Starwood Capital to Acquire Austin’s Forestar Group

The Forestar board unanimously approved the $605 million merger, which is expected to close in the third quarter of 2017. The firm has been reducing its debt and exiting non-core assets for the last 18 months.
Radisson Hotel & Suites, Austin
Forestar Group sold the Radisson Hotel & Suites in Austin in February 2016, as part of its strategy to exit non-core assets.

Forestar Group Inc. has entered into a merger agreement with affiliates of Starwood Capital Group under which Starwood will acquire Forestar for $14.25 per share in cash, or about $605 million, Forestar announced late last week.

The transaction price reportedly represents an 8.2 percent premium to the 90-day volume weighted average price of Forestar’s common stock.

“Over the past 18 months Forestar has significantly reduced costs and outstanding debt, exited non-core assets and focused on its core community development business. While executing these key initiatives, the board and management have been evaluating longer-term strategic alternatives,” Forestar Chairman James A. Rubright said in a prepared statement.

The Forestar board unanimously approved the merger agreement and has recommended approval of the merger by Forestar’s stockholders. Contingent on that approval, the transaction is expected to close in the third quarter of 2017.

JMP Securities LLC is acting as financial advisor to Forestar, with Skadden, Arps, Slate, Meagher & Flom LLP acting as legal advisor. Kirkland & Ellis LLP is Starwood’s legal advisor.

Primarily an energy company, Forestar has been involved on the CRE side mostly via single-family and multifamily residential and mixed-use developments. At at the end of 2016, it owned, directly or through ventures interests, 50 residential and mixed-use projects totaling about 4,600 acres of real estate in 10 states.

In addition, non-core assets that the company is “divesting opportunistically over time” include more than 523,000 net acres of mineral assets, principally in Texas, Louisiana, Georgia and Alabama; 19,000 acres of timberland and undeveloped land (including mitigation banking); four multifamily assets; and about 20,000 acres of groundwater leases in central Texas.

In February, Forestar sold its owned mineral assets for $85.6 million.

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

As CPE reported in January 2014, Forestar had committed to developing the four-building, 320-unit Westmont Apartments in Nashville’s West End neighborhood, with the project to include a six-story, 414-car parking garage.

But by late 2015, Forestar was already paring its CRE business. In November of that year, CPE reported on the company’s plan to sell the Radisson Hotel & Suites in downtown Austin. The company sold the hotel in February 2016 for $130 million, according to the Austin Business Journal.

And in March 2016, tennessean.com reported that Forestar was listing for sale its 320-unit Acklen apartments and the site of its planned $48 million, 230-units-plus-retail Music Square Flats project, both in Nashville.