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A Toll Brothers sign rests outside the corporate headquarters in Horsham, Pennsylvania.
Toll Brothers, the country's largest builder of luxury homes, is making a big move in the affluent coastal California market: On Wednesday, Toll announced that it's acquiring the homebuilding business of Beverly Hills-based Shapell Homes for $1.6 billion in cash.
The privately owned Shapell Homes was founded in 1955 by brothers Nathan and David Shapell and their brother-in-law, Max Webb. It has grown into one of California's largest land development and homebuilding companies. Its website markets homes in upscale developments in Porter Ranch and Yorba Linda.
Toll Brothers is acquiring Shapell's land portfolio of 5,200 home sites, most of which are already approved for development.
A statement announcing the deal says the sites are located in many of the state's "most affluent and high-growth markets": the San Francisco Bay area, metro Los Angeles, Orange County and the Carlsbad area. The statement adds that through Aug. 31 of this year, Shapell has delivered 347 homes at an average price of $791,000.
Pennsylvania-based Toll Brothers has been building and developing in California for nearly 20 years. The Shapell acquisition will more than double the number of California lots Toll Brothers owns and controls at a time when developable land is in short supply.
"The tremendous land portfolio the Shapell family has amassed over decades in California presents an incredible opportunity for Toll Brothers," Douglas C. Yearley, Jr., Toll Brothers' chief executive officer, said in a statement. Shapell's current portfolio dovetails perfectly with Toll's own California footprint and luxury brand and adds meaningfully to our presence in premier coastal locations in California, Yearley added.
Bill West, Shapell's chief executive officer, said the decision to sell was "difficult" but "made easier" by Toll Brothers reputation. The Shapell family will retain ownership of its retail, commercial and multi-family businesses.
Regulators must approve the deal, which Toll Brothers expects to close in the first quarter of 2014.