Japanese luxury-home developer plans U.S. IPO

Tokyo-based Lead Real Estate Co. Ltd., a developer of luxury single-family homes and condominiums, which also has residential leasing operations in Dallas, is looking to raise up to $30 million via the U.S. stock market.

The company has filed a Form F-1 registration statement with the U.S. Securities and Exchange Commission (SEC) for a planned initial public offering of 2 million American Depository Shares (ADS) valued in the range of $12 to $15 a share — $24 million to $30 million. 

ADS are shares of non-U.S. companies held by a U.S. bank and available to U.S. investors for purchase. A form F-1 filing is required by the SEC for any foreign company seeking to be listed on a U.S. stock exchange. Lead Real Estate (LRE) seeks to have its ADS securities listed on the NASDAQ Global Market exchange.

LRE plans to use the proceeds from its U.S. IPO to continue developing its business operations in Japan, to expand a startup online listing network and for general corporate purposes. Although its SEC filing states that the money raised through the IPO will not be used to fund its expansion plans in the United States, the fling does make clear that LRE’s longer-term growth plans include growing its residential real estate development operations in Texas as well as in other regions in the United States.

“We have established subsidiaries in the U.S. and Hong Kong and plan to expand our operations in these markets and in Southeast Asia, especially the Philippines,” the company states in its SEC filing. “… We will continue to expand our operations overseas.

“We have been leasing apartment building units to individual customers in Dallas, Texas, since 2020 and Mr. Eiji Nagahara [the company’s founder and president] has built personal relationships with landowners and local builders in Texas over the years. In the long term, we plan to acquire land or residential properties in Dallas as well as other cities and states in the U.S. and further expand our operations in the U.S. through acquisition and joint ventures.”

The company’s SEC filing added that, so far, LRE has “not entered into any binding agreement for any acquisition nor identified any definite acquisition target.”

In addition to currently developing and selling luxury residential properties “domestically” in Japan and leasing apartment building units to individual clients in Japan and Dallas, LRE also operates hotels in Tokyo. It launched an interactive media platform as well in the fall of 2021, called Glocaly, which serves as a listing and marketing exchange for matching sellers and buyers of condos.

The company initially expanded into the United States in 2017 with the launching of a Dallas-based subsidiary now called Lead Real Estate Global Co. Ltd., which LRE’s SEC filing states was “established for expansion of our overseas business in the U.S.” 

The company’s filing adds that in Japan and Dallas, it leased units in a total of 12 apartment buildings to 70 customers during the first half of 2021. For its fiscal year ended June 30, 2021, LRE leased units in 17 apartments to a total of 118 customers in the same markets.

LRE recorded a total of 102 land-transaction deliveries for luxury single-family home developments in fiscal 2021 and delivered a total of 50 single-family homes and seven condos. LRE reported net income of $2.4 million on revenue of $97.7 million in fiscal year 2021, its SEC filing shows — with the bulk of that income generated from real estate development activities. 

“We primarily generate revenue from developing and selling single-family homes and condominiums,” the company’s SEC filing continues. “Since our inception in 2001, we have delivered more than 1,000 single-family homes and 25 condominiums. 

“The target customers of our single-family homes are wealthy family buyers who are looking for luxury single-family homes as their primary residence, while the target customers of our condominiums are institutional customers who look to purchase entire condominiums for investment purposes.”

LRE taps real estate agencies to help identify land and development sites for its luxury residential projects, generally acquiring the land from private landowners. The design and construction of the luxury properties is outsourced to third parties.

“When developing a single-family home or condominium, we typically deliver the land to the customer before starting the construction of the building and deliver the completed building to the customer six to 12 months after the land delivery, in order to quickly recover our payment for the land,” LRE’s SEC filing states. 

Texas is home to some 400 Japanese companies, including Toyota Motor Manufacturing, Toshiba International, Tokyo Electron America and NTT DATA Enterprise Services, to name a few, according to a report from the Texas Economic Development Corp. (TEDC). Between 2011 and the end of 2021, Japanese companies operating in Texas accounted for a total of some $6.8 billion in direct foreign investment in the state via 117 projects, TEDC reports, with more than 19,000 jobs created by 95 companies.

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