Major home builder warns of joint venture losses
Toll Brothers, one of the nation’s largest home builders, has warned of what could be “significant losses” due to ailing joint venture agreements that have suffered in the housing downturn.
The home builder said that if some of its joint venture partners -- businesses that are now in financial trouble -- don’t honor their financial obligations to Toll Brothers, high charges could ensue.
In a filing with the Securities and Exchange Commission, the company said, “As a result of the continued downturn in the home-building industry, some of these joint ventures or their participants have or may become unable or unwilling to fulfill their respective obligations. In addition, we may not have a controlling interest in these joint ventures and, as a result, we may not be able to require these joint ventures or their participants to honor their obligations or renegotiate them on acceptable terms.”
The Wall Street Journal estimates that Toll Brothers could be on the hook for as much as $352 million if some of its joint venture partners fail, but the newspaper noted, “Toll has fewer joint ventures than many other builders.”
In the first quarter, the builder announced losses of about $96 million, swinging from $54 million in earnings in the previous year.