Toll Brothers buys Seattle area homebuilder

AP News
Posted: Nov 21, 2011 4:53 PM
Toll Brothers buys Seattle area homebuilder

Luxury homebuilder Toll Brothers Inc. is expanding into a new state for the first time since the days of the housing boom.

The Horsham, Pa.-based company said Monday that it bought privately held Seattle-area builder CamWest Development LLC for an undisclosed amount.

Toll Brothers last made a foray into markets in a new state in 2005, when it entered Minnesota. The builder's last acquisition also was in 2005, when it bought the Orlando, Fla., division of Landstar Homes.

CEO Douglas Yearley Jr. said the CamWest acquisition does not represent the start of a broader expansion push by Toll, which operates in 20 states.

"We have been looking at Seattle for a decade, so this was a bit of a long time coming, and we found the right opportunity," Yearley said.

While Toll had been eyeing the Seattle market for years, it was put off by concerns over how to ramp up operations in a market where land can be hard to find and difficult to clear for new construction.

The CamWest deal not only gains Toll established operations in a new market, but a portfolio of some 1,300 or so land parcels, giving Toll an immediate jump start, Yearly said.

"They have a terrific land position in a difficult land market," he said.

CamWest, based in Kirkland, Wash., develops luxury single-family houses, condominiums and townhouses. The average selling price for homes in CamWest's backlog is about $500,000.

Toll said the acquisition will add to its earnings in fiscal year 2012, which began this month. For the 2011 calendar year, CamWest expects to deliver about 180 homes, generating $90 million in revenue.

Earlier this month, Toll reported home deliveries in the August-to-October quarter rose 8 percent from a year earlier, while net signed contracts grew by 15 percent. The company ended fiscal 2011 with 1 percent fewer home deliveries, but a 7 percent increase in net signed contracts.

Uncertainty over the U.S. economy, high unemployment and concerns that U.S. home prices have yet to hit bottom have kept many home buyers on the sidelines this year. That led to a lackluster spring-and-summer peak homebuying season and has placed U.S. sales of new homes on track to be the worst on records dating to 1963.

Sales of new homes rose in September after four straight monthly declines, but only after builders cut their prices because of depressed demand.

Yearley said he's impressed with how the Seattle market has held up during the housing downturn, and cites employment growth and the presence of large companies such as Boeing Co. and Microsoft Corp. as factors that bode well for home sales.

CamWest founder Eric Campbell said all of the company's home communities are starting to sell out, which prompted the builder to look for financing to build more communities.

Financing has been tough to come by for private builders _ a trend that has helped Toll and other publicly traded homebuilders take market share from smaller rivals during the housing downturn. Campbell said he was concerned that any financing he could get would not allow the company to be as aggressive as it would like to be, leaving the builder vulnerable to competition from a larger rival.

Ultimately, he said, a buyout by the nation's largest builder of luxury homes proved the best option.

"When this opportunity came about, we just saw it as a really great strategic fit," Campbell said.

Shares of Toll Brothers rose 7 cents to close at $18.93.