Graywood Developments is preparing to partner on more multi-residential projects with Japan’s Hankyu Hanshin Properties (HHP) in the Greater Toronto Area now that their first joint-venture is underway.

“We’ve already presented them a follow-on transaction,” said Stephen Price, Graywood’s president and CEO, in an interview with Connect CRE Canada.

HHP has expanded into Canada through a new strategic partnership with Toronto-based Graywood.

Under the initial joint-venture, Graywood and HHP are partnering on Claystone, a 141-unit condominium project in Oakville, Ont. Located at 2375 Lakeshore Road West, the project is designed for end users rather than investors who lease out their units. It will include 6,500 square feet of ground-level retail space.

The seven-storey building is set to launch presales in 2025, with unit deliveries planned for 2028.

Graywood and HHP are 50-50 partners in the $120-million project. Going forward, HHP may hold larger shares in projects.

“I think their interest in each project will be, probably, primarily based on size of the transaction,” said Price. “But at minimum, they’re interested in a 50% stake, and that stake could rise to as high as 90% in a particular project.”

The Japanese company plans to open an office in Toronto in the first half of 2025 and have a full-time employee there working on expanding the relationship with Graywood, said Price.

“The relationship has no end date,” he said. “The HHP organization runs with very long-term plans, 10 years and more. And so, we are envisioning this relationship will continue for a long time. Right now, we’re hoping to do two or three transactions per year with HHP, if we’re able to find good potential projects at reasonable prices that can generate the returns we want.

“Obviously, when I say good projects, [I mean] well located, with good access to transit, and the other amenities that are important to a particular site.”

There will be no caps on the amount of capital allocated to each project, he added.

“It’s really subject to finding good transactions and being comfortable with the capital commitment on each transaction,” said Price.

HHP is serving as a capital partner on Claystone, while Graywood is both a capital partner and the development partner. As part of its roles, Graywood will manage construction, sales and leasing. But Price said HHP could assume additional roles in future projects.

Privately owned Graywood, celebrating its 40th anniversary, is known for its expertise in residential and mixed-use projects. The firm currently manages a portfolio valued at $5.8 billion, with 16 active developments comprising 7,300 residential units.

HHP has operated in Japan for more than a century and in other countries in more recent years. The company has developed about 67,000 residential units globally since 2015.

HHP has a market capitalization of about $9 billion and generates about $10 billion in annual revenues, according to Price. Based in Osaka, HHP invests in multiple asset classes within Japan but focuses on residential assets internationally.

Colliers Canadian capital markets group and Colliers facilitated the partnership and advised Graywood and HHP on a capital raise tied to Claystone.

After choosing a country in which to expand, HHP does a “deep dive” to find a preferred market and local partner with a proven track record and, most importantly, integrity and likemindedness, said Price. After compiling a list of specifications necessary for the partner in Toronto, HHP chose Graywood from a shortlist of five candidates.

The partnership was finalized in December 2024 following negotiations that began in April 2024.

“They had a very thorough process that involved numerous trips with elevating levels of senior management coming to Toronto to see our active projects, to do due diligence on our company, and to interact with our senior team to ensure that there was a fit,” said Price. “They had many questions about Graywood, about the marketplace [and] about the project that we’re using as our kick-off project.

“They were extremely careful, extremely thorough, and we were vetted by numerous management professionals right up to the vice-chair and the president of of HHP.”

While HHP was evaluating Graywood, the Canadian firm was also assessing its potential Japanese partner. Price came away impressed with HHP’s market knowledge, thoroughness, experience, and emphasis on respect.

Lessons from his days studying Japanese cultural norms in business school many years ago “really resonated.”

“It’s really been an honour to have been selected to work with (HHP),” he said. “We’re really looking forward to building this relationship and delivering on the expectations that we both have.”

Pictured: Claystone condominium project under development in Oakville, Ont.

Photo: Graywood Developments