Charlotte-based Crescent Communities, one of the city's oldest and most prominent developers, said Friday that it's reached an agreement to be acquired by Sumitomo Forestry America, a subsidiary of a Japanese firm.
Crescent is the developer behind huge projects such as the 26-story Ally Center at Stonewall and Tryon streets, the 1,400-acre River District west of Charlotte's airport, Novel Stonewall Station, with a Whole Foods and apartments uptown, as well as luxury single-family communities such as the Sanctuary on Lake Wylie and the Peninsula on Lake Norman.
Terms of the deal to buy privately held Crescent were not disclosed, but were likely substantial: Crescent has more than $1.1 billion worth of assets under management, and a development portfolio that stretches across the Southeast and totals almost $2 billion. The deal is not subject to any financing contingencies.
Crescent _ a former Duke Energy subsidiary that dates to the 1960s _ is largely owned by private equity firms including MatlinPatterson and Anchorage Capital Group. The deal is expected to close in the second quarter.
The company's current management team will continue in their roles and be based in Charlotte. Palmetto Bluff, a 20,000-acre resort in South Carolina, will be split off and retained by Crescent's current owners.
Sumitomo Forestry is a wood products company and homebuilder, a major producer and importer of timber. The company owns building companies in the U.S., such as Dan Ryan Homes, and is also a promoter of wood-framed construction, which is how most of Crescent's apartments are built.
Todd Mansfield, CEO of Crescent Communities, said Crescent has been in negotiations with Sumitomo for about six months. The deal was inked in Japan at around midnight Friday.
"It's been a long courtship," said Mansfield. Sumitomo and Crescent started testing the waters in 2017, when they joined in a $37 million joint venture to develop upscale apartments at Atherton Mills. "It was a perfect opportunity to get to know them."
According to an investor disclosure from Sumitomo, the company is spending $370 million on the Crescent acquisition. Mansfield said they are also paying off Crescent's $380 million worth of outstanding corporate debt, and assuming all of the company's outstanding debts on their development projects. He declined to give a total price but said, "It was a very healthy premium to our book value."
"We end up with a new long term owner that has very deep real estate experience," said Mansfield. The deal will allow Crescent to increase its reach with a deep-pocketed new owner and by eliminating its debt, while it offers Sumitomo entry into the Southeast's booming apartment market. Mansfield said the new owners will be able to help Crescent design and build more innovative projects.
" I hope we learn from the Japanese," he said. "They are masters of mixed-use development."
Decades of Charlotte growth
For Crescent, which employs about 200 people, Charlotte roots go deep. The company started out in 1963 as a timber and real estate management company for Duke Energy's landholdings, known as Crescent Resources. The company became completely independent from Duke in 2006. Known for its luxury waterfront communities such as The Sanctuary on Lake Wylie and The Point in Mooresville, Crescent filed for bankruptcy in 2009, hobbled by falling real estate prices and debt.
The company emerged in 2010 and re-branded itself as Crescent Communities, with an increased focus on apartment and mixed-use development. In 2016, Crescent started a homebuilding subsidiary, Fielding Homes, to pursue more single-family development.
"Crescent Communities has successfully established itself as an integrated platform of diverse real estate assets with a significant development pipeline that provides a long runway for future growth," said Atsushi Iwasaki, president of Sumitomo Forestry America, in a statement. "We have been pursuing further expansion of our U.S. real estate business and the acquisition of Crescent Communities is a perfect fit with our investment philosophy."
The Japanese company saw about $10.2 billion in revenue in fiscal 2017, with almost $500 million profit.
Sumitomo's acquisition includes all of Crescent's current assets aside from the resort at Palmetto Bluff, totaling 6,400 apartments in 20 communities, 1,700 single-family lots and 1.5 million square feet of commercial square feet. Sumitomo is also buying Crescent's slate of future projects in development, totaling 5,500 apartments, 2,200 houses, and 2.5 million square feet of office and industrial space.
Moelis & Company served as the exclusive financial adviser to Crescent Communities, and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal adviser. Vinson & Elkins served as legal adviser to Sumitomo.
