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Efficient practices a hit with Wall Street By Sacha Pfeiffer, Globe Staff, 4/29/01
WEB-ONLY
LATER PARTS
WBZ-TV reporter Ron Sanders and photographer Tom Rehkamp joined in the Globe investigation. Watch their reports on RealVideo.
PART ONE
The Globe Spotlight Team would like to hear from readers willing to share their experiences -- or thoughts -- about new home construction. The Spotlight telephone number is (617) 929-3208. Confidential messages about new home construction and other issues can also be left at (617) 929-7483. You can email Spotlight at spotlight@globe.com.
Today, Toll Brothers is the ninth largest home builder in the country, with roughly $1.8 billion in revenue last year and an average sale price of $450,000, double that of other major builders. Toll also enjoys the distinction of being the nation's largest builder of high-end, ''semi-custom'' homes, a lucrative niche trumpeted in its corporate tag line, ''America's Luxury Home Builder.''
With more than 32,000 homes in 20 states, Toll's residential subdivisions span the country, and the company is growing at breakneck speed. A decade ago, Toll Brothers sold just over 700 homes; last year, it sold nearly 4,000.
By its own account, 2000 was a ''fabulous year'' for Toll Brothers. Record home sales, fueled by a roaring economy, swelled the Huntingdon Valley, Pa., company's earnings 42 percent and boosted revenues by almost a quarter. That growth has rewarded shareholders handsomely; Toll's stock price rose 86 percent last year alone, marking a 1,000 percent increase since the company went public in 1986.
In the highly cyclical business of home building, where sales fluctuate with mortgage rates and other economic indicators, Toll commands the highest profit margins in the industry, due in part to ''production building'' techniques designed to keep down costs, such as assembling wall panels, roof and floor trusses, windows, and woodwork at a company plant near Philadelphia, and another in Virginia.
And Toll Brothers keeps a strategic eye on changing demographics, primarily targeting affluent baby boomers and their appetite for gourmet kitchens, nine-foot ceilings and other pricey upgrades. Indeed, on average, Toll buyers add more than $70,000 in ''options,'' from wet bars to media centers to ''hobby rooms,'' to the sale price of their homes.
In addition to its focus on high-income home buyers, the company is also moving to occupy another potentially profitable housing niche - marketing ''age-qualified'' communities to affluent empty-nesters.
Yet the robust economic performance masks discontent among many Toll customers that goes unheard on Wall Street: disappointment in the quality of their homes and Toll's often slow response to complaints, and a feeling that the company is more interested in pleasing shareholders than homeowners.
''They basically will try and get away with taking out a stud here or taking out a stud there, and knowing that that translates into big dollars because of the number of houses that they build,'' said Christopher Laskey, building commissioner in Canton, home to Canton Woods, a Toll subdivision.
Despite Toll's meteoric rise, when the Globe began to raise questions about its building practices, Robert I. Toll, 60, the company's chairman and chief executive officer, said that in more than 30 years, Toll had never needed public relations advice. But Toll retained the Rasky/Baerlein Group, a Boston public relations firm, to respond to Globe inquiries.
Bruce E. Toll, 57, stepped away from active management in 1998, but he remains vice chairman of the board.
Toll's corporate reach extends beyond house building. It also operates a commercial property arm that develops and acquires apartment, office, and retail properties. And in a move to capitalize on the desire of its upscale buyers for ancillary services, Toll has its own mortgage and title insurance divisions, and offers security monitoring, landscaping, digital cable television, and broadband Internet services.
This story ran on page A26 of the Boston Globe on 4/29/2001.
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hey are known by many in the home building industry as, simply, Bob and Bruce, the Pennsylvania brothers who continued a two-generation family tradition when they started a small construction company in 1967.
