CORPORATE PROFILE May 27, 2015
TABLE OF CONTENTS & CONTACT INFORMATION Slide #1: Slide #2: Slide #3: Slide #4: Slide #5: Slide #6: Slide #7: Slide #8: Slide #9: Slide #10: Slide #11: Slide #12: Slide #13: Slide #14: Slide #15: Slide #16: Slide #17: Slide #18: Slide #19: Slide #20:
Logo Table of Contents & Contact Information Statement of Forward-Looking Information Overview Brand Name Most Admired Home Building Company America’s Most Trusted Home Builder™ Toll Brothers Results Current U.S. Housing Market Key Metrics Basic Demographics Nationwide Footprint Only National HB Focused on Luxury Market Toll Home Sale Prices FY 2014 Widest Variety of Homes Product Diversification Move-Up Empty Nester Active Adult Master Planned
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Second Home Urban Redevelopment Suburban High Density Urban & Suburban Rental Urban Infill Current City Living Pipeline Future City Living Pipeline Focus on land Building a Solid Land Position Number of Selling Communities Submarket Desirability Index Homebuilder School Quality Index ESE High-Volume Technology Toll Architecture Toll Integrated Systems TBI Mortgage Diversifying Income Streams Other Income & JV Income What’s New Since The Downturn?
Slide #41: Slide #42: Slide #43: Slide #44: Slide #45: Slide #46: Slide #47: Slide #48: Slide #49: Slide #50: Slide #51: Slide #52: Slide #53: Slide #54: Slide #55: Slide #56: Slide #57: Slide #58: Slide #59:
Toll Apartment Living Current Apartment Living Pipeline Future Apartment Living Pipeline Shapell Homes Acquisition Shapell: Lots & Communities Overview of Gibraltar Capital Superior Capital Market Access Maintain Conservative Debt Maturities Toll Brothers Revenue Cash & Marketable U.S. Treasury Securities Net-Debt-to-Capital Capitalization Long Term Fundamentals Unemployment Rates U.S. Births $100,000 Income Households Housing Starts vs. Household Growth Why Toll Home
Investor Relations Team MARTIN CONNOR CFO Email: mconnor@tollbrothersinc.com Phone: 215-938-6934
2
FREDERICK COOPER SVP, Finance, International Development & Investor Relations Email: fcooper@tollbrothersinc.com Phone: 215-938-8312
GREGG ZIEGLER SVP, Treasurer Email: gziegler@tollbrothersinc.com Phone: 215-938-8365
RUSSELL ROCHESTIE VP, Finance Email: rrochestie@tollbrothersinc.com Phone: 215-938-5227
STATEMENT OF FORWARD-LOOKING INFORMATION
Information presented herein for the second quarter ended April 30, 2015 is subject to finalization of the Company’s regulatory filings, related financial and accounting reporting procedures and external auditor procedures. Certain information included in this release is forward‐looking within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, information related to: anticipated operating results; anticipated financial performance, resources and condition; selling communities; home deliveries; average home prices; consumer demand and confidence; contract pricing; business and investment opportunities; market and industry trends; and the anticipated benefits to be realized from the consummation of the Shapell acquisition and the related post‐closing asset sales. Such forward‐looking information involves important risks and uncertainties that could significantly affect actual results and cause them to differ materially from expectations expressed herein and in other Company reports, SEC filings, statements and presentations. These risks and uncertainties include, among others: local, regional, national and international economic conditions; fluctuating consumer demand and confidence; interest and unemployment rates; changes in sales conditions, including home prices, in the markets where we build homes; conditions in our newly entered markets and newly acquired operations; the competitive environment in which we operate; the availability and cost of land for future growth; conditions that could result in inventory write‐downs or write‐downs associated with investments in unconsolidated entities; the ability to recover our deferred tax assets;
3
the availability of capital; uncertainties in the capital and securities markets; liquidity in the credit markets; changes in tax laws and their interpretation; effects of governmental legislation and regulation; the outcome of various legal proceedings; the availability of adequate insurance at reasonable cost; the impact of construction defect, product liability and home warranty claims, including the adequacy of self‐ insurance accruals, and the applicability and sufficiency of our insurance coverage; the ability of customers to obtain financing for the purchase of homes; the ability of home buyers to sell their existing homes; the ability of the participants in various joint ventures to honor their commitments; the availability and cost of labor and building and construction materials; the cost of raw materials; construction delays; domestic and international political events; weather conditions; and the anticipated benefits to be realized from the consummation of the Shapell acquisition and the related post‐closing asset sales. For a more detailed discussion of these factors, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent annual report on Form 10‐K and our subsequent quarterly reports on Form 10‐Q filed with the Securities and Exchange Commission. Any or all of the forward‐looking statements included in this release are not guarantees of future performance and may turn out to be inaccurate. Forward‐ looking statements speak only as of the date they are made. The Company undertakes no obligation to publicly update any forward‐looking statements, whether as a result of new information, future events or otherwise.
OVERVIEW
•
Founded in 1967 and publicly traded since 1986
•
Nation’s leading luxury home builder
•
Average delivered home price of $746,000 YTD FY 2015 was more than double the average of the other public homebuilders
•
Builds in 19 states and approximately 50 markets
•
Balanced footprint across key Eastern, Western and Southern markets
•
Expanding urban presence in New York, Washington, DC and Philadelphia
•
Serves urban and suburban, luxury move-up, empty nester, and active-adult buyers
•
Strong balance sheet and credit ratings
•
Executive & director beneficial ownership of approximately 10.5% at January 15, 2015 4
The Hills at Parker, Parker, CO
THE #1 BRAND IN LUXURY HOME BUILDING
5
FORTUNE’S MOST ADMIRED HOME BUILDING COMPANY 2015 Rank
6
Overall Score
1
Toll Brothers
6.23
2
Lennar
6.00
3
Standard Pacific
5.78
4
NVR
5.34
5
D.R. Horton
4.99
6
PulteGroup
4.98
7
Taylor Morrison Home
4.63
8
Ryland Group
4.39
9
KB Home
4.29
2015 AMERICA’S MOST TRUSTED HOME BUILDER™
Toll Brothers Standard Pacific
Drees
Shea
Richmond American
Lennar
7
Ashton Woods
Taylor Morrison
Meritage
David Weekley
K. Hovnanian
Ryland
Ryan (NVR)
Pulte
Toll Brothers received the highest score among the largest 133 builders in the country, based on a study of 43,200 new home shoppers in the nation’s top 27 housing markets.
Highland
M/I
D.R. Horton
Beazer
Disclaimer: Toll Brothers received the highest numerical score in the United States in the proprietary Lifestory Research 2015 America’s Most Trusted Home Builder™ study. Study based on 43,200 new home shoppers in 27 markets. Proprietary study results are based on experiences and perceptions of consumers surveyed between January and December 2014.
TOLL BROTHERS RESULTS
3 Months Ended April 30, ($ in millions), except Avg Prices
Fiscal Year Ended October 31,
2015
2014
% Change
2014
2013
% Change
1,931
1,749
10.4%
5,271
5,294
-0.4%
$1,596
$1,275
25.2%
$3,897
$3,634
7.2%
$826
$729
13.4%
$739
$686
7.7%
4,387
4,324
1.5%
3,679
3,679
0%
$3,483
$3,207
8.6%
$2,720
$2,630
3.4%
$794
$742
7.0%
$739
$715
3.4%
Units
1,195
1,218
-1.9%
5,397
4,184
29.0%
Dollars
$853
$860
-0.9%
$3,912
$2,674
46.3%
Avg price ($ in 000s)
$713
$706
1.0%
$725
$639
13.5%
Contracts Units Dollars Avg price ($ in 000s)
Backlog Units Dollars Avg price ($ in 000s)
Deliveries
8
CURRENT U.S. HOUSING MARKET
•
In a gradual and extended recovery
•
Housing market is on firm footing and heading in the right direction
•
Strong job growth with little wage growth
•
Household formations are increasing
•
Seven years of pent-up demand: continued population growth
•
Mortgage market has improved. Affordability remains solid
•
Home purchase decision is a confidence sensitive issue
•
Few land entitlements have been processed for several years, resulting in lot shortages in many markets Constrained capital availability favors largest builder
•
9
The Fairhaven, Regency at Yardley, Yardley, PA
KEY METRICS IMPROVING FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
YTD FY 2015
($117,187)
($29,366)
$112,942
$267,697
$504,582
$210,555
$9,853
$74,058
$226,049
$408,145
$671,088
--
$1,236,927
$1,139,912
$1,217,892
$825,480
$598,341
$542,172
195
215
224
232
263
269
Owned & Optioned Lots
34,852
37,497
40,350
48,628
47,167
45,000
Gross Margin**
20.7%
23.3%
24.0%
24.6%
25.3%
26.3%
Operating Margin
-9.7%
-3.1%
3.4%
7.5%
10.2%
9.6%
$51,783
$22,209
$49,512
$66,630
$107,333
$47,063
Pre-tax Income (000s)
EBITDA (000s)* Cash and Marketable Securities (000s) Selling Community Count
Other Income (000s)
10
Through April 30, 2015 *EBITDA for YTD FY 2015 will be updated upon release of 10-Q **Excluding interest and write-downs
BASIC DEMOGRAPHICS DRIVE AN INDUSTRY EMERGING FROM ITS SLUMBER Total estimated construction shortfall of 5.7 million houses from 20082014. Annual Shortfall in Production (est.)
Average Annual Production
818,000 1,585,000 Actual Average Annual Housing Starts
767,000
1970-2007
2008-2014 Average Annual Housing Starts
11
Source: U.S. Census Bureau
NATIONWIDE FOOTPRINT POSITIONS US FOR GROWTH Seattle
Minneapolis
Boston Detroit
Sacramento San Francisco
Reno
Chicago
Fort Collins San Jose
Philadelphia
Hartford New York Princeton Wilmington
Washington DC
Denver Las Vegas
Los Angeles Palm Springs San Diego
Charlotte
REGIONS North
Phoenix Tucson
Mid-Atlantic South
Dallas Austin
West
Jacksonville Houston
San Antonio
19 STATES, 50 MARKETS 12
Raleigh
Orlando Jupiter West Palm Beach Ft . Myers Boca Raton Naples Miami
City Living
ONLY NATIONAL HOMEBUILDER FOCUSED ON LUXURY MARKET Toll’s main competitors are small private builders, not the larger public builders. $725
$746
Average Delivered Home Price* ($000) $478
$272
$285
DR Horton
Beazer
13
$326
$328
$329
$333
Lennar
KB Home
Pulte
Ryland
$369
$377
$393
NVR
MDC
Hovnanian
*Updated based on most recent reported fiscal-year-end deliveries.
St Pac
Toll Brothers FY 2014
Toll Brothers YTD FY 2015
TOLL HOME PRICES YTD FY 2015* (by unit deliveries)
61%
63% Under $750,000
Under $300,000 $300,000 to $749,999 $750,000 to $999,999 Over $1,000,000 20% 2% 17%
14
*Numbers may not add due to rounding in units
THE WIDEST VARIETY OF HOMES IN THE INDUSTRY
•
Move-up
•
Empty Nester
•
Active Adult
•
Second Home
•
Urban-Infill
•
Urban Redevelopment
•
Golf Course & Country Club
•
High-Rise
•
Suburban High Density
•
Urban & Suburban Rental 15
PRODUCT DIVERSIFICATION (by unit deliveries)
FY 2000 8%
FY 2014
1%
5% 12%
15%
68%
91% 16
Single Family
Multi-Family
Age Qualified
City Living
MOVE-UP
17
Chapel Hill at Sparta, Sparta, NJ
EMPTY NESTER
18
Casabella at Windermere, Windermere, FL
A C T I V E A D U LT
19
Anthem Ranch by Toll Brothers, Broomfield, CO
MASTER PLANNED
20
Gale Ranch, San Ramon, CA
SECOND HOME
21
Aviano速 at Desert Ridge, Phoenix, AZ
URBAN REDEVELOPMENT
22
Pierhouse at Brooklyn Bridge Park, Brooklyn, NY
SUBURBAN HIGH DENSITY
23
The Morgan at Provost Square, Jersey City, NJ
URBAN & SUBURBAN RENTAL
24
URBAN INFILL
25
CURRENT CITY LIVING PIPELINE* Estimated Timing Total Units
Settled Units
Estimated Remaining Revenue****
Construction Start
Open for Sale
1st Settlement
Maxwell C (Hoboken)
210
148
32
30
$66 million
Q1 2012
Q2 2013
Q2 2014
400 Park Ave South (Manhattan)
81
0
33
48
$333 million
Q3 2012
Q4 2014
Q4 2015
410 at Society Hill (Phila)
55
0
39
16
$56 million
Q3 2013
Q4 2013
Q4 2015
Pierhouse at BBP (Brooklyn)**
106
0
62
44
$464 million
Q3 2013
Q2 2014
Q1 2016
1110 Park Ave (Manhattan)
9
0
2
7
$135 million
Q3 2013
Q3 2014
Q1 2016
The Sutton (Manhattan)***
113
0
22
91
$266 million
Q3 2014
Q1 2015
Q4 2016
2400 South – Condos (Phila)
59
0
58
1
$32 million
Q4 2013
Q4 2013
Q3 2015
Hampden Row (Bethesda)
55
0
10
45
$76 million
Q3 2014
Q1 2015
Q1 2017
160 East 22nd St (Manhattan)
81
79
2
0
$5.8 million
Q3 2012
Q2 2013
Q4 2014
Total
769
227
260
282
$1.43 billion
26
Contracted (Not Units Left Settled) Units to Sell
* Projects open for sale as of April 30, 2015 ** Will be delivered in joint venture; data is for condo units only *** Will be delivered in joint venture **** Represents the value of the Sold (Not Settled) Units plus the Units Left to Sell
FUTURE CITY LIVING PIPELINE* Estimated Timing
Total Units
Estimated Revenue
Construction Start
Open for Sale
1st Settlement
55 W 17th Street (Manhattan)
53
$205 million
Q1 2015
Q4 2015
Q1 2017
Hudson Tea E (Hoboken)
236
$216 million
Q1 2015
Q4 2015
Q2 2017
St. Lukes
35
$158 million
Q2 2015
Q2 2016
Q4 2017
Provost Square (Jersey City)
501
$370 million
Q4 2015
Q2 2016
Q3 2017
122 East 23rd Street
153
$506 million
Q1 2016
Q4 2016
Q3 2018
355 Broadway
98
$301 million
Q3 2016
Q4 2016
Q4 2018
Hudson Tea D (Hoboken)
99
$96 million
Q2 2016
Q1 2017
Q1 2018
Maxwell D (Hoboken)
76
$71 million
Q1 2017
Q4 2017
Q3 2018
82 King Street (Manhattan)
145
$374 million
Q2 2018
Q1 2019
Q3 2020
1,396
$2.29 billion
Total
27
*Projects scheduled to open for sale after April 30, 2015
FOCUS ON LAND
•
One of the largest land developers in the U.S.
•
Control 45,000 home sites*
•
Operate in the most difficult land approval markets in the country
•
Skilled in land acquisition, approvals, and development across all markets
•
Manage site design and land improvements across most communities
•
Provides protection against potential shortages in our lot-constrained markets
land
Parkland Golf and Country Club, Parkland, FL
28
* As of April 30, 2015
28
BUILDING ON A SOLID LAND POSITION 91,207
Lots Owned and Optioned
83,126 73,768
16,100 Finished Lots at 4/30/15
59,251
60,189
48,628
48,058 39,146
40,350
39,784
40,844
33,118
31,917
47,167
45,000
34,852 37,497
8,609
36,386
2000
2001
2002
2003
2004
2005 Q2 2006 2006
2007
Owned
29
2008
Optioned
Fiscal Year End
2009
2010
2011
2012
2013
2014 Q2 2015
NUMBER OF SELLING COMMUNITIES
300
315 290* 273
220 200
146
155
263
230 200
170
At Fiscal Year End
30
*Midpoint of estimated range
215 195
224
232
269
JOHN BURNS’ SUBMARKET DESIRABILITY INDEX November 2014 Rank
31
Wtd Avg Submarket Desirability Index
1
Toll Brothers
3.34
2
Taylor Morrison
2.91
3
K Hovnanian
2.84
4
Pulte Group
2.83
5
Standard Pacific
2.83
6
M/I Homes
2.79
7
Ryland
2.68
8
Meritage
2.58
9
Lennar
2.53
10
Beazer
2.50
11
Brookfield
2.50
12
Tri Pointe
2.48
13
KB Homes
2.38
14
DR Horton
2.33
15
M. D. C. Holdings
2.22
16
William Lyon
2.18
17
NVR
2.13
Submarket Desirability Index: The weighted-average Submarket Desirability Index for each builder denotes which builders' communities are in the best locations within each market.
HOMEBUILDER SCHOOL QUALITY INDEX
Average School District Rating 10 9 8 7
(0-10 Scale)
8.84 7.43
7.18
7.12
6.91
6.78
6.67
6
6.17
5.89
5.84
5.73
5.19
5
4.90 4.03
4 3 2 1 0
32
TOL TMHC SPF PHM
WY
MHO MTH
RYL
LEN MDC HOV BZH
Source: Raymond James, “’Back to School 3.0’: Our Most Detailed Land Analysis Yet,” U.S. Research, July 11, 2014
DHI
KBH
ESE
•
ESE is a full service land engineering firm that provides a wide range of services to Toll Brothers.
•
Every ESE plan is designed for approvals, constructability and most importantly, the end use…a luxury home community.
•
Having allows:
an
in-house
engineering
company
Superior land acquisition / evaluation / support
Maximize premium lots
Maximize land value – not total home sites
33
CUSTOM HOMES BUILT USING HIGH -VOLUME TECHNOLOGY
•
Toll’s luxury systems developed over 40 years
•
Buyers choose from hundreds of structural and designer options
•
In FY 2014 the average buyer added approximately $124,000 in options and premiums, consistent with 16 - 20% of base in prior years
•
Provides competitive advantage vs. small builders
•
Toll Architecture systemizes high-volume home production 34
Regency at Wappinger – Villas, Wappinger Falls, NY
TOLL ARCHITECTURE
•
Designs customized homes for high volume production
•
Introduces annually
•
Pre-designs every home and option to improve production quality and efficiency
35
70
new
models
TOLL INTEGRATED SYSTEMS – PANEL & TRUSS PLANT
36
•
Manufactures and distributes wall panels, floor and roof trusses, signature millwork, windows, and doors
•
Operates four plants in suburban Philadelphia, Virginia, and Indiana
•
Builds more than 150 different homes with multiple elevations and hundreds of options
•
Improves timeline, quality, costs, and reduces waste
•
Reduces dependence on skilled carpenters in times of labor shortage
TBI MORTGAGE
•
21% of buyers paid cash
•
Served 58% of Toll buyers using mortgages in Q2 2015
•
Pre-sells loans individually to minimize risk
•
Investors who provide our customers with mortgages have continued to issue new commitments
•
Our buyers have strong credit profiles with an average YTD FY 2015 FICO score of 756 on conforming loans and jumbo loans
•
Average LTV of 71% YTD FY 2015
•
37% of buyers used jumbo mortgages YTD FY 2015
37
Toll Brothers at Amalfi Hills, Yorba Linda, CA
DIVERSIFYING INCOME STREAMS Generated $47.1 million of other & JV income YTD FY 2015 Project $75 million to $90 million in FY 2015 Sustainable, recurring income Suburban Home Building (For Sale) - 50 markets in 19 states • Move up • Empty nester • Active Adult • Second home • Masterplanned resort style • Suburban high density On Income Statement:
38
Revenue
Land Sales & Development - Shapell (CA) - Northgrove at Spring Creek (TX) - Woodson's Reserve (TX) - Travisso (TX) - Sienna South (TX) - Other lot sales to 3rd parties
JV & other income
City Living (Condo for Sale) - Manhattan, Brooklyn, and Queens, NYC - Hoboken and Jersey City, NJ - Metro Washington, DC - Philadelphia, PA
Revenue & JV
*As of April 30, 2015
Apartment Living (Rental)*
Ancillary Businesses
- Located in Urban and Suburban locations - 2 projects (685 units) leasing - 5 projects (1,833 units) under development - 7 projects (2,247 units) in the pipeline
- Gibraltar Capital and Asset Management - TBI Mortgage - Golf Course Development & Management - Toll Landscaping - Security - Title
JV & other income
Other income
OTHER INCOME AND JOINT VENTURE INCOME ($ Thousands)
Other Income
Joint Venture Income
$107,333
$110,000 $90,000 $66,630
$70,000 $51,783 $50,000
$49,512
$34,388
$30,000
$22,209
$10,000 -$10,000
2009
2010
2011
2012
2013
2014
• In fiscal 2011 and 2009, the Company recognized impairment charges on investments in unconsolidated entities of $40.9 million and $11.3 million, respectively, which are included above. The Company did not recognize any impairment charges on investments in unconsolidated entities in fiscal 2010. 39
WHAT’S NEW SINCE THE DOWNTURN? New Markets •
Entered major markets of Houston and Seattle
•
Reentered Austin
Expanding Core Business •
Expanded City Living within Metro NYC and Philadelphia, introduced City Living to Metro Washington, DC with other major markets under consideration
•
Expanding Active Adult beyond East and Midwest into Western U.S. (Denver, Las Vegas, Reno)
•
Growing community count in existing markets
New Initiatives •
Acquired and fully integrated Shapell Homes, bolstering footprint in key Northern and Southern coastal California markets (complemented by two communities in Southern California: Hidden Canyon and Baker Ranch, a master planned community)
•
Formed Gibraltar Capital
•
Developing apartments in Northeast and Mid-Atlantic
•
Significantly expanding TX presence 40
Briarcliff at Magnolia, Seattle, WA
TOLL APARTMENT LIVING •
Investing in Apartment Development to maximize synergies of our operations and hedge for-sale cyclicality
•
Developed & operate 1,441 units*
•
Leasing commenced at two communities consisting of 685 units
•
1,415 Toll Brothers Apartment Living units under construction 4 projects from Massachusetts to Washington DC*
•
418 Toll Brothers Campus Living units under development in College Park, MD*
•
Control land for 2,247 future apartment and student living units in Northeast / Mid-Atlantic corridor* Expect to invest an additional $100 million to $200 million in Toll Brothers Apartment Living and Campus Living over next 2 years
•
41
*As of April 30, 2015
Parc at Plymouth Meeting, Plymouth Meeting, PA
CURRENT APARTMENT LIVING PIPELINE (Developed in Joint Venture) Estimated Timing Existing Apartments
Location
Total
Dev.
Open For
Stab.
Units
Start
Occupancy
Year
Dulles Greene
Herndon, VA
806
1998
1999
2003
Mews at Princeton Junction
Princeton, NJ
635
2003
2005
2008
2 Total Existing Apartments In Lease-Up
1,441 Location
Parc Riverside (Phase I)
Washington, DC
287
2013
2014
2016
Parc at Plymouth Meeting
Plymouth Meeting, PA
398
2013
2014
2017
2 Total In Lease-Up In Construction
685 Location
The Morgan at Provost Square
Jersey City, NJ
417
2013
2015
2016
East Brunswick
East Brunswick, NJ
400
2013
2015
2018
University of Maryland**
College Park, MD
418
2014
2016
2017
Westborough Woods
Boston, MA
249
2015
2016
2017
French Creek
Phoenixville, PA
349
2015
2016
2018
5 Total Under Development
42
1,833
* Projects under development as of April 30, 2015 ** Student Housing Projects
FUTURE APARTMENT LIVING PIPELINE (To Be Developed in Joint Venture) Estimated Timing
Location
Total Units
Dev. Start
Open For Occupancy
Stab. Year
Parc Riverside (Phase II)
Washington, DC
314
2015
2016
2017
Bryant
Chantilly, VA
250
2017
2018
2019
Penn State University**
State College, PA
268
2015
2017
2017
Union Place
Washington, DC
525
2015
2017
2019
Belmont
Ashburn, VA
376
2017
2018
2020
Maneely
Princeton, NJ
232
2017
2018
2020
Morristown
Morristown, NJ
282
2017
2018
2020
7 Projects
43
2,247
** Student Housing Projects
ACQUISITION OF SHAPELL HOMES: Leading Coastal California Homebuilder and Developer
Opportunity Overview •
Acquisition announced in November 2013 and closed February 2014
•
One of the largest homebuilders in California and the leading builder in several of the state’s premier, high-growth markets
•
~5,000 concentrated lots in 15 locations, 97.5% of which were entitled
•
Well-known luxury brand with a reputation for delivering high-quality, sought-after home product Sizable amount of lots concentrated in a manageable number of communities
•
44
Geographic Footprint Highly Attractive and Proven Lot Locations in NorCal and SoCal
NorCal Orinda Alamo Creek San Francisco Gale Ranch Evergreen San Jose Gilroy
Porter Ranch Plum Canyon Thousand Oaks Yorba Linda Los Angeles Long Beach Laguna Niguel SoCal Carlsbad San Diego
SHAPELL: OVERVIEW OF LOTS AND COMMUNITIES 02/04/14 ($ in 000s)
City
Metro Area
Lot Breakdown By Status (02/04/14)
Backlog
Raw
Graded
Finished
WIP
Total Lots Remaining
Models
Northern California Gale Ranch
San Ramon
San Francisco
20
-
1,181
201
36
18
1,456
Alamo Creek
Danville
San Francisco
25
-
159
114
16
10
324
Gilroy
Gilroy
San Fran-Santa Clara
-
-
-
59
-
-
59
Evergreen
San Jose
San Fran-Santa Clara
2
-
-
2
3
-
7
Orinda
Orinda
San Francisco
2
-
-
-
2
-
4
49
-
1,340
376
57
28
1,850
Northern California Subtotal Southern California Porter Ranch
Porter Ranch
Los Angeles
25
904
712
70
19
12
1,742
Plum Canyon
Santa Clara
Los Angeles
27
-
503
77
8
8
623
Yorba Linda
Yorba Linda
Orange County
17
288
-
48
7
4
364
Carlsbad
Carlsbad
San Diego-Carlsbad
-
305
-
-
-
-
305
Laguna Niguel
Laguna Niguel
Orange County
8
-
-
17
10
9
44
Thousand Oaks
Thousand Oaks
Los Angeles
-
-
-
24
-
-
24
77
1,497
1,215
236
44
33
3,102
61
4,952
Southern California Subtotal Total
45
126 2,555 to Toll’s California 612 101 Shapell is an active homebuilder in many of the same markets as Toll and adds1,497 immediate scale Division
97.5% of Shapell’s lots have been entitled
OVERVIEW OF GIBRALTAR CAPITAL •
An industry leader in the acquisition, management, and resolution of non-performing AD&C and CRE loans, portfolios, and properties
•
Capitalizes on Toll’s core expertise, nationwide presence, and relationships
•
Expands Toll’s ability to identify and control attractive land at historically low valuations and create value
•
Deals done as majority partner, minority partner, and wholly owned in portfolio on a single loan
•
At Q2 FY 2015, Toll’s investment in Gibraltar was $36.6 million
•
In Q2 FY 2015, Gibraltar generated pretax income of $4.5 million
•
Wholly/majority own 876 improved lots and land for 5,709* future lots at April 30, 2015 46
*Excludes assets in the AmTrust portfolio in which Gibraltar has an 8% effective interest
SUPERIOR CAPITAL MARKET ACCESS SENIOR/CORPORATE CREDIT RATINGS Fitch Inc.
BBB- (Stable)
Standard & Poor’s
BB+
(Stable)
Moody’s
Ba1
(Stable)
All three affirmed Toll’s Credit Ratings after Shapell acquisition announcement Nov 2013.
47
MAINTAIN CONSERVATIVE DEBT MATURITIES* Accessing Capital For Growth $500 Public Debt (Senior) Convertible Debt (Senior)** Bank Debt
$420
$400
$400
$288
$250
$250 $350
FY
17
18
19
20
21
22
23
$ millions 48
*As of April 30, 2015 **Convertible notes mature in September 2032. Holders’ first put right is December 2017 at a conversion price of $49.08
24
TOLL BROTHERS REVENUE ($ Thousands)
$6,115,000
$4,635,000 $3,912,000 $3,148,000 $2,674,000
$1,755,000
2006
2007
2008
2009
$1,883,000 $1,495,000
$1,476,000
2010
2011
At Fiscal Year End
49
2012
2013
2014
TOLL BROTHERS CASH AND MARKETABLE U.S. TREASURY SECURITIES ($ Thousands)
During unprecedented time of industry distress Toll grew cash $1,909,000 $1,633,000
$1,237,000
$1,146,000
$1,220,000
$900,000 $689,000
2005 50
$825,000
$633,000
2006
$598,000
2007
2008
2009
2010
At Fiscal Year End
2011
2012
2013
2014
STRONG BALANCE SHEET PROVIDES ROOM TO GROW
48.2% 46.0%
Net‐Debt‐To‐Capital* 2000‐2015
46.2%
47.0% 41.3%
40.9% 35.5% 32.5%
31.8% 27.6%
26.8% 23.6%
15.0% 13.6%
12.6% 7.4%
At Fiscal Year End
51
*Calculated as total debt minus mortgage warehouse loans minus cash and marketable securities divided by total debt minus mortgage warehouse loans minus cash and marketable securities plus stockholders’ equity. **Pro Forma net debt-to-capital ratio after completing the Shapell acquisition on Feb. 4, 2014.
40.8%
CAPITALIZATION* Toll Brothers, Inc. First Huntingdon Finance Corp. $1.035 BN Revolving Credit Facility Due August 2018 ■ Citi $100 MM ■ Deutsche Bank $100 MM ■ Royal Bank of Scotland $100 MM ■ PNC $100 MM ■ SunTrust $100 MM ■ Capital One $75 MM ■ US Bank $75 MM ■ Wells Fargo $75 MM ■ Bank of America $50 MM ■ Comerica $50 MM ■ Fifth Third Bank $50 MM ■ Regions Bank $50 MM ■ Sumitomo Mitsui $50 MM ■ Texas Capital Bank $35 MM ■ TD Bank $25 MM TOTAL $1,035 MM
52
■ ■ ■ ■ ■ ■ ■ ■ ■ ■
Toll Brothers Finance Corp.
$500 MM Term Loan Facility Due February 2019 SunTrust $100 MM Sumitomo Mitsui $75 MM US Bank $75 MM Bank of New York $55 MM Capital One $50 MM Wells Fargo $50 MM Beneficial Bank $30 MM Fifth Third Bank $30 MM PNC $25 MM Mega International $10 MM
TOTAL
$500 MM
*As of May 15, 2015
Senior Notes
Principal
Coupon
Maturity
$400 MM $288 MM $350 MM $250 MM $420 MM $400 MM $250 MM
8.910% 0.500% 4.000% 6.750% 5.875% 4.375% 5.625%
October 2017 December 2017 December 2018 November 2019 February 2022 April 2023 January 2024
Total $2,357 MM
Weighted Average 5.268% 5.21 years
LONG TERM INDUSTRY FUNDAMENTALS FAVORABLE
•
Population growth and positive demographic trends
•
Mortgage rates near historical lows
•
Affordability near all-time high
•
Few land entitlements have been processed for several years in many markets resulting in lot shortages
•
Seven years of pent up demand releasing
•
Constrained builders
53
capital
availability
favors
largest
Pierhouse at Brooklyn Bridge Park, Brooklyn, NY
Jan-92 Jul-92 Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Unemployment Rate (%)
UNEMPLOYMENT RATES
12
6
2
54
April 2015 Civilian Labor Force Rate 5.4% College Graduate Rate 2.7%
10
8
Civilian Labor Force
4
College Graduates
0
Source: U.S. Bureau of Labor Statistics
U.S. BIRTHS 4.75 4.55
Baby Boomers (Ages 61 – 51)
Millennials (Ages 35 – 11)
Generation X (Ages 50 - 36)
4.35
Births (Millions)
4.15 3.95 3.75 3.55 3.35 3.15 2.95 2.75
55
U.S. BIRTHS 1954-2013 Source: CDC.gov
Generation Z (Ages 10 – 1)
$100,000+ INCOME HOUSEHOLDS GROWING 3 TIMES FASTER THAN ALL U.S. HOUSEHOLDS (2013 Dollars)
All Households (mill)
$100,000+ Income Households (mill) 27.7
123.0 82.4 10.8
1980 56
1980
2013 Source: U.S. Census Bureau (P60-249)
2013
HOUSING STARTS VS. HOUSEHOLD GROWTH 1970-1979 Average Annual Housing Starts 1.77 (mil)
1980-1989 Average Annual Housing Starts 1.49 (mil)
1990-1999 Average Annual Housing Starts 1.37 (mil)
2000-2007 Average Annual Housing Starts 1.74 (mil)
2008-2014 Average Annual Housing Starts .77 (mil) 2,400.00
100,000
80,000
1,600.00
60,000
800.00
40,000
20,000
Number of Households Has Grown 78% Since 1970 0.00
0 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
57
Total Households
Total Single and MultiFamily Housing Starts Source: U.S. Census Bureau
Housing Starts (000)
Households (000)
120,000
WHY TOLL BROTHERS? •
A proven management team with a tremendous track record
•
The dominant player with few competitors in the luxury market
•
Control 45,000 lots in a lot-constrained environment*
•
A strong balance sheet
•
Balanced footprint across key Eastern, Western and Southern markets
•
Expanding urban presence in New York, Washington, DC, and Philadelphia
•
Nationally recognized, award-winning brand
•
A homebuilder with a niche in urban, rental and distressed real estate
•
The nation's growing number of affluent households
•
Strongest buyer profile in the industry
58
*As of April 30, 2015
59 59