“We are not just a passive investor or partner.”
That’s Satoshi Yoshimura, president and COO of North America Sekisui House, the McLean, Va.–based subsidiary of Sekisui House Ltd., the Osaka, Japan–based company reputed to be the world’s largest home builder.
He is referring to North America Sekisui House’s recent joint-venture agreement with San Diego–based Newland Real Estate Group—perhaps best known for its mixed-use development group Newland Communities—to acquire residential and commercial projects in the U.S. For its first project, forged last September, the partners acquired 492 acres of raw land in west Houston for the expansion of Cinco Ranch, Newland’s best-selling master-planned community. That expansion will include more than 1,200 new homes, to be delivered over the next three years.
North America Sekisui House has also entered into its first home-building partnership in the U.S. with McLean-based Miller & Smith to build out the 358-acre One Loudoun, the biggest project ever proposed in Virginia’s Loudoun County. This project was in foreclosure until last September, when it was sold at auction for $35 million to Bill May, Miller & Smith’s vice president. A month later, the builder entered into its joint venture with Sekisui House, which provided financing that allowed Miller & Smith to retire debt owed to Goldman Sachs, which in 2007 had lent this project’s developers $125 million.
One Loudoun’s original development group—which included Miller & Smith and Meridian Group—had already pumped $30 million into this project on infrastructure. The master plan ultimately calls for 1,040 homes, 702 acres of retail, 3 million square feet of office space, 150 acres of open space, a luxury hotel, a community center, and an amphitheater. The first 60-acre phase, which is starting this spring, will include 168 single-family homes, 146 townhouses, as well as retail and office space.
It’s worth noting that One Loudoun is the first project in Loudoun County to be approved by the Washington Smart Growth Alliance. Among Sekisui House’s criteria for choosing partners and projects in the U.S. is their commitment to sustainable communities and “green consciousness,” says Yoshimura, who spoke with Builder by phone last Friday and via a follow-up e-mail on Monday. Since 1997, his company has made environmentalism a core management target. But Sekisui House also identifies “profit potential and strength of market,” as its “most important” factors in choosing a project. “Both Washington, D.C., and Houston fit these criteria,” he says.
“We concluded that [Miller & Smith] and Newland had a lot in common with us philosophically, and they were able to present us with attractive development opportunities going forward,” says Yoshimura, who adds that before entering the U.S., his subsidiary had met with numerous other developers and builders on the East and West coasts in late 2009 and early 2010.
In the two projects it has invested in here, Sekisui House has been involved in house design and land-use decisions. Yoshimura says that his company’s internal development team is working with both Newland and Miller & Smith, and the American companies have sent representatives to Japan. “We have actively discussed the areas of housing designs and features which can be integrated into U.S. housing design,” he says. One example is where windows are positioned to let in the maximum amount of light and allow owners better views of the outdoors while they sit in their tea rooms or living rooms.
Yoshimura points out that Japanese houses, in general, are much smaller than those in the U.S., and American builders could benefit from its experience with getting efficiency from less space. “We may also be able to introduce our eco-friendly materials and advanced energy-saving home appliances and technologies into U.S. housing, as well as subject [their design and construction] to further cost and marketing analyses.”
However, he acknowledges that Sekisui House still needs to study American lifestyles and house designs before it can determine which features from Japanese homes might be suitable for export. “We hope to present a small but comfortable wonder to homeowners here, jointly with our partners,” he says.
Yoshimura says that confidentiality agreements prevent him from discussing which other builder partners or markets Sekisui House is targeting in the United States. He says his company is open to considering projects that are smaller than either Cinco Ranch or One Loudoun. But it doesn’t sound like Sekisui House is ready to take a flyer on a market that’s hasn’t already shaken off the housing recession. “Generally speaking, we are paying attention to areas of the U.S. where residential market fundamentals are showing relatively good signs of recovery,” he says.
While it doesn’t have a set number of projects or markets it wants to engage, Sekisui House, says Yoshimura, sees “sufficient opportunities” in the U.S. “to align with our objectives."
Since its founding in 1960 through 2010, Sekisui House and its 90 subsidiaries and affiliates sold 2,023,373 housing units. Last year, the corporation’s revenue rose by 10% while its net income was flat.
John Caulfield is senior editor for Builder magazine.