D.R. Horton is one of the top homebuilders in Dallas/Fort Worth. Forestar is one of the leading real estate development companies. Combining the strengths of both companies could expand D.R. Horton’s reach into additional markets.
Speaking to the Dallas Business Journal, Jim Gaines, an economist for The Real Estate Center at Texas A&M, said that it has become increasingly difficult for third-party land developers to operate in the past decade. That has forced builders like D.R. Horton into the land development side of the business.
Forestar owns about 50 residential and mixed-use projects under development in 10 states, and has been one of the leading single-family home developers in Dallas-Fort Worth.
The bid for Forestar reflects an attempt to manage these new realities of real estate development. Gaines told the Dallas Business Journal, “Forestar could become what is really missing out there on the marketplace: A well-capitalized, large-scale company that could develop and sell lots to D.R. Horton and to other builders."
Megan McGrath, a home-building analyst for MKM Partners in Connecticut, told the Dallas Business Journal that the merger with Forestar could give D.R. Horton access to the resources it needs to capitalize on increased consumer confidence during this busy building season. She also added that Forestar and D.R. Horton have been discussing this issue for the past year.
Connecticut-based Starwood Capital Group announced plans in April to merge with Forestar. However, the D.R. Horton bid upped the ante on the deal — potentially having a major impact on the future of land development for home builders.