L&G completes £605m buyout of Cala Homes from Patron Capital

By James Wallace - Tuesday, March 13, 2018 7:15

Legal & General has completed its buyout of housebuilder Cala Homes this morning, taking the remaining 52.1% equity tranche it did not already own for £315m from Patron Capital.

The transaction values Cala Homes at £605m. Under L&G and Patron’s joint ownership, Cala Homes’ revenues have more than tripled in the four years to 2017 with £748m.

Legal & General has taken control of the housebuilder under its Legal & General Capital (LGC) division, which is targeting sectors including housing and urban regeneration where there remains an investment and innovation, gap, the insurance giant believes.

Cala Homes is a leading UK provider of high quality family housing.  It delivered 1,677 total completions in 2017. Of these completions, 1,322 private homes were sold with an average selling price of £497k.  Over 60% of profits came from its English regions (the remainder from within Scotland), with 21% of units (355 units) delivered being affordable homes.

Kerrigan Procter, chief executive officer of LGC said Cala Homes “is growing business which we know and understand well” adding: “[Cala] has a strong management team with proven experience of managing a housebuilding business across business cycles and has delivered great returns for shareholders since its acquisition in 2013.”

Legal & General reported operating profit before tax for its 47.88% stake in Cala Homes in 2017 of £42.5m, which would have equated to £91.5m has the insurer owned the housebuilder outright during 2017.

Cala Homes is one of the UK’s leading high-quality homes.  In 2017, Cala delivered 1,677 new homes, of these completions, 1,322 private homes were sold with an average selling price of £497k. The remaining 355 units, or 21%, were affordable homes.

Prime Minister Theresa May promised a shakeup of planning rules to tackle the UK’s perennial housing shortage with measures including ending the “perverse incentive” for housebuilders to sit on undeveloped land and wait for land value appreciation. “I want to see planning permissions going to people who are actually going to build houses, not just sit on land and watch its value rise,” the Prime Minister said last week.

Measures could include granting councils access to developers’ housebuilding records as part of planning permission assessment to reward and punish developers in line with their track record.

“L&G has acquired Cala on the strength of its current business plan and growth strategy, which we fully support, so there is no change of strategy expected,” the insurer said in a statement to CoStar News.  “Legal & General Capital plans to retain Cala as a separate legal entity, with a distinct management team and governance structure held alongside Legal & General Capital’s other operational housing businesses.

“Given our long-term capital, we can invest for the longer term and we believe that CALA has extremely strong growth prospects under Legal & General Capital ownership.”

James Wallace is a freelance consultant and can be reached via WhatsApp on 07825 382670 or email: jawallace32@gmail.com


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