FROM HIS VACATION HOME amidst snow-covered pines in Telluride, Colo., Toll Brothers CEO Bob Toll reflected on 2006, saying it was “not bad.” Toll Brothers increased its revenues 5.7 percent to $6.12 billion, though its closings fell 1.9 percent to 8,601 units, placing the Horsham, Pa.–based builder 14th on the 2006 BUILDER 100, the same spot it has occupied three years running.
“You can't hate the year when you make $687 million [net income],” Toll says. “On the other hand, that was off a backlog that to a large extent had been built in early 2005.”
Toll Brothers was able to generate better revenues despite fewer closings, in part because of a product mix made up of half move-up units along with another 35 percent split between luxury/custom homes and vacation homes. Only 5 percent of Toll's closings were entry-level, with active adult housing filling in the remaining 10 percent. Toll was not the only builder to enjoy a solid or even big year despite market conditions that many builders, analysts, and economists say are signs of impending doom and gloom.
On the closings side, The Enterprise Cos., a Chicago-based builder specializing in high-rise condominiums and townhouses, led all companies with a 138.7 percent increase, moving from 143 on the Next 100 list to 64 on the BUILDER 100. All 1,215 units closed by Enterprise were condos in Chicago. Ron Shipka Sr., the company's chairman, says that long lead times on high-rises, often two years, means that the company's great numbers for 2006 closings were built off sales from 2005 and 2004.
Still, 2006, “was absolutely terrific,” Shipka says. “A lot of stars lined up on these projects for us. It worked out in terms of deliveries, in terms of production, and definitely in terms of sales.”
THE WAY IT WAS The king of the BUILDER 100 hill also enjoyed a very good year measured in closings and revenue. For the sixth straight year, D.R. Horton checked in atop the list, closing 3.94 percent more homes in 2006 than in 2005, the company's second year as the only 50,000-unit builder. In addition, Horton saw its revenues improve 5 percent.
Though D.R. Horton remains the biggest home builder, Lennar made the most money ($16.267 billion in revenue). Lennar finished second in closings with a 17.02 percent increase, closing 38,477 single-family homes, 7,191 multifamily homes, and 3,900 condos.
Pulte, with closings down 9.08 percent and its revenue off 3 percent, fell from the second spot to the third. The company saw flat sales carrying over from 2005 through February 2006 when “all of a sudden, we saw a 25 percent speed bump in March,” says Richard Dugas Jr., president and CEO.
“The first half to two-thirds of the year were marked by relatively good earnings and closings, with weak sign-ups,” Dugas says. “Then the lack of sign-ups, starting in March, began to catch up with us in the fourth quarter.”
Centex finished fourth, after seeing its revenues fall 2 percent year over year and its sales decline each quarter over the past year by about 25 percent, Centex chairman and CEO Tim Eller says.