Commonly known as builders of McMansions, Toll Brothers has branched out into urban development in the last decade. Here is a description of their efforts in New York City, as told by the head of Toll Brothers City Living:
We did some projects early on in Williamsburg, which I didn’t think would have been ahead of the curve. But for a lot of people who came to our sales office from places like Manhattan felt the neighborhood hadn’t arrived yet.
Based on that experience, we’re really focusing on neighborhoods that are established. When your main focus is condo, the way ours is, it needs to be that way, because you get one chance to sell a project. If everything isn’t perfectly right, then you’re going to suffer for it…
We’re certainly busy, but we’ve been more selective, so we’re on Gramercy, we’re on Park at 89th, we’ve got a tower on Park Avenue South going up, we just did the Touraine at 65th and Lex. Further down the line, we’ve got something on First and 52nd and in Hudson Square, on King Street. The project we’re doing in Brooklyn is in Brooklyn Bridge Park, which is basically in Brooklyn Heights, which was basically the first suburb…
We were fortunate coming out of the real estate recession and having a lot of cash and not needing to borrow, when most lenders were very reluctant to do condo loans. Toll has about a billion in cash and a billion-dollar credit line nationwide. We bought the Touraine site with just cash; we bought the Gramercy site with just cash; we bought a site in Dumbo with just cash. This was in ’09 and ’10. Most of the condo guys were not yet back, and we were competing with the rental guys, and we can always pay more than them.
Three quick thoughts:
1. It is hard to tell whether the image of Toll Brothers is changing. This article is similar to a number of other ones in recent months (example here) discussing the company’s efforts in New York City. At the same time, Toll Brothers is consistently linked to the construction of large suburban houses. In the long run, I wonder if there are critics who will never be able to look past the company’s connections to McMansions and see whatever else they are doing.
2. Few of the articles that discuss the efforts of Toll Brothers in New York City give any numbers about how much of the company’s business is in cities versus suburban development. From the projects described above, I would guess the urban efforts are still just a small part of the total operations.
3. The last paragraph hints at the dynamics of the housing market in recent years. Toll Brothers had the resources to capitalize on the housing market bubble. They aren’t alone but while these flush buyers make more money at the upper-end of the market, the lower end languishes.