Embed Size (px)
Citation preview
Bank of America Merrill Lynch 2015 Paper, Packaging and Builders Conference
December 9th, 2015
2
CONTACT INFORMATION CONTACT INFORMATION
Investor Relations Team
RUSSELL ROCHESTIE VP, Finance
Email: [email protected] Phone: 215-938-5227
MARTIN CONNOR CFO
Email: [email protected] Phone: 215-938-6934
FREDERICK COOPER SVP, Finance, International Development
& Investor Relations Email: [email protected]
Phone: 215-938-8312
GREGG ZIEGLER SVP, Treasurer
Email: [email protected] Phone: 215-938-8365
Information presented herein for the forth quarter ended October 31, 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 presentation 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; and market and industry trends.
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; 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; and weather conditions. 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 presentation 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.
STATEMENT OF FORWARD-LOOKING INFORMATION
3
4
• Founded in 1967 and publicly traded since 1986
• Nation’s leading luxury home builder
• Average delivered home price of $755,000 in FY 2015 was more than double the average of most other public homebuilders
• Builds in 19 states and approximately 50 markets
• Balanced footprint across key Eastern, Western and Southern markets
• Expanding urban presence in New York, Washington, DC and Philadelphia
• Serves urban and suburban, luxury move-up, empty nester, and active-adult buyers as well as renter in select markets
• Strong balance sheet and credit ratings
• Executive & director beneficial ownership of approximately 10.5% at January 15, 2015
OVERVIEW
The Hills at Parker, Parker, CO
THE #1 BRAND IN LUXURY HOME BUILDING
5
FORTUNE’S MOST ADMIRED HOME BUILDING COMPANY 2015
Rank Overall Score
1 Toll Brothers 6.23
2 Lennar 6.00
3 Standard Pacific 5.78
4 NVR 5.34
5 D.R. Horton 4.99
6 PulteGroup 4.98
7 Taylor Morrison Home 4.63
8 Ryland Group 4.39
9 KB Home 4.29
6
7
2015 AMERICA’S MOST TRUSTED HOME BUILDER™
Disclaimer: Toll Brothers received the highest numerical score in the United States in the proprietary Lifestory Research 2015 America’s Most Trusted Home Builder™ study. Study based on 43,200 new home shoppers in 27 markets. Proprietary study results are based on
experiences and perceptions of consumers surveyed between January and December 2014.
Toll
Brothers
Standard Pacific Ashton Woods
Meritage Taylor Morrison Drees
K. Hovnanian David Weekley Shea
M/I Ryland Ryan (NVR) Richmond American
Beazer D.R. Horton Highland Pulte Lennar
Toll Brothers received the highest score among the largest 133 builders in the country, based on
a study of 43,200 new home shoppers in the nation’s top 27 housing markets.
3 Months Ended October 31, Fiscal Year Ended October 31,
($ in millions), except Avg Prices 2015 2014 % Change 2015 2014 % Change
Contracts
Units 1,437 1,282 12% 5,910 5,271 12%
Dollars $1,253 $971 29% $4,956 $3,897 27%
Avg price ($ in 000s) $872 $757 15% $838 $739 13%
Backlog
Units 4,064 3,679 10% 4,064 3,679 10%
Dollars $3,504 $2,720 29% $3,504 $2,720 29%
Avg price ($ in 000s) $862 $739 17% $862 $739 17%
Deliveries
Units 1,820 1,807 1% 5,525 5,397 2%
Dollars $1,437 $1,351 6% $4,171 $3,912 7%
Avg price ($ in 000s) $790 $747 6% $755 $725 4%
TOLL BROTHERS RESULTS
8
9
• Housing market is on solid foundation. Slow and steady demand acceleration boding well for the long-term health of the market
• Increasing but still depressed volumes of new and existing home sales
• Improving job growth with little wage growth
• Continued population growth through recession and recovery
• Household formations are increasing
• Seven years of pent-up demand releasing
• Mortgage market has improved. Rates remain low. 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 some markets
• Constrained capital availability favors largest builder
• Rising home prices improve home equity of potential buyers
Liseter, Newtown Square, PA
CURRENT U.S. HOUSING MARKET
10
NATIONWIDE FOOTPRINT POSITIONS US FOR GROWTH
* As of October 31, 2015
19 STATES, 50 MARKETS
North
Mid-Atlantic
South
West
California
City Living
R E G I O N S / S e l l i n g C o m m u n i t i e s
Chicago Hartford
Austin
Dallas Phoenix
San Francisco
Philadelphia
Charlotte Raleigh
Ft . Myers West Palm Beach
Los Angeles
Naples
Las Vegas
San Diego
Miami
Detroit
Palm Springs
Denver
San Antonio Jupiter
Reno
Jacksonville
Minneapolis
San Jose
Houston
Seattle
Tucson
Fort Collins
Boca Raton
Sacramento
Orlando
Wilmington
Washington DC
Princeton New York
Boston
68
64
56
64
29
7
$163
$286 $313 $314 $326 $328 $329
$365 $369 $377 $382
$464 $478
$531
$755
LGI DR Horton M/I Beazer Lennar KB Home Pulte Meritage NVR MDC Hovnanian TaylorMorrison
CalAtlantic TRI Pointe TollBrothersFY 2015
Average Delivered Home Price* ($000)
ONLY NATIONAL HOMEBUILDER FOCUSED ON LUXURY MARKET
Toll’s main competitors are small private builders, not the larger public builders.
* Updated based on most recent reported fiscal-year-end deliveries. 11
TOLL HOME PRICES FY 2015* (by unit deliveries)
2%
60%
20%
18%
Under $300,000
$300,000 to $749,999
$750,000 to $999,999
Over $1,000,000
*Numbers may not add due to rounding in units
62% Under
$750,000
12
13
• Move-up
• Empty Nester
• Active Adult
• Second Home
• Urban-Infill
• Urban Redevelopment
• Golf Course & Country Club
• High-Rise
• Suburban High Density
• Urban & Suburban Rental
THE WIDEST VARIETY OF HOMES IN THE INDUSTRY
64%
16%
17%
4%
FY 2015
91%
8% 1%
FY 2000
PRODUCT DIVERSIFICATION (by unit deliveries)
Single Family Attached Age Qualified City Living 14
M OV E - U P
15
Chapel Hill at Sparta, Sparta, NJ
Casabella at Windermere, Windermere, FL E M P T Y N E S T E R
16
AC T I V E A D U LT Anthem Ranch by Toll Brothers, Broomfield, CO
17
Gale Ranch, San Ramon, CA M A S T E R P L A N N E D
18
SECOND HOME
19
Aviano® at Desert Ridge, Phoenix, AZ
20
URBAN REDEVELOPMENT Pierhouse at Brooklyn Bridge Park, Brooklyn, NY
SUBURBAN HIGH DENSITY
21
URBAN INFILL
22
23
Parc Riverside, Washington, DC
Parc at Plymouth Meeting, Plymouth Meeting, PA
The Morgan at Provost Square, Jersey City, NJ
URBAN & SUBURBAN RENTAL
23
* As of October 31, 2015 24
• Formed in 2001 as the urban development division of Toll Brothers, Inc.
• Development experience includes new and redeveloped mid- and high-rise condominiums, townhomes, apartments, urban infill, brownfields, and mixed-use communities
• Metro New York Urban Division began in Hoboken, NJ in 2003 and expanded into New York City in 2004, with projects in Manhattan, Brooklyn, and Queens
• Since inception, the City Living division has built and sold more than 3,800 units in 29 buildings, with more than 700 units in 9 buildings under construction and over 1,100 units in 7 buildings in planning in metro New York City, Washington DC and Philadelphia*
400 Park Avenue South, New York, NY 1110 Park Avenue, New York, NY
FOCUS ON LAND
• One of the largest land developers in the U.S.
• Control 44,253 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 land shortages in our lot-constrained markets
• All land deals approved at corporate headquarters by senior management
* As of October 31, 2015 25
Parkland Golf and Country Club, Parkland, FL
25
BUILDING ON A SOLID LAND POSITION
2000 2001 2002 2003 2004 2005 Q2 2006 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Owned Optioned
48,628 47,167 44,253
33,118
39,146 40,844
48,058
60,189
83,126
91,207
59,251
39,784
31,917 34,852 37,497
40,350
73,768
8,381
35,872
Lots Owned and Optioned
16,500 Finished Lots at 10/31/15
Fiscal Year End 26
146 155
170
200
220 230
300 315
273
200 195
215 224
232
263
288
NUMBER OF SELLING COMMUNITIES
27
At Fiscal Year End
JOHN BURNS’ SUBMARKET DESIRABILITY INDEX May 2015
Submarket Desirability Index: The weighted-average Submarket Desirability Index for each builder denotes which builders' communities are in the best locations within each market.
Rank Wtd Avg Submarket Desirability Index
1 Toll Brothers 3.33
2 Taylor Morrison 2.93
3 Standard Pacific 2.86
4 K Hovnanian 2.85
5 Pulte Group 2.82
6 M/I Homes 2.72
7 Ryland 2.66
8 Meritage 2.58
9 Beazer 2.55
10 Lennar 2.53
11 Tri Pointe 2.46
12 KB Homes 2.43
13 DR Horton 2.34
14 M. D. C. Holdings 2.32
15 William Lyon 2.32
16 NVR 2.10
28
HOMEBUILDER SCHOOL QUALITY INDEX
9.06 8.88 8.40
7.30 6.89 6.82 6.67
6.33 5.87
5.59 5.47 5.47 5.44
4.75 4.20 4.11
3.66
1.17
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
TOL WCIC TMHC MHO TPH CAA HOV PHM NVR LEN MTH WLH BZH MDC DHI CCS KBH LGIH
Average School District Rating (0-10 Scale)
Source: Raymond James, “’Back to School, Episode IV’: Our Expanded Land Analysis of Public Homebuilders” U.S. Research, October 20, 2015 29
• Toll’s luxury systems developed over 40 years
• Buyers choose from hundreds of structural and designer options
• In FY 2015 the average buyer added approximately $134,000 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
CUSTOM HOMES BUILT USING HIGH -VOLUME TECHNOLOGY
30
Regency at Wappinger – Villas, Wappinger Falls, NY
TOLL INTEGRATED SYSTEMS – PANEL & TRUSS PLANT
• 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
31
• 22% of buyers paid cash
• Served 57% of Toll buyers using mortgages in FY 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 FY 2015 FICO score of 756 on conforming loans and jumbo loans
• Average LTV of 70% FY 2015
• 41.7% of buyers used jumbo mortgages FY 2015
TBI MORTGAGE
Toll Brothers at Amalfi Hills, Yorba Linda, CA
32
DIVERSIFYING INCOME STREAMS
Generated $88.7 million of other & JV income FY 2015
Project $100 million to $150 million in FY 2016
Sustainable, recurring income
Suburban Home Building
(For Sale)
Land Sales & Development
City Living (Condo for Sale)
Apartment Living (Rental)*
Ancillary Businesses
- 50 markets in 19 states • Move up • Empty nester • Active Adult • Second home • Master-
planned resort style
• Suburban high density
- Gibraltar Capital and Asset Management
- TBI Mortgage - Golf Course
Development & Management
- Toll Landscaping - Security - Title
- Located in Urban and Suburban locations
- 3 projects (1,102 units) leasing
- 4 projects (1,834 units) under development
- 11 projects (3,496 units) in the pipeline
- Manhattan, Brooklyn, and Queens, NYC
- Hoboken and Jersey City, NJ
- Metro Washington, DC
- Philadelphia, PA
- Shapell (CA) - Northgrove at
Spring Creek (TX)
- Woodson's Reserve (TX)
- Travisso (TX) - Sienna South
(TX) - Other lot sales
to 3rd parties
Revenue JV & other income Revenue & JV JV & other income Other income
On Income Statement:
33 *As of October 31, 2015
Briarcliff at Magnolia, Seattle, WA
34
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)
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, a distressed asset acquirer
• Developing rental apartments in Northeast and Mid-Atlantic and looking to expand nationally
• Significantly expanding TX presence
WHAT’S NEW SINCE THE DOWNTURN?
35
• Investing in Apartment Development to maximize synergies of our operations and hedge for-sale cyclicality
• Developed & operate 1,441 units*
• Leasing commenced at three communities consisting of 1,102 units
• 1,416 Toll Brothers Apartment Living units under construction in three projects from Massachusetts to Washington DC*
• 418 Toll Brothers Campus Living units under development at UMD in College Park, MD*
• Control land for 3,496 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
• Plan to expand business into Toll markets nationally
TOLL APARTMENT LIVING
* As of October 31, 2015
Parc at Plymouth Meeting, Plymouth Meeting, PA
San Francisco
NorCal
SoCal
San Jose Gilroy Evergreen
Orinda Alamo Creek
Los Angeles
Gale Ranch
Plum Canyon
San Diego
Long Beach
Carlsbad
Porter Ranch Thousand Oaks
Yorba Linda
Laguna Niguel
36
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
• Currently selling from 15 former Shapell communities
ACQUISITION OF SHAPELL HOMES: Leading Coastal California Homebuilder and Developer
Geographic Footprint Highly Attractive and Proven Lot Locations in NorCal and SoCal
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.
37
$350
$500
$400
$350
$250
$420 $400
$250
$350
$288
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025FY
Public Debt (Senior)
Convertible Debt (Senior)**
Bank Debt †
$ millions
* As of October 31, 2015 ** Convertible notes mature in September 2032. Holders’ first put right is December 2017 at a conversion price of $49.08
† Bank Debt includes $350 million of outstanding draws on our credit facility as of 10/31/2015 due in FY 2018 and our $500 million term loan due in FY 2019
MAINTAIN CONSERVATIVE DEBT MATURITIES* Accessing Capital For Growth
38
No corporate debt maturities until October 2017
46.0% 48.2%
46.2%
40.9%
35.5%
27.6%
31.8%
26.8%
12.6%
7.4%
13.6% 15.0%
23.6%
32.5%
47.0%
41.1% 39.5%
Net-Debt-To-Capital* 2000-2015
STRONG BALANCE SHEET PROVIDES ROOM TO GROW
* 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.
39
At Fiscal Year End
DEMOGRAPHICS FAVOR THE INDUSTRY
40
Toll Brothers at Hidden Canyon , Lake Forest, CA
UNEMPLOYMENT RATES
0
2
4
6
8
10
12
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
Jul-
15
Un
emp
loym
ent R
ate
(%)
November 2015 Civilian Labor Force Rate 5.0%
College Graduate Rate 2.5%
Civilian Labor Force
College Graduates
Source: U.S. Bureau of Labor Statistics 41
$100,000+ INCOME HOUSEHOLDS GROWING 3 TIMES FASTER THAN ALL U.S. HOUSEHOLDS
1980 2014
82.4
124.6
All Households (mill)
1980 2014
11.3
30.8
$100,000+ Income Households (mill)
Source: U.S. Census Bureau (P60-252)
(2014 Dollars)
42
1,585,000
767,000
818,000
1970-2007 2008-2014
Annual Shortfall in Production
(est.) Average Annual
Production
Source: U.S. Census Bureau
Total estimated construction shortfall of 5.7 million houses from 2008-2014.
Actual Average Annual Housing
Starts
Average Annual Housing Starts
BASIC DEMOGRAPHICS DRIVE AN INDUSTRY EMERGING FROM ITS SLUMBER
43
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)
0.00
800.00
1,600.00
2,400.00
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 13 140
20,000
40,000
60,000
80,000
100,000
120,000
Source: U.S. Census Bureau
Ho
use
ho
lds
(00
0)
Ho
usin
g Starts (00
0)
N u m b e r o f H o u s e h o l d s H a s G r o w n 7 8 % S i n c e 1 9 7 0
Total Single and Multi- Family Housing Starts
Total Households 44
WHY TOLL BROTHERS?
• A proven management team with a tremendous track record
• The dominant player with few competitors in the luxury market
• Control 44,253 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
• Diversified move-up, active adult, and high-density product lines
• The nation's growing number of affluent households
• Strongest buyer profile in the industry
* As of October 31, 2015 45
