| WSJ BLOG/Developments: Toll CEO Sells More Company Stock |
|
By James R. Hagerty
Why is Robert Toll unloading large amounts of stock in Toll Brothers Inc.?
The chief executive of the luxury home builder isn't talking. The company's chief financial officer, Joel Rassman, has said the 68-year-old Mr. Toll wants to diversify his personal investments.
Whatever the case, says Ivy Zelman, chief executive of Zelman & Associates, a housing research firm, "I think he's smart." Ms. Zelman says the share prices of home builders have run up too fast on hopes of a recovery in the housing market. She thinks new waves of foreclosure spell trouble ahead as builders will face tough competition with bank-owned properties.
"I believe that homebuilding equities are ahead of the fundamentals and that selling (their stock) into strength is prudent," Ms. Zelman says.
Mr. Toll, who helped found the company in 1967, sold 1.58 million shares of the stock Wednesday, according to a securities filing by Toll Brothers Thursday. That included 452,182 shares acquired through stock options due to expire in December.
The latest sales reaped pretax proceeds, net of the cost of exercising the options, of about $33 million. So far this year, Mr. Toll has sold about 4.4 million shares for total pretax proceeds of $83 million, according to filings by the company.
After the latest sales, Mr. Toll's direct and indirect holdings in the company total 14.7 million shares, or about 9% of the stock outstanding, down from 11% in early January.
Toll Brothers last month reported a loss of $472.3 million for the fiscal third quarter ended July 31, largely reflecting write downs of asset values. At that time, Mr. Toll said told analysts in a conference call that stronger housing demand in recent months "makes us feel a whole lot better."
During the call, Ms. Zelman prodded Mr. Toll about whether he and others in the building industry might be getting carried away in their hopes for a recovery in housing. "I sense a little optimism," she said. "I don't want to call it Kool-Aid." Given the outlook for further waves of mortgage defaults and foreclosures and other "headwinds" in the housing market, she said, "I'm just wondering if your views of stabilization might be a little bit premature."
Mr. Toll replied: "I am concerned, (though) probably not as much as you are." He added that his company hadn't bought huge amounts of land recently. "So while we're optimistic," he said, "we're also unwilling to make bets on the future being much different than the current market." |
2 comments:
Luxury builder Toll Brothers Inc. (TOL) plans a nationwide housing sale, the company said Tuesday.
It's a move showing that, while buyers might be tiptoeing back into the market, even strong builders with ample cash still have to work for deals as the housing market looks towards recovery from the worst downturn in decades.
The "National Fall Sales Event" will be offered at its 215 selling communities - including the New York city condos, which have been excluded from previous deals - from Saturday until Oct. 4.
The deals range from half-off options, including custom tile and appliances, to mortgage-specials, including paid closing costs. The Illinois and Michigan divisions, for example, are offering a 2/1 mortgage-rate buy down for a 30-year fixed-rate loan. The first-year's rate is 2.875%, followed by 3.875% for year two. It locks in at 4.875% for the loan's remainder.
While Horsham, Penn-based Toll's latest offer doesn't directly lower prices, such specials erode a company's gross margin. And in the case of mortgage-rate buy downs, builders make an upfront cash payment to the investor who buys the mortgage. The buy down is treated as a cost of sale for the builder.
In its third-quarter earnings conference call on August 27, Chairman and Chief Executive Robert Toll told investors that the builder was raising prices in about 40% of its communities and that "the rest" were seeing price stability.
"We’re fairly well convinced that the bottom has been turned, and, therefore, we are not increasing incentives or lowering prices anywhere," Toll said.
While incentives continue, they're getting smaller, explained Kira McCarron, the builder's chief marketing officer.
That hasn't yet shown up in results. At July 31, incentives were an average $84,000, or 12.6% of the home's sales value, up from an average $57,000, or 8.5%, a year earlier, according to financial statements.
Toll is next scheduled to report Dec. 10.
Here are the Toll Hoboken deals that somebody will waste their time over:
http://www.tollsalesevent.com/nfse/home?action=search&s_state=NJ&county=Hudson&cmpid=NFSE09&target_id=
Post a Comment