Arizona-based homebuilder Taylor Morrison, with an eye on entering the Las Vegas market, has acquired William Lyon Homes and will become the fifth largest builder in the nation.
The deal announced this week between the two publicly traded companies for $2.4 billion will introduce buyers in Nevada, Oregon and Washington to Taylor Morrison for the first time. The company says the deal will “significantly increase” its offerings of entry-level homes.
The deal is expected to close late in the first quarter or early second quarter of 2020. It’s the company’s sixth builder acquisition in seven years.
Based in Scottsdale, it operates under two brands, Taylor Morrison and Darling Homes and serves a wide array of consumer groups from coast to coast, including first-time, move-up, luxury and 55-plus buyers.
Taylor Morrison Chairman and CEO Sheryl Palmer, who previously worked in Las Vegas as area president for Pulte Homes, said the agreement to acquire William Lyon Homes “marks a historic day for Taylor Morrison as we continue to grow our business in smart and meaningful ways. The combined business provides the unique opportunity to gain increased local scale and expertise within six of our major markets, while expanding Taylor Morrison into Washington, Oregon and Nevada. We’ve long aspired to be in the Pacific Northwest and have looked for the right point of entry at the right time and at the right price — and that’s exactly what this represents.”
William Lyon, known as a high-end homebuilder in Las Vegas, has just been outside the top 10 in sales in Southern Nevada with 367 in 2018, according to Home Builders Research.
The California-based company, founded in 1954, had its best year in 2018 by selling more than 4,000 homes in California, Arizona, Nevada, Colorado, Washington, Oregon and Texas.
Matthew R. Zaist, William Lyon Homes president and CEO, said the “combined business will represent a powerhouse of a builder that can meet the strong demand for entry-level and first-time move-up buyers — consumer segments that represent 85 percent of William Lyon’s (national) closings last year. We are excited to join forces with Taylor Morrison and draw upon their proven track record and greater access to scale efficiencies to meet consumer demand with a reputable, quality product.”
Nat Hodgson, CEO of the Southern Nevada Home Builders Association, said the Arizona builder is a good company, and that he worked for Palmer with Pulte.
“They have never been in our market, but a lot of the employees of Taylor Morrison worked in this state for Pulte and Del Webb. When the market turned, a lot of my former co-workers went to Phoenix to build that up. It’s a good fit. The upper management is very familiar with our market. I’m excited to have them here. They have a good reputation.”
William Lyon has focused most of its higher-end building in unincorporated Clark County in the valley in Summerlin and west side and Lake Las Vegas, Hodgson said. It also has a collection of town homes and condos.
Hodgson said he expects Taylor Morrison will expand that footprint.
“I think you will see them more in areas they haven’t been predominantly in because they were building upscale,” Hodgson said of William Lyon.
William Lyon had five of the top 20 highest-priced custom homes sold in the valley through the first six months of 2019. Three of those five, two in Summerlin and one in Lake Las Vegas, sold for more than $2 million.
Veteran Las Vegas homebuilder Richard Plaster, president and CEO of Plaster Development, said builders nowadays to gain entry into markets are buying other companies with a footprint rather than starting anew.
“That is how big builders grow now,” Plaster said. “They don’t open their own divisions but buy up other companies. It’s tough to start a homebuilding business. It’s a long gestation, and you don’t know if you will be in a good shape or not.”
Plaster said Pulte’s acquisition of Las Vegas-based private builder American West Homes in April fits the pattern of builders acquiring land to increase a footprint. American West was the last of the large private builders in the valley.
Acquisitions like Taylor Morrison’s purchase of William Lyon will increase efficiency in the company and help it grow, Plaster said.
“It not only gets them into new markets, but gives them a bigger footprint and more leverage with landowners and subcontractors,” Plaster said. “It makes your marketing more efficient. Getting bigger is usually a plus. It gives you access to money on Wall Street because it’s the cheapest and most patient. Small builders have to pay banks.”
Dennis Smith, founder of Home Builders Research, said the two builders have a lot of similarities and doesn’t expect a lot of changes in Las Vegas after the acquisition other than a likely name change. William Lyon has a lot of longtime employees and expects Taylor Morrison not to make any wholesale changes with staff, he said.
“Taylor Morrison has a very good reputation in Phoenix. They may try to expand a little bit.”