Related Party Disclosures

12 Months Ended

Sep. 30, 2021

Related Party Transactions

The Company has a Shared Services Agreement with D.R. Horton whereby D.R. Horton provides the Company with certain administrative, compliance, operational and procurement services. During fiscal 2021, 2020 and 2019, selling, general and administrative expense in the consolidated statements of operations included $4.0 million, $5.0 million and $2.1 million for these shared services, $4.7 million, $2.7 million and $1.4 million reimbursed to D.R. Horton for the cost of health insurance and other employee benefits and $6.1 million, $4.0 million and $1.2 million for other corporate and administrative expenses paid by D.R. Horton on behalf of the Company.

The Company is subject to a Tax Sharing Agreement with D.R. Horton. The agreement sets forth an equitable method for reimbursements of tax liabilities or benefits between the Company and D.R. Horton related to state and local income, margin or franchise tax returns that are filed on a unitary basis with D.R. Horton. In accordance with the agreement, the Company reimbursed D.R. Horton $0.5 million and $0.2 million in fiscal 2021 and 2020, respectively, for its tax expense generated in fiscal 2020 and 2019, and D.R. Horton reimbursed the Company $0.4 million in fiscal 2019 for its tax benefit generated in the nine months ended September 30, 2018.

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 September 30, 2021 and 2020, the Company owned approximately 64,400 and 42,400 residential lots, of which D.R. Horton had the following involvement.


	September 30,
	2021		2020
	(Dollars in millions)
Residential lots under contract to sell to D.R. Horton	21,000		14,000
Residential lots subject to right of first offer with D.R. Horton	18,200		16,400
Earnest money deposits from D.R. Horton for lots under contract	$	143.1	$	92.2
Earnest money notes from D.R. Horton for lots under contract	$	0.7	$	4.8
Remaining purchase price of lots under contract with D.R. Horton	$	1,582.7	$	1,022.2

During fiscal 2021, 2020 and 2019, the Company's residential lot sales totaled 15,915, 10,373 and 4,132 and lot sales revenues were $1.3 billion, $880.3 million and $351.7 million. Lot and land sales to D.R. Horton during those periods were as follows.


	Year Ended September 30,
	2021		2020		2019
	(Dollars in millions)
Residential single-family lots sold to D.R. Horton	14,839		10,164		3,728
Residential lot sales revenues from sales to D.R. Horton	$	1,212.1	$	859.7	$	311.7
Tract acres sold to D.R. Horton	85		143		290
Tract sales revenues from sales to D.R. Horton	$	25.9	$	25.6	$	10.9

In addition, the net impact of the change in contract liabilities decreased revenues on lot sales to D.R. Horton by $5.6 million in fiscal 2021 and increased revenues on lot sales to D.R. Horton by $2.3 million and $4.0 million in fiscal 2020 and 2019, respectively.

During fiscal 2021, 2020 and 2019, the Company reimbursed D.R. Horton approximately $30.8 million, $27.0 million and $34.5 million, for previously paid earnest money and $61.3 million, $36.3 million and $13.1 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 fiscal 2021, 2020 and 2019, the Company paid D.R. Horton $5.7 million, $6.2 million and $2.4 million for land development services. These amounts are included in cost of sales in the Company’s consolidated statements of operations.

At September 30, 2021 and 2020, 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 of 12% to 16% per annum.

At September 30, 2021 and 2020, accrued expenses and other liabilities on the Company's consolidated balance sheets included $6.7 million and $8.4 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.