Sumitomo Forestry Continues to Buy Residential Builders in the U.S.
Posted on 10/28/2023
Sumitomo Forestry Co., Ltd. was founded over 330 years ago. The company’s business expanded to include importing, trading and distributing timber and wood-based products, as well as single-family homebuilding and other housing-related businesses. In the early 2000’s, Sumitomo Forestry began building homes in Seattle, Washington, followed by a series of equity investments in homebuilders and real estate development, resulting in the company quickly expanding its footprint nationwide. In 1691, the roots of the Sumitomo family business started using timber harvested in neighboring forestlands to fortify the Besshi Copper Mine, where the Sumitomo family started mining operations. In 1955, Toho Norin Co., Ltd. and Shikoku Ringyo Co., Ltd. merged to form Sumitomo Forestry Co., Ltd., and established a nationwide network to procure and sell domestic timber.
Sumitomo Forestry America, Inc. is the holding company of Sumitomo Forestry Co. Ltd.’s affiliates in the U.S. As of the latest shareholder data, a trust account overseen by The Master Trust Bank of Japan, Ltd. is the biggest shareholder in Sumitomo Forestry America.
Sumitomo Forestry America has plans to acquire JPI’s operating platform. JPI is a national developer, builder, and investment manager of Class A multifamily assets across the U.S., with over 9,700 apartment homes under development. JPI will maintain management over all assets currently under construction until their completion and realization. Sumitomo Forestry America has committed over US$ 200 million in seven JPI communities within the last four years. JPI will keep its name and maintain headquarters in Irving, Texas, supplemented by offices in San Diego and Irvine, California. Under the leadership team, led by Mayes and Fadule, JPI will operate autonomously within the Sumitomo Forestry conglomerate. JPI started construction of 5,051 homes in 2022. The acquisition is expected to be finalized in the fourth quarter of 2023, and partnership details will be disclosed subsequently. Jones Lang LaSalle Securities, LLC, an affiliate of Jones Lang LaSalle Americas, Inc. and Norton Rose Fulbright US, LLP advised JPI on the transaction, and Perkins Coie LLP served as legal advisor to Mayes and Fadule. Falls River Group and Zelman Partners, a subsidiary of Walker & Dunlop, served as financial advisors to Sumitomo, and Vinson & Elkins served as Sumitomo’s legal advisor.
Sumitomo Forestry America acquired Crescent Communities, LLC in 2018.
In February 2, 2021, Gehan Homes, Ltd., a subsidiary of Sumitomo Forestry, signed a deal to buy CDL Homes, Inc., which operates a housing business in the Denver region of Colorado. The transfer of business assets—including real estate for sale, various rights, and other assets. This marked the Sumitomo Forestry Group’s first foray into the Denver region for its housing business. CDL is engaged in the construction and sales of detached houses and town houses under the brand name of Wonderland Homes, primarily targeted at move-up home buyers.
Forest Fund
The United States, which has a long history of forestry funds, forests are considered an attractive alternative investment because they physically grow. Eastwood Climate Smart Forestry Fund I is a forestry fund involves gathering funding from investors to purchase and manage forests for the purpose of producing wood for sale. By increasing the volume of absorbed CO2, the fund can issue carbon credits to investors and other companies to help them offset their CO2 emissions. Investors in the fund as of July 2023 include Japan Post Holdings, Unicharm, Tokyo Century Corporation, Sumitomo Mitsui Trust Bank, Eneos Corporation, Osaka Gas Co., Ltd. (now: Daigas Group), Fuyo Lease Group, Sumitomo Mitsui Banking Corporation, and Nippon Yusen Kaisha Line (NYK). The fund invests mainly in forests in North America and is around US$ 415 million in size as of July 2023. The fund is managed by Eastwood Forests Co., Ltd and SFC Asset Management, LLC, both entities owned by Sumitomo Forestry Group. Eastwood Forests, LLC makes the business decisions for the fund is managed out of Chapel Hill, North Carolina. As for the forestry fund, 60 billion yen has been committed by 10 companies, including by Sumitomo Forestry, and they have already begun due diligence and purchase negotiations for candidate forests from the pipeline. The fund plans to purchase appropriate forest assets while diversifying the risks by diversifying the areas, tree species, and sales markets, etc., and plan to make purchases over the next two to three years.
