The Deal: Toll Expands California Footprint With Shapell Acquisition
By Lou Whiteman
NEW YORK (The Deal) -- Luxury homebuilder Toll Brothers
Beverly Hills, Calif.-based Shapell has been building in the state since its founding in 1955, and currently has a land portfolio of about 6,200 home sites spread across highly desirable markets including San Francisco, Los Angeles, Orange County and Carlsbad. The company through Aug. 31 has delivered 347 houses in 2013, selling for an average price of $791,000.
Toll, of Horsham, Pa., has been in California since 1994 and is currently offering homes in nine communities. Post-deal the company, which has operations in 19 states, will have or control about 9,200 lots in California, which the company said leaves it well positioned to compete as the housing market in the state continues to rebound from recession lows.
"The tremendous land portfolio the Shapell family has amassed over decades in California presents an incredible opportunity for Toll Brothers," said Toll CEO Douglas C. Yearley Jr. "This acquisition will provide significant growth over the coming years and, we believe, will be accretive to earnings in the first year, excluding transaction costs."
The company has been focused on growing out west in recent years, acquiring Seattle-based CamWest Development LLC in 2011 for $150 million. In 2012 Toll bought 117 lots in Yorba Linda, Calif., from Shapell for $47 million, and also bought into a development in Orange County.
Toll said it would fund the transaction with a combination of draws from its existing $1.04 billion credit facility as well as debt and equity financing. The company said it has received a supplemental commitment for a $500 million, 364-day senior unsecured revolving credit facility. Post-deal Toll said it will still have more than $1 billion in available liquidity, and said it intends to seek out selective land sales to generate about $500 million.
Post-acquisition the Shapell family will retain ownership of its retail, commercial and multi-family entities. Bill West, CEO of Shapell Industries, in a statement said that the company's board "made the difficult decision to sell ... after careful deliberation," praising Toll's "outstanding reputation as a high quality home builder."
The deal is the second large transaction involving homebuilders announced this week, following Weyerhaeuser's
There was reportedly a healthy auction for Shapell, with Standard Pacific, Brookfield Homes and Tri Pointe all mentioned as bidders in recent weeks.