At a time when the U.S. housing market continues to limp with meager sales, Sumitomo Forestry Group, a Japan-based home builder that builds more than 10,000 homes annually in several countries, is investing at least $100 million to expand its footprint in America’s Pacific Northwest over the next few years, with ambitions to eventually become a national player in this country.

Henley Properties, an Australia-based builder 50% owned by Sumitomo Forestry, is using financial backing by the Japan conglomerate to purchase land in Washington State’s Puget Sound area. Henley has already acquired 54 lots in a subdivision of a 379-lot master-planned community called Bridges in Kent, Wash., paying $110,000 for each 50-foot lot and $90,000 for each 40-foot lot, for a total of $5.55 million.

“Given the economy, we wanted to be very careful about who we sold to,” notes Brian Ross, managing partner of this community’s developer, Kirkland, Wash.-based Yarrow Bay Communities. Ross elaborates that his company wanted to avoid a buyer “with a cookie-cutter mindset,” and was impressed with the “high-style architectural design” that Henley wanted to inject into this project. Peter Hayes, Henley’s managing director, tells Builder that his company intends to build what he calls “a world of homes” at this subdivision, featuring 11 different models that will be showcased to market not only the houses in this neighborhood but other communities that Henley develops in the region.

Henley also has taken over management control of Bennett Homes, a 27-year-old builder based in Bellevue, Wash., that, according to its website, is active in a dozen communities. In 2006, Bennett Homes and Sumitomo formed a joint-venture partnership to develop master-planned communities, the first of which was the 109-homesite Dahlia Park. Sumitomo reportedly was attracted to Bennett because both companies were committed to larger projects and energy efficient production. Bennett was one of the first builders in Washington State to introduce Built Green standards to its construction processes.

In 2008, Sumitomo formed another joint-venture partnership with Cascadia, the state’s largest planned community at the time, to develop Cascadia’s first resort, with an 18-hole golf course. Bennett Homes subsequently was one of the builders that purchased lots from Cascadia for neighborhoods that include Bennett’s 89-lot Prospectors Reach and 78-lot Talisman.

Bennett Homes closed about 225 homes in 2007 for an average price of $723,000. But then the local market’s economy started to unravel, and Sumitomo ended up taking ownership of Bennett Homes last year.

American-born Vanessa Normandin, who had been a project director for Delfin Lend Lease, one of Australia's largest developers, and who has dual citizenship, is now general manager of Henley’s U.S. operations. Hayes says that Henley is building out Bennett’s projects at a pace of 15 to 20 homes per month. (Normandin tells Builder that Bennett has about 170 lots left to build out in its communities.) According to its website, Bennett Homes’ single-family houses currently are priced from the $200s to high $500s.

By this time next year, Hayes expects that the U.S. operations will have closed around 200 homes. Henley has stated that it intends to build 500 houses in Washington State’s King, Snohomish, and Pierce counties by the end of 2012. The new stuff Henley is building in those counties will range from 2,000 to 3,000 square feet and be priced from the high $200s to the $500s, says Hayes and Normandin.

Expanding when buyer demand is tepid

Sumitomo announced Henley’s plans for the Seattle market a few days before the Census Bureau reported that sales of new single-family homes in the U.S. had fallen to an annualized rate of 250,000 units, the lowest level ever recorded. Only 19,000 new homes were sold nationwide in February, the lowest level since 1963.

Seattle’s housing market is a bit stronger. The Northwest Multiple Listing Service reported earlier this month that sales in King County were off in February by 1.2% from January. But the median home price in Seattle fell by 6.8% from a year ago, higher than the national decline of 5.2%.

Nevertheless, Sumitomo Forestry is the second giant Japan-based builder to push its way into the U.S. market. Sekisui House, reputedly the world’s largest builder, has struck land development and construction agreements with American companies Newland Communities in California and Miller & Smith in Virginia.

Both Japanese builders are searching for growth opportunities elsewhere at a time when Japan’s population has been stuck at around 127 million for the past several years and is aging: Japanese 65 years old or older account for nearly 23% of their country’s population, versus less than 12% in 1989.

Sumitomo Forestry now builds in China and Korea, says Hayes. And The Australian newspaper reported that earlier this month Sumitomo was negotiating a deal to acquire up to $20 million in residential real estate along Australia’s eastern seaboard capitals, such as Melbourne, as part of its expansion into land development. “Our target is to create a model we can use in the U.S. and China,” Toshiro Mituyoshi, Sumitomo Forestry’s general manager for overseas business, was quoted as saying.

Long term, still a promising market

Hayes says that America’s housing recession doesn’t worry him about Henley’s prospects because it’s not unlike what Henley grappled with in Australia. Despite receding buyer demand there, he says that Henley still managed to grow its business to where it’s been building between 2,000 and 2,500 homes per year in a country that only produces 160,000 new houses annually. It’s worth noting, too, that Henley knows a thing or two about moving product in a tough economy: its website is currently offering buyers savings of up to 80,000 Australian dollars (US$81,396) on options and amenities.

Henley also has a reputation for green building, which Hayes says meshes well with Bennett Homes’ energy-efficient construction objectives, although Normandin notes that the company is still learning just how important green construction is to local buyers.

“Even in bad markets, people still buy homes,” says Hayes, who is confident Henley can establish itself in the Puget Sound region whose population is projected to grow by half again over the next decade. “Everyone is feeling pretty good about Seattle’s demographics and local economy,” says Ross of Yarrow Bay.

Ross notes, too, that it’s not just foreign builders who are moving into this area, pointing specifically to Denver-based Richmond American, which reportedly is negotiating to enter the Seattle market via an acquisition of another local builder, and is said to have several parcels of land under contract. (Builder was unable to reach Richmond American for comment at press time.)

Henley is still deciding on what to call itself for marketing purposes and should have that sorted out by this summer, when it goes into full production mode. Once Henley and Sumitomo are satisfied that their business model works in the Puget Sound market, Hayes says the plan is to expand development and home building operations “down the coast” into Oregon and California. “And we have the resources of Sumitomo behind us,” says Hayes, who implies that Sumitomo Forestry is prepared to spend above its initial $100 million investment to stake its claim to the U.S. market. Expansion to another state, though, might not be for another two or three years, says Normandin.

While its timetable is still up in the air, Hayes says Sumitomo’s intention is to become a national home builder in the United States.

John Caulfield is senior editor for Builder magazine.

This is a corrected version of this article. The original misstated that MDC Holdings was advertising to hire a site manager in Seattle.

Learn more about markets featured in this article: Seattle, WA, Olympia, WA.