In a recent conference call announcing its first quarter results for 2008, Robert Toll, chairman and CEO of Toll Brothers, described the extent of his company’s recent slump, saying, “Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel.”
Yet if the tunnel in question is the Holland or the Queens-Midtown, there is some brightness shining through.
Like other national home builders, the Horsham, Penn.-based Toll Brothers is having a rough time lately. Its revenues are down, and its net signed-contracts have been cut in half, while its share price has dropped by more than 60 percent from its 2005 high.
Amid the national gloom, though, Toll’s New York-area story is upbeat, with condos in Brooklyn, Queens, Manhattan, Hoboken, and Jersey City selling briskly. While urban high rises are not Toll’s traditional stock-in-trade — the company is best-known for high-end, single-family suburban homes often tagged “McMansions” — Toll says its “City Living” urban development division is in town to stay.
In the past several years, Robert Toll has been assigning letter grades to various markets in which his Fortune 500 company operates. Northern California was recently handed a D-minus, while Southern California, Las Vegas and eastern Florida all scored an F-minus.
But urban New Jersey scored a B. And, according to a company spokesman, the New York City metro region also scored a B with the company’s Williamsburg and Long Island City properties around 80 percent sold, and its Manhattan building on Third Avenue near 14th Street sold out.
Since Toll Brothers tends to build in the suburbs or even exurbs, it’s a little ironic that its New York projects are all in edgy areas like Williamsburg, Long Island City and the East Village. While many of the national builders have arrived on the shores of the Hudson and the East River, even sniffing around Manhattan, Toll has made the longest leap.
“Our buyers really took us here,” says Benjamin Jogodnik, Toll’s executive in charge of Hoboken and Jersey City projects. The company, he says, moved from single-family homes to “active adult” and golf-course communities favored by older buyers.
Now some of those same buyers are empty-nesters interested in buying condos for their adult children and possibly moving to cities themselves.
Because Toll is not an old-line New York real estate family, when it came to New York, it had nothing in the pipeline, says David Von Spreckelsen, director of acquisition and development for Toll in New York City. As a result, it gravitated to areas that were being rezoned for residential towers but that were still close to Manhattan.
One of its most current projects is in the rezoned section near the Gowanus Canal, whose once-toxic waters are being flushed and cleaned. Toll intends to build nearly 600 low-rise units there in what it calls Carroll Gardens. Last month, the company revealed those plans. And it has asked the city to rezone a three-acre swath in the neighborhood.
While the company has found buyers citywide, there’s been some culture shock.
“People in Williamsburg want something cool and eclectic,” says one broker active in the area, who asked not to be identified because she is not authorized to speak to the media. Toll’s buildings there, Northside Piers and North 8, are “cookie cutter,” she says, calling the company the Wal-Mart of real estate.
While the buildings afford some river views, they tend to be a fairly long walk from subway lines, with desolate stretches along the way. At the same time, she adds, “I’m sure there’s a market for Toll Brothers.”
Toll, of course, agrees. Along with the sold-out 77 units at 110 Third Avenue (off 14th Street), Toll has sold 80 percent of the 118 apartments at its 5th Street Lofts in Long Island City.
While the nearby hipsters may scoff, their new neighbors seem attracted by granite finishes and Bosch dishwashers, just as Toll’s suburban customers have long been. Far from being turned off, the Toll name has helped sell, as has Toll’s network of past and potential customers, says Stephen Kliegerman, executive director of development marketing for Halstead Property, who has worked with Von Spreckelsen.
“There is a quality and a familiarity with the brand that people feel good about,” Kliegerman says.
On the New Jersey side of the river, Toll has some boldface names as customers. Giants quarterback Eli Manning lives in a Toll condo in Hoboken, as Robert Toll has noted in investor calls. New Jersey Governor Jon Corzine lives in the Hudson Tea building, a former Hoboken factory converted to condominiums by Toll. He will soon move to another Toll project, Maxwell Place, an 800-unit project on the site of a former coffee factory, also on the river in Hoboken.
Toll has also built 230 units, nearly all sold, just over the Hoboken line and three-quarters of a mile inland in Jersey City. From there, Toll has gained preliminary approval to build three high-rise towers in Jersey City’s Powerhouse District.
Like Queens, Manhattan and Hoboken, Jersey City is void of McMansions and has yet to see its first Wal-Mart. But it does have a Toll Brothers — and a Target is not far away.