Toll Builds at Naval Square

PHILADELPHIA, PA - Toll Brothers Inc. broke ground on a $100 million, second phase of its Naval Square development in the Grays Ferry neighborhood of Philadelphia.

Despite the housing slump, the project began in March as the developer managed to sell out on its first phase of the project, defying doldrums plaguing the residential real estate market. Kicking off a new phase of the project comes as housing starts nationally plunged to historic lows, according to the latest data from the U.S. Commerce Department. Housing starts fell by 12.8 percent in April to 458,000, which is considered the lowest since the government began tracking the data 50 years ago.

"It's unique," said Chuck Breder, division vice president with Toll. "Even though we don't have the investor market, the sales pace over the last three years has been pretty constant."

Toll began selling the first phase, which consisted of 345 condominiums, at the end of 2004 and sold on average 70 units each year, Breder said.

The second phase consists of four buildings with 220 condos and separately, a collection of 74 townhouses. Buyers have shown an interest in the units, with Toll selling 10 townhouses in the last two months. The project also includes a 2,000-square-foot fitness and community center.

Toll isn't seeing sales activity like this at all of its communities and has taken a beating on its earnings.

Last week it reported that it saw its fiscal second-quarter loss lessen to $83.2 million, or 52 cents a share, which included pre-tax write-downs totaling $119.6 million. During the comparable period last year, Toll reported a $93.7 million, or 59 cents a share, loss that included pre-tax write-downs totaling $288.1 million. Revenue for the quarter came in at $398.3 million, a plunge of 51 percent.

One aspect of the project that has kept buyers traffic strong and steady is that Naval Square has a suburban-like setting that has attracted suburbanites used to large yards and those with dogs who want room for them to roam. The development sits on 20 acres, has mature trees and an abundance of green space.

Toll also hasn't had to drop asking prices on the condos during the past two years as the housing market tanked. "There's been minimal discounting," he said. "It's always been right priced and we adjusted prices a couple of years ago. Depending on the size of a unit, prices have ranged from $245 to $355 a square foot.

Phase two will complete Naval Square, which Toll bought in 1987. The property at 24th and Bainbridge streets is a National Historic Landmark and the first home of the U.S. Naval Academy. The property had been vacant since 1977 before Toll bought it from the federal government.