Location: We’re probably in a recession, and a big culprit is the housing market—prices were much too high, and now they’re really sinking. As the nation’s largest luxury home builder, do you feel guilty?
Mr. Toll: I feel guilty for not being more cautious and recognizing that we had to be on thin ice because things had been so good for so long. [But], by 2000, we should have entered the next down cycle, on an ordinary basis. But we didn’t. And if I had become cautious then, my company would have missed the great ride that it took in ’05 and ’06. In ’05 we made $800 million plus—net, net, net!
Yet, in 2005, you said in an interview that the housing market was ‘frothy and infested with speculators,’ and you also said ‘the mortgage industry needed to tighten up its lending practices.’ But you profited brilliantly through exactly those problems.
Now, we didn’t profit from those things. … We profited from tremendous demand for housing. That demand was pushed above what should have been by speculation, by investment, and by a mortgage market that was rabid for product.
If you knew the system was flawed, what could you have done?
You see, on the one side I had sales people who are on commission, who are paid to sell; and on the other side I’m asking these sales people not to sell to speculators, investors or people who are demanding more mortgage than they should, and are therefore at risk. … The reason capitalism works is that one of the basic instincts of human nature is greed; everybody wants to get bigger, better, more, you know? And there are very few of us that walk around all day long with the thought of being our brother’s keeper.
But as the biggest luxury developer, do you feel a social responsibility for not selling houses to people who shouldn’t be buying them because their finances aren’t good enough?
No, I don’t think we’re feeling socially responsible not to sell homes. I think it’s on a business basis that we don’t want to sell homes to people that are going to fail, because we don’t want those homes back.
As of today, you have a new bonus agreement, which gives you a bonus even if your company isn’t performing well.
The board felt for somebody who works as hard as I do—I guess, they think, as well as I do—that they ought to have the option to give me some additional bonus when the formula has taken me down to zero.
Do you deserve a multimillion-dollar bonus when your company is doing poorly?
I definitely deserve to make four, five [million], etc., in that range, for the work that I do.
You made $19.2 million in 2006, plus a $17.5 million bonus, but made over $8 million in total compensation last year, with no bonus.
I don’t think your numbers are right.
They’re from your company’s regulatory filings.
O.K. Go ahead.
How much time have you spent skiing this winter?
Ski season is still on, and I go out to Telluride and ski at the end of the week, and the rest of the time I go to the office and work. My honey, Jane, and my dog moved to Telluride; we have a home in Telluride. … I go back and forth as much as I can, and try and be with my honey and my mountain.
What kinds of issues keep you up at night? It’s been such a weird winter.
It hasn’t been weird for us in Telluride; it’s been the greatest winter on record.
You know what I mean—in America over 3.6 million mortgages were foreclosing or past due in the last three months of last year. Do you worry about families losing their homes, or just homes that are Toll’s?
I try when I’m not working not to worry. What do I worry about? I worry about my family’s health first.
But haven’t foreclosures been a plague on housing?
Is it a plague? I think that’s too strong a word. … Remember, it’s a two-way street. The people were to some extent misled into buying more than they could afford, and borrowing more than they could afford. But it’s a two-way street, the person has to be willing to be led, you have to want to go for the sales pitch, take a home that’s bigger than you want to, take a mortgage that’s bigger than you want to.