Toll Brothers’ focus on “moderate luxury” in the face of a high-end slowdown appears to be paying off: the Pennsylvania-based homebuilder saw profits soar 58 percent as revenue jumped 24 percent during the third quarter, the company reported Tuesday.
“While there’s been a lot of discussion about weakness in the luxury home market, we just aren’t seeing it based on this quarter’s continued growth across all of our regions,” CEO Doug Yearley said during an earnings call.
The company’s Toll Brothers City Living division, which accounts for 4 percent of the company’s revenue, saw contracts rise 40 percent during the third quarter, driven primarily by projects in Jersey City and Hoboken.
And even while the New York City market has been relatively flat, the homebuilder signed seven contracts on condo units between $10 million and $20 million during the third quarter, it reported. “While the summer months are not a bell weather by which to judge New York City condo sales, once buyers can enter our buildings and have better confidence in delivery dates, our sales paces ramp up,” Yearley said.
After lowering prices at its ultra-luxurious 1110 Park Avenue last year, Yearley said Toll is focused on projects in the more “moderate” price range of $2,000 to $2,500 per square foot. “We believe the buyer base is deeper at this price point,” he said. The company’s sweet spot is buildings with fewer than 150 units, he added, which can be “built and delivered in shorter time frames than super towers.”
During the third quarter, Toll Bros.’ traditional home-building segment generated $1.217 billion, up 25.8 percent from $967 million in revenue year-over-year. City Living, meanwhile, generated $52.5 million in Q3 2016, down 13.2 percent from $60.5 million in 2015’s third quarter. But company executives said several closings in Manhattan and Brooklyn were delayed, and would be reflected in the fourth-quarter and early 2017 results.
Overall, Toll Brothers reported revenue of $1.27 billion during the third quarter, up 24 percent year-over-year. Net income rose 58 percent to $105.5 million compared to $66.7 million during the same period last year. Nationwide, the company inked 18 percent more contracts during the third quarter, and its backlog of 5,200 new homes — which represent $4.37 billion in sales — saw a 19 percent jump from last year’s third quarter.
Home sales nationwide shot up 12.4 percent in July to the fastest-pace since October 2007, according to new data from the Commerce Department released Tuesday.