Sumitomo Forestry : Notice Regarding the Acquisition of Equity Shares of the JPI Group (U.S.) to Create a Subsidiary

September 29, 2023

PRESS RELEASE

Company Name: Sumitomo Forestry Co., Ltd. (Code No. 1911, Prime market, Tokyo Stock Exchange)

Representative: Toshiro Mitsuyoshi, President & CEO

Inquiries: Toshihiro Horii, General Manager of Corporate Communications Dept. (Phone: [phone])

Notice Regarding the Acquisition of Equity Shares of the JPI Group (U.S.) to Create a Subsidiary

Sumitomo Forestry Co., Ltd. (hereinafter, Sumitomo Forestry) announced that on September 29, 2023, it has decided to acquire 90 percent of the equity shares of the JPI Group (hereinafter, JPI) in the United States through its wholly owned subsidiary, Sumitomo Forestry America, Inc. (hereinafter, SFAM). With this transaction, JPI will become a consolidated subsidiary of Sumitomo Forestry.

1. Overview of acquisition of equity shares of JPI

(1) Reasons for the acquisition

JPI operates a multi-family housing development business mainly in the states of Texas and California in the United States. With JPI becoming a consolidated subsidiary, Sumitomo Forestry will seek to expand its commercial real estate business in the United States and build a stable income portfolio.

JPI possesses land acquisition, development management, construction management, and investment management functions related to the development of multi-family housing projects. The company develops a wide range of multi-family housing projects, from affordable housing to luxury housing. It is ranked eighth in the United States in terms of the number of units started in 2022*, maintaining stable growth. JPI's strengths lie in its ability to arrange real estate development projects by utilizing its local network, and in cost and quality control by leveraging its own construction management capabilities.

*Ranking of NMHC 25 Largest Developers in 2023

Headquartered in Irving, Texas, JPI develops/builds multifamily communities in the northern part of the state (Dallas-Fort Worth area) and the southern part of California (Los Angeles, Orange County, Riverside, and San Diego areas). In 2022, Texas ranked second in the United States in both GDP (2.4 trillion USD) and population (30 million people). The demand for housing is increasing due to population growth from increased employment and immigration. As for California, the state ranked first in both GDP (3.6 trillion USD) and population (39 million) in 2022, and stable demand for rental housing is expected due to the decrease in affordability resulting from the rise in housing prices.

The Sumitomo Forestry Group has focused on the single-family homes business in the United States since 2003. In recent years, the Group has also expanded its real estate development business, starting with the acquisition of Crescent Communities, LLC as a subsidiary in 2018. With the acquisition of JPI as a subsidiary, the Group's annual number of multi-family housing construction in the United States will be 8,118 units, equivalent to 6th place in the country, further expanding the scale and area of its real estate development business. By expanding the real estate development business in addition to the single-family homes business in the United States, the Group aims to build a stable business portfolio through diversifying revenue sources. The Group will also establish a structure that can flexibly respond to changes in the business environment in the future by expanding synergies with the Group's timber and building materials distribution and manufacturing business and the single-family homes business.

(2) Overview of the company to be acquired

Among JPI Group companies, Sumitomo Forestry will acquire operating companies with land acquisition, development management, construction management, and investment management functions, some real estate holding companies, and other assets.

First, SFAM will establish SFA JPI Top Holdings LLC on September 30, 2023 (planned). Then in October (planned), SFA JPI Holdings LLC will be established under SFA JPI Top Holdings. At the same time, SFA JPI Guarantor Co LLC will be established under SFA JPI Holdings, and SFA JPI RE Holdings LLC, SFA JPI Services Holdings, LLC, and JPI Development Hold Co, LLC will be established under the company (these six newly established holding companies will be classified as specific subsidiaries).

Subsequently, in November 2023 (tentative), SFAM will underwrite 90% of the capital increase of SFA JPI Top Holdings and will indirectly invest in the companies under its control (see below for the amount of investment in each company). At the same time, SFA JPI Services Holdings, JPI Development Hold, and SFA JPI RE Holdings will acquire equity interest in the operating companies of the JPI Group (operating companies and some real estate holding companies).

In addition, the real estate development project companies (SPCs) that JPI has already jointly invested in with other investors are not subject to this equity interest acquisition. The details of the newly established companies as of the capital increase and equity interest transfer date in November 2023 (scheduled) are shown below.

(1)	Name	SFA JPI Top Holdings LLC *Newly established company
(2)	Headquarters	Irving, Texas, U.S. (near Dallas)
(3)	Representative	Payton Mayes (President, CEO) & Mollie Fadule (CFO, CIO)
(4)	Business description	Holding company of the JPI Group

(5)	Capital at time of equity	USD 175 million
	interest acquisition
(6)	Establishment date	September 30, 2023 (scheduled)
(7)	Major shareholders and	Sumitomo Forestry America, Inc. 90% (wholly owned
	shareholding ratios	subsidiary of Sumitomo Forestry)
			Payton Mayes/Mollie Fadule	10% (holding company of
			representative)
(8)	Relationship	with	Capital
	Sumitomo Forestry
	Personnel	None
			Business
(9)	Consolidated	operating	Omitted as the company is a new establishment.
	results and consolidated	Outlook for consolidated financial standing at the time of
	financial standing for the	establishment: Net assets: Approximately USD 175 million; total
	past three years	assets: Approximately USD 278 million
(1)	Name		SFA JPI Holdings LLC *Newly established company
(2)	Headquarters		Irving, Texas, U.S. (near Dallas)
(3)	Representative	Payton Mayes (President, CEO) & Mollie Fadule (CFO, CIO)
(4)	Business description	Holding company of the JPI Group
(5)	Capital at time of equity	USD 278 million
	interest acquisition
(6)	Establishment date	October 2023 (scheduled)
(7)	Major shareholders and	SFA JPI Top Holdings LLC	100%
	shareholding ratios
(8)	Relationship	with	Capital
	Sumitomo Forestry	Personnel	None
			Business
(9)	Consolidated	operating	Omitted as the company is still in preparation for establishment.
	results and consolidated	Outlook for consolidated financial standing at the time of
	financial standing for the	establishment: Net assets: Approximately USD 278 million; total
	past three years	assets: Approximately USD 278 million
(1)	Name		SFA JPI Guarantor Co LLC	*Newly established company
(2)	Headquarters		Irving, Texas, U.S. (near Dallas)
(3)	Representative	Payton Mayes (President, CEO) & Mollie Fadule (CFO, CIO)
(4)	Business description	Guarantee for real estate development business for multi-family
			housing
(5)	Capital at time of equity	USD 266 million
	interest acquisition
(6)	Establishment date	October 2023 (scheduled)

(7)	Major shareholders and	SFA JPI Holdings LLC 100%
	shareholding ratios
(8)	Relationship	with	Capital
	Sumitomo Forestry
	Personnel	None
			Business
(9)	Consolidated	operating	Omitted as the company is still in preparation for establishment.
	results and consolidated	Outlook for consolidated financial standing at the time of
	financial standing for the	establishment: Net assets: Approximately USD 266 million; total
	past three years	assets: Approximately USD 266 million
(1)	Name		SFA JPI RE Holdings LLC	*Newly established company
(2)	Headquarters		Irving, Texas, U.S. (near Dallas)
(3)	Representative	Payton Mayes (President, CEO) & Mollie Fadule (CFO, CIO)
(4)	Business description	Real estate development business for multi-family housing
			(project investment)
(5)	Capital at time of equity	USD 33 million (scheduled)
	interest acquisition
(6)	Establishment date	October 2023 (scheduled)
(7)	Major shareholders and	SFA JPI Guarantor Co LLC	100%
	shareholding ratios
(8)	Relationship	with	Capital
	Sumitomo Forestry
	Personnel		None
			Business
(9)	Consolidated	operating	Omitted as the company is still in preparation for establishment.
	results and consolidated	Outlook for consolidated financial standing at the time of
	financial standing for the	establishment: Net assets: Approximately USD 33 million; total
	past three years	assets: Approximately USD 33 million
(1)	Name		SFA JPI Services Holdings, LLC *Newly established company
(2)	Headquarters		Irving, Texas, U.S. (near Dallas)
(3)	Representative	Payton Mayes (President, CEO) & Mollie Fadule (CFO, CIO)
(4)	Business description	Real estate development business for multi-family housing
			(management of construction, etc.)
(5)	Capital at time of equity	USD 195 million
	interest acquisition
(6)	Establishment date	October 2023 (scheduled)
(7)	Major shareholders and	SFA JPI Guarantor Co LLC	100%
	shareholding ratios
(8)	Relationship	with	Capital	None
	Sumitomo Forestry
	Personnel

		Business
(9)	Consolidated operating	Omitted as the company is still in preparation for establishment.
	results and consolidated	Outlook for consolidated financial standing at the time of
	financial standing for the	establishment: Net assets: Approximately USD 195 million; total
	past three years	assets: Approximately USD 195 million

(1)	Name		JPI Development HoldCo, LLC *Newly established company
(2)	Headquarters		Irving, Texas, U.S. (near Dallas)
(3)	Representative	Payton Mayes (President, CEO) & Mollie Fadule (CFO, CIO)
(4)	Business description	Real estate development business for multi-family housing (asset
			holding company)
(5)	Capital at time of equity	USD 38 million
	interest acquisition
(6)	Establishment date	October 2023 (scheduled)
(7)	Major shareholders and	SFA JPI Guarantor Co LLC 100%
	shareholding ratios
(8)	Relationship	with	Capital
	Sumitomo Forestry
	Personnel	None
			Business
(9)	Consolidated	operating	Omitted as the company is still in preparation for establishment.
	results and consolidated	Outlook for consolidated financial standing at the time of
	financial standing for the	establishment: Net assets: Approximately USD 38 million; total
	past three years	assets: Approximately USD 38 million

*Notes

These companies will be established as part of a reorganization to be implemented by JPI upon the Sumitomo Forestry Group's acquisition of JPI's equity interest. Consolidated operating results of JPI (acquisition target only) for the fiscal year ended December 31, 2022, before the reorganization, are as follows: net sales of USD 423 million and income before income taxes of USD 13 million. During the same period, construction of 5,051 units was started.

(3) Outline of major parties from which Sumitomo Forestry will acquire equity interest

The sellers of the equity interest are three individuals-the founders of JPI. Sumitomo Forestry has no capital, personnel or business relationships with these parties to note.

(4) SFA JPI Top Holdings LLC equity interest before and after acquisition

As a result of the equity interest acquisition, SFAM will own 90% of SFA JPI Top Holdings, and JPI's leadership team members (Payton Mayes and Mollie Fadule) will collectively own 10%.