Taylor Morrison has expanded into the Indianapolis metro market through the purchase of approximately 1,500 lots from Pyatt Builders, an illustration of the home builder’s opportunistic growth strategy.

Chairman and CEO Sheryl Palmer said Taylor Morrison’s entrance into Indianapolis further diversifies the builder’s geographic footprint and adds a “healthy and growing market” to its central region.

“Indianapolis boasts meaningful net migration that ranks [in the] top ten in the country, fueled by above-average employment growth of 3% over the last twelve months, and favorable affordability that is highest among the country’s top 30 major metros,” Palmer said during the home builder’s first quarter earnings call. “Due to its low land residuals, its housing market has been remarkably resilient over time and we are encouraged by the capital efficient growth opportunities this market presents.”

Nearly 55% of the acquired lots are controlled via options, according to Taylor Morrison. Whelan Advisory acted as the exclusive financial advisor to Pyatt Builders.

During the earnings call, Taylor Morrison shared targets of approximately 10 new community openings in Indianapolis and 175 home deliveries in the metro for the remainder of the fiscal year.

Geographic diversification remains an important element of Taylor Morrison’s long-term strategy which, in tandem with consumer mix diversification, provides risk mitigation and growth opportunities for the company, according to Palmer.

“This unique diversification, combined with our operational capabilities, provides important competitive advantages that we believe will deliver strong growth and profitability in the years ahead, as reflected in our long-term targets for 10%-plus annual home closings growth,” Palmer said.

While Taylor Morrison’s growth will largely be focused on organic growth within its existing markets, the builder will pursue and evaluate opportunities presented by single-market local builders—such as Pyatt Builders. Such opportunities must meet Taylor Morrison’s high threshold for strategic fit and financial accretion, according to Palmer.

Quarterly Results

As a result of strong financial results in the first quarter, including better-than-expected profit and sales activity, Taylor Morrison upwardly revised its year-end target to 12,500 home closings.

“This improved outlook is reinforced by our healthy backlog of over 6,200 homes and includes an expected contribution of around 175 closings over the remainder of the year from our entry into Indianapolis,” Palmer said.

Taylor Morrison reported home closings in the quarter improved 8% to 2,731 and home closings revenue improved 2% to $1.6 billion. Net sales orders increased 29% to 3,686, driven by a 28% increase in monthly absorption pace to 3.7 per community. The absorption pace is well above the home builder’s target in the low 3 range for the full year. Cancellations in the quarter equaled just 7.0% of gross orders, down from 14.0% a year ago.

For the first quarter, Taylor Morrison generated profits of $190 million, or $1.75 per share, roughly in line with results from the same period of 2023. For the quarter, analysts projected Taylor Morrison to report profits per share of approximately $1.60.

Cycle times improved by one week sequentially in the first quarter and Taylor Morrison ramped up its construction pace, started roughly 3,400 homes in the quarter, up 35% on a year-over-year basis. Of the builder’s 8,578 homes under production, 38% are spec homes, with spec home production skewed toward entry-level home buyers.

Land Update

At the end of the first quarter, Taylor Morrison owned or controlled 74,182 home building lots. Controlled lots represent 53% of total lot supply. Erik Heuser, executive vice president and chief corporate operations officer, said the builder is working toward a controlled lot percentage of 60% to 65%.

“We already own or control 90% of the lots needed to fulfill our growth plans through 2026, providing flexibility when evaluating lot acquisitions that are primarily targeted for deliveries in 2027 and beyond,” Heuser said. “Given the scarcity of finished lot deals, we have reduced our reliance on expensive finished lot acquisitions delivered by master plan developers in favor of balance sheet friendly self-developed land parcels.”

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