Defensive mind-set keeps Toll Bros. going

HORSHAM, Pa. -- Robert Toll's father, Albert, was a multimillionaire investor by age 24, then lost it all in the 1929 stock market crash. To support his family through the Depression, Albert delivered laundry and sold used cars. Gradually, he rebuilt his fortune by buying discounted real estate bonds. By the end of World War II, he owned several office and retail buildings.

Robert, 67, who goes by Bob, remembers the hard-learned lessons his father taught him and his younger brother, Bruce. "Be careful, be wary," he recites. "You make a mistake, it could be your last."

Toll built 6,687 luxury homes in 22 states last year, down nearly one-quarter from its peak two years ago. In the fourth quarter, orders for new homes fell a staggering 35%, and the company posted an $82 million loss — its first ever. Even so, Toll still commands one of the strongest positions in the industry, in part because the company's up-market buyers are less affected than most by the turmoil in the financial markets.

A company strategy

Toll describes a builder's survival strategy: "You concentrate on what's necessary to hold your business steady and prepare yourself to ride out the storm and take advantage of opportunities that must come.

"Then, as fast as you can, you go to concentrating on liquidity … (because) when you're out of money, you're out of Schlitz, you're out of beer, you're done. You must recognize that very fast," says Toll, whose company has $900 million in the bank.

At the end of October, the company had a debt-to-capital ratio of 27%, its lowest ever, compared with 32% the year before.