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REVIEW SUMMARY
Business. Taylor Morrison, West Florida division
Industry. Homebuilding
Key. Company hopes to grow its Gulf Coast homebuilding division.
The top Gulf Coast executive for one of the country's largest homebuilders says he and the firm have learned a lot of lessons after being pounded by the recession.
Top of the list: Size still matters — but it's not the panacea many in the industry once considered it. That goes for both the size of homes and the amount of homes a company builds. Several other Gulf Coast homebuilders have made the same conclusion.
“It's not about volume now, necessarily,” says Steve Kempton, Taylor Morrison West Florida division president. “It comes back to being flexible and nimble enough to react to your customers.”
Kempton is charged with doing just that for the Sarasota-based Gulf Coast unit of Taylor Morrison, which covers 24 communities and has more than 7,000 lots from Pasco County through Collier County. Kempton will lead the effort under a new owner, one that sees the nationwide homebuilding market with potential, not pessimism.
That owner is TMM Holdings Limited Partnership, a trio of private equity firms: Fort Worth, Texas-based TPG Capital, a global leveraged buyout group with $48 billion in assets under management; Los Angeles-based Oaktree Capital Management LP, an investment management firm with a focus on distressed and corporate debt; and Vancouver-based JH Investments, a real estate and resort development firm.
TMM bought Taylor Morrison, in addition to Canadian homebuilder Monarch, from London-based Taylor Wimpey for $955 million. The deal closed July 13.
Builder magazine ranked Taylor Morrison, with home communities in five states, the 14th largest homebuilder in the country in 2010 in terms of closings. The company ranked first in that category for private builders.
Kempton is one of several Taylor Morrison executives who say TMM's financial commitment is a refreshing change over the cost-cutting ways of the past few years. “We were in preservation mode,” says Kempton. “We had to keep the doors open.”
Taylor Morrison CEO and President Sheryl Palmer relishes TMM's confidence. “We've shown that we can be a profitable, viable company during a difficult time,” says Palmer, in a statement.
Adds Kempton: “(TMM) believes the homebuilding industry as a whole is bouncing along the bottom. They are more than willing to invest.”
That investment includes at least $20 million in land deals on the Gulf Coast. In 2010 alone, the division closed on five sites: Lake Thomas Pointe in Land O'Lakes; Tuscany at Tampa Palms in Tampa; Sun Ketch Townhomes at Northeast in St. Petersburg; Verona Reserve in Venice; and Andalucia in Naples.
The 65-employee division has also added six employees in recent months, with plans to add more in the last half of 2011.
A big focus of employee recruitment will be in land planning, says Kempton, work that had mostly been outsourced the past few years. “We won't need to outsource as much as we take on new projects,” says Kempton.
The enthusiasm generated from the Taylor Wimpey-TMM deal has also begun to show in the most important homebuilding metric: sales. With 262 sales through June 30, the Gulf Coast division, for example, is on pace to surpass 2010 sales, which totaled 498 sales and 564 closings.
Broad range
Those closings represent a diverse cross-section of homes and locations. “We changed products to meet customers' desires,” Kempton says. “We also changed our products to meet customers' affordability requirements.”
The company's 24 communities are split up and down the Gulf Coast. There are nine in the Tampa-St. Petersburg area, seven in the Sarasota-Manatee market and 10 in the Fort Myers-Naples region. Those communities have 37 models, a number the firm recently increased, part of Kempton's plan to offer more, and different, choices.
Taylor Morrison's Tampa-St. Petersburg market, for example, includes Avelar Creek in Riverview and Ladera in Lutz, 35 miles apart. Homes in Avelar Creek range from 1,268 square feet through 2,594 square feet and from two to four bedrooms. Prices start at $118,900.
The smaller home model follows a regional and national trend, to shrink both the size and the price point.
The big house lives on in Ladera, though. Homes there range from 2,694 square feet to 4,674 square feet. Four bedrooms are standard. The gated community has 168 homes. Prices start at $370,000.
Other communities Taylor Morrison offers, or plans to offer, is a response to Kempton's mission to meet customers' new needs. In east Manatee County, for instance, the company is in the early planning stages for Esplande at Lakewood Ranch.
Taylor Morrison says that project, on 207 acres just north of State Road 70, is a maintenance-free resort lifestyle. Early plans call for 450 homes in the community, a mix of detached villas and single-family homes.
New homes, of course, need buyers, which is a homebuilder's biggest challenge. Taylor Morrison recently unveiled several programs designed to entice buyers. One program, Fly and Buy, tries to capitalize on snowbirds. The deal offers up to $2,000 in reimbursed travel expenses to buyers from more than 100 miles away who sign a contract on a Taylor Morrison home by Nov. 13.
More challenges
Taylor Morrison's momentum notwithstanding, the homebuilding industry still faces stark challenges.
On a national basis, the industry is still stuck in what's now a five-year swoon. For example, there were 312,000 new home sales in June, down 1% from 319,000 sales reported in May, according to U.S. Census Bureau data. Those sales figures are far below the 1.3 million sales the industry peaked at in 2005.
Moreover, some publicly traded homebuilders have had poor results lately. Reston, Va.-based NVR Inc., for one, reported a 46% drop in profit in the 2011 second quarter, from $71.3 million in the same quarter last year to $38.4 million this year. Revenues for the quarter fell 28%, from $968.34 million in 2010 to $698.45 million this year, according to a July 21 earnings release.
Privately held Taylor Morrison hopes to avoid that kind of malaise. The Scottsdale, Ariz.-based firm was initially the result of a merger between Taylor Woodrow Homes and Morrison Homes. Taylor Wimpey bought it in 2007 and owned it through July.
Kempton has worked for Taylor Morrison in Florida and Arizona for four years. He has been in land development and homebuilding for 20 years.
He says more than anything, the recession has taught him, or re-taught him, the value of customer awareness. “It's about staying ahead of customer expectations,” says Kempton. “It's not a one size fits all.”
On the Gulf Coast specifically, Kempton prefers to take an optimist's view to the potential impact of high unemployment, low consumer confidence and other looming challenges.
“Yes, we have a lot of external issues that keep people from being mobile,” says Kempton, “but people still want to live on the west Coast of Florida.”
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