If that doesn’t make you forget Toll’s role in this mess, and root for him, perhaps the next paragraph will:
Homebuilding is an industry prone to spectacular cataclysms. Bob Toll became one of its patriarchs the same way Noah did—by staying afloat through the floods. ‘I think he loves being the grandfather of the business,’ says Michael Greenberg, a former senior executive at Toll Brothers. In the early years, Bob was notoriously prickly and irascible—Bruce was the company diplomat—but age has smoothed his persona, turning sharp edges into charm and bluntness into wisdom. Toll’s conversational style resembles the layout of one of his developments, full of meandering byways and digressive culs-de-sac. He has a broad Philadelphia accent and cultivates an air of disarming schlumpiness. He’s been known to show up to industry conferences in sandals.
Before you answer that, you should know that we do get some startling news toward the end of the piece:
Toll Brothers executives say they glimpsed the first signs of a downturn in mid-2005. Analysts started wondering about the company’s position months before that, however, when Toll Brothers insiders began selling off stock. Over a sustained period between December 2004 and September 2005, Bob Toll made $323 million from these transactions, Bruce Toll made $206 million, and other company executives took home smaller amounts. At the time, the sales were explained as diversification and estate-planning measures, and Bob Toll continued to call his company ‘a tremendous buy.’ The sales are now the subject of a federal shareholder lawsuit, about which Toll would not comment.
But Portfolio doesn’t pay too much attention to the revelation, and soon we are comfortably back to where we were:
Bruce Toll scaled back his involvement in the company a decade ago and has since devoted himself to various other pursuits, such as financing movies and buying a stake in the Philadelphia Inquirer. But Bob Toll has never cared for any business except building, and he says he feels a responsibility to right his company. Friends say that this challenge has invigorated him.
And we even get some good news:
In fact, stock analysts say that Toll Brothers could end up profiting over the long term from widespread misery. With a relatively low debt load and one of the largest cash reserves in the industry—roughly $1.5 billion, twice as much as its competitors’ on average—Toll Brothers seems to hold a decent position compared with others in its field.
So it looks like the hero of the story might triumph after all. Concerned that it will be at the cost of “widespread misery”? Don’t be. That’s not the narrative here. You’re supposed to root for Bob Toll.
Oh, and you know those greedy customers? It turns out the company’s future business model requires them. That’s right future business model:
The company refuses to lower its prices too much for fear of compromising its brand, which means it must accept the costs of carrying considerable inventory until demand returns…. The company’s executives say Toll Brothers is catering to universal appetites and has no plans to scale back its trademark homes.
Here’s hoping for more greed.
And on to the second piece.
The story is titled “The Mansion: A Subprime Parable. But we warn you now that it has little to do with subprime lending—or parables—and a lot to do with mansions.
Michael Lewis sets up the story this way:
I was looking to return to New Orleans, where I’d grown up, to write a book. The move would uproot my wife and three children from California, and I felt a little bad about that. They needed a place to live, but places to live in New Orleans are hard to find. Ever since Hurricane Katrina, the real estate market there has been in turmoil. Owners want to sell, buyers want to rent, and the result is a forest of for sale signs and an army of workers commuting from great distances.
At the bottom of every real estate ad I saw was the name of the same agent. One woman ruled the market, it seemed, and her name was Eleanor Farnsworth. I called her and threw myself on her mercy. She thought my problem over and then said, ‘I only know of one place that would work for you.’ She’d suggested it to Brad Pitt and Angelina Jolie, she said, before selling them their more modest place in the French Quarter.
That shouldn’t have been a selling point; it should have been a warning. I should have asked the price. Instead, I asked the address.
Now, this would be an engaging tale—we at The Audit are not uninterested in peeping into houses we can’t afford—if it didn’t pretend to have a larger moral dimension to it.