Sunday, 30 April 2017

L&Q in talks to buy strategic land company Gallagher Estates

L&Q is in talks to buy strategic land company Gallagher Estates, which carries on the bulk of its activity outside of the housing association’s south-east heartland. 

Discussions between the groups are understood to have started several months ago, running alongside L&Q’s merger talks with East Thames Group.

The Sunday Times reported that Mr Gallagher has held talks with potential purchasers including the Wellcome Trust and Berkeley Group. It reports that the company could sell for £550m.

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Gallagher is one of the UK’s biggest strategic land companies. The bulk of the West Midlands company’s activity is buying and assembling land.

It then brings the sites forward for development by securing planning permission and providing infrastructure at which point it sells them to developers.

Overall, according to a list of projects on the company’s website, Gallagher currently has nearly 37,000 homes in its development pipeline. Just over half of these units (18,940) are under development, according to the company. The pipeline also contains 10,770 homes which have received planning consent, 4,000 on sites currently being promoted and 3,350 allocated in local plans.

Broken down regionally, the strategic land company is most heavily exposed in east Anglia where it has 12,200 homes in the development pipeline, the bulk of which (10,000) are located at the new town it is developing at Northstowe in Cambridgeshire.

Gallagher also has 11,550 homes in its south east development pipeline, over half of which are located in a 6,600 unit planned urban extension to Milton Keynes.

The company is also a big player in its West Midlands home region, where it has projects on the go for 9,730 homes.

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Gallagher currently has no land holdings in London, which is where L&Q’s portfolio is concentrated, having already developed all of its projects in the capital.

Acquiring Gallagher’s land holdings would help L&Q deliver its pledge to build 100,000 new dwellings over the next 10 years, half of which it has been earmarked for affordable rent or low-cost ownership.

The newly merged association is planning £15bn worth of investment to deliver its home building plans, which include major projects at Barking Riverside and the regeneration of the Ocean Estate.

L&Q said at the time of the merger that it will be achieving its 100,000-home target via relationships with like-minded organisations in the south east and partnerships, like the one it has forged with the Trafford Housing Trust.

Following its recent merger with East Thames Group, which completed in November, L&Q announced that it had refinanced giving cheaper long-term funding costs, a better liquidity cover ratio and a funding structure that supports its objectives. 

Adam Challis, head of residential research, said that the potential acquisition of Gallagher by L&Q was a ‘really exciting’ development for efforts to boost housing supply.

‘They are effectively turning themselves into a multi-tenure developer,’ he said.

‘Getting hold of Gallagher Estates is a way of getting hold of oven-ready strategic sites. It’s about getting access to a pretty extraordinary development pipeline.

‘It shows that L&Q are very serious about ratcheting up their rate of delivery.’

He added that big housing associations were in a stronger position than volume house builders to carry out an acquisition like Gallagher because they had stronger balance sheets and so could raise debt at cheaper rates.

‘L&Q does not have the same return requirements as a traditional house builder and so may be able to develop these sites more quickly.’

L&Q declined to comment. Gallagher Estates has been contacted for comment.

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