Investments in Unconsolidated Entities

We have investments in various unconsolidated entities. These joint ventures (i) develop land for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury for-rent residential apartments, commercial space and a hotel (“Rental Property Joint Ventures”); and (iv) invest in a portfolio of distressed loans and real estate (“Structured Asset Joint Venture”). In fiscal 2015, 2014 and 2013, we recognized income from the unconsolidated entities in which we had an investment of $21.1 million, $41.1 million, and $14.4 million, respectively.

The table below provides information as of October 31, 2015, regarding active joint ventures that we are invested in, by joint venture category ($ amounts in thousands):



	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Structured Asset Joint Venture		Total
Number of unconsolidated entities	7		3		10		1		21
Investment in unconsolidated entities	$	214,060	$	76,120	$	110,454	$	12,226	$	412,860
Number of unconsolidated entities with funding commitments by the Company	5		2		4		—		11
Company's remaining funding commitment to unconsolidated entities (a)	$	162,022	$	23,012	$	10,559	$	—	$	195,593


(a)	The remaining funding commitment for our Land Development Joint Ventures excludes $90.0 million, which one of the joint ventures expects to fund through outside financing.

Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at October 31, 2015, regarding the debt financing obtained by category ($ amounts in thousands):



	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Total
Number of joint ventures with debt financing	4		2		9		15
Aggregate loan commitments	$	505,000	$	222,000	$	780,835	$	1,507,835
Amounts borrowed under commitments	$	415,924	$	111,136	$	514,895	$	1,041,955

More specific and/or recent information regarding our investments in, advances to, and future commitments to these entities is provided below.

Land Development Joint Ventures

See Note 15, “Commitments and Contingencies,” for information regarding land purchase agreements that we have with our Land Development Joint Ventures

In the fourth quarter of fiscal 2015, we entered into a joint venture with an unrelated party to purchase and develop a parcel of land in Irvine, California. The joint venture expects to develop approximately 840 home sites on the land in multiple phases. We have a 50% interest in this joint venture. The current plan is to develop the property and sell approximately 50% of the value of the home sites to each of the members of the joint venture. At October 31, 2015, we had an investment of $76.8 million in this joint venture and were committed to make additional contributions to this joint venture of up to $130.7 million. To finance a portion of the land acquisition, the joint venture entered into a $320.0 million purchase money mortgage with the seller.

In the first quarter of fiscal 2015, we obtained approximately 48 home sites from a Land Development Joint Venture in consideration of our previous investment in the joint venture. In the third quarter of fiscal 2014, we received approximately 515 home sites from this venture. We have a commitment to this joint venture to fund approximately $17.0 million, which represents our expected share of the major infrastructure improvements related to this community. Contributions to this joint venture related to the improvements will be included in “Inventory” in our Consolidated Balance Sheets when they are actually made.

In the first quarter of fiscal 2014, we entered into a joint venture with an unrelated party to develop a parcel of land in Texas. The joint venture expects to develop a master planned community consisting of up to 6,800 home sites and sell groups of lots to us and to other home builders. At October 31, 2015, the joint venture owned approximately 6,300 home sites. We have a 50% interest in this joint venture. Prior to the formation of the joint venture, we had entered into a land purchase agreement to acquire the land for approximately $79.3 million. We contributed our rights under the purchase agreement to the joint venture and were reimbursed by our joint venture partner for 50% of the costs we incurred prior to the formation of the joint venture. At October 31, 2015, we had an investment of $43.5 million in this joint venture. In May 2014, the joint venture obtained outside financing of $40.0 million to help fund the future development of the property. At October 31, 2015, the joint venture had $10.0 million of borrowing under the loan facility.

In the fourth quarter of fiscal 2013, we entered into a joint venture with an unrelated party to develop a parcel of land in Maryland. The property consists of 945 acres that the joint venture expects to develop into approximately 1,300 home sites. We have a 50% interest in this joint venture. The current plan is to develop the property and sell approximately 50% of the home sites to each of the members of the joint venture. At October 31, 2015, we had an investment of $12.2 million in this joint venture.

In the second quarter of fiscal 2013, we entered into a joint venture with an unrelated party to develop a parcel of land in Texas as a master planned community consisting of approximately 2,900 lots. We have a 50% interest in this joint venture. The joint venture expects to develop the property in multiple phases and sell groups of lots to the members of the joint venture and to other home builders. At October 31, 2015, the joint venture owned approximately 2,600 home sites. We made an initial investment of $15.5 million of cash to the joint venture. The joint venture entered into a $25.0 million line of credit with a bank, secured by a deed of trust on the property, which can be expanded up to $40.0 million under certain conditions. At October 31, 2015, the joint venture had $26.1 million of borrowings under this line of credit. At October 31, 2015, we had an investment of $30.1 million in this joint venture and were committed to make additional contributions to this joint venture of up to $2.2 million.

Home Building Joint Ventures

In the first quarter of fiscal 2015, we entered into a joint venture with an unrelated party to complete the development of a high-rise luxury condominium project in New York City on property that we owned. We contributed $15.9 million as our initial contribution for a 25% interest in this joint venture. We sold the property to the joint venture for $78.5 million, and we were reimbursed for development and construction costs incurred by us prior to the sale. The gain of $9.3 million that we realized on the sale was deferred and will be recognized in our results of operations as units are sold and delivered to the ultimate home buyer. At October 31, 2015, we had an investment of $16.9 million in this joint venture. The joint venture entered into a construction loan agreement of $124.0 million to fund the land purchase and a portion of the cost of the development of the property. At October 31, 2015, the joint venture had $70.1 million borrowed under the construction loan.

We had invested in a joint venture in which we have a 50% voting interest to develop a high-rise luxury for-sale/rental project in New York City. Pursuant to the terms of the joint venture agreement, with the completion of the construction of the building’s structure in the third quarter of fiscal 2015, we acquired, with no additional consideration due from us, ownership of the top 18 floors of the building to sell, for our own account, luxury condominium units. Our partner received ownership of the lower floors containing residential rental units and retail space, with no additional consideration due from them. Upon our acquisition of the top 18 floors of the building, we transferred our investment of $132.3 million in this joint venture from “Investments in unconsolidated entities” on our Consolidated Balance Sheets to “Inventory.”

We have an investment in a joint venture in which we have a 50% interest to develop a high-rise luxury condominium project in conjunction with a luxury hotel in New York City being developed by a related joint venture, discussed below in Rental Property Joint Ventures. At October 31, 2015, we had invested $35.7 million in this joint venture and expect to make additional investments of approximately $14.7 million for the development of this project. In November 2014, this joint venture, along with the related hotel joint venture, entered into a $160.0 million construction loan agreement to complete the construction of the condominiums and hotel. At October 31, 2015, this joint venture has $41.1 million of outstanding borrowing under the loan agreement.

Rental Property Joint Ventures

In the second quarter of fiscal 2015, we entered into two joint ventures with an unrelated party to develop luxury for-rent residential apartment buildings. Prior to the formation of these joint ventures, we acquired the properties, through two 100%-owned entities, and incurred $18.8 million of land and land development costs. Our partner acquired a 75% interest in each of these entities for $14.5 million. At October 31, 2015, we had a combined investment of $7.8 million and funding commitments of $2.2 million in these ventures. In addition, in fiscal 2015, these joint ventures entered into construction loan agreements, with a total commitment of $87.0 million, with several banks to finance the development of their respective apartment buildings. At October 31, 2015, these joint ventures had no borrowings under their respective construction loan agreements.

In the fourth quarter of fiscal 2014, we entered into a joint venture with an unrelated party to develop a 418-unit student housing project and retail space in College Park, Maryland, on land that we were under contract to purchase. We have a 25% interest in this joint venture. We made an initial investment of $11.9 million to the joint venture, which included $3.5 million of land deposits previously funded by us, and our partner made an initial capital contribution of $35.7 million. In addition, we received a reimbursement of $3.1 million for certain costs incurred by us prior to the closing of the joint venture. The joint venture obtained construction loan financing of $104.5 million to fund a portion of the cost of the development of the property. At October 31, 2015, the joint venture had $44.2 million of outstanding borrowings under the loan agreement. At October 31, 2015, we had an investment of $12.7 million in this joint venture.

In the first quarter of fiscal 2014, a Rental Property Joint Venture entered into a $70.0 million construction loan agreement to finance construction of multifamily residential apartments in northern New Jersey. At October 31, 2015, this joint venture had $31.6 million of outstanding borrowings under the facility. At October 31, 2015, we had an investment of $6.7 million in this joint venture.

In the fourth quarter of fiscal 2013, we entered into a joint venture with an unrelated party to develop a 287-unit luxury for-rent residential apartment building in the Capitol Riverfront of Washington, D.C., on land that we owned and conveyed to the joint venture. We have a 50% interest in this joint venture. As part of our initial capital contribution, we contributed land and improvements with a fair value of $27.1 million to the joint venture and subsequently received a cash distribution of $12.5 million to align the capital accounts of each of the members of the joint venture. In the fourth quarter of fiscal 2013, the joint venture entered into a $54.0 million construction loan agreement with a bank to finance the development of this project. At October 31, 2015, the joint venture had $46.3 million of outstanding borrowings under the construction loan agreement. At October 31, 2015, we had an investment of $14.4 million in this joint venture.

In the second quarter of fiscal 2013, we entered into a joint venture with an unrelated party to develop a 38-story luxury for-rent residential apartment building and retail space in Jersey City, New Jersey, on land that we owned and conveyed to the joint venture. We have a 50% interest in this joint venture. As part of our initial capital contribution, we contributed land and improvements with a fair value of $28.8 million to the joint venture and subsequently received distributions of $10.2 million and a $1.2 million payment by the joint venture on our behalf to align the capital accounts of each of the members of the joint venture. In the second quarter of fiscal 2014, the joint venture entered into a $120.0 million construction loan agreement with a bank to finance the development of this project. At October 31, 2015, the joint venture had $96.1 million of borrowings under the facility. At October 31, 2015, we had an investment of $31.7 million in this joint venture.

In the fourth quarter of fiscal 2012, we invested in a joint venture in which we have a 50% interest to develop a multifamily residential apartment project containing approximately 398 units in suburban Philadelphia. In the first quarter of fiscal 2014, this joint venture entered into $56.0 million construction loan agreement to finance construction. At October 31, 2015, this venture had $50.0 million of borrowings under the facility. At October 31, 2015, we had an investment of $13.1 million in this joint venture.

We have an investment in a joint venture in which we have a 50% interest to develop a luxury hotel in conjunction with a high-rise luxury condominium project in New York City being developed by a related joint venture discussed above in Home Building Joint Ventures. At October 31, 2015, we had invested $23.1 million in this joint venture and expect to make additional investments of approximately $8.0 million for the development of the hotel. In November 2014, this joint venture, along with the related condominium joint venture, entered into a $160.0 million construction loan agreement to complete the construction of the condominiums and hotel. At October 31, 2015, this venture has $20.8 million of outstanding borrowings under the loan agreement.

In fiscal 2005, we, together with an unrelated party, formed Toll Brothers Realty Trust II (“Trust II”) to invest in commercial real estate opportunities. Trust II is owned 50% by us and 50% by our partner. In December 2013, Trust II sold substantially all of its assets to an unrelated party. As a result of this sale, we realized income of approximately $23.5 million in the first quarter of fiscal 2014, representing our share of the gain on the sale. In the three-month period ended April 30, 2014, we recognized an additional gain of $0.6 million from the sale of a property by Trust II. The gain on sale of assets is included in “Income from unconsolidated entities” on our Consolidated Statements of Operations and Comprehensive Income. In December 2013, we received a $20.0 million cash distribution from Trust II. In addition, in the first quarter of fiscal 2014, we recognized $2.9 million in previously deferred gains on our initial sales of the properties to Trust II. This gain is included in “Other income – net” in our Consolidated Statements of Operations and Comprehensive Income. At October 31, 2015, we had an investment of $0.9 million in Trust II.

In 1998, prior to the formation of Trust II, we formed the Trust to invest in commercial real estate opportunities. The Trust is effectively owned one-third by us; one-third by Robert I. Toll, Bruce E. Toll (and members of his family), Douglas C. Yearley, Jr., and former members of our senior management; and one-third by an unrelated party. As of October 31, 2015, our investment in the Trust was zero as cumulative distributions received from the Trust have been in excess of the carrying amount of our net investment. We provide development, finance, and management services to the Trust and recognized fees under the terms of various agreements in the amounts of $2.2 million, $2.3 million, and $4.2 million in fiscal 2015, 2014 and 2013, respectively. In fiscal 2015, we received distributions of $6.1 million from the Trust, of which $3.5 million was recognized as income and is included in “Income from unconsolidated entities” in our Consolidated Statements of Operations and Comprehensive Income. In fiscal 2014, the Trust refinanced the mortgage on one of its properties and distributed $36.0 million of the net proceeds from the refinancing to its partners. We received $12.0 million as our share of the proceeds and recognized this distribution as income which is included in “Income from unconsolidated entities” in our fiscal 2014 Consolidated Statement of Operations and Comprehensive Income.

Structured Asset Joint Venture

Through a wholly owned subsidiary, Gibraltar Capital and Asset Management, LLC (“Gibraltar”), we are a 20% participant with two unrelated parties that acquired a 40% interest in an entity that owns and controls a portfolio of loans and real estate (“Structured Asset Joint Venture”). At October 31, 2015, we had an investment of $12.2 million in this Structured Asset Joint Venture.

Guarantees

The unconsolidated entities in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we and our partners have guaranteed debt of certain unconsolidated entities. These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a percentage of the outstanding loan; (iii) guarantees of indemnities provided to the lender by the unconsolidated entity with regard to environmental matters; (iv) a hazardous material indemnity that holds the lender harmless for any liability it may suffer from the threat or presence of any hazardous or toxic substances at or near the property covered by a loan; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity.

In some instances, the guarantees provided in connection with loans to an unconsolidated entity are joint and several. In these situations, we generally have a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed upon share of the guarantee; however, if the joint venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, we may be liable for more than our proportionate share.

We believe that, as of October 31, 2015, in the event we become legally obligated to perform under a guarantee of the obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the venture. At October 31, 2015, the unconsolidated entities that have guarantees related to debt had loan commitments aggregating $980.2 million and had borrowed an aggregate of $514.3 million. The term of these guarantees generally ranges from five months to 54 months. We estimate that the maximum potential exposure under these guarantees, if the full amount of the loan commitments were borrowed, would be $980.2 million, without taking into account any recoveries from the underlying collateral or any reimbursement from our partners. Based on the amounts borrowed at October 31, 2015, our maximum potential exposure under these guarantees is estimated to be approximately $514.3 million, without taking into account any recoveries from the underlying collateral or any reimbursement from our partners.

In addition, we have guaranteed approximately $10.3 million of ground lease payments and insurance deductibles for three joint ventures.

As of October 31, 2015, the estimated aggregate fair value of the guarantees provided by us related to debt and other obligations of certain unconsolidated entities was approximately $4.8 million. We have not made payments under any of the guarantees, nor have we been called upon to do so.

Variable Interest Entities

At October 31, 2015, we determined that one of our joint ventures was a VIE under the guidance within ASC 810. At October 31, 2014, we had determined that three of our joint ventures were VIEs. We have, however, concluded that we were not the primary beneficiary of the VIEs because the power to direct the activities of these VIEs that most significantly impact their performance was shared by us and the VIEs’ other members. Business plans, budgets, and other major decisions are required to be unanimously approved by all members. Management and other fees earned by us are nominal and believed to be at market rates, and there is no significant economic disproportionality between us and other members. The information presented below regarding the investments, commitments, and guarantees in unconsolidated entities deemed to be VIEs is also included in the information provided above.

At October 31, 2015 and 2014, our investments in our unconsolidated joint ventures deemed to be VIEs, which are included in investments in unconsolidated entities in our Consolidated Balance Sheets, totaled $6.7 million and $46.4 million, respectively. At October 31, 2015, the maximum exposure of loss to our investments in unconsolidated joint ventures that are VIEs is limited to our investment in the unconsolidated VIEs, except with regard to $0.4 million of additional commitments to the VIEs and $12.5 million of loan guarantees. At October 31, 2014, the maximum exposure to loss of our investments in unconsolidated joint ventures that are VIEs was limited to our investment in the unconsolidated VIEs, except with regard to a $43.4 million additional commitment to fund the joint ventures, $21.6 million of loan guarantees, and a $9.1 million guarantee of ground lease payments.

Joint Venture Condensed Financial Information

The Condensed Balance Sheets, as of the dates indicated, and the Condensed Statements of Operations and Comprehensive Income, for the periods indicated, for the unconsolidated entities in which we have an investment, aggregated by type of business, are included below (in thousands).

Condensed Balance Sheets:



	October 31, 2015
	Land Develop- ment Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Structured Asset Joint Venture		Total
Cash and cash equivalents	$	29,281	$	11,203	$	44,310	$	10,469	$	95,263
Inventory	701,527		322,630						1,024,157
Non-performing loan portfolio							27,572		27,572
Rental properties					278,897				278,897
Rental properties under development					390,399				390,399
Real estate owned (“REO”)							117,758		117,758
Other assets (1)	70,799		61,144		12,199		80,475		224,617
Total assets	$	801,607	$	394,977	$	725,805	$	236,274	$	2,158,663
Debt (1)	$	417,025	$	117,251	$	514,895	$	77,950	$	1,127,121
Other liabilities	29,772		70,078		30,329		136		130,315
Members’ equity	354,810		207,648		180,581		63,288		806,327
Noncontrolling interest							94,900		94,900
Total liabilities and equity	$	801,607	$	394,977	$	725,805	$	236,274	$	2,158,663
Company’s net investment in unconsolidated entities (2)	$	214,060	$	76,120	$	110,454	$	12,226	$	412,860



	October 31, 2014
	Land Develop- ment Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Structured Asset Joint Venture		Total
Cash and cash equivalents	$	31,968	$	21,821	$	33,040	$	23,462	$	110,291
Inventory	258,092		465,144						723,236
Non-performing loan portfolio							57,641		57,641
Rental properties					140,238				140,238
Rental properties under development					327,315				327,315
Real estate owned (“REO”)							184,753		184,753
Other assets (1)	30,166		75,164		14,333		77,986		197,649
Total assets	$	320,226	$	562,129	$	514,926	$	343,842	$	1,741,123
Debt (1)	$	102,042	$	8,713	$	333,128	$	77,950	$	521,833
Other liabilities	23,854		56,665		43,088		177		123,784
Members’ equity	194,330		496,751		138,710		106,298		936,089
Noncontrolling interest							159,417		159,417
Total liabilities and equity	$	320,226	$	562,129	$	514,926	$	343,842	$	1,741,123
Company’s net investment in unconsolidated entities (2)	$	140,221	$	189,509	$	97,353	$	19,995	$	447,078


(1)	Included in other assets of the Structure Asset Joint Venture at October 31, 2015 and 2014 is $78.0 million of restricted cash held in a defeasance account that will be used to repay debt of the Structured Asset Joint Venture on July 25, 2017.

(2)

Differences between our net investment in unconsolidated entities and our underlying equity in the net assets of the entities are primarily a result of the acquisition price of an investment in a land development joint venture in fiscal 2012 that was in excess of our pro rata share of the underlying equity, impairments related to our investment in unconsolidated entities, a loan made to one of the entities by us, interest capitalized on our investment, the estimated fair value of the guarantees provided to the joint ventures, and distributions from entities in excess of the carrying amount of our net investment.

Condensed Statements of Operations and Comprehensive Income:



	For the year ended October 31, 2015
	Land Develop- ment Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures			Structured Asset Joint Venture			Total
Revenues	$	128,889	$	78,072	$	35,732		$	6,102		$	248,795
Cost of revenues	58,435		69,142		15,539			16,739			159,855
Other expenses	1,999		6,135		24,174			1,312			33,620
Total expenses	60,434		75,277		39,713			18,051			193,475
Gain on disposition of loans and REO								42,939			42,939
Income (loss) from operations	68,455		2,795		(3,981		)	30,990			98,259
Other income	615		1,072		4,376			2,224			8,287
Net income	69,070		3,867		395			33,214			106,546
Less: income attributable to noncontrolling interest								(19,928		)	(19,928		)
Net income attributable to controlling interest	69,070		3,867		395			13,286			86,618
Other comprehensive income					52						52
Total comprehensive income	$	69,070	$	3,867	$	447		$	13,286		$	86,670
Company’s equity in earnings of unconsolidated entities (3)	$	12,005	$	3,448	$	3,027		$	2,639		$	21,119



	For the year ended October 31, 2014
	Land Develop- ment Joint Ventures		Home Building Joint Ventures			Rental Property Joint Ventures			Structured Asset Joint Venture			Total
Revenues	$	136,949	$	54,923		$	32,875		$	8,023		$	232,770
Cost of revenues	73,628		53,221			14,250			14,152			155,251
Other expenses	730		5,165			35,003			1,585			42,483
Total expenses	74,358		58,386			49,253			15,737			197,734
Gain on disposition of loans and REO									30,420			30,420
Income (loss) from operations	62,591		(3,463		)	(16,378		)	22,706			65,456
Other income	66		105			45,933			3,121			49,225
Net income (loss)	62,657		(3,358		)	29,555			25,827			114,681
Less: income attributable to noncontrolling interest									(15,496		)	(15,496		)
Net income (loss) attributable to controlling interest	62,657		(3,358		)	29,555			10,331			99,185
Other comprehensive income						728						728
Total comprehensive income (loss)	$	62,657	$	(3,358	)	$	30,283		$	10,331		$	99,913
Company’s equity in earnings (losses) of unconsolidated entities (3)	$	1,190	$	(2,034	)	$	40,081		$	1,904		$	41,141



	For the year ended October 31, 2013
	Land Develop- ment Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Structured Asset Joint Venture			Total
Revenues	$	43,937	$	40,386	$	38,727	$	37,492		$	160,542
Cost of revenues	20,142		36,208		16,704		30,496			103,550
Other expenses	1,146		2,554		20,875		3,399			27,974
Total expenses	21,288		38,762		37,579		33,895			131,524
Gain on disposition of loans and REO							68,323			68,323
Income from operations	22,649		1,624		1,148		71,920			97,341
Other income	11		571		86		329			997
Net income	22,660		2,195		1,234		72,249			98,338
Less: income attributable to noncontrolling interest							(43,349		)	(43,349		)
Net income attributable to controlling interest	22,660		2,195		1,234		28,900			54,989
Other comprehensive income					922					922
Total comprehensive income	$	22,660	$	2,195	$	2,156	$	28,900		$	55,911
Company’s equity in earnings of unconsolidated entities (3)	$	3,288	$	1,471	$	3,965	$	5,668		$	14,392

(3)

Differences between our equity in earnings (losses) of unconsolidated entities and the underlying net income (loss) of the entities is primarily a result a basis difference of an acquired joint venture interest, distributions from entities in excess of the carrying amount of our net investment, and our share of the entities’ profits related to home sites purchased by us which reduces the our cost basis of the home sites acquired.