One of the UK’s largest housebuilders is tapping investors for £500m to spend on land, claiming that coronavirus has pushed down prices, thinned the competition and created opportunities.
Taylor Wimpey, the FTSE 100 developer, has already been active in the land market over the past few months, despite much of the UK being under lockdown. The company has bought a dozen sites at a cost of around £136m but said it had appetite for more.
The pandemic has created “short term opportunities to acquire land from a broad range of sources at attractive returns and prices below pre-Covid-19 levels,” said the company, which also announced it would return any money it had received as part of the government’s furlough scheme.
The approximately £500m equity raise would “enable us to take advantage of these near term opportunities. These investments will support sustainable future growth and deliver enhanced, long term value to shareholders,” said Pete Redfern, Taylor Wimpey’s chief executive, who is investing £200,000 as part of the fundraise.
The new capital will go towards 13 sites that the builder is in the process of acquiring and a further 60 it is in discussions regarding, it said.
Chris Millington, an analyst at Numis Securities, said the action was “a surprise”.
“They argued they have got such a good balance sheet, but as soon as they need to buy land they’re knocking on the door [of investors], which I don’t see Persimmon or Berkeley doing,” he added, referring to two other big housebuilders.
As well as seeking opportunity for discounts, Taylor Wimpey was looking to diversify its land holdings, which have skewed towards larger sites, he said. The company might also be keen to emulate its rival Berkeley Group, which took advantage of discounts in the wake of the financial crisis to buy up land, he added.
Land bought now would typically take a minimum of two years to build houses on, by which point Taylor Wimpey said it expected the housing market to have recovered from the slowdown caused by coronavirus.
Taylor Wimpey kicked off the placing on Wednesday evening and broadened the pool of eligible investors to retail investors and employees via the PrimaryBid platform. The company follows Compass Group and IWG in offering private investors access to a fundraising in recent weeks.
The move showed that companies were considering a broader range of stakeholders than solely institutional investors, said Anand Sambasivan, PrimaryBid’s chief executive.
Shares in Taylor Wimpey were trading at £1.52 at market close on Wednesday, giving the company a market capitalisation of just below £5bn.