Toll Brothers expects its bet on Pierhouse – a hotel-condo development at Brooklyn Bridge Park – to pay off in spades.
The developer, which is investing nearly $39 million in the project, is projecting revenues of at least $250 million from the development, executives said during a fourth-quarter earnings call Wednesday.
The homebuilding giant’s Toll Brother City Living division is developing the 106-unit Pierhouse in a joint venture with Barry Sternlicht’s Starwood Capital Group, with whom Toll will split the projected $500 million in total revenue.
To date, Toll has sold 60 out of 106 condos since launching sales in late February, according to David Von Spreckelsen, president of Toll Brothers City Living. Sales are averaging $1,850 per square foot, he said. Prices, which increased six times during the first 10 weeks of sales, are still rising. Sales are now averaging $1,850 per foot.
Overall, the City Living division, which is heavily concentrated in New York City, currently has 837 units for sale (or soon to be launched). It has another 1,203 units in the approval process.
At Pierhouse, Toll’s investment includes $24 million in equity in the residential development and $14 million for the 193-room hotel, which will operate as a 1 Hotel, a Starwood brand. “Remember that that is a building that’s on a ground lease so there’s not a large land purchase payment and it has as a [joint venture] external bank financings,” CFO Martin Connor said during the earnings call.
Connor noted that Pierhouse’s hotel will be sold at some point, providing an additional revenue stream for the developer. He projected another $100 million in revenue for Toll from the sale.
Still, sales of condos in New York City will decline next year since they take longer to deliver, said Connor. Instead, he said, “2016 will be the big year for City Living deliveries.”
Toll Brothers’ stock price dropped 7.9 percent to $32.06 on Wednesday, as company executives reported they wouldn’t raise prices for new homes in many parts of the country. The market “is certainly a bit frustrating and confusing,” CEO Douglas Yearley Jr. said during the earnings call.