Sumitomo Realty & Development Co., Ltd.
Sumitomo Realty & Development Co., Ltd.
Incorporated: 1949 as Izumi Fudosan
Sales: ¥300.64 billion (US$2.21 billion)
Stock Exchanges: Tokyo Osaka
Sumitomo Realty & Development Co., Ltd. shares the 400-year lineage of the Sumitomo group firms. The company designs, constructs, leases, and manages commercial and residential real estate and other properties in Japan and around the world. It is devoted primarily to urban development, community development, and overseas activities.
Sumitomo Realty & Development’s operations date back to 1933, when the Sumitomo Goshi Company erected the Tokyo Sumitomo Building. As the successor to the real estate division of the former Sumitomo Honsha, then the group’s holding company, Izumi Fudosan was established in December 1949 with its headquarters in Tokyo.
At its inception the company was engaged primarily in serving the real estate needs of the Sumitomo group. Izumi Fudosan leased, and administered office buildings used by Sumitomo group companies, carrying on the pre-World War II functions of Sumitomo’s real estate division.
In May 1957 the firm assumed its present name, Sumitomo Realty & Development Co., Ltd. By 1963 the company had begun its continuing program of international expansion through the establishment of its overseas affiliate, Sumitomo Investment Co., (HK) Ltd., in Hong Kong. The division developed and operates three factories in Hong Kong. Sumitomo was the first of the major Japanese developers to expand internationally. In 1969 Sumitomo moved into Thailand where the company owns and leases a large office building in downtown Bangkok. Building leasing continued in 1991 to be integral to the company’s operations.
Through the 1960s Sumitomo continued as its primary business the management and development of commercial buildings. In April 1964 Sumitomo Realty opened its first office in Osaka, the historical seat of the Sumitomo group. In 1964 the company erected and began to lease the Kazan Building. Sumitomo also forayed into residential construction for the first time, concentrating on building luxury condominiums in desirable neighborhoods of Tokyo, including the City House series in Koishikawa, which was completed in 1968; Minami-Aoyama, which was ready for occupancy in 1969; Otowa in 1970; and Takanawa in 1971.
By the 1970s Sumitomo Realty was firmly established as a leading Japanese developer. Sumitomo Realty is owned by a group of stockholders that includes other Sumitomo group firms, including The Sumitomo Bank, The Sumitomo Trust & Banking Company, and Sumitomo Shoji. The strength of the company depends in large part on the support it enjoys from the Sumitomo group. This network has helped the company prosper despite sometimes-unfavorable economic conditions.
Achieving a global presence was a priority for Sumitomo Realty. The 1970s saw Sumitomo Realty aggressively expand both at home and overseas. In May 1972 Sumitomo gained a foothold in the United States through the establishment of La Solana Corporation, now known as Sumitomo Realty & Development CA., Inc. Through the 1970s, La Solana developed and marketed a variety of residential housing alternatives, including single-family houses and townhouses, in prime locations in and around Los Angeles county. In October 1972 La Solana paid $3.6 million for 46 acres in Huntington, California. More than 1,100 houses in Huntington, West Covina, Anaheim, Palos Verdes, and Dana Point, California, were completed by 1989. Another 1,000 units were under construction in the area. Also in 1972, Sumitomo moved into Hawaii, establishing another local subsidiary to manage the newly acquired Hawaii Country Club, outside Honolulu.
Sumitomo Realty was adversely affected by the world oil crisis of 1973 and 1974. Nevertheless, Sumitomo Realty’s sales in 1973 were ¥24.9 billion and profits were ¥1.4 billion. In 1974 sales climbed to ¥33.4 billion and profits to ¥1.5 billion. By 1977, sales topped ¥45 billion, yet the company was in the red with losses of ¥2 billion. In response to this fall the company, then under the guidance of Chairman Seigoro Seyama and President Taro Ando, began to provide more affordable housing for a larger market. The construction of expansive suburban Tokyo condominium complexes intended for the middle class included the Chiba Garden Town, completed in 1973, and Sobudai Green Park, completed in 1979, each with more than 1,500 units. These developments reflected the new priorities of Sumitomo. These included a shift from rapid growth and sales volume to social responsibility and efficient management.
In March 1974 Sumitomo completed the 52-story Shinjuku Sumitomo Building in Tokyo and three months later moved the company’s headquarters there from the Tokyo Sumitomo Building. The Kyoto Sumitomo Building, completed in 1976, and the Sumitomo Nakanoshima Building in Osaka, completed in 1977, were among buildings the company owned and leased just outside of Tokyo.
Sumitomo launched one of its most important subsidiaries in March 1975, when Sumitomo Real Estate Sales Co., Ltd. was created from the company’s sales division. Sumitomo Sales sells condominiums, single-family homes, and housing sites developed by Sumitomo Realty. Since 1979, Sumitomo Sales has established a network of sales offices that it both owns and manages. Between 1979 and 1989, the number of sales offices jumped from 2 to 98. In 1989 Sumitomo Sales involved 5% of the residential resale market in Japan.
The sales company established its own international-business department in 1988. Among its plans was the creation of a data base to provide Japanese customers with information they needed to purchase either residential or commercial real estate in the United States. To bolster its presence in the United States, the company became associated with Locations, Inc., with seven offices in Hawaii; Fred Sands Realtors, with 40 offices on the U.S. West Coast; and Coldwell Banker Commercial Group, Inc., with 96 offices across the United States. In 1989 Sumitomo Sales handled sales of condominium units in the Worldwide Plaza in New York City.
In 1977 the company announced plans to construct a 30-story building in the Shinjuku district of Tokyo, with Nippon Life Insurance Company. This building was completed in 1982 and became Sumitomo Realty’s new headquarters in October of that year. The majority of the office buildings erected, owned, leased, and managed by Sumitomo are located in downtown Tokyo. These buildings were designed by Sumitomo’s architecture and engineering staffs. Most feature contemporary architecture including dramatic atriums, extensive use of glass, and luxurious amenities.
Sumitomo Fudosan Home Co., Ltd., an associated company, took over the design and construction of single-family homes from Sumitomo Realty’s residential-business division in 1982. The company had erected more than 50 model homes in Japan by 1991. New housing, based on these plans, was designed and constructed by Sumitomo’s staff after the buyer had an opportunity to view the models. Sumitomo System Construction, a subsidiary of Sumitomo Realty, began to offer interior design services through interior coordinators, who were licensed by the Interior Industry Association.
The 1980s were a period of rapid growth for Sumitomo in a volatile market. Land prices in Japan and in Tokyo in particular escalated dramatically during this period. Residential land prices rose 93% in the year ending July 1, 1987. From 1986 to 1989 the total value of land in Japan doubled to $14 trillion, about twice the value of all of the land in the United States. Domestic demand policies were responsible for a construction boom early in the decade. Under the leadership of Hiroma Yamamoto, chairman through 1984; Taro Ando, his successor in that position; and Shinichiro Takagi, president since 1986; Sumitomo prospered financially in this environment. The company posted six consecutive years—from 1983 to 1989—of record earnings and revenues. In a one-year period, from 1988 to 1989, net income rose 51.6%. Sumitomo Realty stock was one of the top performers of 1989.
The company was, however, often blamed for escalating property values and placing real estate ownership out of reach of the average Japanese. In one widely reported encounter, three young men wielding samurai swords and homemade pistols entered Ando’s home in January 1987, seized his wife, and littered his yard with leaflets condemning the practices of so-called land sharks. The extremely high cost of land forced Sumitomo to take some creative measures to acquire needed property on which to build. The company began to utilize alternatives to the outright purchase of large blocks of land. One strategy involved the slow acquisition of contiguous lots one by one until the company owned enough land to develop. A second method was joint development, in which Sumitomo cooperated with existing landowners in the development of their land. In this way, Sumitomo was able to continue its tremendous rate of growth and development. Sumitomo managed 10 Tokyo office buildings in 1979, 19 in 1984, and 50 in 1989. The company added another 33 buildings by March 1991.
Worldwide, Sumitomo was involved in projects from New York to Australia. In June 1987, Sumitomo paid roughly $500 million, then the second-highest price ever paid for a Manhattan office property, to purchase 666 Fifth Avenue. In 1989, Sumitomo purchased the JW Marriott Hotel at Century City, Los Angeles, California, which it then managed. The company expected to venture further into hotel management in ensuing years. Sumitomo was also involved in developing the largest hotel complex in Australia.
In 1989, as the company celebrated its 40th anniversary, it adopted a new mission statement centered on three policies, “. . . expanding the types of activities we deal with, enlarging the geographical extent of our operations, and diversifying the techniques used to promote developmental projects.” By 1990, the Japanese real estate boom seemed to be leveling off. Rising interest rates, the falling yen, and rapid inflation contributed to the bleak picture.
Sumitomo Real Estate Sales Co., Ltd. (93.8%); Sumitomo Fudosan Home Co., Ltd.; Sumitomo Fudosan Finance Co., Ltd.; Sumitomo Fudosan System Construction Co., Ltd.; Sumitomo Fudosan Tatemono Service Co., Ltd.; Izumi Restaurant Co., Ltd.; Sumitomo Fudosan Ryokka Co., Ltd.; Sumitomo Realty & Development Co., Inc. (U.S.A.); Izumi Development Co., Ltd. (85.6%); Shinjuku Sumitomo Building Management Co., Ltd. (60%); La Solana N.Y., Inc. (U.S.A.); La Solana D.C., Inc. (U.S.A.); Sumitomo Realty & Development (Australia) Pty. Ltd.
Company Profile, Tokyo, Sumitomo Realty & Development Co., Ltd. 1989; A Brief History of Sumitomo, Tokyo, Sumitomo Corporation, 1990.
—Lynn M. Kalanik