Toll Brothers Buys Sabal Homes, Sets Foot In South Carolina
Zacks Investment Research | Sep 11, 2019 09:30PM ET
Toll Brothers, Inc. (NYSE:TOL) continues its geographical expansion spree with the recent acquisition of Sabal Homes, one of the top private homebuilders in South Carolina. With the acquisition, the company expanded its footprint in the markets of Charleston, Greenville and Myrtle Beach, SC. However, the terms of the deal have been kept under wraps.
What Toll Brothers Will Gain From Sabal Homes
Founded in 2005, Sabal Homes — serving first-time, move-up and move-down buyers — has built more than 1,375 homes in South Carolina since its inception. It had approximately $30 million in backlog, consisting of 80 homes, with an average price of $380,000, as of the date of the acquisition.
With this backlog, Toll Brothers acquired approximately 1,600 lots owned and controlled throughout Charleston, Greenville and Myrtle Beach. The acquisition will boost Toll Brothers' selling community count by approximately 11 as of the closing date.
Expansion Efforts to Drive Revenues
Notably, the company’s revenues in the last reported quarter declined 7.7% year over year due to lower deliveries, partly offset by higher average selling prices. Toll Brothers mostly offers luxury homes. Demand in the high-end housing market has been declining in recent times, thanks to reduced activity of wealthy overseas purchasers, many of whom seek out amenity-rich, full-service communities with on-site property management.
This is mostly affecting California, which typically accounts for more than one-third of purchases by China buyers, and products that are sold at a high price point in New York. Again, reduced SALT deductions — particularly in high-tax states like California, New York, New Jersey and Connecticut — have been impacting higher-end real estate markets.
In order to overcome this situation, Toll Brothers has been expanding geographically, having different price points. In May, the company acquired Sharp Residential, one of the largest private homebuilding companies in Atlanta, to expand presence in the market in Atlanta, GA. Now, the Sabal Homes buyout is consistent with Toll Brothers’ strategy to broaden its product lines and price points.
In 2019, Toll Brothers entered markets in Atlanta, Salt Lake City and Portland, OR. It is expanding northward on Florida's west coast into Tampa. Meanwhile, the company has been serving urban and suburban renters. As of third-quarter fiscal 2019, through Toll Brothers Apartment Living, it had a pipeline of 19,000 units in various stages of approval and development across the country.
The company’s solid land position places it well to meet the growing demand in these regions, thus giving it a competitive edge over its peers, who are presently facing land availability constraints.
Get The News You Want
Shares of Toll Brothers have gained 16.6% year to date, comparing unfavorably with its Original post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.