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Toll Brothers to Develop Luxury Apartment Community in Dallas

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Toll Brothers, Inc.’s TOL subsidiary, Toll Brothers Apartment Living announced a new joint venture with real estate investment firm, Canyon Partners Real Estate LLC, to develop Westerly — a 331-unit, mixed use, luxury apartment community. Located in the West Dallas submarket, the community will be easily accessible to Trinity Groves — one of Dallas’ most desirable dining and entertainment districts.

Importantly, for the construction of this seven-story midrise wood frame and podium wrap building, the joint venture has secured a $42-million loan. The construction of the community is projected to commence in spring 2021.

Toll Brothers currently has more than 850 units under construction within three rental communities in metro Dallas. Notably, it expects to develop more such communities going forward.

Toll Brothers mostly focuses on offering luxury homes. Most of its communities are located in prosperous suburban areas with easy access to major cities. Recently, the company announced that its Brothers Apartment Living rental subsidiary and JD Capital USA formed a joint venture to develop a 262-unit luxury apartment community in the City of Orange, CA by 2020.

Also, to mitigate land availability constraints, the company has secured some of the most sought-after urban locations in the country, where land is scarce and approvals are not easy to obtain.

However, demand for such high-end markets has been declining in recent times, thanks to reduced activity of wealthy overseas purchasers, many of whom seek amenity-rich, full-service communities with on-site property management.

Recently, it reported fourth-quarter fiscal 2019 results, wherein the top and bottom lines declined 3.1% and 32.2%, respectively, due to lower deliveries and average selling prices. Deliveries fell 1.4% year over year owing to softness across the regions served, barring South.

Coming to price performance, shares of the company have declined 3.7% in the past three months against its industry’s 10.5% growth.

That said, the company remains optimistic about attaining higher deliveries in first-quarter fiscal 2020, courtesy of lower mortgage rates and a solid job market. Encouragingly, the number of net signed contracts or orders during the quarter grew 18.4% and value of net signed contracts was up 11.8% from the year-ago period. We believe strengthening housing industry, strong fundamentals and initiatives undertaken by Toll Brothers will help it overcome the above-mentioned headwinds.

Zacks Rank

Toll Brothers — which shares space with PulteGroup Inc. PHM, NVR, Inc. NVR and D.R. Horton, Inc. (DHI - Free Report) in the Zacks Building Products - Home Builders industry — currently carries a Zacks Rank #3 (Hold).

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