Toll Brothers, Inc. designs, builds, markets, sells, and arranges financing for an array of luxury residential single-family detached home, attached home, master-planned, and urban low-, mid-, and high-rise communities.
In recent years, the company has pursued a strategy of broadening its product lines, price points and geographic footprint, as well as increasing the number of quick move-in (or ‘spec’) homes that the company sells relative to its traditional build-to-order homes. The company ca...
Toll Brothers, Inc. designs, builds, markets, sells, and arranges financing for an array of luxury residential single-family detached home, attached home, master-planned, and urban low-, mid-, and high-rise communities.
In recent years, the company has pursued a strategy of broadening its product lines, price points and geographic footprint, as well as increasing the number of quick move-in (or ‘spec’) homes that the company sells relative to its traditional build-to-order homes. The company caters to luxury first-time, move-up, empty-nester (move-down), active-adult and second-home buyers in the United States, as well as urban and suburban renters under the brand names Toll Brothers Apartment Living and Toll Brothers Campus Living. The company also designs, builds, markets, and sells high-density, high-rise urban luxury condominiums with third-party joint venture partners through Toll Brothers City Living (‘City Living’). At October 31, 2024, the company was operating in 24 states and in the District of Columbia.
At October 31, 2024, the company had 1,041 communities in various stages of planning, development or operations containing approximately 74,700 home sites that the company owned or controlled through options. At fiscal year-end, the company was selling from 408 of these communities.
The company operates its own architectural, engineering, mortgage, title, land development, insurance, smart home technology and landscaping subsidiaries. The company also develops master-planned and golf course communities, as well as operate, in certain regions, the company’s own lumber distribution, house component assembly and manufacturing operations.
In addition to the company’s residential for-sale business, the company develops and operates urban and suburban for-rent apartment communities primarily through joint ventures. These projects are located in various metropolitan areas throughout the country and are generally being operated or developed (or the company expects will be developed) with partners under the brand names Toll Brothers Apartment Living and Toll Brothers Campus Living. At October 31, 2024, the company or joint ventures in which the company has an interest, controlled 67 land parcels as for-rent apartment projects containing approximately 21,300 planned or completed units.
Communities and Homes
The company’s home building communities are generally located in affluent suburban areas near major transit hubs and highways that provide access to employment and urban centers. They are generally located on land the company has either acquired and developed or acquired fully approved, and in some cases, improved.
At October 31, 2024, the company’s home building communities were operating in the following major suburban and urban residential markets: Boston, Massachusetts metropolitan area; New Haven County, Connecticut; Westchester and Dutchess Counties, New York; New York metropolitan area; Central and northern New Jersey; Philadelphia, Pennsylvania metropolitan area; Virginia and Maryland suburbs of Washington, D.C.; Delaware; Raleigh and Charlotte, North Carolina metropolitan areas; Nashville, Tennessee; Charleston, Greenville, Hilton Head and Myrtle Beach, South Carolina; Atlanta, Georgia metropolitan area; Southeast and southwest coasts and the Jacksonville, Orlando, and Tampa areas of Florida; Detroit, Michigan metropolitan area; Dallas, Houston, Austin, and San Antonio, Texas metropolitan areas; Denver, Colorado metropolitan area, Fort Collins and Colorado Springs, Colorado; Phoenix and Sedona, Arizona; Las Vegas and Reno, Nevada metropolitan areas; Boise and Coeur d’Alene, Idaho metropolitan areas; Salt Lake City, Utah metropolitan area and St. George/southern Utah; San Diego and Palm Springs, California; Los Angeles, California metropolitan area and Orange County; San Francisco Bay, Sacramento, and San Jose areas of northern California; Seattle, Spokane, and Clark County, Washington metropolitan areas; and Portland, Oregon metropolitan area.
The company develops individual stand-alone single-product communities as well as multi-product, master-planned communities. The company’s master-planned communities enable the company to offer multiple home types and sizes to a broad range of move-up, first-time, empty-nester, active-adult, and second-home buyers. The company seeks to realize efficiencies from shared common costs, such as land development and infrastructure, over the several communities within the master-planned community.
Each of the company’s detached home communities offers several home plans with the opportunity for many of the company’s home buyers to select various structural options and exterior styles. The company designs each community to fit existing land characteristics. The company strives to achieve diversity among architectural styles within a community by offering a variety of house models and several exterior design options for each model, preserving existing trees, foliage and other natural features whenever feasible, and curving street layouts to allow relatively few homes to be seen from any vantage point. The company’s communities have attractive entrances with distinctive signage and landscaping. The company’s added attention to detail gives each community a diversified neighborhood appearance that enhances home values.
The company’s attached home communities generally offer one- to four-story homes, provide for select exterior options, and often include commonly owned recreational facilities, such as clubhouses, playing fields, swimming pools, and tennis courts.
The company sells its spec homes at various stages of construction, which allows many buyers of such homes to select their finishing options at the company’s design studios.
The company is continuously developing new designs to replace or augment existing ones to ensure that the company’s homes reflect current consumer tastes. Increasingly, the company is modifying designs and the number of options the company provides to offer its customers a curated experience while gaining efficiencies in the home building process, particularly in respect to the company’s affordable luxury product and the company’s spec homes. The company uses its own architectural staff and also engage third-party architectural firms to develop new designs.
A wide selection of structural and finishing options are available to the company’s home buyers for additional charges. The number and complexity of options available typically increase with the size and base sales price of the company’s homes. A greater variety of options are generally available for detached build-to-order homes as compared to attached homes and spec homes. Major structural options include home offices, fitness rooms, multi-generational living suites, finished basements, and spacious indoor/outdoor living areas. The company also offers numerous interior fit-out options such as flooring, wall tile, plumbing, cabinets, fixtures, appliances, lighting, and home-automation and security technologies.
The company markets its high-quality homes to both upscale luxury and affordable luxury home buyers. The company’s luxury homes are marketed primarily to buyers who generally have previously owned a home and who are seeking to buy a larger or more desirable home — the so-called ‘move-up’ market. The company’s affordable luxury homes are marketed primarily to more affluent first-time buyers. The company’s reputation as a builder of luxury homes in these markets enhances the company’s competitive position with respect to the sale of the company’s smaller, more moderately priced homes.
The company continues to pursue growth initiatives by expanding its product lines and price points to appeal to buyers across the demographic spectrum. The company has also significantly expanded its geographic footprint over the past decade. In addition to the company’s traditional ‘move-up’ home buyer, the company is focusing on the ‘empty-nester’ market, the millennial generation, and the affordable luxury buyer.
The company markets to the ‘empty-nester’ (or ‘move-down’) market, which has strong growth potential. The company has developed a number of home designs with features, such as single-story living and first-floor primary bedroom suites, as well as communities with recreational amenities, such as golf courses, marinas, pool complexes, country clubs, fitness and recreation centers that appeal to this category of home buyer. The company has integrated certain of these designs and features in some of its other home types and communities. As of October 31, 2024, the company was selling from 76 age-restricted active-adult communities, in which at least one home occupant must be at least 55 years of age.
With the millennial generation in its prime family formation years, the company also continues to focus on this group with its core suburban homes, affordable luxury offerings, urban condominiums and luxury rental apartment products.
Through the company’s City Living brand, with third-party joint venture partners, the company is developing two high-density, high-rise urban luxury communities to serve affluent move-up families, empty-nesters, and young professionals who are seeking to live in or close to major cities.
The company’s City Living communities are generally high-rise condominiums that take an extended period of time to construct. The company generally starts selling homes in these communities after construction has commenced. By the time construction has been completed, the company typically have a significant number of homes under contract with buyers in backlog. Once construction has been completed, the homes in backlog in these communities are generally delivered quickly. Because of the larger upfront costs and longer development time periods associated with high-rise projects, the company generally expect to continue developing future high density, high-rise urban luxury condominium communities through joint ventures with third parties.
At October 31, 2024, the company was selling homes from 408 communities. At October 31, 2024, significant site improvements had not yet commenced on approximately 12,000 of the 25,592 available home sites. Of the 25,592 available home sites, approximately 8,900 were not yet owned by the company but were controlled through options.
Of the company’s 471 operating communities at October 31, 2024, a total of 408 communities were offering homes for sale; with the remaining consisting primarily of sold out communities where not all homes had been completed and delivered. Of the 408 communities in which homes were being offered for sale at October 31, 2024, a total of 329 were detached home communities and 79 were attached home communities.
At October 31, 2024, the company had 3,526 spec homes in its communities, of which 2,664 were under construction and 862 were completed.
Of the homes delivered in fiscal 2024 (the year ended October 31, 2024), approximately 27% of the company’s home buyers paid the full purchase price in cash; the remaining home buyers borrowed approximately 68% of the sales price of the home.
Community Development
The company acts as a general contractor for substantially all of its communities. Subcontractors perform all home construction and land development work, generally under fixed-price contracts. The company generally has multiple sources for the materials the company purchases and its suppliers have sufficient capacity to support the company’s business operations.
The company’s construction managers coordinate subcontracting activities and supervise all aspects of construction work and quality control. One of the ways in which the company seeks to achieve home buyer satisfaction is by providing the company’s construction managers with incentive compensation arrangements based upon each home buyer’s satisfaction, as expressed by the buyers’ responses on pre- and post-closing questionnaires.
Marketing and Sales
The company’s marketing strategy for its homes has enhanced the company’s reputation as a builder and developer of high quality luxury homes.
The company utilizes an internally developed value analysis program that compares its homes with homes offered by other builders and competitive resale homes in each local market area.
The company typically has a sales center in each community that is staffed by the company’s own sales personnel. Sales personnel are generally compensated with both salary and commission. A significant portion of the company’s sales is also derived from the introduction of customers to the company’s communities by local real estate agents, to whom the company pays a real estate agent commission.
Visitors to the company’s website, www.TollBrothers.com, can obtain detailed information regarding the company’s communities and homes across the country, take panoramic or video tours of the company’s homes, and design their own homes based upon the company’s available floor plans and options. The company has increasingly focused its marketing efforts to the digital environment for media buying and have adopted a number of virtual tools and techniques to allow the company’s sales personnel to engage in remote interactions with potential customers.
The company has a two-step sales process. The first step takes place when a potential home buyer visits one of the company’s communities (either in person or virtually) and decides to purchase one of the company’s homes, at which point the home buyer signs a non-binding deposit agreement and provides a small, refundable deposit. This deposit will reserve, for a short period of time, the home site or unit that the home buyer has selected. This deposit also locks in the base price of the home. Because these deposit agreements are non-binding, they are not recorded as signed contracts, nor are they recorded in backlog. Deposit rates are tracked on a weekly basis to help the company monitors the strength or weakness in demand in each of the company’s communities. If demand for homes in a particular community is strong, the company determines whether the base sales prices in that community should be increased. If demand for the homes in a particular community is weak, the company determines whether or not sales incentives and/or discounts on home prices should be adjusted.
The second step in the sales process occurs when the company signs a binding agreement of sale contract with the home buyer and the home buyer provides a larger cash down payment that is generally non-refundable.
Customer Mortgage Financing
The company maintains relationships with a diversified group of mortgage financial institutions, many of which are among the largest in the industry. National, regional and community banks continue to recognize the long-term value in creating relationships with the company’s affluent home buyers, and these banks continue to provide these customers with financing. The company’s home buyers generally are, and should continue to be, better able to secure mortgages due to their typically lower loan-to-value ratios and attractive credit profiles, as compared to the average home buyer.
The company’s mortgage subsidiary, Toll Brothers Mortgage Company (‘TBMC’), provides mortgage financing for a portion of the company’s home closings. The company’s mortgage subsidiary determines whether the home buyer qualifies for the mortgage that the home buyer is seeking based upon information provided by the home buyer and other sources. For those home buyers who qualify, the company’s mortgage subsidiary provides the home buyer with a mortgage commitment that specifies the terms and conditions of a proposed mortgage loan based upon then-current market conditions.
Seasonality
The company’s quarterly operating results typically fluctuate with the seasons. A significant portion of the company’s agreements of sale are generally entered into with customers in the winter and spring months.
Investments in Unconsolidated Entities
The company has investments in joint ventures (i) to develop lots for the joint venture participants and for sale to outside builders (‘Land Development Joint Ventures’); (ii) to develop for-sale homes (‘Home Building Joint Ventures’); (iii) to develop luxury for-rent residential apartments and single family homes, and commercial space (‘Rental Property Joint Ventures’); and (iv) to provide financing and land banking for residential builders and developers for the acquisition and development of land and home sites (‘Other Joint Ventures’).
Land Development Joint Ventures
At October 31, 2024, the company had investments in 16 Land Development Joint Ventures to develop land. Some of these Land Development Joint Ventures develop land for the sole use of the venture participants, including the company, and others develop land for sale to the joint venture participants and to unrelated builders. At October 31, 2024, the company’s Land Development Joint Ventures owned approximately 22,700 home sites.
At October 31, 2024, the company had agreed to acquire 316 home sites from four of its Land Development Joint Ventures. In addition, the company expects to purchase approximately 9,000 additional home sites over a number of years from several of these joint ventures. The company counts lots in these joint ventures as optioned lots if the company has a contractual right to acquire them.
Home Building Joint Ventures
At October 31, 2024, the company had investments in its Home Building Joint Ventures to develop luxury for-sale homes.
Rental Property Joint Ventures
As part of the company’s strategy to expand product lines, over the past several years, the company acquired control of a number of land parcels intended to be developed as for-rent apartment or single family rental home projects, including several student housing sites. At October 31, 2024, the company had investments in 40 Rental Property Joint Ventures.
At October 31, 2024, the company or joint ventures in which the company has an interest controlled 67 land parcels that are planned or operating as for-rent apartment projects containing approximately 21,300 units. These projects are located in multiple metropolitan areas throughout the country and are being operated or developed (or the company expects will be developed) with partners under the brand names Toll Brothers Apartment Living and Toll Brothers Campus Living.
At October 31, 2024, the company had approximately 4,500 units in for-rent apartment projects that were occupied or ready for occupancy, 5,700 units in the lease-up stage, 6,500 units in the design phase or under development, and 4,700 units in the planning stage. Of the 21,300 units at October 31, 2024, 13,300 were owned by joint ventures in which the company has an interest, approximately 2,400 were owned by the company, and land underlying 5,600 were under contract to be purchased by the company.
History
Toll Brothers, Inc. was founded in 1967. The company was incorporated in Delaware in 1986.
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