Lennar & CalAtlantic merger to create homebuilding titan in Greater Orlando

Bob Moser
GrowthSpotter

Lennar Corporation and CalAtlantic Group announced plans to merge this week and form America's largest homebuilder. In Greater Orlando it will bring together the buying power of two of this market's largest production builders, with local footprints that may complement each other. 

In Orange, Seminole and Osceola counties alone this year, CalAtlantic had 135 single-family lot closings in the first quarter and 174 closings in the second quarter, while Lennar had 294 closings in Q1 and 310 closings in Q2, according to the Greater Orlando Builders Association

Lennar, Greater Orlando's largest builder by volume, has 43 local communities in development, with concentrations in Horizon West, ChampionsGate and Storey Park in southeast Orlando. 

CalAtlantic has 49 active developments, with most of its focus in Osceola County, Horizon West and Lake County.

The stock and cash deal is worth an estimated $5.7 billion, and would create a homebuilder with close to 240,000 single-family home lots in 21 states, a market value near $18 billion and combined revenue of $17.2 billion over the past year. 

That combined revenue tops D.R. Horton's $12.6 billion reported in 2016, which ranked it as the top-producing homebuilder this year by Builder Magazine. 

Nationally, the merger is a response by both companies to rising costs of labor, materials and the need for greater efficiencies. When Standard Pacific and Ryland Homes merged in 2015 -- creating CalAtlantic -- they estimated annual cost savings of $50 million to $70 million. 

The local impact won't be known until Lennar and CalAtlantic reveal more details about how the new company will look and operate.

The companies haven't announced if one brand will absorb the other, if they'll continue to operate separately but merge regional offices to find efficiencies and purchasing power, and if they find the brands of CalAtlantic and Lennar carry distinct reputations with buyers. 

The companies said in a public filing that they have a May 2018 deadline to finalize the merger. 

The median sale price for new homes in Metro Orlando from July through September of this year was $318,000 compared to $220,000 for existing homes, which reflects a year-over-year price increase of 4.6 percent for new build compared to 10 percent for existing product, according to Redfin

New construction home sales were up 14.1 percent in September compared to last year in Metro Orlando, while existing home sales were down 7.4 percent. And 5,210 residential building permits were issued in the metro area in August, up almost 16 percent from the year prior, per Redfin. 

Have a tip about Central Florida development? Contact me at bmoser@growthspotter.com, (407) 420-5685 or @bobmoser333. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.

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