Investors eye housing recovery by snapping up CALA Homes in £210m deal
HOUSING developer CALA Group, whose Midlands head office is based in Henley-in-Arden, has been sold in a private equity deal worth £210m.
The firm, which is based in Scotland, has reached an agreement with private equity firm Patron Capital Partners and insurance giant Legal & General.
It is thought investors may be eyeing a recovery in the housing market and have made their move now while the market is receptive.
CALA completed 153 homes in the Midlands in the last financial year and is currently building in locations across the region including Moreton-in-Marsh, Shrewsbury, Rugby and Eastcombe and has forthcoming developments in Crowle and Pebworth.
Under the terms of the agreement, Legal & General and Patron will each take a 46.5% equity stake in CALA alongside the developer’s existing senior management team, which will take a 7% share of the business.
The deal comprises £140m of equity, and £70m of debt, valuing CALA at £210m. Patron will lead the investment and both Legal & General and Patron will have a representative on CALA’s board going forward. Lloyds Banking Group will continue to support the builder with a new £100m five-year banking facility.
Rothschild, KPMG and Ernst & Young acted as financial advisers to the transaction, while Dundas and Wilson, Pinsent Masons, DLA Piper and Hogan Lovells acted as legal advisors.
CALA said its market positioning and presence in more affluent areas of the UK such as the Home Counties, The Cotswolds and around Glasgow, Edinburgh and Aberdeen had enabled it to return to profitability in 2011 for the first time since 2007, one year ahead of management’s plans. In 2012, the group announced a six fold increase in profitability to £11.4m on a pre-tax basis for the 12 months to June 30, 2012 alongside a 35% rise in completions to 875 homes and a 16.4% house sales gross margin, up from 14.8% the previous year.
The group’s trading performance during the first eight weeks of 2013 has seen strong levels of business with sales of private homes up 34% to 154 (2011: 115) at an average selling price of c.£330,000, consistent with the same period last year. Average sales per site per week are up 31% to 0.72 for the eight-week period (2011: 0.55).
At February 28, 2013, CALA’s land bank stood at 9,900 owned and contracted plots with a potential gross development value of £3.1bn, equivalent to approximately 10 years’ output on current projections. In addition, the group controls a longer term strategic land bank comprising c.5,400 plots.
Alan Brown, Chief Executive of CALA, said the investment represented “a significant step forward for CALA”.
“We are now poised for the next phase of our growth. By selecting Patron, one of the leading European real estate private equity houses, and Legal & General, to support the group in the next stage of our development, we have secured the backing of two highly respected investors who both share our vision for the business,” he said.