A Double Debit to Conde Nast Portfolio for offering us an extended portrait of luxury homebuilder Bob Toll as a gutsy CEO who is down but not out, and then following that unfortunate puff piece with another one on how a reporter’s choice to rent a $13,000-a-month mansion he couldn’t afford is emblematic of the housing crisis. Each article has problems of its own, but together they look even worse, and make Portfolio seem embarrassingly out of touch with the realities of the current financial situation.
We’ll start with Portfolio’s cover profile of Toll, which combines two shopworn bizpress formulas—the counterintuitive slant and access journalism—in a single story. Perhaps all these journalistic calisthenics would be worth it if there were a point to this piece. But there isn’t.
This piece opens on a bleak note:
On a bright morning in late July, the corporate headquarters of Toll Brothers, the luxury homebuilder that profited mightily from the latest housing boom, are uncannily silent. Outside chief executive Bob Toll’s office, swaths of cubicles sit vacant and bare, depopulated by deep layoffs. Inside, a Bloomberg terminal scrolls dismal updates: A new report says home prices are plummeting by record margins; in markets like Las Vegas and Miami, they’re off almost 30 percent. Toll Brothers’ stock is trading at about $20, down two-thirds from its 2005 high.
And then some history:
Perhaps no company better symbolizes the engorged consumption of the last real estate spree than Toll Brothers, which Bob founded with his brother, Bruce, in a one-room office four decades ago. During the height of the housing bubble, from 2004 to 2006, Toll Brothers reported nearly $16 billion in revenue, putting it in the top ranks of the industry. Its carefully cultivated brand—large, high-end suburban homes with all the latest must-have appliances—was among the most enviable in the business and catered to the yearning for bigger and better that the era’s easy credit allowed. Although Toll Brothers once had uncanny judgment, it has hit tough ground in the bust.
Okay so far. But then, as the piece veers off this initial course, we begin to understand what kind of story we are in for: The drama of a brave and embattled CEO trying to pull his company back from the brink.
The piece starts to go wrong a few paragraphs in:
Toll offers me no excuses and freely concedes that he made some foolish deals. ‘We boatloaded a bunch of real estate in ’04 and ’05 that is underwater today,’ he says ruefully….
Still, as many other real estate executives have headed for cover—or unemployment—Toll is reveling in the self-appointed role of cantankerous spokesman for his beleaguered industry.
Now, given the industrywide—make that countrywide—disaster, this is really the only possible positive take. Why Portfolio thinks that’s worth a cover is unclear.
It also helps, of course, to pass along blame:
In our conversation, he spreads the blame liberally, even pointing to customers, saying it wasn’t the builders’ fault that banks made foolish loans and people took them, knowing full well what their incomes were:
’What cracked the market was not just our greed but the greed of our buyers.’
Just to drive home that quote, Portfolio prints it on the cover of the magazine and also as a pull quote in the middle of the piece, with “greed of our buyers” bolded and in caps.
Now, we point out two things. One, that Toll Brothers has a mortgage arm and so is not detached from the financing. And two, that blaming borrowers is not exactly a new strategy.
It also can be easily refuted or at least put into context; this Portfolio doesn’t bother to do.
But we won’t dwell on these details because Toll doesn’t. He’s not that kind of guy:
At 67, Toll is old enough to step aside and let others handle unpleasant times, but instead he approaches the wreckage with grim cheer.
And here we learn the drama around which Toll’s story will revolve:
If all of Toll’s previous experience has offered a single lesson, it’s that the truly big money is made at the bottom, when other people are scared to buy. If he bets right again this time, he could lead his industry out of the doldrums. If he doesn’t, it augurs poorly for the entire sector—and perhaps indicates that the housing situation is even more dire than Toll imagined.