Starwood Capital Buys Forestar Portfolio for $232M

By Scott Baltic, Contributing Editor

In a $232 million deal, a joint venture between an affiliate of Starwood Capital Group and an affiliate of Land Strategies Management (d/b/a Starwood Land Advisors), has acquired a portfolio of residential and commercial real estate from Forestar Group. The portfolio is concentrated in high-growth markets throughout Texas, the Southeast and the Western U.S.

The bulk of the portfolio consists of nearly 4,800 fully entitled residential lots across 20 projects in such top U.S. home building markets as Dallas, Austin, San Antonio, Houston, Charlotte, Nashville, Raleigh and Denver. The off-market acquisition also includes a joint venture interest in an existing multifamily community in Katy, Texas, additional commercial land within six distinct projects, and 730 acres of unentitled land in Southern California.

Land Strategies Management will manage the assets on behalf of the joint venture.

“Rising household formations, strong job creation, and improving wage growth have created significant pent-up demand across the buyer spectrum, with a particular focus on starter and first-time move-up homes,” Starwood VP David Baker said in a prepared statement. “Ninety-five percent of this portfolio is concentrated in markets with less than four months of resale supply, while housing starts remain well below long-term averages.”

Starwood did not respond to Commercial Property Executive’s request for additional information.

“Divesting these legacy projects will help streamline our business and provide capital for future growth. We plan to invest this capital primarily into new land development projects,” Donald Tomnitz, executive chairman of the Forestar board, said in the company’s announcement on the transaction.

A portfolio acquisition, not a corporate one

In April 2017, CPE reported that the Forestar board had unanimously approved the company’s acquisition by affiliates of Starwood Capital for $605 million, or $14.25 per share. That corporate acquisition agreement was later amended, such that Starwood agreed to pay $16.00 per share.

In late June of last year, however, Forestar announced that it was scotching the Starwood deal and that instead, D.R. Horton Inc. would acquire 75 percent of Forestar’s outstanding common stock, for $16.25 per share. As part of that transaction, other agreements were entered into, under which Forestar would supply Horton, the nation’ largest home builder, with finished lots.