Daiwa House Industry Co., Japan’s biggest homebuilder by market value, plans to invest 150 billion yen ($1.48 billion) in U.S. rental housing, three times more than it had aimed to allocate to overseas investments, to boost revenue.
Daiwa House will acquire and develop leasing properties in Texas and allocate the funds over the next three years, the Osaka-based company said in an e-mailed statement today. The homebuilder targets 50 billion yen of revenue in the U.S. by the year ending March 2019, it said.
Japan’s shrinking population has prompted the country’s homebuilders such as Daiwa House to seek new revenue sources. Texas is the most that Daiwa House is investing overseas for rental housing and compares with the 50 billion yen the company had announced for investments abroad in its mid-term plan in November.
“The investment amount is very aggressive and it seems risky,” said Masahiro Mochizuki, an analyst at Credit Suisse Group AG via telephone.
Daiwa House plans to invest in Texas because of its rising population and it will target “Generation Y,” those born between 1975 to 1989, an age group seen to support demand in the leasing market, the company said in the statement.
The investment plan revealed in November for overseas investments was “just a tentative estimate,” Eiji Matsuda, a spokesman at Daiwa House, said by telephone today.
Daiwa House plans to boost its rental housing revenue by 35 percent to 800 billion yen by the year ending March 2015, the company said in November. The rental housing business, the biggest contributer to the homebuilder’s revenue, is almost double that from the home construction division, it said. The developer raised as much as 137.9 billion yen from a share sale in July.
“Daiwa House has plenty of cash,” said Yoji Otani, an analyst at Deutsche Bank AG in Tokyo. “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.”
Shares of Daiwa House gained 0.4 percent to 1,853 yen at the close of trading in Tokyo. The stock has declined 8.9 percent so far this year.