WEBVTT - Taylor Morrison CEO Talks Mergers and Labor 0:00:00.160 --> 0:00:03.760 This is Bloomberg Business Week with Carol Messer and Jason 0:00:03.840 --> 0:00:15.239 Kelly on Bloomberg Radio. All right, always good to get 0:00:15.280 --> 0:00:18.280 a sense of what's going on in the home buying, 0:00:18.320 --> 0:00:22.560 home building, all of the residential market. Nobody better to 0:00:22.560 --> 0:00:26.200 talk about than Cheryl Palmer, chairman and CEO of Taylor Morrison, 0:00:26.239 --> 0:00:29.760 joining me on the phone from lovely Scottsdale, Arizona. Cheryl, 0:00:29.840 --> 0:00:32.080 every time I talked to you this time of year, 0:00:32.240 --> 0:00:34.519 I think, wait, why are you? Why do you get 0:00:34.560 --> 0:00:35.920 to be in Scottsdale and I have to be in 0:00:35.920 --> 0:00:38.760 New York City. It's not fair. I bet it's beautiful now. 0:00:38.880 --> 0:00:41.320 It's beautiful here, but I was just in your lovely 0:00:41.360 --> 0:00:43.599 city early in the week talking to investors and it's 0:00:43.680 --> 0:00:46.080 quite beautiful there too. Just a little could Yeah, it's 0:00:46.080 --> 0:00:48.760 a little chili. It's actually sunnier today, so we'll take it. 0:00:48.840 --> 0:00:51.839 But in any case, you've been very busy. You were 0:00:51.880 --> 0:00:56.080 talking to investors. Earnings out as well as some deal making. 0:00:56.320 --> 0:00:59.720 Let's talk about deal making first, because making a big 0:01:00.160 --> 0:01:05.000 here William Lyon, Yeah, exciting. We actually closed on the 0:01:05.040 --> 0:01:08.720 transaction last Thursday, so you're right. The timing of earnings 0:01:08.720 --> 0:01:11.840 and then closing on the deal and then move immediately 0:01:11.920 --> 0:01:15.000 going onto the road and talking to investors. But it's 0:01:15.080 --> 0:01:17.759 huge for the organization. It makes us top five builder 0:01:17.800 --> 0:01:21.760 in the US, and strategically, it really accomplished you know, 0:01:21.840 --> 0:01:24.080 quite a bit for us. It made us top five 0:01:24.120 --> 0:01:27.640 position in most of our markets. It put us on 0:01:27.680 --> 0:01:33.000 the map in Portland's and um uh, washed Seattle and 0:01:33.200 --> 0:01:37.720 Las Vegas. It really allowed us to increase kind of 0:01:37.720 --> 0:01:42.680 our entry level first time mover positions across the portfolio, 0:01:42.840 --> 0:01:45.839 a lot of synergies. We quoted over eighty million in synergies. 0:01:46.560 --> 0:01:51.280 So yeah, it's a big, big, big transaction for the organization. 0:01:51.320 --> 0:01:53.320 We're very excited and we got to welcome nearly eight 0:01:53.400 --> 0:01:55.920 hundred team members to the company. Yeah, it's a big one. 0:01:56.040 --> 0:01:57.840 And uh, tell me how it came about? I mean, 0:01:57.920 --> 0:02:00.560 was it just sort of a natural next step for 0:02:00.640 --> 0:02:05.760 you guys what you talked about the adding some geographic diversity, 0:02:06.560 --> 0:02:11.880 but this particular deal. How to come about this particular one. 0:02:12.200 --> 0:02:14.519 You know, I've had the opportunity over the years to 0:02:14.600 --> 0:02:17.120 get you know, it's a small industry kind of right, 0:02:17.160 --> 0:02:19.520 and so I've had the opportunity to know the CEO, 0:02:20.240 --> 0:02:23.840 Matt sized as well as the Lion family a great 0:02:23.919 --> 0:02:26.840 deal of respect UM and for a long time, I 0:02:26.840 --> 0:02:30.720 think I believe these two businesses belonged together. And then 0:02:30.960 --> 0:02:33.320 it was really about, you know, one was the right 0:02:33.360 --> 0:02:36.799 time because strategically, for all the reasons I just talked about, 0:02:37.200 --> 0:02:39.640 it just made so much sense. And I think about 0:02:39.720 --> 0:02:43.240 how they approached the customer. UM. We're the most trusted 0:02:43.280 --> 0:02:47.359 builder UM in America and five years running, and they 0:02:47.400 --> 0:02:50.480 were in the top three. So we believed in kind 0:02:50.480 --> 0:02:54.480 of the same experience for our customers. Are penetrations in 0:02:54.560 --> 0:02:57.240 each of our markets were slightly different, so it allowed 0:02:57.320 --> 0:02:59.600 us to make a bigger impact in each of the 0:02:59.600 --> 0:03:02.360 markets we do business in. And so then it was 0:03:02.400 --> 0:03:05.040 about getting you know, a deal that made sense and 0:03:05.160 --> 0:03:07.200 working with the family. I think they put a great 0:03:07.240 --> 0:03:11.040 deal of trust into the organization to do the right 0:03:11.080 --> 0:03:13.800 thing and kind of carry on the legacy that the 0:03:13.840 --> 0:03:17.200 general you know, I think began more than started nearly 0:03:17.240 --> 0:03:20.800 sixty years and so a business like this, Cheryl, you 0:03:20.840 --> 0:03:23.959 know much better than I. It's high touch, it's very 0:03:24.000 --> 0:03:28.480 customer focus, very customer service, uh focus. How do you 0:03:28.560 --> 0:03:31.840 ensure as you get bigger that you sort of hold 0:03:31.919 --> 0:03:37.920 onto that at the highest level, it's probably where we put, 0:03:38.000 --> 0:03:41.560 you know, most of our energy. And you're absolutely right 0:03:41.680 --> 0:03:45.840 that the integration of bringing these two companies together, it's 0:03:45.880 --> 0:03:49.000 all about the people. If we get that right and 0:03:49.080 --> 0:03:51.360 we bring these two companies. When we bring these two 0:03:51.400 --> 0:03:55.160 companies together the right way then and do the right 0:03:55.200 --> 0:04:00.280 things internally, it actually allows for a very different, very 0:04:00.320 --> 0:04:04.360 different experience for our external customers. We started a partnership 0:04:05.160 --> 0:04:08.200 well over a year ago with the Ritz Carlton UM 0:04:08.280 --> 0:04:11.880 and have a very extensive training program and a daily 0:04:12.040 --> 0:04:15.960 communication vehicle across all three thousand of our team members. 0:04:16.000 --> 0:04:18.400 All of those things to ensure that our team members 0:04:18.400 --> 0:04:22.240 are empowered both internally and externally, and I think it 0:04:22.279 --> 0:04:24.760 makes a difference and it's showing up in our results. Interesting, 0:04:24.760 --> 0:04:28.440 tell me about the Ritz Carlton thing. That's fascinating. Well, 0:04:28.480 --> 0:04:31.839 you know, it's all about experience, right, think about today's 0:04:31.880 --> 0:04:34.880 economy and its service economy, and it's a high to 0:04:34.960 --> 0:04:38.159 your point, a high touch point. And I had had 0:04:38.200 --> 0:04:41.120 the pleasure many many years ago to work with them 0:04:41.240 --> 0:04:44.960 on the rollout of a community and it was about 0:04:45.000 --> 0:04:47.720 making sure that you know, one it was a level 0:04:47.720 --> 0:04:50.839 of experience you you provided to your customers. And you 0:04:50.839 --> 0:04:52.840 think about walking into a hotel and what you would 0:04:52.839 --> 0:04:55.719 expect for the ritz, but hey, that's a hotel room. 0:04:55.800 --> 0:04:58.440 Think about the experience you should expect as you were 0:04:58.440 --> 0:05:02.600 about to make the largest, most meaningful UM purchase in 0:05:02.640 --> 0:05:06.919 your life. And we really believe that our customers deserve that, 0:05:07.000 --> 0:05:09.839 and we believe the best way to provide that is 0:05:09.880 --> 0:05:13.520 to make sure that our team are internal customers one 0:05:13.680 --> 0:05:17.200 feel part of this organization that they're making a difference 0:05:17.200 --> 0:05:20.200 in every day and that they're empowered to make decisions 0:05:20.240 --> 0:05:24.560 and they're treated with respect, and it just becomes a 0:05:24.680 --> 0:05:28.600 viral within the organization and um, I couldn't be more 0:05:28.600 --> 0:05:31.000 proud of the work that they've done and really the 0:05:31.040 --> 0:05:34.120 way the organization has kind of embraced it, And like 0:05:34.160 --> 0:05:36.960 I said, it's kind of culminated with this series, this 0:05:37.200 --> 0:05:41.200 daily huddle where every single person in the company gets 0:05:41.200 --> 0:05:44.640 together to understand what's going on in their organization. Yeah, 0:05:44.720 --> 0:05:47.400 that's interesting, and I hadn't really thought about an exactly 0:05:47.400 --> 0:05:49.000 the way that you just laid out. I mean, it is. 0:05:49.120 --> 0:05:52.200 It's it's when you think about sort of these catalytic 0:05:52.279 --> 0:05:54.279 moments in our lives that things we look back on, 0:05:54.560 --> 0:05:57.400 you always remember, you know, even if you buy several 0:05:57.400 --> 0:05:59.599 houses over the course of your lifetime, like you remember 0:05:59.600 --> 0:06:03.160 each one especially, Uh, those are early experiences. It's a 0:06:03.279 --> 0:06:08.320 very intimate and in some ways very vulnerable moment, right, Yeah, 0:06:08.440 --> 0:06:11.279 no matter if it's your first house, if you have 0:06:11.400 --> 0:06:13.760 a growing family. I mean, my kids are I'm old, 0:06:13.800 --> 0:06:16.320 so my kids are all grown up, but they still talk. 0:06:16.400 --> 0:06:18.720 I mean, their friends are still the friends they had 0:06:18.880 --> 0:06:20.960 amy and the house we lived in twenty five years ago. 0:06:21.040 --> 0:06:23.640 So I mean it sounds a little, you know, a 0:06:23.640 --> 0:06:28.440 little squishy, but we were in the business of creating memories. Yeah. Absolutely. 0:06:29.200 --> 0:06:31.920 Let's get back to my conversation with Cheryl Palmer, still 0:06:31.960 --> 0:06:34.799 sticking with me, Thanks for hanging around. Chairman and CEO 0:06:34.960 --> 0:06:39.599 of Taylor Morrison joining me on the phone from lovely Scottsdale, Arizona. So, Cheryl, 0:06:39.640 --> 0:06:42.200 before the break, we were talking about sort of managing 0:06:42.200 --> 0:06:45.440 the people in your business, that the folks who are 0:06:45.480 --> 0:06:47.920 you know, dealing with customers and selling homes and things 0:06:47.960 --> 0:06:49.520 like that. I did want to ask you about the 0:06:49.560 --> 0:06:53.440 broader labor market because we continue to be in a 0:06:53.720 --> 0:06:56.799 very tight labor market. I do wonder as you're actually 0:06:56.839 --> 0:07:00.760 getting homes built and sold. What are you finding? Yeah, 0:07:00.880 --> 0:07:03.120 I would say we're seeing exactly the same thing. And 0:07:03.160 --> 0:07:05.320 this has been with us for a number of years now. 0:07:05.920 --> 0:07:08.240 Um for a number of different reasons, right, Like you said, 0:07:08.240 --> 0:07:11.000 the broader market, um, but if you think about the 0:07:11.040 --> 0:07:14.520 downturn and a lot of people left the industry, some 0:07:14.720 --> 0:07:17.840 aged doubt. Um, we didn't really grow new talent through 0:07:17.880 --> 0:07:20.800 the school system. So it's been very tight. It's been 0:07:20.800 --> 0:07:24.120 tight both on the home building side. I'd say most recently, 0:07:24.200 --> 0:07:26.160 the biggest shift we've seen is we're really seeing it 0:07:26.200 --> 0:07:29.760 on the development side to what we call the horizontal development. 0:07:29.800 --> 0:07:34.800 The usdergrounds that it's taking longer to bring communities to market, 0:07:34.880 --> 0:07:37.840 is taking longer to build homes. But this is what 0:07:37.880 --> 0:07:39.840 we do when we work through it every day, and 0:07:40.120 --> 0:07:43.560 you really feel the pressure month end, quarter and year ends. 0:07:43.680 --> 0:07:47.320 But you know it's UM. We're having to look at 0:07:47.360 --> 0:07:50.720 opportunities on building sciences and how we get more efficient. 0:07:50.920 --> 0:07:53.440 We're looking at developing and training and bringing new people 0:07:53.480 --> 0:07:56.560 into the industry. So there's not one quick answer here. 0:07:56.800 --> 0:07:59.440 And do you see it sort of playing through to 0:08:00.040 --> 0:08:03.080 margins and sort of overall profitability at this point, Cheryl, 0:08:04.880 --> 0:08:08.320 You know, you go through different parts of the construction 0:08:08.360 --> 0:08:11.080 cycle where you see pressures. I mean, at some point 0:08:11.080 --> 0:08:14.400 it's on the commodities where we've seen it most, you know, 0:08:14.440 --> 0:08:17.320 consistently over the last many years, has been on the 0:08:17.400 --> 0:08:21.960 labor side. So yes, um, and you see it both 0:08:22.000 --> 0:08:24.880 directly in cost and you see it and just how 0:08:24.920 --> 0:08:27.920 long it takes. And so it's really critical that we 0:08:28.080 --> 0:08:31.600 go into partnerships with our trade partners because it's about 0:08:31.680 --> 0:08:34.719 getting them to the job and keeping them there and 0:08:34.800 --> 0:08:38.240 making sure that there's no dead days. The job's ready 0:08:38.280 --> 0:08:41.439 for them when they get there. You know that we know. 0:08:41.520 --> 0:08:45.400 So it truly is and every meaning of the word 0:08:45.400 --> 0:08:47.959 a partnership for us to get done and deliver the 0:08:48.040 --> 0:08:50.880 quality homes we need to on time for our customers. 0:08:50.960 --> 0:08:53.360 So you've had a nice little run in the stock 0:08:53.400 --> 0:08:56.640 already this year stuck up. Based on what I'm seeing 0:08:56.679 --> 0:08:59.559 here in my Bloomberg terminal, I do wonder, is that 0:09:00.000 --> 0:09:04.400 elective in your mind of just great performance on your part, 0:09:04.559 --> 0:09:08.000 or does this tell us something well, that's clear, but 0:09:08.360 --> 0:09:11.000 does it tell us something more broadly about demand? Does 0:09:11.000 --> 0:09:13.000 it tell us something more broadly about sort of the 0:09:13.040 --> 0:09:17.440 state of the industry across the US. I think it's 0:09:17.800 --> 0:09:20.280 you know, I'd love to say it's the performance of 0:09:20.320 --> 0:09:22.439 the team, and they've done some great work, and certainly 0:09:22.440 --> 0:09:24.960 that's a piece of it. And um all the things 0:09:24.960 --> 0:09:26.880 that they've been we've been working on for quite some 0:09:26.920 --> 0:09:29.319 time seeing finally come through the P and L and 0:09:29.320 --> 0:09:32.520 and that being appreciated. And hey, William Lyons our six 0:09:32.559 --> 0:09:35.200 acquisition in six years, so each time you take a 0:09:35.200 --> 0:09:37.560 little bit of a step forward to take you know, 0:09:37.600 --> 0:09:40.120 take one back to take one forward. But I think 0:09:40.160 --> 0:09:43.560 more than anything, it's really a signal to how everyone's 0:09:43.600 --> 0:09:46.199 feeling about the industry. You know, we're just coming off 0:09:46.320 --> 0:09:50.480 of the year and earnings and everybody I think reported 0:09:50.559 --> 0:09:53.840 very nice results. I look at our fourth quarter and 0:09:54.160 --> 0:09:59.320 our sales were up for that continued in January, you know, 0:09:59.400 --> 0:10:04.800 more than four five um. And it's it's been across 0:10:04.800 --> 0:10:09.280 all geographies, it's been across all consumer cohorts, and so 0:10:09.320 --> 0:10:11.840 I think it's really evidence of how the consumers feeling. 0:10:12.480 --> 0:10:15.680 You know, they're feeling good about their jobs, their incomes 0:10:15.679 --> 0:10:18.880 are starting to grow. We don't have really any supply 0:10:19.000 --> 0:10:21.800 to speak of in most parts of the country. Um, 0:10:21.880 --> 0:10:24.319 so I think it's a number of factors that's actually 0:10:24.360 --> 0:10:27.160 playing into the confidence across the board. All right, only 0:10:27.160 --> 0:10:29.840 about a minute, minute and a half left here, Cheryl, 0:10:30.240 --> 0:10:33.200 tell me about a market you're especially excited about. I know, 0:10:33.240 --> 0:10:36.679 it's like choosing among your children because you know, and 0:10:36.720 --> 0:10:38.679 things like that. But you know, what's the market that 0:10:38.720 --> 0:10:41.520 maybe we should be thinking about that's not so obvious? 0:10:43.520 --> 0:10:48.240 It's not so obvious. Um wow, I think that I 0:10:48.360 --> 0:10:51.120 point to a couple. Then one is, you know, California 0:10:51.120 --> 0:10:53.400 has had a lot of noise over the last year, 0:10:53.480 --> 0:10:56.319 and it could have been terroriffs, it could have been prices, 0:10:56.360 --> 0:10:59.079 it could have been salved. But both in the Bay 0:10:59.520 --> 0:11:02.760 as well Southern Cow, we've really seen some consistency back 0:11:02.760 --> 0:11:06.880 in the business. Interesting. I think that's exciting because you know, 0:11:06.960 --> 0:11:08.720 I think a year ago the sky was falling and 0:11:08.760 --> 0:11:11.720 it really wasn't UM. And then if I were pointing 0:11:11.760 --> 0:11:15.120 to a couple others that were just seeing continued strength 0:11:15.200 --> 0:11:18.360 really across the board, it's Phoenix and I don't know 0:11:18.440 --> 0:11:20.840 if that's expected or not, but it just continues and 0:11:20.920 --> 0:11:24.120 has for quite some time. And then really through Texas, 0:11:24.480 --> 0:11:30.439 UM Austin is powerful, UM Houston has been very consistent 0:11:30.559 --> 0:11:33.319 in Dallas. Very similar to what I'd say about California. 0:11:33.360 --> 0:11:37.640 It had seen a pretty tremendous piece of both price 0:11:37.720 --> 0:11:41.920 and volume a movement, and so it took a little breather, 0:11:42.040 --> 0:11:44.400 but it's feeling in most some markets feeling once again 0:11:44.480 --> 0:11:47.080 very consistent. All right, Cheryl Palmer. Always good to catch 0:11:47.160 --> 0:11:50.520 up with you, Chairman CEO of Taylor Morrison, doing some deals, 0:11:50.559 --> 0:11:54.679 putting earnings out, joining me on the phone from Scottsdale, Arizona. 0:11:54.920 --> 0:11:57.199 Looking forward to seeing you the next time you're back 0:11:57.280 --> 0:11:58.439 in New York City.