By Linda O’Flanagan
Luxury home builder, Toll Brothers announced it is paying $1.6 billion to buy the home building business of Shapell Industries, a California-based firm.
Shapell is one of the biggest development and home building companies in the Golden State’s affluent coastal markets.
Its land portfolio, which Toll Brothers is acquiring, consists of 5,200 home sites in established communities, 97.5% of which are entitled. The land was assembled over decades in high-growth markets like San Francisco Bay, metro Los Angeles, Orange County and Carlsbad.
Toll Brothers first entered the California market in 1994 and has since built nearly 8,000 homes there itself, generating $6.5 billion.
The lots it will acquire from Shapell will bring its total California land mass to 9,200 lots.
Douglas C. Yearley, Jr., Toll Brothers’ chief executive officer, said, “Shapell’s current portfolio dovetails perfectly with our own California footprint and luxury brand, and adds meaningfully to our presence in premier coastal locations in California.”
Toll Brothers intends to finance the deal with a combination of draws from its $1.035 billion credit facility as well as debt and equity financing. It also has a $500 million, 364-day senior unsecured revolving credit facility it can tap into.
Post-closing, Toll Brothers said it intends to “selectively sell land of approximately $500 million,ˮ a move it predicts will create “a significant return of its investment within 18 months.ˮ
Toll Brothers cash-rich ability to not only buy and develop land, but also to hold sites for future development, is part of a strategy the builder has also employed in the north east. Between 2008 and 2012, the company spent $81 million in cash on land acquisitions in Manhattan and Brooklyn alone, not counting what it spent in Jersey City and Hoboken.
In recent months, it has bought sites at 122-130 East 23rd Street, 82 King Street, 953-961 First Avenue and just last week, according to a report in the Real Deal, 55 West 17th Street.