EXCLUSIVE: Trumark CEO Dishes On Sale To Japanese Developer, National Expansion Plans
Trumark co-founder and co-CEO Michael Maples said Tuesday that the driving force behind selling a controlling interest of his firm to Daiwa House Group was an opportunity to keep all of the company's employees while taking dealmaking to the next level.
News broke last week that a subsidiary of one of Japan’s largest housing and commercial developers entered into an agreement to buy a majority stake of California real estate developer Trumark Cos. As part of that deal, Daiwa House Group’s Daiwa House USA will acquire 60% of equity interest in Trumark. Daiwa House USA, based in Irving, Texas, will also commit to adding capital funding to further develop Trumark’s business.
The full terms of the deal were not disclosed. Maples, along with co-founder Gregg Nelson, will remain as co-owners and co-CEOs. Maples and Nelson founded Trumark in 1988. The company has offices in Newport Beach and San Ramon.
Maples said Trumark sold Daiwa only 60% of controlling interest in the company so that he and Nelson could continue to run the company.
The company has several deals in the pipeline already, in a mix of residential, mixed-use, office and retail in Northern and Southern California. Maples said the best thing about the acquisition is its process of doing deals will be simplified and efficient, while allowing Trumark to keep all of its 100 or so employees.
"If we did this with a U.S. homebuilder it would be disastrous for our team," Maples said. "This was a unique situation with a foreign investor that valued our team. We think this will allow our team to grow. They [Daiwa] have room to expand to achieve their goals. And this allows us to attract talent. We're very excited about that as well."
Daiwa approached Trumark in February, Maples told Bisnow Tuesday. He said that initially, he and Maples were not interested in selling the company. But as the weeks and months went by and negotiations deepened, the two sides eventually struck a deal.
“It became apparent that we had a lot in common and that there would be a lot of synergy in both of us attaining our growth goals if we work together,” Maples said in an interview with Bisnow. “It was a serendipitous process.”
Daiwa had set out a lofty goal of generating 400 billion yen in sales, or about $3.6B, from real estate investments outside of Japan by 2021, according to Daiwa House Group. Prior to dealing with Daiwa, Maples said Trumark had set its own goal of a billion dollars in revenue by 2025.
“We both have ambitious growth goals and we enjoy multifaceted product types,” Maples said. “At Trumark, we have deep real estate expertise, leadership and company infrastructure to grow much larger. Daiwa has the financial resources and expertise. Together, we can accomplish much.”
The acquisition of Trumark is part of Daiwa Group's worldwide expansion plans, which the Japanese company has rolled out by targeting key markets in which to invest in the U.S., Australia and Southeast Asia.
Daiwa has had a presence in the U.S. since 1976 and currently has a JV partnership with Lincoln Property Co. In 2017, Daiwa acquired Virginia-based homebuilder Stanley-Martin Communities.
Daiwa President, Chief Operating Officer and CEO Keiichi Yoshii has highlighted California as an important market for the company.
"We have been considering California as an important area to expand our North American business, due to its large economy and the high potential for growth," Yoshii said in a statement. "However, California had been also one of the most difficult places in the United States to obtain required approvals for residential development and construction.”
Yoshii said Trumark, which has developed more than 8,000 housing developments and construction projects in California and has a knack for procuring funds from institutional investors, would help Daiwa achieve its real estate sales goals.
“Our firm recognizes California as an important market as a part of our North American growth strategy,” Daiwa House USA President Nobuya Ichiki said in a separate statement. “Development in this state can be challenging and we look forward to working with Trumark and leveraging its track record and unique ability to navigate the complexities of development to achieve our expansion objectives.”
Thus far, Trumark has focused on building single-family residential homes, multifamily, mixed-use, retail and master-planned communities, mostly in Northern and Southern California. The company also relaunched its commercial platform in November, a unit that builds, leases and sells commercial buildings.
Maples said this partnership will allow both of the companies an opportunity to grow in California and across the western United States, adding that they are currently interviewing real estate executives in Arizona. They are also looking at creating a presence in Sacramento, Denver, Utah and Seattle.
“We want to grow significantly in the coming years,” Maples said. “Together, we can grow a multi-discipline platform.”
For housing, the group has targeted two key demographics: millennials and baby boomers. He said the trend was to build housing in urban areas in core markets, but once millennials start having kids, they seek out housing in suburban areas.
“We like this huge demographic 2.0 wave that real estate companies can take advantage of,” he said. “We think both groups like mixed-use [developments], too.”