Good morning and welcome to Taylor Morrison's Fourth Quarter 2019 Earnings Conference Call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference call is being recorded.I would now like to introduce Mr. Jason Lenderman, Vice President, Investor Relations and Treasury.

Thank you and welcome everyone to Taylor Morrison's fourth quarter 2019 earnings conference call. With me today are Sheryl Palmer, Chairman and Chief Executive Officer; and Dave Cone, Executive Vice President and Chief Financial Officer. Sheryl will begin the call with an overview of our business performance and our strategic priorities. Dave will take you through a financial review of our results, along with our guidance. Then Sheryl will conclude with the outlook for the business. After which, we'll be happy to take your questions.Before I turn the call over to Sheryl, let me remind you that today's call including the question-and-answer session includes forward-looking statements that are subject to the Safe Harbor statement for forward-looking information that you will find in today's news release. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.These risks and uncertainties include but are not limited to those factors identified in the release and in our filings with the Securities and Exchange Commission and we do not undertake any obligation to update our forward-looking statements.Now let me turn the call over to Sheryl Palmer.

Thank you, Jason, and good morning everyone.We appreciate you joining us today as we share our year-end results for 2019 and look ahead to what will be a transformational year for the company as we soon close on our acquisition of William Lyon Homes. Before I get into too many details, I'd like to take a step back to reflect on what the last decade meant to Taylor Morrison.In 2010, we totaled 2,300 sales orders across eight U.S. markets. In 2011, we were acquired by private equity firms TPG and Oaktree. In 2012, with plans to deepen our presence in Texas, we completed our first acquisition with Darling Homes. In early 2013, we became a public company through the largest IPO of a homebuilder in New York Stock Exchange history. We sold our Canadian operations in 2015 and continued our acquisition activity with two more that year, JEH and Orleans Homes.We furthered our Southeast expansion in 2016 when we acquired Acadia Homes in Atlanta. And then our Private Equity Partners successfully exited their investment in our company in January of 2018, the same year we closed on our fifth acquisition of the decade and our first public company deal with AV Homes. This intentional focus on and dedication to smart growth and operational excellence put us in a position to make 2019 our biggest year yet.We ended the year with 10,517 sales orders across 21 markets throughout the U.S., representing an 18% compounded annual growth rate over that 10-year period. Passing 10,000 homes is a significant milestone for Taylor Morrison and I believe it positions us to take a big leap forward in 2020.We're extremely optimistic about the landscape today as markets are in a strong place to kick-off the new decade. Economic indicators remain in our favor and consumers…

Thanks, Sheryl, and hello everyone.For 2019 adjusted net income was $323 million and adjusted diluted earnings per share was $2.98. On a GAAP basis, net income was $255 million and diluted earnings per share was $2.35.Total revenues for the year were almost $4.8 billion including homebuilding revenues of more than $4.6 billion. Homebuilding revenues were up just over 12% from the prior-year.As Sheryl mentioned, there were certain unusual items during the quarter that impacted many of our key metrics. The impact to earnings before taxes included almost $50 million for an increase in our reserve related to remediating a warranty issue that impacted our central region, $13 million for the write-offs related to our Chicago exit, almost $11 million for transaction expenses related to both AV and William Lyon, $9 million for the impairments, and almost $6 million related to the loss on extinguishment of debt due to the refinancing transactions earlier in the year. With all of this behind us, we're confident in how this sets up the business and strengthens the balance sheet for the future.For the year, adjusted home closings gross margin was 18.2% when adjusted for the $53 million in unusual charges that impacted the metric. GAAP home closings gross margin for the year was 17%.Moving to financial services, we generated approximately $93 million in revenue for the year and approximately $42 million in gross profit. We experienced continued strength during the year and actually achieved our highest profit per unit in company history during the fourth quarter. Our mortgage company capture rate for the year came at 75% compared to 71% during 2018.As we integrated the AV business into our financial services operations throughout 2019, it was notable to see that our capture rate actually increased every quarter throughout the year ending in Q4 at…

Thank you, Dave.Before we move to Q&A, I'd like to provide a quick update on our build-to-rent strategy and the continued progress of our new business unit during the fourth quarter. We officially closed on the purchase of our first site in Phoenix and have started development work on this project, which is a big milestone for the initial effort. We anticipate closing on our second Phoenix project this month and are excited to start attacking the pipeline that's been built thus far.We're also thrilled to announce that we've expanded our build-to-rent strategy to three additional markets outside of Phoenix, Dallas, Charlotte, and Orlando. We believe our investment thesis fits well in each of these markets as need and demand for the product are apparent and the local teams are excited to capitalize on the opportunity. We expect to continue our expansion into additional markets throughout 2020 and we'll have much more to report as the year progresses.As we've discussed, our expectation for build-to-rent this year is to continue growing the land pipeline and control additional properties within the identified build-to-rent market as well as continued development work with some vertical construction by year-end with our initial projects.We will start leasing activities later this year with any material financial impact from our initial build-for-rent projects expected as we look to divest the projects in late 2021 and/or 2022.I'd also like to take a moment to share a couple of recent announcements that emphasize what makes Taylor Morrison unique, all of which enhance the operational and financial highlights we've already discussed this morning.Most recently, we were named America's most trusted homebuilder by Life Story Research for an unprecedented fifth-year in a row. The very nature of building home means our customers place an incredible amount of trust in us each and…

Thank you. [Operator Instructions].Our first question comes from Alan Ratner with Zelman & Associates. Your line is open.

Hey guys, good morning. Congrats on the quarter and the earlier than expected close of the deal, very exciting.

Thanks, Alan. Good morning.

Good morning. So first question, I guess just thinking about the go-forward of the business, the decision to expand into five regions and obviously sounds like you've taken a kind of a deep look at the organization as you've been looking at the integration here. I know in the past, you've kind of targeted a sub-10% SG&A. And this year was a little bit of a step backwards here and a lot going on, obviously, but how should we think about where the new kind of goal posts are with this current organizational structure? Are you still kind of targeting that type of level? Will there be any near-term impact from the restructurings? And I guess just more broadly understanding not giving annual guidance, but how should we think about just the go-forward business in terms of where you want it to be whether it's thinking about margins, absorptions, returns, any metrics you do well at least directionally share would be helpful?

Sure, well, I guess I'll start Alan with SG&A. You're correct. We're not changing our long-term vision on driving leverage on SG&A. The increase in the scale from William Lyon that's obviously going to help that leverage but that will just take a little bit of time; we'll need to work through the integration. And we will have better insight into that when we get to our Q1 call.I tell you on a legacy basis, we would expect to be flat to slightly leveraging even before William Lyon acquisition. We're continuing to invest and grow in our BTR business; those revenues are going to come a little bit later. But as we look out longer-term, we do feel like with the structure we have in place, we're going to be able to drive leverage going forward.And then maybe on a couple other ones that you hit on, I think you hit on absorptions and margins. So, I'll start maybe on the absorption side, looking at 2020, we would anticipate to be up relative to 2019 on a legacy basis. I think if anything -- there'll be maybe a little bit of a governor on pace more around lot availability, not necessarily demand because demand is strong. But with the William Lyon business, it is a higher pace in business. So part of our strategy there was to enhance pace going forward. And we still firmly believe that.And then maybe lastly, I'd hit on the margin again just maybe a little color on the legacy side, we would anticipate margins to be accretive getting the benefits from synergies just from AV where we see the strong demand. We'll have a little bit of noise obviously through the integration of William Lyon with purchase accounting. But again the strategy around this is to drive scale and we think going forward we have upside potential on margins.

Awesome, I really appreciate that David, that's very helpful. I guess just secondly, very impressive order growth, I think you and your peers obviously are putting up some strong numbers this quarter, January sounds like it's off to a great start as well. You kind of touched on it a little bit with the margin outlook and maybe on the flip side the lot count perhaps becoming a bit of governor but what are you doing on the pricing front at this point, is there more aggressive price increases coming given the fact that it seems like communities are closing out faster, maybe lot counts becomes an issue, labor might become tighter as the year goes on. What does that translate to in terms of pricing power right now?

Yes, good question, Alan. I think as you can see, we're quite focused on driving pace in each of the communities, even at the expense a little bit of community count. I do think there's still pricing power amongst all segments. If you just look at the simple economics of demand, specifically in the entry level, we're seeing it. But I think there's also sensitivity across the sector that people don't get ahead of ourselves and certainly at that entry level that we're little more disciplined and sensitive to the impact of the buyer.I think what's most important as we look at kind of managing pace and prices given the labor market, as you mentioned, is that we really match paces to construction capacity. And so it's really our plan to continue to maintain a production cadence but the price [ph] concern accordingly. And we don't put them in a difficult position.

Thank you. Our next question comes from Jack Micenko with SIG. Your line is open.

Hi, good morning. First question Sheryl, in past deals; you've been pretty active around share repurchase following the closing. And you talked about leverage, maybe taking up to the years, just the normal production cadence occurs. But how are we thinking about buybacks relative to that leverage level that you talked about 38 maybe moving it up into the low-50s temporarily. How do we think about that in the context of some of the prior deals you guys have closed?

Jack, I'll take that one. As you know, we like share repurchases as part of our overall strategy. Since Q4 of 2018 we've purchased almost $300 million in stock. For now, we'll need to wait until we close the transaction before we likely go out and seek a new share repurchase authorization. The combined business is expected to generate sufficient cash flows going forward.But I'd also say given where current interest rates are, we might have a little bit more of a bias towards looking at the debt, potentially refine some of the debt that we're getting through the William Lyon transaction and even possibly paying some of that down. So we're going to continue to take a balanced approach to capital allocation. You've heard us talk about it before reinvesting back into the business, looking at M&A opportunities, which obviously with William Lyon, we're checking that box going to debt leverage and then looking at share repurchase, and it's going to be really a function around our free cash flow. And in this case where interest rates are they're very favorable right now and we feel like that's something we might want to take advantage, we will be opportunistic.

All right, that's helpful. Thank you. And then you've got the five acquisitions since 2020, I guess 2015 or 2015 or so. And a number of those were or have been really first time oriented as is the William Lyon's deal. As another company this quarter, what's the Taylor Morrison brand at the entry level going forward? Now that you combine all that I mean, you've got some competitor doing very small footprint, very stripped down, you've got build-to-order, you've got everything include where -- where is Taylor going to compete in the entry level from a branding perspective?

I think I'll take a stab at that one. I think everyone's playing this first time consumer a little bit differently and you're absolutely right, the first time buyer penetration has been a key focus of the organization. But I think it's really critical that we look at this consumer market- by-market because we've talked before, we do a sort -- we do serve that very affordable first-timer in some markets. And we do that through simplified product; maybe attach product, very simple fact levels, little choice for the consumer. And for those folks, it's really about being in the right, the right house, quality home in the right place at the right price.Along the first-timer continuum though, we also serve what we've coined the professional first time buyer, and with that consumer, we do give them a little bit more choice. And they do spend a little bit more money and time really customizing the specifications to their liking. So when we talk about our first-timer, I think it's a pretty broad breath across the portfolio, very affordable to truly something that would be right on the edge of that first time move-up.I think with the William Lyon penetration, we definitely are going to have a greater penetration of that more affordable, I would say our overall entry level position will probably move up somewhere around five or six percentage points. And we'll have a larger piece of the spec businesses, as Dave discussed, where that would really be a much more simplified product.

Thank you. Our next question comes from Michael Rehaut with JPMorgan. Your line is open.

Thanks, good morning everyone. And congrats on getting the deal done a little earlier than expected.

Thank you, Michael.

First question I had was on the deal and I know, Sheryl, you've a lot of comments and obviously part of working to the deal or what do you expect from the combined company going forward upon your close? I was hoping to get maybe a little additional perspective from the standpoint that you've done several deals, over the past few years. William Lyon will be the biggest. You've also had a couple of other deals out in the industry. Some that haven't gone as well or were more criticizes have not gone as well. Specifically, Calatlantic impact which investors had different views on, Lennar's takeover of Calatlantic, I think was a bit different and perhaps a bit more successful. But as you look at the deals that you’ve done and some of the others in the industry, what are the two or three things that you're particularly mindful of that that you feel can put this the acquisition of William Lyon on the right path over the next year or two?

Yes, that's a really easy, complicated topic and easy answer for us. As you go through the process, Michael, obviously you go through the due diligence, you underwrite all the assets, the price has to work. But the most difficult thing to underwrite and the most important piece of any transaction is making sure you have the people right because at the end of the day, if you don't properly staff or you don't have the right people, you don't integrate the cultures, you actually have very little chance to have a successful acquisition.And so I would tell you and I think I've spent some time in my prepared comments talking about the depth in which we go through this, and there's not one methodology. But ours is we're going to put the best team in the field. And every role even though we have a wonderful organization within Taylor Morrison, we're acquiring this business, not to rip it apart, but to actually enhance it. And that's by bringing their history, their people, their processes, seeing what's better than ours, and having a very open mindset to that.So we start with the people, we go through a very diligent process of interviewing for every single role and making sure that we have the best team in the field. And then it's really, as I said, getting to a "we" very quickly, and making sure that we have an open mind understand the best about organization and that becomes the go-forward strategy.

And I will double down on that a little bit and say, even the best Integration plans have bumps and you have to plan accordingly for those bumps. And a lot of things that Sheryl's done around dedicating the necessary resources to do this, where there's a little bit of cost upfront, the dividends that it pays on the back end are tremendous, financially for sure, but also just from a morale standpoint for our team members to know that they're -- they're supported during this process, which, as you know, is difficult at times as you go through an integration.

And I've got one more last thing, Michael, communication is key, and it's key through the entire process. So we've been talking to team members in both organizations since the day of announcement. We send multiple memos a week. It's really about keeping everything in front of them. The daily huddle that I spoke about is going to be critical to the success because we will be putting our arms around the entire organization on a daily basis and getting to know people. I'll tell you, if it isn't for the last five transactions and the muscle that we've kind of developed, we would not have been prepared for the quick, quick trigger on this one. As we said in the November call, we didn't think this was going to happen till the end of March. I'm thinking very quickly, that's great news. But my confidence is really because of kind of the IMO team and what they've been able to do to get us ready for this week.

That's great. I appreciate that. And obviously best of luck this year as you execute those plans.

Thank you.

I guess secondly, secondly, I want to circle back to SG&A I think there's earlier question on it. And if you look back over the last four or five years, since 2015, the SG&A has been kind of flattish in the, let's say, roughly 10% to 10.5% range despite revenues going from 2.7 to this year around 4.7. And understanding obviously that you're building out the organization, there's a lot of investment involved in that, there's been different systems and functional investments. But I think going forward, when you look at the lower valuation multiple, I think trying to drive a better operating margin, better returns will be critical. So Dave, and Sheryl, I mean as you look at over the next two or three years, what do you think the real opportunity is in terms of that number because you talked about on a legacy basis maybe being flat to down a little bit. But how do you think about where that that number should be over time and what would the levers be to get there?

Sure, Michael, I think at first by start by going to our SG&A rate. I think if you look at it against their peer group, I would argue it's actually very competitive. And you're right, we have made investments. I mean, through the different acquisitions we've done, we have made several investments around [indiscernible] in our purchasing function or construction cycle.And, as Sheryl mentioned, that was part of creating that muscle to allow us to do acquisitions and to be successful at integration. So those are actually things that we're very proud of. And it lays the foundation for where we're today and where we're going forward.William Lyon for us is going to be transformational. This is going to change the game for us a little bit. We're not in a position to go and vote long-term SG&A rates right now because, as we said, we want to get at least a couple of months under our belt, establish guidance for this year. But I'll tell you as we look out strategically once we decided to move forward with William Lyon, leveraging SG&A, having accretive margins, generating additional cash; it was all based on enhancing our returns going forward. But in the short-term we have to get through the process of the integration.But when we come out the other end, we think we're going to be well-positioned, we're going to continue to be very competitive in our sector, and take advantage of market conditions.

And I think to your earlier point, Dave, when we come out the other end of the integration and when we actually have the revenue streams from BTR and not just the investment side, so a lot of good stuff there.

Thank you. Our next question comes from Mike Dahl with RBC Capital Markets. Your line is open.

Hi, I wanted to come back to the absorption question. I think that Alan kind of asked around it earlier. But in the press release, you talked about those January sales translating to over three sales per -- for the month it seems like you actually look at the numbers, 1Q on pace for more like 3.5 or so a month, that's a number even north of three that as a public company at least, Taylor Morrison hasn't produced in any quarter. So I just wanted to follow-up and just ask is there something structurally different about the way that you're looking to manage the business on a go-forward basis with respect to pace versus price, and notwithstanding that the mix impact coming from William Lyon, but on the legacy is there any evidence that you're seeing I guess secondly, that this is kind of a pull-forward alongside the pullback in rates or anything like that?

I don't think anything structural at all, Michael. Like I said, I think we've been talking about for a couple quarters that for a long time you saw us have a very strong bias to margin and price and is that started moderating, we probably have more of a corporate bias to pace and the advantages that that gives you market-by-market. But at the end of the day, it's a community-by-community decision on pace over price, even though we've certainly wanted to see the benefits of that acceleration.Is there a pull-forward, we ask ourselves that every time if you think about the last two, three years and there's some strong activity out in the field, we say is this a pace pull-forward. I don't think rates are pulling us forward. In fact, I think I even saw this morning that rates are likely given the concerns around the virus, we could even see rates pullback even more or drop a little more. So I don't think so. I think all the things, it's almost the perfect storm in a good way around what we're seeing on the way that consumer is feeling. Inventory is tight, I mean inventory is tight across the markets and that is creating some of the energy and excitement if you go market-by-market.

I also throw in that, when you look at AV when we acquired them, they were a higher phasing business. And we had to get through the integration. And as Sheryl talked about in our last quarter call, we completed the integration and I think what you're seeing is now, that efficiency that we expected out of that business really coming through our numbers as well.

And we're delighted to see that with the entry level. But as we said in our prepared comments, we're so excited to see that strength across all consumer groups and to see that first and second time move-up buyer also up 50% year-over-year, it’s tremendous.

Got it, yes, it's great to see the rebound extending into move-up and beyond entry level there. Second question just around margins and understand that you're going to hold off on providing pro forma guidance until next quarter but specifically as we look to build-out models and think about those purchase impact, accounting impacts Dave that you mentioned. And any way you can size those the numbers specific to purchase accounting and when you talk about your margins up, gross margins up year-on-year on a legacy basis, but some noise should we still think that margins even inclusive of purchase accounting are flat to up, just anything you can give us there?

Yes, I'll speak a little bit more to the legacy side and then I'll touch on purchase accounting. But yes, like I said on a legacy basis, I would expect our margin to be accretive year-over-year from the benefits from the synergies that we've seen through AV; obviously the strong demand is playing a bit of a factor.From a cost perspective, input costs have been somewhat normalized. And we're looking at our backlog that gives us some confidence into the first half of the year. We're seeing strong margins so. But you're right; the William Lyon transaction will have an impact on purchase accounting. And I will tell you right now; this is a core focus for us as we begin this integration process. But there's a lot at this stage that that we don't know, we know overall purchase price for the transaction. But we'll have to do a deeper dive around fair value of the assets and see how that allocates out. So we’re not in a position to share that right now. It'd be kind of a pure speculation at this point.But maybe one thing I would leave you with is we did AV transaction around one-time book. We're doing this transaction roughly around one-time book. But we have a little bit more work to do. And it will take us all the way through next quarter, but we'll have it for you in our Q1 call as we guide for Q2 and the full-year.

Thank you. Our next question comes from Truman Patterson with Wells Fargo. Your line is open.

Hi, good morning, everyone. First just wanted to touch on gross margin. It's been a little messy over the past year with purchase accounting; there was the market deceleration and increasing incentives. So it's been difficult to see what kind of gross margin synergies have flown through from the AV acquisition. Can you just walk us through or possibly quantify what kind of synergies you guys have seen that have actually flown through your P&L today?

Yes, you bet. We talked a little bit about it last quarter that our overall synergy number as we move through maybe transaction ultimately ended up at $50 million, about two-thirds of that, ultimately goes through the margin. But at the end of December, we're about 15 months in there, it takes us call it 12 to 18 months for that to fully go through.So we're still seeing that that benefit come into play as we move into the 2020. And you're right, I mean, it's noisy with transactions. What we saw last year was the impacts of purchase accounting and then for example, AV they had a lower margin rate than we typically did, so as the purchase accounting benefits started to wane, we started to see improvement on the underlying margin rate as we got better cost, more efficiency out of that. But it does take some time. And like I said here in the next quarter we'll probably at that point hit kind of more of the annualized run rate going forward.

Okay. Okay. Thank you. And then kind of a multi-part question on community count. You all guided first quarter down about 10% to 15% year-over-year, how should we think about the cadence through the year, will it actually inflect positive by the end of the year? And then, regarding the William Lyon acquisition, if it's generally thought of in the industry that M&A leads to a bit of a slower growth rate than what maybe the pro forma combined company would suggest as managers focus on integration, community count openings become a little more difficult, maybe Will and AV even sometimes suffers. I guess what kind of safeguards do you all have to kind of keep that community count and growth rate from gapping out?

Well, let's start with community count for 2020. Again on a legacy basis, I would expect us to be call it probably flat to slightly up relative to Q4 of this year. So our average community count was around 333. As we talked about on the prepared remarks, we'll see a little bit of a dip in the first quarter, we have communities coming online late second quarter, but more second half weighted. But we'll see that again kind of flatten out to be flat to slightly up by the end of the year.

Only thing I'd add to that Truman is you're right. When you pull these together, there's lots of work to do. And I think if you look at kind of William Lyon's sales trend in the quarter when the deal was first announced; I think it was a slower start as it was all being digested into the organization.They saw that pickup as the year went on and people began to understand what the future looks like. And certainly they've seen it coming into January with a very good sales and pace in January and we've seen it across the board for them. Really delighted, as I said earlier, on the Pacific Northwest where paces were amongst the top in the organization. So I think that it will be our intent to be able to integrate these and really not see too many blips on the community opening side because our teams are already starting to work together on that.

Thank you. And our next question comes from Jay McCanless with Wedbush. Your line is open.

Hey, good morning. So the first question Sheryl, I think about the pro forma company after the transaction. Where do you guys believe your entry level versus active adult versus move-up? How are those buckets going to look maybe on a percentage basis?

So we’ve normally talked about, Jay kind of that third, third and third, right. And that that first time buyer is kind of a third of the business and that's the makeup of that entry level, maybe a little bit moving into the first move-up kind of middle of the market is a third, and the net 50 plus is a third, not specific to active adult communities, but really where they show up in the total portfolio.My expectation as I look at the blended business and I look at the lot, kind of the go-forward lots of the two organizations, if you're going to see probably that first buyer entry level buyer move-up a few percentage points. And I think you're going to see that first time that first move-up buyer probably move-up a few percentage points and you'll see the second move-up luxury business slightly reduced.

That's great. Then the second question I had in terms of thinking about our forward model, is there going to be a meaningful change if we just took the community count for William Lyon to Taylor Morrison today, and then fast forward it a week after you guys have closed the deal? Is there going to be an immediate impact on the community council to combined businesses after closing? Or as we're thinking about our model, we should assume that that roughly the same amount of communities for the blended business are going to be operating for the next two to three quarters?

Yes, I think the only feedback I drove and Dave if you concur is that both -- with the sales success both businesses are seeing, we're seeing closeouts move quickly. We're seeing moving into some closeouts, a little earlier than we anticipated. And that shows up in the guidance that Dave just shared, I think they're seeing the very same thing. And as we analyze the portfolio, the work -- the early work that we've done, there might be a few positions that we might think long-term don't make sense in the portfolio. And we might have a different strategy. Generally, I'd say that's correct that the bias is probably a little lighter given the strategy on some communities.

Thank you. And our next question comes from Carl Reichardt with BTIG. Your line is open.

Thanks. Good morning all. I just have one, Truman got my other one. I guess that crude way to ask it, Sheryl, is, are you done doing deals? I guess the nice way to ask it is if you look at your footprint post-close and the scale and depth of share, you think you'll have in a relatively stable market is your footprint kind of where you want it to be, is your scale where you want it to be as it sits now.

So I like your crude approach. That is good. We're head down and I can't even sit here today and think about another large transaction. We're very busy. I think you'll see us busy for a little while here, we're going to make just like we had to make sure AV was appropriately integrated and we were ready for this, we would have to do the same before we'd ever consider anything different.When I look at the strategic benefits of this transaction and I look at the market dynamics at Denver being one of the markets that I would say with sub-scale and what's happened there, I look at Austin doubling the size, I look at what it's done to our California footprint. I'm very delighted, as well as the added markets at the Pacific Northwest and Las Vegas. So I think we feel like we're in a very good place. I could never comment on what, 12, 18 months, 24 months from now holds. But I'm not really thinking about that right now to be quite honest, I think we're in a very good place. We like the portfolio. And I don't see any big deals emanates at all.

Thank you. And our next question comes from Alex Rygiel with B. Riley FBR. Your line is open.

Thank you, two quick questions. Could you give us a little bit of update on William Lyon's in the month of January as it relates to the sales pace and order activity as well could you quickly run through sort of a regional update on sort of what else you're seeing feeling in the tranches?

Yes, I'd be happy to. So as far as the preliminary numbers that we've seen from William Lyon, I think that their sales in January, like I said, was quite strong. I think they had a pace of something close to 3.5. So that's -- that's tremendous. I think it was slightly ahead of their expectations. And I think each week they saw the business pickup. So excited about that and as I said, when I look at the pace of the last four weeks compared to their last eight, 12 weeks, the activity has been good.If I do a quick around the world for, yes, I would tell you generally things are feeling nice across the board. I think before I do a quick tour, it probably makes sense to talk about some of the markets that let's say over the last 12 months, we've seen maybe a little bit more challenge, maybe some inventory create, maybe some pricing resistance, and I'd start with the Bay. They saw tough back half of 2018, and then a little resurgence in Q1 of 2019 and that pace has dropped considerably as we move through the year. Having said that, it feels like the last three months, we've seen some pickup in traffic and sales activity and even seeing pricing power back in some of the sub-markets. January felt pretty good with their sales slightly above their budget and interestingly enough, it seems like we saw an impact with the January Chinese trade deal signing, seeing some of those buyers back in the communities.As I move through the rest of the State of California, SoCal repositioned the business over the last couple of years and our ASP is down more than 30% year-over-year. And so when I look at how that started…

And our next question comes from Matthew Bouley with Barclays. Your line is open.

Good morning. Thanks for fitting me in here. I wanted to ask on the pricing power side again, Sheryl, you give some color around pricing power still being sort of fickle. Obviously, incentives have left the markets and maybe that's a piece of it. But I guess it would just be great to hear your perspective around sort of if or when pricing power could return to the market. I mean, we've already seen resale inventories tightening, demand is strong, rates are favorable, I guess what else would it take to kind of bring pricing back into the market from your perspective? Thank you.

You bet. Well I think we do have pricing power in the market. I think what you're seeing is the builders act responsibly to make sure that we don't shut this off. So I'm a fan of taking a much more measured approach. And as you -- when you look at long communities have long shelf life, you want to be really careful where you really see some opportunities is that you're closing out a community, if you know that there's not a replacement opportunity. So I wouldn't say, we don't have pricing power. In fact, I do think we have pricing power and we're seeing it in all markets. I think the difference is instead of seeing 5,000 a shot; we're probably being a little bit more responsible and metering it out a little bit more carefully to make sure that we don't get over our ski tips.

Okay, understood. Appreciate that. And then secondly, just on the synergy side, I appreciate the full guidance is still yet to come. But I guess just ahead of the deal closure with Lyon, have you guys been able to sort of get a head start around the synergies whether it's on the material or land sourcing side just kind of any updates on how you're thinking about that? Thank you.

Yes, Matthew, we're in the same spot maybe when we announced the deal. So what we're expecting right now would be a run rate target of around $80 million. Again, probably take us 12 to 18 months to work through that. We're continuing to work on identifying local, regional, and national synergies. Probably 75% of the synergies are going to come from overheads through consolidation of our divisional and corporate offices.I would say that we're starting with $80 million. We hope to deliver something more, but again, it's early in this process, we have work to do and each quarter we'll come back with an update as to where we think synergies are trending.

Thank you and that's all the time we have for questions today. I'd like to turn the call back to Sheryl for any closing remarks.

Thank you very much. I appreciate everyone joining us today as we talk about the Q4 results and more importantly the exciting year ahead. Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.