Pulte move more a hit to area pride than home industry
Crain’s Detroit Business
Originally Published: June 02, 2013 6:00 AM Modified: June 02, 2013 6:40 AM
By Daniel Duggan
Relocating the headquarters of PulteGroup Inc. to Atlanta will impact local morale more than it will homebuilding, local builders say.
Builders say the operations of a large homebuilder like Bloomfield Hills-based PulteGroup are detached from the work on the ground, and companies go where there are homes to be built.
“This is no different than Comerica (Inc.),” said Paul Robertson, chairman and CEO of Bloomfield Hills-based homebuilder Robertson Bros. Co. “Companies tend to go where the volume is and where their customers are. Detroit is not a big number again for Pulte. They did 300 or 400 homes here (in 2012); they’ll do 3,000 or 4,000 in Atlanta.”
Richard Dugas Jr., PulteGroup chairman, president and CEO, said during a Friday interview that the move won’t impact the company’s local homebuilding, noting there is still money to be made in the Detroit market.
“We’ve allocated additional money to the Michigan market twice this year,” he said. “We like the market; it’s coming back strongly.”
On the headquarters decision, he said, the choice is to be near the national growth.
“The country is growing in the Southeast and the Southwest, and we need to be near our customer base,” he said.
PulteGroup’s investment numbers show its interest outside the Midwest.
In 2000, 72 percent of its business investments were located outside of its Midwest markets. By 2012, the company’s investments outside the Midwest increased to 92 percent. The company said its operations in the Southeast — from northern Virginia down through Florida — in 2012 represented 37 percent of its home closings and 43 percent of its year-end invested capital.
Dugas cited Atlanta’s central location to being a hub for travel to the East Coast, Texas and Florida. His history, living in Atlanta during a past position with PulteGroup, had nothing to do with the move, he said.
“This was an objective process; we looked at a number of cities, and picked Atlanta,” he said.
There’s always a range of factors that a company takes into account when picking a headquarters location, said Lisa Niscoromni, a senior associate in the Detroit office of Hickey & Associates LLC, which specializes in site location for companies. She was not involved with the PulteGroup situation.
“It makes good business sense to be in proximity to a large customer base, but typically companies look at a multitude of factors when considering a possible expansion or relocation,” she said.
The expiration of a lease, or even excessive employee travel to a particular market, are factors, she said. Additionally, the corporate tax environment and real estate costs, as well as the quality, availability and cost of labor, are factors, she said. Certain industries need to consider proximity to suppliers and transportation networks, and in some cases, business incentives also come into play.
Dugas said he planned to inform Gov. Rick Snyder before the news came out, but the information was leaked out of a meeting Thursday night.
“It was unfortunate that this information was leaked, because we had intended to inform the governor,” Dugas said.
Snyder said he was not aware of the company’s decision beforehand, and Pulte did not reach out to the state to ask for any tax breaks or some type of assistance to stay in the state.
“They didn’t come to the table to say, ‘Let’s talk,’ ” Snyder said.
Pulte said in a statement that it expects to have 300 to 350 employees based in Atlanta. The company now employs about 380 people in Michigan, of which 54 work in its local homebuilding operations and will be unaffected by the move.
It is too early to say how many Michigan employees will be relocated to Atlanta, said James Ellinghausen, executive vice president, human resources in a statement.
Aside from morale and perceptions, the effects of the news on the homebuilding business is likely to be minimal, said Michael Stoskopf, CEO of the West Bloomfield Township-based Home Builders Association of Southeastern Michigan.
In the industry, homebuilders are national entities that work in markets where they see a need.
“KB Home, for example, is based in Los Angeles,” he said. “They do work all over the country. That’s how their model is, they go where the action is. It’s unrelated to where their headquarters is.”
The news was likely disappointing to the founder of PulteGroup’s predecessor companies, William Pulte, said Howard Fingeroot, managing partner of Farmington Hills-based Pinnacle Homes, and a former Pulte executive.
“It was always Bill Pulte’s desire to keep this as a Michigan-based company,” said Fingeroot.
In a statement by Pulte’s grandson, Bill, the family continues to be involved in the state through its investment firm Pulte Capital and the nonprofit Detroit Blight Authority.
Added Robertson: “They wouldn’t have had the guts to do that with Pulte on the board.”
Daniel Duggan: (313) 446-0414, email@example.com. Twitter: @d_duggan
Chris Gautz contributed to this report.