Toll Brothers Inc. (TOL) recently announced that one of its fully owned subsidiaries, Gibraltar Capital and Asset Management, LLC has closed three private transactions with large financial institutions.
The transactions involved the purchase of 38 non-performing real estate loans with a combined outstanding balance of approximately $71.4 million with an average loan balance of $1.9 million. The assets encompassing six states include residential acquisition, development, and construction loans secured by properties in various stages of completion.
With this acquisition, Gibraltar now has completed loan transactions worth $2 billion. Earlier, it also acquired 83 loans valued at $200 million from Deutsche Bank AG (DB).
Last year, the company entered into an agreement with Oaktree Capital Management LP and Milestone Asset Resolution Co. to purchase a portfolio of loans with a face value of $1.7 billion from the Federal Deposit Insurance Corp.
In the backdrop of a critical homebuilding industry, large homebuilders tend to engage in managing and trading distressed real estate assets to strengthen their financial positions. In this regard, Lennar Corp.’s (LEN) formation of Rialto Investments is worth mentioning as it has been immensely successful since its inception early last year.
Similarly, Toll Brothers is highly confident about Gibraltar’s growth prospects and intends to use its own expertise, relationships, network, brand name, nationwide presence and capital strength to pursue complex transactions in order to maximize the value of underperforming real estate assets.
During the third quarter of fiscal 2011, Toll Brothers reported an adjusted income of $3.9 million or 2 cents per share compared with $0.8 million in the year-ago quarter. Revenues declined 13% year over year to $394.3 million, due to a 14% decrease in home deliveries to 693 units.
The demand for luxury homes fell in the quarter on account of poor industry conditions and subdued confidence among luxury homebuyers. At quarter-end, the company’s total selling communities amounted to 207 versus 190 selling communities at the end of the prior-year quarter.
The shares of Toll Brothers maintain a Zacks #3 Rank, which translates into a short-term “Hold” rating.
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TOLL BROTHERS (TOL): Free Stock Analysis Report
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