Newland Communities’ land development partnership with a subsidiary of Japanese home builder Sekisui House more than tripled late last year with Sekisui buying out the interests of the California Public Employees’ Retirement System (CalPERS) in 28 Newland master-planned communities in 15 markets in 11 states.
Newland announced today the transaction with North America Sekisui House (NASH), which includes 16,300 housing units and 5,778 acres planned for commercial/retail use or currently being entitled for future development.
“This is a good thing for a whole bunch of reasons on a whole bunch of fronts,” said Newland CEO Robert B. McLeod. After taking heavy losses on its residential land investments during the real estate recession, CalPERS is moving some of its investments out of residential real estate, said McLeod. At the same time, Sekisui House has a desire to up its investment in the U.S. housing industry.
The sale price of CalPERS’ interest was not released because of confidentiality agreements.
McLeod said CalPERS’ managers took him up on his offer to buy out its interests in the Newland communities, interests that Sekisui quickly agreed to assume.
“All we have done is replace a capital partner for all these projects,” he said. “I think all three parties are happy.”
“The cool thing about it is Sekisui wants to invest in U.S. real estate. They have a lot of faith in the U.S. economy and U.S. business,” McLeod said. “They are one of the few investors putting money in land now. Nobody is investing in brand new deals now except Sekisui.”
McLeod praised CalPERS for its partnership with Newland that began in 1994, toward the end of the last housing recession in the United States. “They gave us a fund, several funds, and we co-invested with them. Over a period of time we bought and sold 45 communities in our run with CalPERS. CalPERS was really a great visionary in the early 1990s. They saved the home building business after the last recession in California.”
And, during the current housing downturn, CalPERS, unlike many banks and other housing investors, didn’t run from its commitments, McLeod said. “When the going got rough this go around in 2006 and 2007 they really hung in there. These guys hung in there all the way through.”
In fact, CalPERS remains a partner in some land investments with Newland, including seven larger raw-land projects, McLeod said.
The new Sekisui investment is its third with Newland in 16 months. In August 2010, Sekisui and Newland bought 492 acres of undeveloped land next to Newland’s Cinco Ranch community in Houston for 1,200 homes. And in March of 2011, they acquired 4,218 acres in the Seattle-Tacoma metro area of Pierce County, Wash., in the shadow of Mount Rainier. Six thousand homes are planned for that community, recently named Tahaleh, as well as a town center.
With a financial partner interested in aggressive real estate investment, McLeod said to expect more purchases with Sekisui, elaborating that there are two deals “in the hopper” now.
McLeod said Sekisui House, which is Japan’s largest builder, has no intention of building homes in the United States, only investing in the development of lots to sell to American home builders. The partnership with Sekisui has been copacetic so far with Newland and Sekisui sharing many business philosophies, particularly the desire to build sustainable communities and a rigorous customer-first focus.
“Myself and the leadership team at NASH are committed to continuing this success and looking for ways to integrate some of our company’s design and planning philosophies with Newland’s,” said Satoshi Yoshimura, North America Sekisui’s Arlington, Va.–based president and chief operating officer in the news release on the sale.
Communities included in the sale include:
1. 4S Ranch,
2. Merriam Mountain, San Diego
3. Torrey Hills, San Diego
4. Paseo del Sol, Temecula, Calif.
5. Stonegate, Denver
6. Bexley, Tampa, Fla.
7. FishHawk Ranch, Tampa, Fla.
8. Lake Hutto, Tampa, Fla.
9. MiraBay, Tampa, Fla.
10. Waterset, Tampa, Fla.
11. Sterling on the Lake, Atlanta
12. Clarksburg Town Center, Clarksburg, Md.
13. Jamaica, Cottage Grove, Minn.
14. Stonemill Farms, Woodbury, Minn.
15. Briar Chapel, Chapel Hill, N.C.
16. Churton Grove, Hillsborough, N.C.
17. Reed’s Crossing, Hillsboro, Ore.
18. Taralon, Happy Valley, Ore.
19. Lakeshore on Lake Wylie, Tega Cay, S.C.
20. Cinco Ranch, Katy, Texas
21. Eagle Springs, Houston
22. Falcon Pointe, Pflugerville, Texas
23. Stonebridge (golf course), Dallas
24. Summerwood, Houston
25. Telfair, Sugarland, Houston
26. Teravista, Round Rock, Texas
27. Creekstone, Kennewick, Wash.
28. Eagle Ridge, Spokane, Wash.
Teresa Burney is a senior editor for Builder magazine.