Toll Bros. hints at joint-venture problems

Toll Bros. Inc., the Horsham luxury-home builder, said it might face "significant" losses if its joint-venture partners on a number of projects were unable to meet their financial obligations.

"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," the company said in a Securities and Exchange Commission filing Monday in advance of its annual stockholders' meeting today.

Joel H. Rassman, Toll's chief financial officer, was not available for comment yesterday.

Builders often join together in developing housing communities to share the cost.

One such joint-venture partner is Kimball Hill Homes, of Illinois, which posted a net loss of $220 million for its fiscal year ended Sept. 30.

In that report, Kimball said: "There are substantial doubts about whether we will be able to continue as a going concern, and therefore, we may be unable to realize our assets and discharge our liabilities in the normal course of business."

Kimball is partnered with Toll and other builders, including Beazer Homes USA Inc. and KB Home, in a 13,500-unit project in Las Vegas called Inspirada.

In Monday's SEC filing, Toll Bros. said that since it might not have a controlling interest in some of these ventures, "we may not be able to require these joint ventures or their participants to honor their obligations or renegotiate them in acceptable terms."

Toll Bros. reported last month a net loss of $96 million and a 23 percent drop in revenue for the company's first quarter ended Jan. 31. The company's stock is down 28 percent in the last year, closing yesterday at $20.20, up $1.27 in the New York Stock Exchange trading.

As the company's stockholders prepare to meet at noon today in Horsham, proxy-voting service Proxy Governance Inc. is recommending against approval of the proposed bonus plan for chief executive officer Robert I. Toll.

If the proposal had been in effect for fiscal 2007, Toll would have received a total bonus of $6.56 million, according to the proxy materials for today's meeting. His base salary last year was $1.3 million, and he received stock option awards worth $7 million, the proxy statement said.

Proxy Governance's vice president of research, Allie Monaco, said that Toll Bros.' recent "compensation practices" had led to "excessive cash-incentive awards for Chair/CEO R. Toll" and that it appeared that the company had introduced this proposal as a way to ensure that Robert Toll received a cash incentive "even when company performance is suffering."

Two other proxy services, Glass Lewis & Co. L.L.C. and RiskMetrics Group Inc., also are against the plan.

In addition, two of the nation's largest pension funds, the California State Teachers' Retirement System and the New York State Common Retirement Fund, said they would withhold votes for the reelection of Toll as chief executive and also would reject the CEO bonus plan.

Also, Laborers International Union of North America, which invests its pension funds in the company's stock, "will encourage fellow shareholders to withhold votes for Toll and to reject the bonus plan with visual displays and information" before the meeting, said spokesman Jacob Hay.

Bruce Toll, vice chairman of Toll Bros., is also chairman of Philadelphia Media Holdings L.L.C., which owns The Inquirer, Philadelphia Daily News and Philly.com.