Doug Yearley and 91 Leonard Street

A year after backing off the super-luxury market, Toll Brothers said its City Living division is leading the company in terms of sales velocity. The national homebuilder — which missed analyst projections for its 2017 revenue and earnings — said its urban properties business accounted for $383.1 million of the company’s annual revenue, up 48.7 percent from $257.5 million in 2016. “It’s Steady Eddie,” CEO Doug Yearley said during an earnings call Tuesday. “What we’ve learned is that in New York City, if you’re at $2,000 a foot in a good location, you’re going to do pretty darn well. And we are.” In Hoboken and Jersey City, the same is true for homes priced between $800 and $1,000 per foot. “You’re going to crush it, which we have,” Yearley said. Overall, Pennsylvania-based Toll Brothers reported revenue of $5.82 billion, up 12 percent year-over-year. The company’s profits rose 40 percent to $535.5 million, compared to 2016’s profits of $382.1 million. But the company’s fourth-quarter revenue and profits missed analyst projections. Shares fell 10 percent — the steepest drop in nine years. During the quarter, revenue rose 9 percent to $2.03 billion, just under the $2.09 billion target. Net income rose to $191.9 million or $1.17 per diluted share, less than the projected $1.39 estimate. In New York, Toll Brothers has moved away from the uber-high-end market over the past year. In 2017, City Living’s average price per unit was $1.47 million, down from $2.83 million in 2016. As a result, it ended the fiscal year with 189 units in contract valued at $267.8 million. That’s compared to 186 units worth $342.8 million in 2016. Nationwide, Yearley said the real estate company’s business in California was “very hot” thanks to a strong job market and low housing inventory. Toll Brothers’ revenue in the region was $1.5 billion, up from $1.4 billion in 2016, with a relatively flat average home price of $1.49 million. The number of contracts also soared to 1,395 worth $2.18 billion, compared to 2016’s 930 contracts worth $1.42 billion. Its City Living division is currently comprised of projects in New York and New Jersey as well as the Washington, D.C. metro area, but Toll Brothers said it’s looking to expand the division to Los Angeles, San Francisco, Seattle, Miami, Boston and Philadelphia. In New York, Toll Brothers said it put the Sutton, a 113-unit condo at 959 First Avenue, back on its balance sheet. Previously, Och-Ziff Capital Management Group provided the majority of the equity and the developer received third-party debt from Capital One. “As the building got built and three-quarters sold and delivered, we just said, ‘It’s strategically important for the partner to get cashed out, and it’s pretty good for us,'” Yearley said. Exiting a joint venture was more of an exception than a rule, however, and Toll Brothers has been active in partnering up with equity backers to limit its risks. Last month, the U.S. arm of Shanghai Municipal Investment paid $73 million for a majority stake in 91 Leonard Street, a planned 111-unit luxury condo with a projected sellout of $309 million.