Japanese Homebuilder Eyes Big Investment In U.S. Rental Housing Market

Earlier this week, Japan’s biggest homebuilder by market value, Daiwa House Industry Co., announced its plan to invest ¥ 150 billion ($1.5 billion) in the U.S. rental housing market by 2016. The amount of this new investment is three times more than Daiwa previously had planned to invest overseas.

Japan’s land shortage and shrinking population has prompted Japanese homebuilders to seek new revenue sources, including overseas investments in population-rich countries such as China and the U.S. Daiwa raised as much as ¥ 137 billion from a share sale last July, leaving the homebuilder flush with liquidity, but without a domestic market in which to invest. Yoji Otani, an analyst at Deutsche Bank AG in Tokyo, succinctly summarized Daiwa’s position as follows: “Daiwa House has plenty of cash. The management doesn’t think Japan has much growth prospect so they are investing overseas. The healthy balance sheet that Daiwa has enables them to take on such risk.”

Over the next three years, Daiwa intends to acquire and develop leasing properties in Texas with the belief that the Lone Star state’s population will continue to increase at a rapid rate. In particular, the homebuilder will target “Generation Y” (those individuals born between 1975 and 1989), whom it believes will support rising demand in the leasing market.

Daiwa House to Collaborate With Lincoln Property

Daiwa intends to team up with Texas-based Lincoln Property, America’s third-largest real estate management firm. Under the arrangement, Daiwa will work with Lincoln to select sites and plan residential developments. Upon completion of construction, the homebuilder will engage Lincoln to provide both property management and tenant recruitment services.

The first step in this partnership will be a 716-unit development on roughly 100,000 square meters in Fort Worth, Texas. It is believed that Daiwa will invest approximately ¥ 10 billion in the project and incorporate various technologies it has successfully implemented in Japan, including anti-crime systems and soundproof flooring.

Shares of Daiwa gained 0.4% to ¥ 1853 on Monday following this announcement.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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