Merger Madness: Learn What A Combined LEN & CAA Might Look Like


America’s number two homebuilder, Lennar (LEN), and number five, CalAtlantic Homes (CAA), announced on Monday their merger, creating the largest homebuilder in the US. The deal is expected to close late first quarter 2018. The news came just two years after Standard Pacific Homes and Ryland Homes merged to create CAA, and eight months after LEN acquired WCI Communities.

“We have been expecting continued merger and
acquisition activity in the homebuilding industry,
but this merger is huge. The organization will benefit
from notable specialties by leveraging off Lennar’s
excellence in land buying and management and
CalAtlantic’s significant product strengths.”

Tim Sullivan, Managing Principal, Advisory


We pulled our proprietary data from Zonda iPad app to show what a combined CAA and LEN might look like. Each month, our team tracks contract sales activity for 16,000 actively selling new home communities throughout the United States. The analysis below is based on 2017 year-to-date sales (YTD). Going forward, we will use “Lennar” to describe the combined company.

Lennar has home-court advantage:

  • Houston, Tampa, Orlando, Miami, and Phoenix are Lennar’s highest volume markets. Lennar is also the #1 builder in each of these metros.
  • Lennar is based in Florida, and not surprisingly, three of their top five sales markets fall within their backyard. The sunshine state represents 21% of their geographic exposure.
  • Houston and Tampa each represent 8% of Lennar’s overall sales portfolio, Orlando makes up 7%, and Miami and Phoenix each comprise 6%.
  • Of Lennar’s actively selling communities in Houston, the Brookstone and Camden Collections at McCrary Meadows is selling at the fastest pace. The community offers single-family detached homes from the $250,000s, and offers Lennar’s Home Within a Home® to allow for flexible living space.

Lennar tops 30% market share in three different markets:

  • When looking at each metro specifically, Lennar makes up over 30% of the market share for Miami, Bakersfield, and Tampa. This bump above the 30% threshold will be great for brand awareness. In these markets, three of ten homes will be supplied by Lennar. Lennar is also the #1 builder in these markets.
  • In Naples, the merger won’t give Lennar a substantial lift in market share; LEN already supplied 22% of the market.
  • The merger will nearly double Lennar’s position in Minneapolis, a market that enjoys a 3.5% unemployment rate.
  • In high volume markets like Dallas, Atlanta, and Austin, Lennar’s market share is <10%.

Los Angeles is a top revenue market for Lennar due to price:

  • Miami is estimated to bring in the most revenue for Lennar. The market has strong sales volume (#4 for the company) and a relatively high average list price ($470,000).
  • Los Angeles and Riverside bumped out some high volume markets due to the average list prices of $1.1M and $530,000, respectively. In Los Angeles, the high sales price was countered by the relatively muted sales volume of 730 YTD.
  • Houston’s average list price is roughly $350,000, but the metro is the top producer for sales YTD.

Note: estimated revenue is based on YTD sales and current average list price

The merger made waves in the homebuilding industry. The new company will not only be the largest homebuilder in the US, but is aiming to be the most profitable. Empirically, when LEN acquired WCI Communities, they addressed known issues and ended up exceeding profit goals. The lessons learned combined with economies of scale and other gained efficiencies from this merger will help Lennar work towards their monetary goals.

We’ve worked on a lot of mergers and acquisitions in our industry over the years. Contact us if we can help grow your business.
Ali Wolf, Manager of Housing Economics