toll brothers corporate profile
TRANSCRIPT
CORPORATE PROFILEApril 1, 2015
2
Slide #1: Logo
Slide #2: Table of Contents & Contact Information
Slide #3: Statement of Forward-Looking Information
Slide #4: Overview
Slide #5: Brand Name
Slide #6: Most Admired Home Building Company
Slide #7: America’s Most Trusted Home Builder™
Slide #8: Toll Brothers Results
Slide #9: Current U.S. Housing Market
Slide #10: Key Metrics
Slide #11: Basic Demographics
Slide #12: Nationwide Footprint
Slide #13: Only National HB Focused on Luxury Market
Slide #14: Toll Home Sale Prices FY 2014
Slide #15: Widest Variety of Homes
Slide #16: Product Diversification
Slide #17: Move-Up
Slide #18: Empty Nester
Slide #19: Active Adult
Slide #20: Master Planned
Slide #21: Second Home
Slide #22: Urban Redevelopment
Slide #23: Suburban High Density
Slide #24: Urban & Suburban Rental
Slide #25: Urban Infill
Slide #26: Current City Living Pipeline
Slide #27: Future City Living Pipeline
Slide #28: Focus on land
Slide #29: Building a Solid Land Position
Slide #30: Number of Selling Communities
Slide #31: Submarket Desirability Index
Slide #32: Homebuilder School Quality Index
Slide #33: ESE
Slide #34: High-Volume Technology
Slide #35: Toll Architecture
Slide #36: Toll Integrated Systems
Slide #37: TBI Mortgage
Slide #38: Diversifying Income Streams
Slide #39: Other Income & JV Income
Slide #40: What’s New Since The Downturn?
Slide #41: Toll Apartment Living
Slide #42: Current Apartment Living Pipeline
Slide #43: Future Apartment Living Pipeline
Slide #44: Shapell Homes Acquisition
Slide #45: Shapell: Lots & Communities
Slide #46: Overview of Gibraltar Capital
Slide #47: Superior Capital Market Access
Slide #48: Maintain Conservative Debt Maturities
Slide #49: Toll Brothers Revenue
Slide #50: Cash & Marketable U.S. Treasury
Securities
Slide #51: Net-Debt-to-Capital
Slide #52: Capitalization
Slide #53: Long Term Fundamentals
Slide #54: Unemployment Rates
Slide #55: U.S. Births
Slide #56: $100,000 Income Households
Slide #57: Housing Starts vs. Household Growth
Slide #58: Why Toll
Slide #59: Home
TABLE OF CONTENTS & 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 first quarter ended January 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 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; 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;
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; 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.
STATEMENT OF FORWARD-LOOKING INFORMATION
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4
• Founded in 1967 and publicly traded since 1986
• Nation’s leading luxury home builder
• Average delivered home price of $725,000 in FY 2014 was
more than double the average of the other public
homebuilders
• Builds in 19 states and approximately 50 markets
• Balanced footprint across key Eastern, Western and
Southern markets
• Expanding urban presence in New York, Washington, DC
and Philadelphia
• Serves urban and suburban, luxury move-up, empty
nester, and active-adult buyers
• Strong balance sheet and credit ratings
• Executive & director beneficial ownership of approximately
10.5% at January 15, 2015
OVERVIEW
The Hills at Parker, Parker, CO
THE #1 BRAND IN LUXURY HOME BUILDING
5
FORTUNE’S MOST ADMIRED
HOME BUILDING COMPANY 2015
Rank Overall Score
1 Toll Brothers 6.23
2 Lennar 6.00
3 Standard Pacific 5.78
4 NVR 5.34
5 D.R. Horton 4.99
6 PulteGroup 4.98
7 Taylor Morrison Home 4.63
8 Ryland Group 4.39
9 KB Home 4.29
6
7
2015 AMERICA’S MOST TRUSTED HOME BUILDER™
Disclaimer: Toll Brothers received the highest numerical score in the United States in the proprietary Lifestory Research 2015 America’s
Most Trusted Home Builder™ study. Study based on 43,200 new home shoppers in 27 markets. Proprietary study results are based on
experiences and perceptions of consumers surveyed between January and December 2014.
Toll
Brothers
Standard Pacific Ashton Woods
MeritageTaylor MorrisonDrees
K. HovnanianDavid WeekleyShea
M/I Ryland Ryan (NVR)Richmond
American
Beazer D.R. HortonHighland Pulte Lennar
Toll Brothers received the highest score among
the largest 133 builders in the country, based
on a study of 43,200 new home shoppers in
the nation’s top 27 housing markets.
3 Months Ended January 31, Fiscal Year Ended October 31,
($ in millions), except Avg Prices 2015 2014 % Change 2014 2013 % Change
Contracts
Units 1,063 916 16.0% 5,271 5,294 -0.4%
Dollars $873 $702 24.4% $3,897 $3,634 7.2%
Avg price ($ in 000s) $821 $766 7.2% $739 $686 7.7%
Backlog
Units 3,651 3,667 -0.4% 3,679 3,679 0%
Dollars $2,739 $2,688 1.9% $2,720 $2,630 3.4%
Avg price ($ in 000s) $750 $733 2.4% $739 $715 3.4%
Deliveries
Units 1,091 928 17.6% 5,397 4,184 29.0%
Dollars $854 $644 32.6% $3,912 $2,674 46.3%
Avg price ($ in 000s) $782 $694 12.8% $725 $639 13.5%
TOLL BROTHERS RESULTS
8
9
• Still in the early stages of a recovery
• Momentum continues to build as spring selling season starts
• Strong wage and job 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
The Fairhaven, Regency at Yardley, Yardley, PA
CURRENT U.S. HOUSING MARKET
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Q1 2015
Pre-tax Income (000s) ($117,187) ($29,366) $112,942 $267,697 $504,582 $124,023
EBITDA (000s)* $9,853 $74,058 $226,049 $408,145 $671,088 --
Cash and Marketable Securities
(000s)$1,236,927 $1,139,912 $1,217,892 $825,480 $598,341 $510,922
Selling Community Count 195 215 224 232 263 258
Owned & Optioned Lots 34,852 37,497 40,350 48,628 47,167 45,300
Gross Margin** 20.7% 23.3% 24.0% 24.6% 25.3% 27.3%
Operating Margin -9.7% -3.1% 3.4% 7.5% 10.2% 11.4%
Other Income (000s) $51,783 $22,209 $49,512 $66,630 $107,333 $26,917
KEY METRICS IMPROVING
Through January 31, 2015
*EBITDA for Q1 2015 will be updated upon release of 10-Q
**Excluding interest and write-downs
10
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
11
12
19 STATES, 50 MARKETS
Austin
Dallas
Phoenix
San Francisco
Philadelphia
CharlotteRaleigh
Ft . MyersWest Palm Beach
New York
Washington DC
Los Angeles
Naples
Las Vegas
San Diego
Hartford
Miami
Detroit
Chicago Wilmington
Princeton
Boston
Palm Springs
Denver
San Antonio Jupiter
Reno
Jacksonville
Orlando
Minneapolis
San Jose
Houston
Seattle
Tucson
Fort Collins
Boca Raton
Sacramento
North
Mid-Atlantic
South
West
City Living
R E G I O N S
NATIONWIDE FOOTPRINT POSITIONS
US FOR GROWTH
$272 $285
$326 $328 $329 $333$369 $377
$393
$478
$725
$782
DR Horton Beazer Lennar KB Home Pulte Ryland NVR MDC Hovnanian St Pac TollBrothersFY 2014
TollBrothersQ1 FY2015
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.13
TOLL HOME PRICES FY 2014*(by unit deliveries)
3%
63%
18%
16%
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
66%
Under
$750,000
14
15
• 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
68%
15%
12%
5%
FY 2014
91%
8%1%
FY 2000
PRODUCT DIVERSIFICATION(by unit deliveries)
Single Family Multi-Family Age Qualified City Living16
MOVE-UP
17
Chapel Hill at Sparta, Sparta, NJ
Casabella at Windermere, Windermere, FL
EMPTY NESTER
18
ACTIVE ADULT
19
Regency at Monroe, Monroe Township, NJ
19
Gale Ranch, San Ramon, CAMASTER PLANNED
20
SECOND HOME
21
Aviano® at Desert Ridge, Phoenix, AZ
22
URBAN REDEVELOPMENTPierhouse at Brooklyn Bridge Park, Brooklyn, NY
SUBURBAN HIGH DENSITY
23
24
Parc Riverside, Washington, DC
Parc at Plymouth Meeting, Plymouth Meeting, PA
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
Left to
Settle
Est. Remaining
RevenueConstruction Start Open for Sale 1st Settlement
Maxwell C (Hoboken) 210 149 61 $65 million Q1 2012 Q2 2013 Q2 2014
2400 South – Towns (Phila) 68 66 2 $1 million Q2 2012 Q2 2012 Q4 2013
160 East 22nd (Manhattan) 81 78 3 $7 million Q3 2012 Q2 2013 Q4 2014
400 Park Ave South (Manhattan) 81 - 81 $356 million Q3 2012 Q4 2014 Q1 2016
410 at Society Hill (Phila) 55 - 55 $57 million Q3 2013 Q4 2013 Q4 2015
Pierhouse at BBP (Brooklyn)** 106 - 106 $489 million Q3 2013 Q2 2014 Q1 2016
1110 Park Ave (Manhattan) 9 - 9 $125 million Q3 2013 Q3 2014 Q4 2015
The Sutton (Manhattan)*** 113 - 113 $268 million Q3 2014 Q1 2015 Q4 2016
2400 South – Condos (Phila) 59 - 59 $31 million Q4 2013 Q4 2013 Q3 2015
Hampden Row (Bethesda) 55 - 55 $76 million Q3 2014 Q1 2015 Q3 2016
TOTAL 837 293 544 $1.47 billion
*Projects open for sale as of January 31, 2015
** Will be delivered in joint venture; data is for condo units only
*** Will be delivered in joint venture
26
FUTURE CITY LIVING PIPELINE*
Estimated Timing
Total Units Estimated Revenue Construction Start Open for Sale 1st Settlement
55 West 17th Street (Manhattan) 53 $184 million Q1 2015 Q4 2015 Q1 2017
Hudson Tea E (Hoboken) 236 $191 million Q1 2015 Q1 2016 Q2 2017
St. Luke’s (Manhattan) 35 $122 million Q3 2015 Q2 2016 Q4 2017
Provost Square (Jersey City) 501 $316 million Q4 2015 Q3 2016 Q4 2017
122 East 23rd (Manhattan) 103 $498 million Q1 2016 Q4 2016 Q3 2018
355 Broadway (Manhattan) 98 $345 million Q2 2016 Q4 2016 Q4 2018
Hudson Tea D (Hoboken) 99 $83 million Q2 2016 Q1 2017 Q1 2018
Maxwell D (Hoboken) 76 $65 million Q1 2017 Q4 2017 Q4 2018
82 King Street (Manhattan) 145 $369 million Q2 2018 Q1 2019 Q3 2020
TOTAL 1,346 $2.17 billion
27*Projects that will open for sale after January 31, 2015
FOCUS ON LAND
• One of the largest land developers in the U.S.
• Control 45,300 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
* As of January 31, 201528
Parkland Golf and Country Club, Parkland, FL
28
BUILDING ON A SOLID LAND POSITION
2000 2001 2002 2003 2004 2005 Q2 2006 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 2015
Owned Optioned
48,628 47,16745,300
33,118
39,14640,844
48,058
60,189
83,126
91,207
59,251
39,784
31,91734,852 37,497
40,350
73,768
9,158
36,142
Lots Owned and Optioned
15,600 Finished
Lots at 1/31/15
Fiscal Year End
29
146155
170
200
220230
300315
273
200 195
215224
232
263 258
290
NUMBER OF SELLING COMMUNITIES
*Midpoint of estimated range
*
30
At Fiscal Year End
JOHN BURNS’ SUBMARKET DESIRABILITY INDEXNovember 2014
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 3.34
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
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HOMEBUILDER SCHOOL QUALITY INDEX
8.84
7.43 7.18 7.12 6.91 6.78 6.676.17
5.89 5.84 5.735.19
4.90
4.03
0
1
2
3
4
5
6
7
8
9
10
TOL TMHC SPF PHM WY MHO MTH RYL LEN MDC HOV BZH DHI KBH
Average School District Rating
(0-10 Scale)
Source: Raymond James, “’Back to School 3.0’: Our Most Detailed Land Analysis Yet,” U.S. Research, July 11, 201432
33
• 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 an in-house engineering company
allows:
Superior land acquisition / evaluation / support
Maximize premium lots
Maximize land value – not total home sites
ESE
• 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
CUSTOM HOMES BUILT USING HIGH -VOLUME
TECHNOLOGY
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Regency at Wappinger – Villas, Wappinger Falls, NY
35
• Designs customized homes for
high volume production
• Introduces 70 new models
annually
• Pre-designs every home and
option to improve production
quality and efficiency
TOLL ARCHITECTURE
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
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• 21% of buyers paid cash
• Served 53% of Toll buyers using mortgages
in Q1 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 Q1 2015 FICO score of 754 on
conforming loans and jumbo loans
• Average LTV of 71% in Q1 2015
• 39% of buyers used jumbo mortgages
in Q1 2015
TBI MORTGAGE
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Toll Brothers at Amalfi Hills, Yorba Linda, CA
37
DIVERSIFYING INCOME STREAMS
Generated $26.9 million of other & JV income in Q1 2015
Project $75 million to $90 million in FY 2015
Sustainable, recurring income
Suburban Home Building
(For Sale)
Land Sales &Development
City Living(Condo for Sale)
Apartment Living(Rental)*
Ancillary Businesses
- 50 markets in
19 states
• Move up
• Empty nester
• Active Adult
• Second home
• Master-
planned
resort style
• Suburban
high density
- Gibraltar
Capital and
Asset
Management
- TBI Mortgage
- Golf Course
Development &
Management
- Toll
Landscaping
- Security
- Title
- Located in
Urban and
Suburban
locations
- 5 projects
(1,920 units)
under
development
- 9 projects
(2,959 units) in
the pipeline
- Manhattan,
Brooklyn, and
Queens, NYC
- Hoboken and
Jersey City, NJ
- Metro
Washington,
DC
- Philadelphia,
PA
- Shapell (CA)
- Northgrove at
Spring Creek
(TX)
- Woodson's
Reserve (TX)
- Travisso (TX)
- Sienna South
(TX)
- Other lot sales
to 3rd parties
Revenue JV & other income Revenue & JV JV & other income Other income
*As of January 31, 2015
On Income
Statement:
38
OTHER INCOME AND JOINT VENTURE INCOME($ Thousands)
$34,388
$51,783
$22,209
$49,512
$66,630
$107,333
-$10,000
$10,000
$30,000
$50,000
$70,000
$90,000
$110,000
2009 2010 2011 2012 2013 2014
Other Income Joint Venture Income
• 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
Briarcliff at Magnolia, Seattle, WA
40
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
WHAT’S NEW SINCE THE DOWNTURN?
41
• Investing in Apartment Development to
maximize synergies of our operations and
hedge for-sale cyclicality
• Developed & operate 1,441 units*
• 1,502 Toll Brothers Apartment Living units
under construction in Jersey City, NJ;
Washington, DC; Plymouth Meeting, PA; and
East Brunswick, NJ*
• Leasing commenced at two properties
• 418 Toll Brothers Campus Living units under
development in College Park, MD*
• Control land for 2,959 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
TOLL APARTMENT LIVING
*As of January 31, 2015
Parc at Plymouth Meeting, Plymouth Meeting, PA
CURRENT APARTMENT LIVING PIPELINE(Developed in Joint Venture)
* Projects under development as of January 31, 2015
** Student Housing Projects
Estimated Timing
Total Dev. Open For Stab.
Stabilized Location Units Start Occupancy Year
Dulles Greene Herndon, VA 806 1998 1999 2003
Mews at Princeton Junction Princeton, NJ 635 2003 2005 2008
2 Total Stabilized 1,441
Estimated Timing
Total Dev. Open For Stab.
Under Development LocationUnits Start Occupancy Year
Parc Riverside (Phase I) Washington, DC287 2013 2014 2016
Parc at Plymouth Meeting Plymouth Meeting, PA398 2013 2014 2017
The Morgan at Provost Square Jersey City, NJ417 2013 2015 2016
East Brunswick East Brunswick, NJ400 2013 2015 2017
University of Maryland** College Park, MD418 2014 2016 2017
5 Total Under Development 1,920
42
FUTURE APARTMENT LIVING PIPELINE(To Be Developed in Joint Venture)
** Student Housing Projects
Estimated Timing
Total
Units
Dev.
Start
Open For
Occupancy
Stab.
YearLocation
Westborough Woods Boston, MA 249 2015 2016 2017
Parc Riverside (Phase II) Washington, DC 314 2015 2016 2018
French Creek Phoenixville, PA 349 2015 2016 2018
Voorhees Voorhees, NJ 350 2015 2016 2019
Penn State University** State College, PA 268 2015 2017 2017
Union Place Washington, DC 525 2015 2017 2019
Belmont Ashburn, VA 390 2016 2016 2018
Maneely Princeton, NJ 232 2017 2018 2020
Morristown Morristown, NJ 282 2017 2019 2020
9 Projects 2,959
43
San Francisco
NorCal
SoCal
San JoseGilroy
Evergreen
OrindaAlamo Creek
Los Angeles
Gale Ranch
Plum Canyon
San Diego
Long Beach
Carlsbad
Porter RanchThousand Oaks
Yorba Linda
Laguna
Niguel
44
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
ACQUISITION OF SHAPELL HOMES: Leading Coastal California Homebuilder and Developer
Geographic FootprintHighly Attractive and
Proven Lot Locations in
NorCal and SoCal
SHAPELL: OVERVIEW OF LOTS AND COMMUNITIES
02/04/14 Lot Breakdown By Status (02/04/14)
($ in 000s) City Metro Area Backlog Raw Graded Finished WIP Models
Total Lots
Remaining
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
Northern California Subtotal 49 - 1,340 376 57 28 1,850
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
Southern California Subtotal 77 1,497 1,215 236 44 33 3,102
Total 126 1,497 2,555 612 101 61 4,952 Shapell is an active homebuilder in many of the same markets as Toll and adds immediate scale to Toll’s California Division
97.5% of Shapell’s lots have been entitled
45
• 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 Q1 FY 2015, Toll’s investment in Gibraltar was $44.6 million
• In Q1 FY 2015, Gibraltar generated pretax income of $1.0 million
• Wholly/majority own 1,330 improved lots and land for 6,210* future lots at January 31, 2015
46
OVERVIEW OF GIBRALTAR CAPITAL
*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
$300
$400
$350
$250
$420 $400
$250
$288
$500
15 16 17 18 19 20 21 22 23 24FY
Public Debt (Senior)
Convertible Debt (Senior)**
Bank Debt
$ millions
*As of January 31, 2015
**Convertible notes mature in September 2032. Holders’ first put right is December 2017 at a conversion price of $49.08
MAINTAIN CONSERVATIVE DEBT MATURITIES*Accessing Capital For Growth
48
$6,115,000
$4,635,000
$3,148,000
$1,755,000$1,495,000 $1,476,000
$1,883,000
$2,674,000
$3,912,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
TOLL BROTHERS REVENUE($ Thousands)
At Fiscal Year End
49
$689,000$633,000
$900,000
$1,633,000
$1,909,000
$1,237,000$1,146,000
$1,220,000
$825,000
$598,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
TOLL BROTHERS CASH AND MARKETABLE U.S. TREASURY SECURITIES ($ Thousands)
During unprecedented time of industry distress Toll grew cash
At Fiscal Year End50
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%
41.3% 41.5%
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.
51
At Fiscal Year End
Senior Notes
Principal Coupon Maturity
$300 MM 5.150% May 2015
$400 MM 8.910% October 2017
$288 MM 0.500% December 2017**
$350 MM 4.000% December 2018
$250 MM 6.750% November 2019
$420 MM 5.875% February 2022
$400 MM 4.375% April 2023
$250 MM 5.625% January 2024
Total Weighted Average
$2,657 MM 5.255% 4.91 years
$1.035 BN Revolving Credit
Facility $500 MM Term Loan Facility
Due August 2018 Due February 2019■ Citi $100 MM ■ SunTrust $100 MM■ Deutsche Bank $100 MM ■ Sumitomo Mitsui $75 MM
■Royal Bank of
Scotland $100 MM■
US Bank $75 MM■ PNC $100 MM ■ Bank of New York $55 MM■ SunTrust $100 MM ■ Capital One $50 MM■ Capital One $75 MM ■ Wells Fargo $50 MM■ US Bank $75 MM ■ Beneficial Bank $30 MM■ Wells Fargo $75 MM ■ Fifth Third Bank $30 MM■ Bank of America $50 MM ■ PNC $25 MM■ Comerica $50 MM ■ Mega International $10 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 TOTAL $500 MM
CAPITALIZATION*
Toll Brothers, Inc.
First Huntingdon Finance Corp. Toll Brothers Finance Corp.
*As of January 31, 2015
**Convertible notes mature in September 2032. Holders’ first put right is December 2017 at a conversion price of $49.08
52
• 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 capital availability favors largest
builders
LONG TERM INDUSTRY
FUNDAMENTALS FAVORABLE
Pierhouse at Brooklyn Bridge Park, Brooklyn, NY
53
UNEMPLOYMENT RATES
0
2
4
6
8
10
12
Ja
n-9
2
Ju
l-9
2
Ja
n-9
3
Ju
l-9
3
Ja
n-9
4
Ju
l-9
4
Ja
n-9
5
Ju
l-9
5
Jan-9
6
Ju
l-9
6
Jan-9
7
Ju
l-9
7
Ja
n-9
8
Ju
l-9
8
Ja
n-9
9
Ju
l-9
9
Ja
n-0
0
Ju
l-0
0
Ja
n-0
1
Ju
l-0
1
Ja
n-0
2
Ju
l-0
2
Ja
n-0
3
Ju
l-0
3
Ja
n-0
4
Ju
l-0
4
Ja
n-0
5
Ju
l-0
5
Ja
n-0
6
Ju
l-0
6
Ja
n-0
7
Ju
l-0
7
Ja
n-0
8
Ju
l-0
8
Ja
n-0
9
Ju
l-0
9
Ja
n-1
0
Ju
l-1
0
Ja
n-1
1
Ju
l-1
1
Ja
n-1
2
Jul-12
Ja
n-1
3
Jul-13
Ja
n-1
4
Ju
l-1
4
Ja
n-1
5
Un
em
plo
ym
ent R
ate
(%
)
February 2015Civilian Labor Force Rate 5.5%College Graduate Rate 2.7%
Civilian Labor Force
College Graduates
Source: U.S. Bureau of Labor Statistics54
2.75
2.95
3.15
3.35
3.55
3.75
3.95
4.15
4.35
4.55
4.75
Bir
ths
(M
illi
on
s)
U.S. BIRTHS 1954-2013
Generation Z
(Ages 10 – 1)Millennials
(Ages 35 – 11)Baby Boomers
(Ages 61 – 51)
Generation X
(Ages 50 - 36)
Source: CDC.gov
U.S. BIRTHS
55
$100,000+ INCOME HOUSEHOLDS GROWING 3 TIMES
FASTER THAN ALL U.S. HOUSEHOLDS
1980 2013
82.4
123.0
All Households (mill)
1980 2013
10.8
27.7
$100,000+ Income Households (mill)
Source: U.S. Census Bureau (P60-249)
(2013 Dollars)
56
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 14
0
20,000
40,000
60,000
80,000
100,000
120,000
Source: U.S. Census Bureau
Household
s (
000)
Housin
g S
tarts
(000)
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
Households57
WHY TOLL BROTHERS?
• A proven management team with a tremendous track record
• The dominant player with few competitors in the luxury market
• Control 45,300 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 January 31, 2015
58
59
59