Related Party Transactions (Notes)

6 Months Ended

Mar. 31, 2020

Related Party Transactions

In October 2017, the Company entered into a Shared Services Agreement with D.R. Horton whereby D.R. Horton provides the Company with certain administrative, compliance, operational and procurement services. During the six months ended March 31, 2020 and 2019, the Company paid D.R. Horton $2.6 million and $1.0 million for these shared services and $1.0 million and $0.6 million for the cost of health insurance and other employee benefits. These expenses are included in selling, general and administrative expense in the consolidated statements of operations.

Under the terms of the Master Supply Agreement with D.R. Horton, both companies identify land development opportunities to expand Forestar's portfolio of assets. At March 31, 2020 and September 30, 2019, the Company owned or controlled through option purchase contracts approximately 52,300 and 38,300 residential lots, of which D.R. Horton had the following involvement.


	March 31, 2020		September 30, 2019
	(Dollars in millions)
Residential lots under contract to sell to D.R. Horton	14,200		12,800
Residential lots subject to right of first offer with D.R. Horton	14,400		10,600
Earnest money deposits from D.R. Horton for lots under contract	$	98.4	$	88.7
Remaining purchase price of lots under contract with D.R. Horton	$	1,033.1	$	953.8

In the three months ended March 31, 2020 and 2019, the Company's residential lot sales totaled 1,951 and 548, and lot sales revenues were $156.4 million and $49.3 million. In the six months ended March 31, 2020 and 2019, the Company's residential lot sales totaled 4,373 and 1,066, and lot sales revenues were $373.5 million and $84.0 million. Lot and land sales to D.R. Horton during those periods were as follows.


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
	(Dollars in millions)
Residential single-family lots sold to D.R. Horton	1,906		453		4,296		908
Residential lot sales revenues from sales to D.R. Horton	$	151.2	$	37.7	$	366.8	$	70.2
Residential tract acres sold to D.R. Horton	—		—		36		—
Residential tract sales revenues from sales to D.R. Horton	$	—	$	—	$	7.2	$	—

In addition, a decrease in contract liabilities increased revenues on lot sales to D.R. Horton by $0.8 million and $2.1 million in the three months ended March 31, 2020 and 2019 and an increase in contract liabilities decreased revenues on lot sales to D.R. Horton by $0.6 million and $1.5 million in the six months ended March 31, 2020 and 2019.

During the three and six months ended March 31, 2020, the Company reimbursed D.R. Horton approximately $5.5 million and $16.2 million for previously paid earnest money and $8.2 million and $13.3 million for pre-acquisition and other due diligence and development costs related to land purchase contracts whereby D.R. Horton assigned its rights under these land purchase contracts to the Company. During the three and six months ended March 31, 2019, the Company reimbursed D.R. Horton approximately $4.7 million and $16.8 million for previously paid earnest money and $0.7 million and $3.7 million for pre-acquisition and other due diligence and development costs.

During the three and six months ended March 31, 2020, the Company paid D.R. Horton $1.5 million and $2.9 million for land development services compared to $0.3 million and $0.8 million for these services in the prior year periods. These amounts are included in cost of sales in the Company’s consolidated statements of operations.

At March 31, 2020 and September 30, 2019, undeveloped land was $28.2 million and $17.1 million. Undeveloped land primarily consists of undeveloped land which the Company has the contractual right to sell to D.R. Horton within approximately one year of its purchase or, if D.R. Horton elects, at an earlier date, at a sales price equal to the carrying value of the land at the time of sale plus additional consideration which ranges from 12% to 16% per annum.

At March 31, 2020 and September 30, 2019, accrued expenses and other liabilities on the Company's consolidated balance sheets included $4.8 million and $2.2 million owed to D.R. Horton for any accrued and unpaid shared service charges, land purchase contract deposits and due diligence and other development cost reimbursements.