Sumitomo Forestry America isn’t shy about its home building goals in the United States: to be one of the biggest builders and deliver 5,000 homes a year.
The company is a subsidiary of Sumitomo Forestry Co., which got its start in forestry in the late 17th century when the Sumitomo family began harvesting timber to run a copper mine; nearly 300 years later, its portfolio expanded to include home building in 1975. It’s Japan’s fourth-largest builder domestically.
Sumitomo made its first appearance in the U.S. in 2002 when it entered the Seattle market, and it now carries out its home building business through four groups: Washington state-based Henley USA Group (a consolidated subsidiary), which controls MainVue Homes and currently builds in Washington and the Dallas-Ft. Worth market; Texas-based Bloomfield Homes Group (an equity-method affiliated company), which builds in Dallas-Ft. Worth; Texas-based Gehan Homes Group (a consolidated subsidiary), which builds in Dallas, Houston, San Antonio, Austin, and Phoenix; and, most recently, Frederick, Md.-based Dan Ryan Builders.
“After making a couple acquisitions in Texas, we identified several areas and regions to which we wanted to expand,” says Atsushi Iwasaki, president of Bellevue, Wash.-based Sumitomo Forestry America. “[The] Mid-Atlantic region was one of those.
“We are happy to have expanded our business into markets where there is strong potential for growth,” he adds.
Mid-Atlantic Growth
Dan Ryan is the 16th largest private builder in the country, with operations in six states and 10 markets along the East Coast from Pennsylvania to South Carolina. Ben Sage, director of Metrostudy’s Mid-Atlantic region, says that now that the builder has cash on hand it has options for how to move forward.
“The new capital would allow them to go for a larger share of not only the Maryland market, but also expand into more of Northern Virginia if they so choose,” he says. “Or they could look to enter and dominate smaller markets like they do in West Virginia.”
Iwasaki declined to disclose how much Sumitomo paid for and what stake it now has in Dan Ryan, but says there was a lot to like when talks with the builder began last spring. “We liked Dan Ryan Builders’ geographic footprint, doing business in a number of Mid-Atlantic growing markets,” he says. “We also liked Dan Ryan Builders’ ‘asset light’ business model by which they control the size of the balance sheet while growing the company.”
When the deal was announced in January, DRB president and CEO Dan Ryan said he was “excited about the opportunities this partnership will provide for our employees, vendors, and customers. Having such a strong partner as Sumitomo Forestry America will give us the financial strength for solid, sustainable, organic growth.”
Texas Impact
In the Dallas market, Sumitomo’s entities closed on 1,135 homes in 2015, by far its biggest market prior to the DRB deal. Its Bloomfield Homes Group led the way in Dallas with 755 home closings last year. Paige Shipp, director of Metrostudy’s Dallas-Ft. Worth region, says Bloomfield is known for “running lean and building a solid, well-priced home.”
One of its companies, MainVue Homes, did misstep in Dallas last year, Shipp says, by building contemporary homes and pricing them too high. “Buyers really liked their homes, but they weren’t willing to pay more for them,” she says. “MainVue has since reduced prices and has seen some success. Considering their price point, their sales are good.”
To meet its goal of delivering 5,000 homes in the U.S., Iwasaki says Sumitomo will consider all options, including acquiring more companies and the organic growth of its existing companies, like Dan Ryan Builders and Bloomfield Homes Group. “We continue to attempt to identify growing, profitable, local home builders with a talented leadership team in areas we want to expand to,” he says.
