L&G takes major stake in upmarket builder

The business, which builds around 875 homes a year with an average selling price of £340,000, is being sold by Lloyds Banking Group.

CALA has built a number of houses in Yorkshire, its most recent being the Hexagon development on Birkby Lodge Road in Huddersfield, which is now sold out.

The group’s sale follows the recent £600m flotation of housebuilder Crest Nicholson and a raft of positive trading updates from the sector.

CALA, which targets the more affluent areas of the UK, said its trading performance so far this year has been “exceptionally strong”.

It returned to profit one year ahead of schedule in 2011 after being loss-making since 2008 and recently announced a six-fold increase in profits to £11.4m in the year to June 30.

The group reported a 35 per cent rise in completions and a 16.4 per cent house sales gross margin, up from 14.8 per cent.

Chief executive Alan Brown called the deal a significant step forward for the company.

“Having invested heavily in growing our land bank since 2010, we are now very well positioned to grow the business significantly over the next five years,” he said.

The deal is made up of £140m in equity and £70m in debt,

Lloyds, which took control of CALA in a debt-for-equity swap in 2009, will continue to support the business with a new £100m five-year banking facility.

Existing senior management will hold a seven per cent stake following the deal, with L&G and Patron each taking 46.5 per cent.

The acquisition is part of L&G’s strategy to target socially useful projects, such as housing, education, transport and energy sectors, that deliver high rates of return and fit its financial and strategic criteria.

CALA, which stands for City of Aberdeen of Land Association, has a land bank of 9,900 owned and contracted plots with a potential gross development value of £3.1bn.

Patron and Legal & General said their investment illustrates their confidence in the group’s future prospects.

They added it will provide CALA with a strong platform for growth and the funds to add significantly to its existing land bank.

The aim is to increase the size of the group substantially.

Patron will lead the investment and both companies will have a representative on CALA’s board going forward.

In a trading update, the group said its performance during the first eight weeks of 2013 has been “exceptionally strong” with increased private home sales up 34 per cent to 154 from 115 at an average selling price of £330,000, consistent with the same period last year.

Average sales per site per week rose 31 per cent.

CALA has 9,900 owned and contracted plots with a potential gross development value of £3.1bn, equivalent to 10 years’ output on current projections.

The group also controls a longer term strategic land bank with 5,400 plots.

Mr Brown said: “This investment represents a significant step forward for CALA and we are now poised for the next phase of our growth.”

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