Newland Real Estate Group has formed a partnership with the largest builder/developer in Japan to buy land and develop communities in the United States.
In announcing the joint venture between Newland and Sekisui House, the joint venture also announced its first investment: 492 acres of undeveloped land in west Houston for the expansion of Newland's Cinco Ranch, the best-selling master-planned community in the country last year. The cost of the land, which is zoned for more than 1,200 homes, was not disclosed, and in Texas it is difficult to determine sales prices from land records.
The new land is expected to be developed in about three years as the existing Cinco Ranch land is exhausted. The community was started in the early 1990s and now has nearly 11,000 completed homes. At buildout, the entire development will have 14,000 homes on 8,092 acres.
"It's on the west side of Houston and happens to be in a great school district, and that's a big help (for success) obviously," CEO Robert McLeod said in an interview. "And the west side of Houston is the center of the corridor for Houston's energy companies in the U.S."
Newland was considering buying the land about a year ago at about the same time CB Richard Ellis Japan introduced executives from the two companies to each other, McLeod said.
Newland will be the master developer of the land, but Sekisui is "providing most of the capital," McLeod said. "However, we are providing capital ourselves as well as part of the arrangement." It isn't clear yet whether Sekisui will also construct homes on the land. "It's too early to tell whether they will or not," said McLeod. "They clearly have the capability of building homes."
In fact, Sekisui (pronounced "seck-eh-sue-ee") has built more than 2 million housing units since its founding in 1961. The Osaka-based company, which trades on the Tokyo, Nagoya, and Osaka securities exchanges, has 90 subsidiaries and affiliates as well as 21,480 employees.
Newland wasn't necessarily looking for a capital partner when its executives were introduced to Sekisui about a year ago, which is coincidentally when Newland began considering buying the land to expand Cinco Ranch.
"We haven't been faced with that kind of capital problem like our other competitors" have, said McLeod. "Not that we haven't had to tighten our belt and conserve our cash the same as every other successful developer has done."
But the two companies had some synergies that were immediately apparent. "We have the same environmental consciousness and concern about the customer who is living there and the community we are building," McLeod said.
"Our technologies developed through advanced as well as environmentally conscious community development projects in Japan are expected to be a valuable contribution to community developments in the United States," said Isami Wada, chairman and CEO of Sekisui House, said in a news release. "We look forward to utilizing our knowledge and experience as the provider of the largest number of residential lots in Japan, within this attractive community, and to expanding our business in the U.S. through this quality joint venture with Newland."
Language hasn't been much of a barrier for the partners. "We both speak development," McLeod said.
The new partners are out traveling the country this week looking for other investments to make together, according to McLeod. "I think neither one of us wants (Cinco Ranch) to be the last" investment in the United States, he explaining, adding senior company executives are traveling the U.S. this week looking for more joint investment opportunities.
"We are looking for specific projects in cities, focused mostly in the wide range of markets we are already in," he said. Specifically, they are looking in Washington, D.C.; Charlotte, N.C.; Atlanta; Orlando and Tampa; Dallas, Houston, and Austin, Texas; Phoenix; Southern and Northern California; Portland, Ore.; Seattle; and Denver.
"They want to invest in community development in the United States, and that is very refreshing today," said McLeod. "I am really pleased to see that happen. While some people are pulling back or treading water, I think Sekisui is looking toward the future."
Teresa Burney is a senior editor for BUILDER and BIG BUILDER magazines.