Douglas Yearley Jr.
The Toll Brothers CEO talks housing markets at "Foxcatcher."
As an interview location, the Weatherstone model home at the Toll Brothers Liseter community couldn't be beat: Coffee and a CEO in a conservatory at an impeccably furnished $1.1 million mansion on what was once a rolling estate in Newtown Square.
"This is the du Pont estate," said Douglas Yearley Jr., chief executive of Toll Brothers Inc., one of the nation's largest home builders. "This is where the Foxcatcher movie took place. The wrestler was murdered on this property.
"It's a very dark movie," said Yearley, 55. "The buildings in the movie, we would have loved to have saved many of them.
"They were all completely beyond hope," he said. "We couldn't save them except for the foundation of an old barn that we converted into a residents club."
It's beautiful, but we keep hearing that millennials would rather live in cities. Are the suburbs dead?
The death of the suburb is just not true. This happens in every housing recession where the pundits come out and say the suburban lifestyle - families chasing the bigger and bigger home - is dead. Housing is not going to be important. [But] it's just not the character of our country. Naturally, in a recession, we sell [fewer] bigger homes, but that is just an expression of the [economic] cycle.
How about the millennials?
We don't build starter homes so we generally don't sell to millennials. In our food chain . . . this may be your third or fourth home. So we need a healthy housing market all the way [back] to the first home.
What's happening with the starter market?
The starter home market is stalled because the millenials are just beginning to age into the new home-ownership age, which is no longer 27, 28, 29. It may be 31, 32, 33, 34. But, is there a fundamental shift that an entire generation doesn't want to own a home? I absolutely don't buy it. The starter home builders, their business isn't off. The housing market is healthy.
What about baby boomers?
We're chasing the baby boomer, the 50- to 65-year-olds, the parents of the millennials. That crowd is becoming empty nesters. They're looking to downsize. They still want luxury. We offer the luxury active adult lifestyle.
You're building in cities.
Ten years ago, we got into high-rises. It was a bold move for the company. There are no other national home builders that have jumped from farm fields to urban homes in skyscrapers. The land is super expensive; the building costs are five times the cost of the suburban buildings. You have to build the whole tower. We haven't figured out yet how to stop a 40-story tower at the 10th floor when the economy turns. The risk profile is much greater.
Lessons learned?
Smaller boutique buildings are better than the big trophy buildings because a 350-unit trophy building that takes a year longer to build and three years longer to sell out - you will get caught in a [down] cycle. But if you can do 50- to 120-unit buildings, you can build faster and sell through.
I'd rather live in a smaller building.
A lot of the foreign buyers would rather go with the trophy building because they aren't focused on the specific neighborhood. They just want to invest and while they are investing, they'd rather be in that big glass tower [they] can brag about.
Do you have a good job interview question?
Some young stud came in to interview. I asked him, 'Do you have any questions for me?' He's with the CEO for 15 minutes. He has one question. 'Hey, what's the dress code around here?'
I guess he didn't get a job offer?
No. The people I'm interviewing are pretty senior. I'm not going to ask them, "What keeps you up at night?" Nobody in their career has had all positive. I want to know what went wrong. What would you have done over? I think you learn more [than from] having someone brag about what they've done.
Any other tips?
We're big on references. If you give me three references, I'm not calling the three you gave me to hear about you. I'm calling those three to ask who else should I be calling. That's where you are going to get a better indication.
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@JaneVonBergen