Toll Brothers, the largest luxury-home builder in the United States, has agreed to buy Shapell Industries' homebuilding business for about US$1.6 billion, gaining 5,200 lots in the Los Angeles and San Francisco Bay areas as buyer demand for housing rises. Toll will pay for Beverly Hills, California-based Shapell with debt and a share offering The deal will more than double the number of California lots controlled by Toll to about 9,200, with most in coastal markets where vacant land is hard to come by, chief executive officer Douglas Yearley said. "It's a game-changer for this company," Yearley said. "It's the most exciting acquisition we've had in our 46-year history." Developers are stocking up on land as US home values climb at their fastest pace in seven years. Last week, California-based Tri Pointe Homes agreed to buy the homebuilding division of Weyerhaeuser for US$2.7 billion. In the Shapell deal, 10 to 15 per cent of the purchase price will be covered by issuing new Toll shares, and Toll plans to sell about US$500 million of land from the Shapell portfolio. The Pennsylvania-based builder also stands to make money immediately by selling homes in Shapell's backlog. California homes sold for a median of US$355,000 in September, up 24 per cent from a year earlier, according to DataQuick, a San Diego-based real estate data provider. Shapell's Porter Ranch development, with about 1,800 home sites, is the largest master-planned community in Los Angeles, and its Gale Ranch in San Ramon, east of San Francisco, has 1,500 lots. Shapell sold 350 homes to August this year for an average of US$800,000. Toll said the average price of homes delivered in the fourth quarter was about US$703,000. Revenue in the three months to October 3 jumped 65 per cent to US$1.04 billion, while signed contracts increased 23 per cent in dollar terms to US$839 million. The Shapell deal is 10 times the size of Toll's 2011 acquisition of Seattle-based builder CamWest Development for US$150 million. Last year, the company paid US$110 million for half of Shea Baker Ranch in Orange County, California, and bought 117 Shapell lots in Yorba Linda, California, for US$47 million. That deal helped pave the way for the purchase of the entire company, Shapell CEO Bill West said.