A joint venture between an affiliate of Starwood Capital Group and an affiliate of Land Strategies Management doing business as Starwood Land Advisors said late Thursday that it has acquired a diverse portfolio of residential and commercial real estate assets concentrated in high-growth markets throughout Texas, the Southeast and the Western United States. The venture acquired equity interests in the portfolio from Forestar Group (NYSE: FOR), the separately traded land unit of D.R. Horton, for $232 million.
The acquired portfolio is primarily comprised of nearly 4,800 fully entitled residential lots spread across 20 projects in Dallas, Austin, San Antonio, Houston, Charlotte, Nashville, Raleigh, and Denver. The acquisition further included a joint venture interest in an existing multifamily community located in Katy, TX, 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.
“The acquisition of a portfolio of this size and quality in many of our favored growth markets is a rare opportunity in the residential land sector. Our extensive land development experience and longstanding relationships with both Forestar and D.R. Horton allowed us to execute this transaction quickly, efficiently, and on an off-market basis,” said David Baker of Starwood Capital Group. “Rising household formations, strong job creation, and improving wage growth has created significant pent-up demand across the buyer spectrum with a particular focus on starter and first-time move-up homes. 95% of this portfolio is concentrated in markets with less than four months of resale supply while housing starts remain well below long-term averages. Collectively, these healthy supply-demand fundamentals are driving home builders to seek finished lots in well-located communities in commuter corridors throughout these markets.”
“The communities acquired in this portfolio are well positioned to capture the increasing demand driven by demographic shifts and strong growth from both younger and older buying profiles,” said Mike Moser, CEO of Land Strategies Management. “The assets we are acquiring from Forestar represent compelling additions to our portfolio, with impressive landscaping, amenities and spine road infrastructure, as well as an attractive risk-reward profile. Land Strategies Management has developed valuable operational experience and deep relationships with public and private home builders throughout this cycle, which will be invaluable in executing the business plan. We look forward to managing this portfolio and developing outstanding residential and commercial real estate assets.”
In a statement published by the Austin American Statesman, Forestar Executive Chairman Donald J. Tomnitz referred to the assets as “legacy projects” and said the company would use the proceeds of the deal to acquire new land assets.
Starwood sought to acquire control of Forestar last year but was bested in a bidding contest by D.R. Horton, which acquired 75% of the outstanding shares of the land development firm but maintained it as a publicly traded entity.
At the time of the Forestar/D.R. Horton deal, the latter explained the strategy behind it. “D.R. Horton is committed to owning no more than a two- to three-year supply of lots and supplementing its land pipeline through lot purchase agreements with land developers. This transaction is consistent with its stated long-term strategy of developing strong relationships with land developers across the country and growing the optioned portion of its land and lot position to enhance both operational efficiency and returns.”
