Shapell Ranch development, Gale Ranch

HORSHAM, PA-Luxury homebuilder Toll Brothers, Inc. has completed its $1.6 billion cash purchase of Shapell Homes, the private California land development and homebuilding company.

The deal was announced last November.

The purchase price includes 5,200 home sites, assembled by Shapell over many decades in affluent and high-growth markets along the coast in both northern and southern California. Almost all the sites – 97.5% – are fully entitled for construction.

The sites are located in the San Francisco Bay area, metro Los Angeles, Orange County and the Carlsbad market.

Douglas C. Yearley, Jr., Toll’s CEO, said his company has been integrating Shapell and about 100 of its associates  into the Horsham-based firm’s nationwide operation. The combination of Shapell and Toll’s teams and land holdings sets up “one of the premier platforms in several of the nation’s most dynamic housing markets,” Yearley said.

Yearley called the portfolio of entitled land possibly “the last great concentrated assemblage of this scale and quality in coastal California.”

The Toll CEO said lenders have given “tremendous support.”

“Our new five-year floating rate term loan is at a rate currently below 2% with covenants substantially similar to our existing $1.035 billion five-year, and new $500 million 364-day revolving, credit facilities,” he said.

Closing the acquisition in the first quarter of 2014 had been the goal, said Yearley, since a re-launch of the Shapell communities is targeted to the spring home-selling season.

The financing involved:

  • a new $485 million, five-year senior unsecured floating rate bank term loan
  • a $600 million five-year and ten-year senior unsecured debt
  • $230 million of common stocks
  • $370 million drawn from an existing $1.035 billion 5-year revolving credit facility

At closing, the company also established a new $500 million 364-day unsecured bank revolving credit facility, which it does not plan to draw on for this transaction. Between cash and untapped bank credit facilities, Toll retains $1.5 billion of available liquidity.

Toll previously announced it will selectively sell approximately $500 million of land to recapture capital and manage its California business. The company said it expects to recapture a significant portion of its investment within 18 months.