Edinburgh-based upmarket home builder Cala Group said it has been acquired from Legal & General Group Plc by investment firm Sixth Street Partners and Patron Capital, a pan-European institutional investor focused on property-backed investments.

The sale has an enterprise value of £1.35 billion and is expected to complete in Q4 of 2024.

Cala is a provider of upmarket homes across the South of England, the Cotswolds and Scotland. In the year ending December 31, 2023, Cala sold 2,917 homes, resulting in a turnover of £1.3 billion and profit before tax (before exceptional items and revaluations) of £112 million.

The company is on track to deliver 3,000 new homes in the financial year ending December 31, 2024.

In a separate statement, Legal & General said: “The consideration for the sale will result in cash proceeds of £1.16bn (after adjustment for net debt), of which c£500m will be paid at closing with the remaining consideration being paid over the next five years on a deferred non-contingent basis.

“As at HY24, Cala had a Net Asset Value of £1.15bn and generated operating profits of £42m.

“The disposal reflects L&G’s disciplined approach to capital allocation and follows the group’s decision to create a Corporate Investments Unit as outlined at the Capital Markets Event (CME) in June 2024.

“Disposal proceeds from the sale will primarily be used, as they become available, to reinvest in the group in line with our strategy and the capital allocation framework set out at the CME. 

“The board will also consider the proceeds as part of the group’s announced intention to increase returns to shareholders through ongoing buybacks. As signalled, the sale of Cala reduces the Group’s Solvency Capital Requirement (SCR) by c£100m after diversification.”

Cala Group employs over 1,300 people across 10 offices and has around 75 live developments at any time. Cala started as the City of Aberdeen Land Association in 1875 and was the first Scottish company listed on the London Stock Market.

Sixth Street has about $80 billion in assets under management and committed capital. The firm’s London-based real estate team partners with property managers and institutional investors to acquire, finance, and provide servicing expertise across the global real estate sector. 

London-based Patron Capital represents €5.2 billion of capital raised across several funds and related co-investments. Investors represent a variety of sovereign wealth funds, prominent universities, major institutions, private foundations, and high net worth individuals located throughout North America, Europe, Asia and the Middle East. 

Cala CEO Kevin Whitaker said: “Today’s announcement is excellent news for Cala. This investment by Sixth Street and Patron demonstrates their confidence in Cala’s business plan and further potential. We look forward to developing a strong partnership with Sixth Street and reigniting the excellent relationship we shared with Patron between 2013 and 2018.

“I would like to thank Legal & General for their support since they first invested in Cala. With their backing, Cala has successfully tripled the number of homes we build each year, whilst revenue and profits have grown five- and ten- fold respectively.

“Cala’s biggest strength is the talent and passion of our people, and I would like to thank our dedicated employees for continuing to deliver for the business and our customers. Cala is in a strong position to go forward, with new ownership and a platform to deliver our next stage of growth.

“We have talented teams in place across the business, and continue to invest in our land pipeline, to grow our delivery of high quality, sustainable new homes throughout the UK.”

Julian Salisbury, Co-Chief Investment Officer of Sixth Street, said: “Cala has a bright future and we are proud to be entering this new chapter as stewards of a company with such a deep history and long track record of sustainable growth.

“We, together with Patron, look forward to continuing to support Cala and its management team, not only with capital but also with the significant resources of our London-based real estate investment team led by Giulio Passanisi.”

Keith Breslauer, Managing Director and founder of Patron Capital, said: “We are pleased to be able to back the Cala business once again. Cala is one of the UK’s leading housebuilders with a best-in-class landbank and a focus on building high-quality homes, being consistently ranked five-star for customer service.

“Furthermore, Cala is also a people business with a strong corporate culture and a business we know well, and we look forward to working closely with Cala’s impressive management team and our partner, Sixth Street, to further build the business and help tackle the undersupply of homes in the UK.”

Legal & General CEO António Simões said: “This transaction demonstrates continued momentum in executing our strategy, simplifying our portfolio to enable a sharper focus on our core, synergistic businesses. Cala has been an important part of L&G for over a decade, with profits increasing ten-fold since our initial investment in 2013.

“The sale announced today will provide capital to deliver our strategic goals of sustainable growth alongside enhanced returns for shareholders. I’d like to thank the whole Cala team for their contribution to the Group and wish them every success in the future.”