WHAT THEY DO
A purveyor of McMansions, McCondos, and “active lifestyle communities,” Toll Brothers is the 11th-largest home builder in the U.S. and a market leader in luxury homes. Headquartered in Horsham, Pennsylvania, Toll Brothers builds in 20 states and has a market capitalization of nearly $4.6 billion.

WHERE THEY CAME FROM
Brothers Robert and Bruce Toll, a lawyer and an accountant respectively, started the company in 1967, when they decided to follow in the footsteps of their father, who had been in the construction business. When they began building homes in the suburbs of Philadelphia, the siblings decided not to establish a generic building firm; from the beginning, they focused on high-end customers who wanted large, traditional-style houses with modern conveniences and all the trimmings. By 1982, the company had expanded into New Jersey, and from there it spread throughout the Northeast. Toll Brothers went public in 1986.

WHAT THEY GOT RIGHT
Toll Brothers is skilled at tapping into cultural and demographic trends. Recognizing that baby boomers wanted big homes away from the congestion of cities, Toll Brothers built them—especially in hot markets like Florida and Arizona. The company bought parcels of undeveloped land in the exurbs of fast-growing cities, divvied them up into lots, and offered buyers a range of customizable designs for houses. Toll Brothers appealed to its aspirational customer base by offering potential buyers homes with names like the Federal and the Chateau (today’s models also include the Coventry, the Philmont, and the Carlton) and optional flourishes like greenhouses, cathedral ceilings, and stucco exteriors.

In creating entirely new neighborhoods, they’ve been masters at navigating zoning and other local regulations.

Its business model resulted in boom times in the early 1990s. Good times continued to roll throughout the decade: Demand was robust—the company had a backlog of orders worth $2.9 billion by 2004—and the average price of a Toll home rose nearly 50 percent between 1999 and 2004. That meant big business for the company, which expanded into California, Texas, and several other southern and western states during the 1990s.

WHERE THE CHALLENGES ARE
Rising interest rates, the increasing cost of materials, and declining consumer confidence in the economy have all hurt the home-building industry. Between summer 2005 and early 2007, Toll’s stock price lost nearly half its value, falling from a high of $58.67; orders for new homes dropped 33 percent during the first quarter of 2007. The best news Robert Toll could report then was that the rate of order cancellations for new homes was decreasing—in other words, the bad news wasn’t getting worse.

The company also found itself in the spotlight in 2005 for inflated C.E.O. compensation: Robert Toll was second on Fortune’s list of highest-paid C.E.O.’s for his $44 million salary package in 2004. As owner of 17 percent of the company, Toll has seen his pay trimmed to less than $20 million in 2006.

WHAT’S NEXT
Americans have been moving back to the cities, and so is Toll. The company expects the housing market to remain strong in places like Jersey City, New Jersey, and New York City; among its urban projects are a 21-story condominium on Manhattan’s Union Square and a six-story condo in Williamsburg, Brooklyn.

So far, Toll Brothers has not expanded outside the U.S., but it hasn’t ruled out that possibility—particularly when it comes to Shanghai. In December, Robert Toll told the Wall Street Journal that his company doesn’t have firm plans but is “just in conversation with the locals.”

Also, in an effort to raise revenue, the company has expanded its menu of offerings, which now includes mortgage services, security services, golf course management, and cable and internet services. —Mary Bridges