Sumitomo Forestry is expanding its “build to rent” capacity in the North American market and has secured the operating platform for the United States’ fastest-growing developer and builder.
The US $215 million deal (AU $340 million) will see one of the world’s largest forestry companies turn JPI into a subsidiary and double the number of apartments under construction to 8,000.
Significantly, the new acquisition will see a greater focus on mid-rise construction and the use of mass timber as part of a global plan to substantially grow its “build to rent” portfolio of apartment assets.
Sumitomo Forestry is already involved in developing 4,000 mass timber build-to-rent housing units using 2×4 construction.
It also adds to the portfolio of US housebuilders under its control, including North Carolina-based Crescent Communities, Dallas-based Gehan Homes, Texas-based Bloomsfield Homes and Brightland Homes, Washington-based MainVue Homes, Maryland-based DRB Group and Utah-based Edge Homes.
Most of Sumitomo Forestry’s interests have focused on custom-built detached and semi-detached housing and “MOCCA” timber solutions – concentrating on low-rise, nonresidential buildings such as retail shops, childcare and schools.
The latest acquisition will substantially increase its volume and capacity in the US market, with JPI constructing more than 5,000 apartments last year.
Sumitomo Forestry is now looking to utilise “2 x 4” mass timber construction to build net-zero dwellings at scale.
According to Atsushi Iwasaki, CEO of Sumitomo Forestry USA, “This collaboration (with JPI) is a milestone in our continued commitment to fostering sustainable communities.”
Wood Central understands that JPI will keep its name and maintain its headquarters in Texas and satellite offices in San Diego and Irvine, California.
“Sumitomo’s dedication to JPI is clear,” according to Mollie Fadule, CFO and Investment Manager for JPI, “having committed over (US) $200 million in seven JPI communities over the past four years.”
The news comes as Sumitomo Forestry announced earlier this year the purchase of 130,000 hectares of US forest assets as part of their carbon abatement strategy.
The investment was made as part of its “Mission TREEING 2030” initiative – and will generate 1 million tons of annual carbon credits equivalent to 1 million tons of C02 through afforestation and thinning.
“Mission TREEING 2030” is Sumitomo Forestry’s long-term vision to use planted forests and forest products to achieve total decarbonisation by 2030 – and its reach is truly global.
As part of its “Wood Cycle”, it “strives to increase the CO2 absorption of forests and store carbon for long periods by popularising mass timber buildings to contribute to decarbonisation worldwide.”
In Japan, supported by government subsidies covering construction and procurement costs, it is forging ahead with a project to develop the world’s tallest hybrid timber tower in Tokyo.
Whilst in the UK, its subsidiary, Bywater, actively promotes mass timber construction in the UK and across Europe, including a 6-storey mass timber office building in London.
Bywater has already developed several mass timber buildings across the UK, including London, Manchester, Glasgow and Belfast and is now looking to expand its footprint across Europe.
“Since opening our first office in Amsterdam (in 1995), Sumitomo Forestry has been consistently supplying the Japanese market with high-quality European timber housing products,” it said in a statement.
“With one of the highest transaction volumes of European timber among Japanese companies, we are utilising our network to support the expansion of real estate development operations in Europe, which boasts the world’s largest production volume and technological capabilities of CLT and other engineered wood.”
It also has a strong presence in the Australian market – including the T3 Collingwood development in Melbourne. The 15-story mass timber building is the first funded under an Australian Government incentive to promote mass timber construction.
Over the past 15 years, it has expanded its residential development business across major Australian cities.
It is now ranked as the 3rd largest real estate developer by volume of builds, and in 2021 reported more than 3,000 dwellings under construction in QLD, NSW, Victoria and WA.
In recent years, “build to rent” construction has been identified as a solution to the housing crisis.
In Australia, there are more than 60 build-to-rent projects, either planned or in construction, delivering 20,000 new dwellings, according to Ernst & Young.
Build-to-rent housing is relatively common in countries like the US and the United Kingdom, but it’s only recently gathered momentum in Australia.
Research by JLL found that there were only about 4,486 build-to-rent apartments across the country before this year, with approximately 2,000 under construction last year.
But it predicts this number will double by the end of next year, and according to Steve Mann, CEO of the NSW branch of the Urban Development Insitute, “it is an important part of the future housing mix.”
“It’s not going to be the game changer in the early years, that’s for sure, it’s more in the longer period,” Mr Mann said.
Governments are also throwing their support behind as they look for ways to boost options for renters.
The federal government has brought tax concessions to attract more investment for build-to-rent developments. At the same time, states such as NSW and Victoria offer a 50 per cent reduction in land tax.
Last month’s NSW budget included AU $60 million to trial build-to-rent projects in the state’s Northern Rivers and Illawarra-Shoalhaven — two regions experiencing an acute housing shortage.
Dr Fotheringham from AHURI argued Australia had lagged behind other countries because the previous federal government “didn’t come to the table” with subsidies for the sector.
“I think it will contribute, but I don’t think it’s going to change our housing system radically,” he said.