LEGAL & General (L&G) and private equity group Patron Capital Partners have struck a £210m deal to buy Scottish housebuilder Cala from Lloyds Banking group.
The insurance giant and Patron said yesterday they will each acquire a 46.5 per cent stake, while Cala’s management – led by chief executive Alan Brown – will buy the remaining seven per cent stake.
The deal will be financed by £140m of equity and £70m of debt, with both investment firms having a representative on Cala’s board.
L&G said the deal marked its first direct investment into the housebuilding market and was part of a strategy “to target socially useful projects” that deliver high rates of return.
Cala builds prime residential property around Glasgow and Edinburgh in Scotland as well as the Home Counties and the Cotswolds in England.
Its currently has 9,900 owned and contracted land plots in its portfolio with a potential gross development value of £3.1bn.
Lloyds became a major shareholder in 2009 when the company underwent a painful £280m debt-for-equity swap after a decade of over expansion and one of the worst downturns in the industry’s history.
The bank yesterday agreed to a new £100m five-year loan facility.
Brown, who took over as chief executive in 2009 after 23 years with the group, told City A.M yesterday steering the group back to health “has been one of the toughest things I have done”.
In 2011, Cala returned to profit for the first time since the start of the crisis in 2007. Brown said the group felt confident to put itself on the market again after achieving record pre-tax profits of £11.4m in the year to July 2012.
“The investment represents a significant step forward for Cala and we are now poised for the next phase of our growth,” he said.
Alex Midgen, Rothschild managing director and head of real estate, has been busy bringing in the rain with six deals under his belt in the past six weeks, including yesterday’s sale of Cala to Legal & General and Patron.
The banker kicked off the year by acting as financial adviser to AREA Property Partners and Capital & Regional on their sale of X-Leisure, the owner of venues including the Xscape indoor ski slopes and Brighton Marina,to Land Securities for £111.9m.
Midgen also advised Regus, the office space supplier, which trumped Hong Kong firm Pyrrho Investments to win the auction launched in December for business centre owner MWB Business Exchange.
Not missing a beat on property deals in the City, Midgen also acted for Intu, the UK’s biggest shopping centre group, on last month’s £280m share placing.
Midgen, who was hired by Rothschild in 1994, also serves as a director of Canary Wharf Group and its parent Songbird.
Meanwhile Patron was advised by KPMG, Ernst & Young and DLA Piper while Legal and General recruited Goldman Sachs and Slaughter and May. Cala’s legal advisers were Dundas and Wilson and Pinsent Masons.