2/13/2009 Update:

Some standard real estate news today, courtesy of Toll Brothers:

For Toll, Bet On Big Apple Turns Sour

By MICHAEL CORKERY (Wall Street Journal)

“Home builder Toll Brothers Inc. reported more bad housing news on Wednesday, including signs that its bet on the once resilient New York City real-estate market is producing some bad apples.

With mortgage credit still tight for high-end homes and the region’s financial industry shedding jobs, Toll has been slashing prices for some of its flashy Brooklyn condos by as much as 25% and battling to prevent buyers from walking away from contracts.”

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Builder’s Low Loan Rate May Fall Flat

“We still have a whole lot of people working on Wall Street and in the banking industry who probably won’t be there in the next year,” Chief Executive Robert Toll said during a conference call with analysts on Wednesday. “So over the next few years, I would think New York is going to be soft.”

Toll’s New York blues were among many dour notes the company struck in recapping preliminary results for its quarter ended Jan. 31.

The Horsham, Pa., company said home-building revenue slumped 51% to $409.3 million and write downs could total as high as $200 million.

Toll’s sales in its latest quarter were grim. Across the country, orders fell 59% from a year ago to just 266 homes, a larger decline than some analysts expected. They plummeted 70% in the North, followed by 63% in the Mid-Atlantic and 56% in the South.

Toll also acknowledged that a much-touted 3.99% mortgage interest-rate promotion had been used by only two dozen buyers since the builder started offering the rate last month. Mr. Toll said another promotion offering buyers additional rooms and appliances at big discounts was more successful than the cut-rate mortgage.

New York condos had been a rare bright spot for the primarily suburban builder. But now some of its New York developments have fallen victim to the financial-market turmoil. The company began sales at a 128 unit tower in Manhattan in October, as the stock market swooned and investment firms, such as Lehman Brothers Holdings Inc., imploded.

At a development in the Williamsburg section of Brooklyn, Toll recently cut the list price on a three-bedroom condo to $894,990 from $1.2 million, a 25% cut. Toll says it is dropping prices on some units to move inventory at its Northside Piers building, which is 60% occupied. Toll has started selling in an adjacent tower, which has a greater proportion of smaller, less expensive units.

Toll looked smart when it unveiled its first Manhattan condo tower in late 2006, hoping to attract a buyer that Mr. Toll referred to as “hedge fund Johnny,” a young, financial services worker. At the time, the New York City housing market continued to roar, even as formerly hot suburban markets such as Florida and California were collapsing.

But in the fourth quarter, home-sales contracts in Manhattan declined more than 50% from a year ago and supply increased 39%, according to Miller Samuel, a New York real estate research and appraisal firm.

“Anyone would have expected some pullback in New York, but no one would expect it to be this dramatic,” says Daniel Oppenheim, a housing analyst at Credit Suisse. “At this time, any exposure to the city is too much.”

See previous updates after the jump…

1/14/2009 Update:

Yesterday we had bad news about Tarragon. Today, Toll Brothers has news of their own…

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Toll Brothers paints grim picture

Uh oh, more bad news on the real estate front in Hoboken and nationwide. Today at the Credit Suisse Homebuilder Conference Toll Brothers Senior Vice President Douglas Yearley presented a grim outlook on the state of the market. He said sales remain soft and traffic is at historic lows, making their sales force “lonely” and “frustrated”. As for their Hoboken and Jersey City operations, the company is backing off its original plans to build out its projects quickly. Here are some of his comments:

“In urban New York, we have one building in Manhattan, two buildings in Williamsburg and four properties in Hoboken and Jersey City with one additional large property coming online in several years. It’s being mothballed right now. There is fear. The buyers are definitely scared. We take 10% down and we do not negotiate the return of that money. So if you have $1 million unit, it’s a tough pill to swallow and walk away from $100,000.

Every deal is a struggle. You’ve got to hold the hand of the bank appraiser. You’ve got to hold the hand of t he mortgage company. You’ve got to hold the hand of your buyer to get them off the ledge. Most are afraid of losing their job right now in the New York world. The lenders are not in love with lending any more in urban New York. So the rates are higher. The down-payments are larger and every deal is a struggle.

Urban New York is obviously slow, although we are very encouraged in the last week with Hoboken, which appears to have come back. We sold five homes last week in Hoboken, which is shocking. Bob (Toll, CEO of Toll Brothers) told me to figure out where these people come from and mass mail everybody they know.”

-Toll S.V.P. Doug Yearley

Toll has approvals for more high-rise buildings at Maxwell Place and the Hudson Tea complex, as well as a sweatheart high-rise deal it recently got in Jersey City to build three high-rise towers on the Manschewitz property in the so-called Powerhouse Arts District. This district was supposed to be a lower rise, artist-centered community which instead will be dominated by more high-rise condo towers.

Watch for falling prices through the end of 2010

If you are looking for prices to bounce back this year, think again. Today PMI Mortgage Insurance predicted home prices will continue to fall until the third quarter of next year!

The Fall 2008 U.S. Market Risk Index shows increases in foreclosures and unemployment have significantly heightened the risk of future home price declines. PMI’s U.S. Market Risk Index ranks the nation’s 50 largest metropolitan statistical areas (MSAs) according to the likelihood that home prices will be lower in two years. Prices nationwide are already down 23% from the peak in the summer of 2006.

How much lower will they go?

See previous updates below…

11/12/2008 Update:

Toll Brothers revenue plunges

The troubles continue for Hoboken’s largest developers. For Toll Brothers, it means a whopping 41% drop in quarterly revenue and an admission from CEO Robert Toll that housing demand in the New York City market has slumped to the point that, “It has now joined the ranks of the rest of the country.”

Six weeks ago Toll was calling NYC a “beacon” of hope in an otherwise bleak market. Now Toll says fourth quarter sales cancellations rose to 30 percent of contracts, while net contracts signed fell 27 percent. Customer traffic and sales hit record lows for Toll last month as the financial crisis hits home.

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Hoboken Questions on the Conference Call

Toll held a conference call with analysts Tuesday, and Kenneth Zener of Macquarie Securities asked for an update on the Hoboken projects. Here is a partial transcript:

Zener: Just want to get a little flavor on the New York market, just specifically over in Hoboken? We talked to a realtor that talked about contracts in October falling by 80%, basically freezing as you had kind of outlined. Can you talk about your Hoboken high-rise projects? I’m especially interested in the Maxwell Place which is largely under construction.

TOLL: Yeah.

Zener: Part of it’s sold but not yet closed. How are you going to hold on to these people given the – what appears to be rising net order loss we saw in the North in your extended delivery units?

TOLL: There is no debt and we’ve had cancellations but I am pleased to say that Hoboken especially has responded and we have resold those that were canceled, some at higher prices, some at lower prices, but on balance approximately what we had originally sold them for. This past week we took four agreements in Hoboken and we took four deposits in Hoboken.

Zener: What is the closing schedule on that?

TOLL: I’m pleased to answer that question because we consider this week pretty decent.

Zener: What is the closing schedule for that project relative to the economic stress that still might be coming down the pike?

TOLL: I can’t remember. Can anybody? We start to close pretty soon in Maxwell… We did receive – oh, I’m sorry. You are correct, guys. We have already closed 51 in Maxwell B for instance. We have 241 outstanding agreements, so we’re doing pretty well there. We’ve already – Building A is all closed I think.

“Rent-to-Own” Condos coming to Hoboken?

With the market drying up and prices falling Toll Brothers has decided to try out a “Rent-to-Own” program for a building in Williamsburg, Brooklyn. Toll said the promotion could also come to Hoboken. Though he didn’t say where it’s likely to be at Hudson Tea where some of the original renters remain in the building with condo converts like Eli Manning.

The times, they are a-changin’ folks!

5/14/2008 Update:

Hoboken no longer #1

Here’s another sign the Hoboken real estate market is deteriorating. During a conference call with analysts Tuesday, Toll Brothers Chief Executive Robert Toll lowered his grade for the Hoboken/Jersey City market to B. That’s a far cry from the A+ ratings Toll gave back when they said they were “Killing ‘em in Hoboken!” For the past year Toll has given Hoboken a B+ rating, but now it’s down to a B and Hoboken is no longer Toll’s best performing market. Princeton gets an A, though the rest of New Jersey gets a C.

Toll gives a lot of his markets an F, including western New Jersey towns off Route 78. Overall Toll says the spring selling season was “quite weak” in most markets, and some buyers are getting cold feet because they can’t sell their current homes for the price they need to upgrade to a Toll “luxury home”. Could it mean those parking lots by the Hudson Tea building won’t be turning into the already approved condo buildings anytime soon?

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Older updates continued below…

2/28/2008 Update:

Some news on Toll:

Big Loss, Hoboken Update, Arabs Buying Stock

Toll Brothers just reported its worst quarter ever, but not because of Hoboken. The biggest builder of “luxury” homes reported a loss of $96 million in its fiscal first quarter – it’s biggest loss in 22 years. Toll blamed the loss on the housing recession, which forced it to write down the value of developments. The loss of 61 cents a share was greater than expected, and a far cry from the $54 million gain a year earlier. On a conference call, Chief Executive Bob Toll said,

“Ceaseless talk of a recession continues to dampen the mood of consumers. This drumbeat, coupled with concerns over mortgages, the direction of home prices, and foreclosures, has kept pent-up demand on the sidelines.”

When asked about our neck of the woods, Toll said:

“Hoboken and Jersey City continue to do really well for us in the urban high rise, but there are another 35 markets out there that we’re still waiting to see hope in… The projects in Hoboken and Jersey City… are selling very well and are progressing nicely.”

Meanwhile, The New York Times says the government of Abu Dhabi is spending some of its oil profits on shares of Toll Brothers. The Times says the Abu Dhabi Investment Authority (ADIA) took a large 4.5% position in Toll, and one estimate says the ADIA may have as much as $700 billion to spend:

“Abu Dhabi has about 9 percent of the world’s oil and 0.02 percent of its population. The result is a surfeit of petrodollars, much of which is funneled into a secretive, government-controlled investment fund that is helping to shift the balance of power in the financial world. Such riches, coupled with the more agressive stance being taken by ADIA and other sovereign funds, has raised concern in Washington that these investors will wield their wealth for political as well as financial reasons.”

12/6/2007:

A reader pointed out this recent Toll Brothers story on CNN.

Their first loss as a public company, and possibly not their last. Are there more economic downturns coming in our future?

11/12/2007 Update:

toll-brothers-hoboken-logo.gifToll Brothers is the biggest builder of luxury homes in America. Which one of its markets are doing the best in this time of strife? You guessed it: Hoboken.

Toll reported quarterly revenue fell 36 percent as their cancellation rate rose to the highest level ever. 39 percent of Toll’s customers backed out of their orders in August, September, and October. Signed contracts with customers were down 33 percent, and Toll said demand worsened last month as excess supply of available housing for sale kept customers at bay.

With all this bad news, CEO Bob Toll was asked to once again give letter grades to his markets. Hoboken/Jersey City came in at the top of the list with a B+. That unit includes Maxwell Place, Harborside Lofts, The Tea Building, and 700 Grove in JC. The rest of New Jersey got a D. Hoboken was followed by B-rated New York City, Connecticut and Delware. Toll gave many markets an F or worse, including Michigan, most of Florida, Southern Calfornia, and Arizona.

Many people are predicting much worse times ahead. What are your feelings about that? Agree / disagree?

8/22/2007 PM Update – Executive Conference Call:

On the Toll Brothers conference call, CEO Bob Toll said overall “traffic is pretty stinky out there.” He changed his tone when he was specifically asked if he still sees strength in the Hoboken/Jersey City markets. He said yes, they see strength here, and that both cities are considered “B+ markets” that are doing “very well”.

When an analyst asked Toll how the 700 Grove Street tower was selling, Toll said it was “pretty much the same as Hoboken”, as he ran through the sales figures:

Hudson Tea Building: 70% sold (still has renters)
Harborside Lofts: 72% sold
Maxwell Place: 78%/97% (probably referring to two phases)
700 Grove: 84% sold

Toll Brothers stock closed 5% higher today, but it’s down 31% this year.

8/22/07 Update: Toll Reports Q3 Profit

Tarragon may be at the brink of bankruptcy, but Toll Brothers continues to turn a profit. Toll shares rose this morning after the developer of Maxwell Place, Hudson Tea, and 700 Grove announced earnings that beat Wall Street estimates.

Toll said fiscal third quarter profit fell 85 percent as the housing slump cut sales and forced them to write down property values. Net income was 16 cents a share, much better than the 2 cents analysts predicted but way down from $1.07 in the same quarter last year.

CEO Robert Toll gives letter grades to each market they operate in. Earlier this month he gave Hoboken and Jersey City a “B+”. We’ll see if that’s still the case when Toll holds a conference call at 2pm today. Back in May Toll said “Hoboken is still pretty much going gangbusters.”

Description – Residential real estate developers
Website – www.tollbrothers.com
Address – 93 Washington St, Hoboken, NJ 07030
Telephone – 201-963-4800

They wrote the SUV off as a business expense.
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Toll Brothers SUV.JPG

5/10/2007 Update:

Apparently, the “killing ‘em in Hoboken” is now just “severely injuring them in Hoboken”, as the A+ rating has been downgraded to a B+.

A question was posed to Bob Toll: “Bob – business is going downward, is this a correct interpretation?” Bob Toll – “yes”,

However, it seems as if our area is still one of the strongest in the country. Here’s their “report card” for the USA:

Mass / RI – F
CT – B+
NY exurbs – B+
NY Urban Q/Bk/M – B+/A-
NJ Urban Hob/JC – B+ [was – killing ‘em aka A+]
NJ exurbs – F
MI – F
Chicago – F
MIN – C-
PA – Phil – B
PA – Poconos – F
DE – C+
MD shore – F
DC/NVA – D+
Raleigh / CHA – B
SC – D
FL Central / Orlando – F
FL East Coast / Jcksvl / Tampa – F+
TX Dallas / SA – B
NoCal – B & D average C
SoCal – C
AZ – D-
Vegas – F
Reno – F
CO – C