How the Lennar/CalAtlantic Deal Impacts the Nation’s Biggest Markets
Brian Croce / Builder / November 13, 2017
Late last month, Lennar (NYSE: LEN and LEN.B) sent shock waves throughout the home building industry with the announcement that it plans to acquire CalAtlantic (NYSE: CAA) in a $9.3 billion deal—including a $3.6 billion net debt assumption. Under the terms of the deal, Lennar, the nation’s second-biggest builder in terms of closings, would acquire CalAtlantic (No. 5 in terms of closings) to create the country’s largest home building enterprise by revenue—$17.3 billion in 2016 revenues, according to our Builder 100 data.
When finalized, the deal will catapult the combined company to the country’s No. 1 spot for home builders in terms of revenue, jumping D.R. Horton, which reported gross revenue of $12.6 billion in 2016.
Combined 2016 closings for Lennar and CalAtlantic are 40,792, just shy of D.R. Horton, which reported 41,652 closings last year. The combined Lennar/CalAtlantic company would control an estimated 240,000 home sites and would have roughly 1,300 active communities in 49 markets across 21 states where approximately 50% of the U.S. population resides.
Once Lennar’s acquisition of CalAtlantic is complete, the combined company will be the country’s second-largest home builder in terms of closings. Chart is based on the 2017 Builder 100, which uses 2016 data.
On a national level, the numbers are impressive, but what impact will the acquisition have on the top local markets across the country? Based on an analysis of BUILDER’s annual Local Leaders list, which ranks the top builders in terms of closings in the top 50 U.S. new-home markets, the numbers are equally impressive.
LENNAR/CALATLANTIC MARKET DOMINANCE
|LOCAL LEADERS MARKET RANK||MARKET||COMBINED CLOSINGS: Lennar and CalAtlantic|
|27||North Port, Fla.||1,292*|
|*includes WCI Communities|
With the acquisition of CalAtlantic, Lennar is now the No. 1 builder in these 16 markets. Italics indicate the markets where it has reached No. 1 because of the acquisition. Information is based on 2017 Local Leaders list, which uses 2016 data.
Referencing the 2017 Local Leaders list, which uses 2016 data, the CalAtlantic acquisition will mean that Lennar is the top builder in 16 of the country’s top 30 markets, including seven markets in which it jumps to the top spot because of CalAtlantic’s combined presence. Along with the CalAtlantic acquisition, Lennar’s purchase of WCI Communities (No. 40 on the Builder 100 list with 1,276 closings) in February helps push it to No. 1 in another top 30 market, 27th-ranked North Port, Fla.
In addition, the CalAtlantic acquisition will propel Lennar into the No. 1 spot in Houston, the nation’s second-biggest new-home housing market, passing D.R. Horton. Lennar was second last year in the market with 2,334 closings, while CalAtlantic was 14th with 676 closings. Together, their 2,910 closings surpass Horton’s 2,728.
TOP SPOT IN HOUSTON
|HOUSTON MARKET RANK||COMPANY||CLOSINGS|
|5||Long Lake Limited||1,226|
In Houston, the country’s second-largest housing market, Lennar and CalAtlantic are poised to overtake D.R. Horton as the market’s top builder. Information is based on 2017 Local Leaders list, which uses 2016 data.
In certain MSAs, like 14th-ranked Tampa, Fla., 19th-ranked Raleigh, N.C., and 25th-ranked Minneapolis, Lennar was the top builder in 2016 and CalAtlantic was second. The combined company will now have a dominating share of these markets.
The Local Leaders data also shows that the combined company will become a top-3 builder in 25 of the top 30 markets, including four markets where neither Lennar nor CalAtlantic were in the top 3 last year: No. 3 Atlanta, No. 6 Washington, DC, No. 9 San Antonio, and No. 22 San Francisco.
In announcing the deal, Stuart Miller, Lennar CEO, said, “This combination increases our scale in the markets that we already know and in the products we already offer to entry level, move-up and active adult customers.”
The acquisition also moves the combined company ahead of D.R. Horton in three top-30 markets (No. 2 Houston, No. 18 Las Vegas, and No. 27 Cape Coral), and PulteGroup, the nation’s third-largest builder last year with 19,951 closings, in five top-30 markets (No. 3 Atlanta, No. 4 Phoenix, No. 6 Washington, D.C., No. 9 San Antonio, and No. 30 Charleston, S.C.). The transaction is expected to close in the first calendar quarter of 2018.
“The combined land portfolio will position the company for strong profitability for years to come, as we continue to benefit from a solid home building market, supported by job and wage growth, consumer confidence, low levels of inventory, and a production deficit,” Miller added.