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November 9, 2016 6:06 AM EST



 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report: November 8, 2016
(Date of earliest event reported)
 
FORESTAR GROUP INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
Commission File Number
 
26-1336998
(State or other jurisdiction of incorporation or organization)
 
001-33662
 
(I.R.S. Employer
Identification No.)
 

6300 Bee Cave Road, Building Two, Suite 500
Austin, Texas 78746
(Address of principal executive offices) (zip code)
 
(512) 433-5200
(Registrant’s telephone number, including area code)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
o       Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o       Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o       Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o       Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

1



Item 2.02. Results of Operations and Financial Condition.
 
On November 8, 2016, Forestar Group Inc. (the “Company”) issued a press release announcing the Company’s results for the quarter ended September 30, 2016. A copy of the press release is furnished as Exhibit 99.1.

 Item 7.01. Regulation FD Disclosure
 
On November 9, 2016, management of the Company will participate in a conference call discussing the Company’s results for the quarter ended September 30, 2016. Copies of the presentation materials to be used by management are furnished as Exhibit 99.2 of this report.


Item 9.01. Financial Statements and Exhibits.
 
(d) Exhibits.
 
Exhibit
 
Description
 
 
 
99.1

 
Press release, dated November 8, 2016
 
 
 
99.2

 
Presentation materials to be used by management in a conference call on November 9, 2016, discussing the Company’s results for the quarter ended September 30, 2016.



2



SIGNATURE
 
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
FORESTAR GROUP INC.
 
 
 
 
 
 
Date:
November 9, 2016
By:
/s/ Charles D. Jehl
 
 
 
Name:
Charles D. Jehl
 
 
 
Title:
Chief Financial Officer


3



EXHIBIT INDEX
 
Exhibit
 
Description
 
 
 
99.1

 
Press release, dated November 8, 2016
 
 
 
99.2

 
Presentation materials to be used by management in a conference call on November 9, 2016, discussing the Company’s results for the quarter ended September 30, 2016.

4
Exhibit 99.1

forlogoq12015a04.jpg

NEWS
RELEASE

FOR IMMEDIATE RELEASE
CONTACT:     Charles D. Jehl
(512) 433-5229

FORESTAR GROUP INC. REPORTS THIRD QUARTER 2016 RESULTS

Forestar significantly transformed in one year through execution of our key initiatives to reduce costs, divest non-core assets, strengthen balance sheet and focus on maximizing shareholder value.
Transformation - Highlights
•
Actions taken to eliminate over $50 million in annualized SG&A, expect full cost savings realization once all non-core assets are sold
•
Decreased headcount by over 50% compared to 2014 peak
•
Executed $425 million in non-core asset sales
•
Reduced outstanding debt by over $320 million - reducing annual interest expense by approximately $23 million going forward
AUSTIN, TEXAS, November 8, 2016—Forestar Group Inc. (NYSE: FOR) (“Forestar” or the “Company”) today reported third quarter 2016 net income of approximately $9.7 million, or $0.23 per share outstanding, compared with third quarter 2015 net loss of approximately ($164.2) million, or ($4.79) per share outstanding. Third quarter 2016 earnings from continuing operations were approximately $16.8 million, or $0.40 per share outstanding, compared with third quarter 2015 net loss from continuing operations of approximately ($57.3) million, or ($1.67) per share outstanding.
Significant progress: Sold Non-Core Assets, Strengthened Balance Sheet, Reduced Costs and Focused on Core Community Development Business
"In one year, we have made significant progress transforming Forestar through the execution of our key initiatives to divest non-core assets, reduce outstanding debt, reduce SG&A costs and focus on maximizing shareholder value. Key highlights include selling $425 million in non-core assets, reducing outstanding debt by over $320 million, and reducing annual interest expense by approximately $23 million going forward. Once non-core asset sales are fully executed, projected annual SG&A costs are expected to decrease by over $50 million compared with 2015 actuals. In addition, we have transformed our capital structure by significantly reducing leverage, which has strengthened our balance sheet and created flexibility," said Phil Weber, Chief Executive Officer of Forestar.
"In addition to executing these initiatives, we have focused on maximizing shareholder value delivered from our core community development business. Builder demand for residential lots in our key communities remains steady. At third quarter-end 2016, we have over 2,080 residential lots under option contract with builders, the highest number of lots under option contract in over five years, " continued Mr. Weber.
Business Segments
Forestar manages its operations through three business segments: real estate, mineral resources and other.
REAL ESTATE

Third Quarter 2016 Highlights (Includes Ventures)
•
Sold 332 developed residential lots for $70,000 per lot
•
Sold 243 residential tract acres for $26,800 per acre
•
Sold 110 commercial acres for approximately $76,200 per acre
◦
Includes 108 acres - Antioch, CA project for $7 million

1


•
Sold approximately 6,500 acres of undeveloped land for $2,410 per acre
•
Incurred $7.6 million in non-cash impairments, primarily related to a multifamily site under contract in Austin

Segment Financial Results:
($ in millions)
 
Q3 2016
 
Q3 2015
 
Q2 2016
Segment Revenues
 
$45.3
 
$28.0
 
$46.4
Segment Earnings
 
$15.0
 
$5.2
 
$73.3

Real estate segment earnings increased in third quarter 2016 compared with third quarter 2015 principally due to higher undeveloped land sales activity which was offset by non-cash impairment charges of $7.6 million related to one non-core multifamily site and two non-core community development projects. Commercial sale activity in third quarter 2016 is primarily related to sale of 108 acres from our San Joaquin River project in Antioch, California for $7 million which generated approximately $37 million in tax losses to offset tax gains. Residential tract sale activity in third quarter 2016 is related to the bulk sale of 243 acres from a venture project near Austin for $6.5 million which contributed approximately $1.4 million in segment earnings. Second quarter 2016 real estate segment earnings includes gain on sale of non-core assets of $107.7 million, principally due to a $95.3 million gain associated with the sale of the Radisson Hotel & Suites and over $10.3 million in gains associated with the sale of our Eleven multifamily community and sale of our Dillon multifamily site, which were partially offset by non-cash impairment charges of $48.8 million related to five non-core community development projects and one non-core multifamily site.

MINERAL RESOURCES

Segment Financial Results:
($ in millions)
 
Q3 2016
 
Q3 2015
 
Q2 2016
Segment Revenues
 
$1.4
 
$2.5
 
$1.3
Segment Earnings
 
$1.2
 
$0.1
 
$0.9

Mineral Resources segment earnings increased in third quarter 2016 compared with third quarter 2015 principally due to a non-cash impairment charge of $1.8 million related to Louisiana wells in third quarter 2015. In third quarter 2016, royalty revenues declined principally due to lower oil and gas production volumes and prices.
OTHER

Segment Financial Results:
($ in millions)
 
Q3 2016
 
Q3 2015
 
Q2 2016
Segment Revenues
 
$0.5
 
$1.7
 
$0.3
Segment Earnings (Loss)
 
($0.2)
 
($0.1)
 
($0.2)

Third quarter 2016 other segment revenues decreased compared with third quarter 2015 principally due to deferral of timber harvest activity in support of our key initiative to exit our non-core timberland and undeveloped land.
OUTLOOK

Fundamentals Stable in Forestar's Community Development Markets
“Fundamentals are stable in our community development markets supported by low developed lot inventories. Forestar sold 1,105 residential lots in the first nine months of 2016 and we continue to project 2016 residential lot sales volume to be in the range of 1,600 - 1,800 lots,” said Michael Quinley, President - Community Development.





2


Executing Key Initiatives
“Our entire organization has worked extremely hard to execute our key initiatives and produce these significant results in one year. On behalf of the entire board, I would like to personally thank our team for their efforts to move our Company forward. We remain focused on maximizing shareholder value, including evaluating the next best steps for Forestar,” added Jim Rubright, Chairman of the Board.
The Company will host a conference call on November 9, 2016 at 10:00 am ET to discuss results of third quarter 2016. The meeting may be accessed through webcast or by conference call. The webcast may be accessed through Forestar’s Internet site at www.forestargroup.com. To access the conference call, listeners calling from North America should dial 1-844-634-1445 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-615-247-0254. The passcode is Forestar. Replays of the call will be available for two weeks following the completion of the live call and can be accessed at 1-855-859-2056 in North America and at 1-404-537-3406 outside North America. The passcode for the replay is 97993686.

About Forestar Group
Forestar is a residential and mixed-use real estate development company. At third quarter-end 2016, we own directly or through ventures interests in 55 residential and mixed-use projects comprised of approximately 7,000 acres of real estate located in 11 states and 15 markets. The company also owns approximately 590,000 net acres of oil and gas fee minerals located in Texas, Louisiana, Georgia and Alabama. The company has water interests in 1.5 million acres which include a 45 percent nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes or sold from 1.4 million acres in Texas, Louisiana, Georgia and Alabama, and 20,000 acres of groundwater leases in central Texas. The company's non-core assets include about 75,000 acres of timberland and undeveloped land, and commercial and income producing properties which consist of three multifamily projects and two multifamily sites. Forestar operates in three business segments: real estate, mineral resources and other. Forestar’s address on the World Wide Web is www.forestargroup.com.

Forward Looking Statements
This release contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are typically identified by words or phrases such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” and other words and terms of similar meaning. These statements reflect management’s current views with respect to future events and are subject to risk and uncertainties. We note that a variety of factors and uncertainties could cause our actual results to differ significantly from the results discussed in the forward-looking statements, including but not limited to: general economic, market, or business conditions; market demand for our non-core assets; changes in commodity prices; opportunities (or lack thereof) that may be presented to us and that we may pursue; fluctuations in costs and expenses including development costs; demand for new housing, including impacts from mortgage credit rates or availability; lengthy and uncertain entitlement processes; cyclicality of our businesses; accuracy of accounting assumptions; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond our control. Except as required by law, we expressly disclaim any obligation to publicly revise any forward-looking statements contained in this news release to reflect the occurrence of events after the date of this news release.

3


FORESTAR GROUP INC.
(UNAUDITED)
Business Segments
 
Third Quarter
 
First Nine Months
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Revenues:
 
 
 
 
 
 
 
Real estate
$
45,297

 
$
27,957

 
$
127,776

 
$
100,196

Mineral resources
1,423

 
2,502

 
3,842

 
7,616

Other
487

 
1,726

 
1,199

 
5,372

Total revenues
$
47,207

 
$
32,185

 
$
132,817

 
$
113,184

Segment earnings (loss):
 
 
 
 
 
 
 
Real estate
$
15,017

 
$
5,154

 
$
108,531

 
$
29,747

Mineral resources
1,182

 
77

 
2,668

 
3,215

Other
(196
)
 
(77
)
 
(974
)
 
(511
)
Total segment earnings
16,003

 
5,154

 
110,225

 
32,451

Items not allocated to segments:
 
 
 
 
 
 
 
General and administrative expense
(4,505
)
 
(8,343
)
 
(13,992
)
 
(19,540
)
Share-based and long-term incentive compensation expense
(1,024
)
 
(2,245
)
 
(2,980
)
 
(5,726
)
Interest expense
(3,369
)
 
(8,315
)
 
(17,926
)
 
(25,851
)
Loss on extinguishment of debt, net
—

 
—

 
(35,864
)
 
—

Other corporate non-operating income
58

 
38

 
283

 
133

Income (loss) from continuing operations before taxes
7,163

 
(13,711
)
 
39,746

 
(18,533
)
Income tax (expense) benefit
9,666

 
(43,568
)
 
(7,415
)
 
(41,699
)
Net income (loss) from continuing operations attributable to Forestar Group Inc.
16,829

 
(57,279
)
 
32,331

 
(60,232
)
Loss from discontinued operations, net of taxes
(7,164
)
 
(106,937
)
 
(17,428
)
 
(146,649
)
Net income (loss) attributable to Forestar Group Inc.
9,665

 
(164,216
)
 
14,903

 
(206,881
)
Net income (loss) per diluted share:
 
 
 
 
 
 
 
Continuing operations
$
0.40

 
$
(1.67
)
 
$
0.76

 
$
(1.76
)
Discontinued operations
(0.17
)
 
(3.12
)
 
(0.41
)
 
(4.28
)
Net income (loss) per diluted share
$
0.23

 
$
(4.79
)
 
$
0.35

 
$
(6.04
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in millions):
 
 
 
 
 
 
 
Basic
34.1

 
34.3

 
34.2

 
34.2

Diluted (a)
42.3

 
34.3

 
42.3

 
34.2


 
 
Third Quarter
 
Year-End
Supplemental Financial Information:
 
2016
 
2015
 
 
(In thousands)
Cash and cash equivalents
 
$
122,130

 
$
96,442

 
 
 
 
 
Senior secured notes, net
 
5,195

 
224,647

Convertible senior notes, net of discount
 
103,637

 
104,719

Tangible equity unit notes, net
 
2,219

 
8,666

Other debt, net (b)
 
1,297

 
43,483

Total debt (c)
 
$
112,348

 
$
381,515

Net cash (debt)
 
$
9,782

 
$
(285,073
)
 _____________________
(a) 
Weighted average diluted shares outstanding for third quarter and first nine months 2015 excludes 7.9 million shares associated with tangible equity units issued during fourth quarter 2013. The actual number of shares to be issued in December 2016 will be between 6.5 million - 7.9 million shares based on the market value of our stock.
(b) 
Other debt for third quarter-end 2016 and year-end 2015 excludes unconsolidated venture debt of $126.1 million and $134.7 million and outstanding letters of credit of approximately $13.7 million and $15.9 million. Other debt at year-end 2015 consists principally of $39.3 million in senior secured loans for Radisson Hotel & Suites and Eleven multifamily property. In second

4


quarter 2016, we sold Radisson Hotel & Suites and Eleven for $130.0 million and $60.2 million. The proceeds were used to pay off the related senior secured loans of $39.3 million.
(c) 
At third quarter-end 2016 and year-end 2015, $1,768,000 and $8,267,000 of unamortized deferred financing fees are deducted from our outstanding debt.


5


FORESTAR GROUP INC.
REAL ESTATE SEGMENT
PERFORMANCE METRICS
 
Third Quarter
 
First Nine Months
 
2016
 
2015
 
2016
 
2015
REAL ESTATE
 
 
 
 
 
 
 
Owned, Consolidated & Equity Method Ventures:
 
 
 
 
 
 
 
Residential Lots Sold
332

 
301

 
1,105

 
1,109

Revenue per Lot Sold
$
69,970

 
$
76,623

 
$
68,573

 
$
75,019

Commercial Acres Sold
110

 
2

 
120

 
56

Revenue per Commercial Acre Sold
$
76,187

 
$
28,037

 
$
99,800

 
$
216,997

Undeveloped Acres Sold
6,501

 
4,616

 
13,898

 
6,595

Revenue per Acre Sold
$
2,410

 
$
2,190

 
$
2,460

 
$
2,411

Owned & Consolidated Ventures:
 
 
 
 
 
 
 
Residential Lots Sold
272

 
186

 
975

 
699

Revenue per Lot Sold
$
69,131

 
$
76,232

 
$
67,301

 
$
73,287

Commercial Acres Sold
108

 
2

 
116

 
27

Revenue per Commercial Acre Sold
$
64,923

 
$
28,037

 
$
83,347

 
$
109,802

Undeveloped Acres Sold
6,501

 
744

 
13,898

 
2,378

Revenue per Acre Sold
$
2,410

 
$
2,900

 
$
2,460

 
$
2,911

Ventures Accounted For Using the Equity Method:
 
 
 
 
 
 
 
Residential Lots Sold
60

 
115

 
130

 
410

Revenue per Lot Sold
$
73,773

 
$
77,256

 
$
78,108

 
$
77,973

Commercial Acres Sold
2

 
—

 
4

 
29

Revenue per Commercial Acre Sold
$
750,902

 
$
—

 
$
527,152

 
$
311,995

Undeveloped Acres Sold
—

 
3,872

 
—

 
4,217

Revenue per Acre Sold
$
—

 
$
2,053

 
$
—

 
$
2,129



THIRD QUARTER 2016
RESIDENTIAL REAL ESTATE PIPELINE
Real Estate
 
 
Entitled Acres
 
Developed & Under Development Acres
 
Total Acres (a)
Residential
 
 
 
 
 
 
 
Owned
 
 
4,030
 
691
 


Ventures
 
 
739
 
182
 
5,642

Commercial
 
 
 
 
 
 
 
Owned
 
 
440
 
217
 


Ventures
 
 
191
 
94
 
942

Total Acres
 
 
5,400
 
1,184
 
6,584

 
 
 
 
 
 
 
 
 _____________________
(a) 
Excludes acres associated with commercial and income producing properties.


6


FORESTAR GROUP INC.
PROJECTS IN ENTITLEMENT

A summary of our real estate projects in the entitlement process (a) at third quarter-end 2016 follows:
Project
County
 
Market
 
Project Acres (b)
California
 
 
 
 
 
Hidden Creek Estates
Los Angeles
 
Los Angeles
 
700

Terrace at Hidden Hills
Los Angeles
 
Los Angeles
 
30

Texas
 
 
 
 
 
Lake Houston
Harris/Liberty
 
Houston
 
3,700

Total
 
 
 
 
4,430

 _____________________
(a) 
A project is deemed to be in the entitlement process when customary steps necessary for the preparation of an application for governmental land-use approvals, like conducting pre-application meetings or similar discussions with governmental officials, have commenced, or an application has been filed. Projects listed may have significant steps remaining, and there is no assurance that entitlements ultimately will be received.
(b) 
Project acres are approximate and the actual number of acres entitled may vary.

TIMBERLAND AND UNDEVELOPED LAND

A summary of our non-core timberland and undeveloped land at third quarter-end 2016 follows:
 
 
Acres
Timberland
 
 
Alabama
 
1,900

Georgia
 
44,300

Texas
 
4,400

Higher and Better Use Timberland
 
 
Georgia
 
18,900

Entitled Undeveloped Land
 
 
Georgia
 
5,100

Total
 
74,600





7


FORESTAR GROUP INC.
REAL ESTATE PROJECTS

A summary of activity within our projects in the development process, which includes entitled, developed and under development real estate projects, at third quarter-end 2016 follows:
 
 
 
 
 
 
Residential Lots/Units
 
Commercial Acres
Project
 
County
 
Interest
Owned (a)
 
Lots/Units Sold
Since
Inception
 
Lots/Units
Remaining
 
Acres Sold
Since
Inception
 
Acres
   Remaining

Texas
 
 
 
 
 
 
 
 
 
 
 
 
Austin
 
 
 
 
 
 
 
 
 
 
 
 
Arrowhead Ranch
 
Hays
 
100
%
 
2

 
382

 
—

 
19

The Colony
 
Bastrop
 
100
%
 
475

 
1,448

 
22

 
5

Double Horn Creek
 
Burnet
 
100
%
 
167

 
—

 
—

 
—

Hunter's Crossing
 
Bastrop
 
100
%
 
510

 
—

 
54

 
51

La Conterra
 
Williamson
 
100
%
 
202

 
—

 
3

 
—

Westside at Buttercup Creek
 
Williamson
 
100
%
 
1,497

 
—

 
66

 
—

 
 
 
 
 
 
2,853

 
1,830


145


75

Corpus Christi
 
 
 
 
 
 
 
 
 
 
 
 
Caracol
 
Calhoun
 
75
%
 
16

 
58

 
—

 
14

Padre Island (b)
 
Nueces
 
50
%
 
—

 
—

 
—

 
15

Tortuga Dunes
 
Nueces
 
75
%
 
—

 
134

 
—

 
4

 
 
 
 
 
 
16

 
192

 
—

 
33

Dallas-Ft. Worth
 
 
 
 
 
 
 
 
 
 
 
 
Bar C Ranch
 
Tarrant
 
100
%
 
448

 
673

 
—

 
—

Keller
 
Tarrant
 
100
%
 
—

 
—

 
1

 
—

Lakes of Prosper
 
Collin
 
100
%
 
165

 
122

 
4

 
—

Lantana
 
Denton
 
100
%
 
3,617

 
484

 
44

 
—

Maxwell Creek
 
Collin
 
100
%
 
982

 
19

 
10

 
—

Parkside
 
Collin
 
100
%
 
60

 
140

 
—

 
—

The Preserve at Pecan Creek
 
Denton
 
100
%
 
619

 
163

 
—

 
7

River's Edge
 
Denton
 
100
%
 
—

 
202

 
—

 
—

Stoney Creek
 
Dallas
 
100
%
 
292

 
404

 
—

 
—

Summer Creek Ranch
 
Tarrant
 
100
%
 
983

 
246

 
35

 
44

Timber Creek
 
Collin
 
88
%
 
61

 
540

 
—

 
—

Village Park
 
Collin
 
100
%
 
567

 
—

 
3

 
2

 
 
 
 
 
 
7,794

 
2,993

 
97

 
53

Houston
 
 
 
 
 
 
 
 
 
 
 
 
Barrington Kingwood
 
Harris
 
100
%
 
176

 
4

 
—

 
—

City Park
 
Harris
 
75
%
 
1,468

 
—

 
58

 
104

Harper's Preserve (b)
 
Montgomery
 
50
%
 
522

 
1,160

 
30

 
49

Imperial Forest
 
Harris
 
100
%
 
74

 
354

 
—

 
—

Long Meadow Farms (b)
 
Fort Bend
 
38
%
 
1,611

 
186

 
194

 
99

Southern Trails (b)
 
Brazoria
 
80
%
 
942

 
53

 
1

 
—

Spring Lakes
 
Harris
 
100
%
 
348

 
—

 
25

 
4

Summer Lakes
 
Fort Bend
 
100
%
 
744

 
323

 
56

 
—

Summer Park
 
Fort Bend
 
100
%
 
119

 
80

 
34

 
62

Willow Creek Farms II
 
Waller / Fort Bend
 
90
%
 
154

 
111

 
—

 
—

 
 
 
 
 
 
6,158

 
2,271

 
398

 
318

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

8


 
 
 
 
 
 
Residential Lots/Units
 
Commercial Acres
Project
 
County
 
Interest
Owned (a)
 
Lots/Units Sold
Since
Inception
 
Lots/Units
Remaining
 
Acres Sold
Since
Inception
 
Acres
   Remaining
San Antonio
 
 
 
 
 
 
 
 
 
 
 
 
Cibolo Canyons
 
Bexar
 
100
%
 
1,104

 
721

 
97

 
58

Oak Creek Estates
 
Comal
 
100
%
 
313

 
240

 
13

 
—

Olympia Hills
 
Bexar
 
100
%
 
743

 
11

 
10

 
—

Stonewall Estates (b)
 
Bexar
 
50
%
 
377

 
9

 
—

 
—

 
 
 
 
 
 
2,537

 
981

 
120

 
58

Total Texas
 
 
 
 
 
19,358

 
8,267

 
760

 
537

Colorado
 
 
 
 
 
 
 
 
 
 
 
 
Denver
 
 
 
 
 
 
 
 
 
 
 
 
Buffalo Highlands
 
Weld
 
100
%
 
—

 
164

 
—

 
—

Cielo
 
Douglas
 
100
%
 
—

 
343

 
—

 
—

Johnstown Farms
 
Weld
 
100
%
 
281

 
335

 
2

 
—

Pinery West
 
Douglas
 
100
%
 
86

 
—

 
20

 
106

Stonebraker
 
Weld
 
100
%
 
—

 
603

 
—

 
—

 
 
 
 
 
 
367

 
1,445

 
22

 
106

Georgia
 
 
 
 
 
 
 
 
 
 
 
 
Atlanta
 
 
 
 
 
 
 
 
 
 
 
 
Harris Place
 
Paulding
 
100
%
 
22

 
5

 
—

 
—

Montebello (b) 
 
Forsyth
 
90
%
 
—

 
224

 
—

 
—

Seven Hills
 
Paulding
 
100
%
 
889

 
189

 
26

 
113

West Oaks
 
Cobb
 
100
%
 
6

 
50

 
—

 
—

 
 
 
 
 
 
917

 
468

 
26

 
113

North & South Carolina
 
 
 
 
 
 
 
 
 
 
 
 
Charlotte
 
 
 
 
 
 
 
 
 
 
 
 
Ansley Park
 
Lancaster
 
100
%
 
—

 
307

 
—

 
—

Habersham
 
York
 
100
%
 
76

 
111

 
—

 
6

Walden
 
Mecklenburg
 
100
%
 
—

 
384

 
—

 
—

 
 
 
 
 
 
76

 
802

 
—

 
6

Raleigh
 
 
 
 
 
 
 
 
 
 
 
 
Beaver Creek (b)
 
Wake
 
90
%
 
24

 
169

 
—

 
—

 
 
 
 
 
 
24

 
169

 
—

 
—

 
 
 
 
 
 
100

 
971

 
—

 
6

Tennessee
 
 
 
 
 
 
 
 
 
 
 
 
Nashville
 
 
 
 
 
 
 
 
 
 
 
 
Beckwith Crossing
 
Wilson
 
100
%
 
24

 
75

 
—

 
—

Morgan Farms
 
Williamson
 
100
%
 
125

 
48

 
—

 
—

Scales Farmstead
 
Williamson
 
100
%
 
—

 
197

 
—

 
—

Weatherford Estates
 
Williamson
 
100
%
 
8

 
9

 
—

 
—

 
 
 
 
 
 
157

 
329

 
—

 
—

Wisconsin
 
 
 
 
 
 
 
 
 
 
 
 
Madison
 
 
 
 
 
 
 
 
 
 
 
 
Juniper Ridge/Hawks Woods (b) (d)
 
Dane
 
90
%
 
8

 
206

 
—

 
—

Meadow Crossing II (b) (c)
 
Dane
 
90
%
 
3

 
169

 
—

 
—

 
 
 
 
 
 
11

 
375

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

9


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential Lots/Units
 
Commercial Acres
Project
 
County
 
Interest
Owned (a)
 
Lots/Units Sold
Since
Inception
 
Lots/Units
Remaining
 
Acres Sold
Since
Inception
 
Acres
   Remaining
Arizona, California, Missouri, Utah
 
 
 
 
 
 
 
 
 
 
 
 
Tucson
 
 
 
 
 
 
 
 
 
 
 
 
Boulder Pass (b) (c)
 
Pima
 
50
%
 
3

 
85

 
—

 
—

Dove Mountain
 
Pima
 
100
%
 
—

 
98

 
—

 
—

Oakland
 
 
 
 
 
 
 
 
 
 
 
 
San Joaquin River
 
Contra Costa/Sacramento
 
100
%
 
—

 
—

 
108

 
180

Kansas City
 
 
 
 
 
 
 
 
 
 
 
 
Somerbrook
 
Clay
 
100
%
 
173

 
222

 
—

 
—

Salt Lake City
 
 
 
 
 
 
 
 
 
 
 
 
Suncrest (b) (c)
 
Salt Lake
 
90
%
 
—

 
171

 
—

 
—

 
 
 
 
 
 
176

 
576

 
108

 
180

Total
 
 
 
 
 
21,086

 
12,431

 
916

 
942

____________________
(a) 
Interest owned reflects our total interest in the project, whether owned directly or indirectly, which may be different than our economic interest in the project.
(b) 
Projects in ventures that we account for using equity method
(c) 
Venture project that develops and sells homes.
(d)
Venture project that develops and sells lots and homes.
A summary of our non-core multifamily properties, excluding two multifamily sites classified as held for sale, at third quarter-end 2016 follows:
Project
 
Market
 
Interest
    Owned (a)
 
Type
 
Acres
 
Description
Elan 99
 
Houston
 
90
%
 
Multifamily
 
17

 
360-unit luxury apartment
Acklen
 
Nashville
 
30
%
 
Multifamily
 
4

 
320-unit luxury apartment
HiLine
 
Denver
 
25
%
 
Multifamily
 
18

 
385-unit luxury apartment
 _____________________
(a) 
Interest owned reflects our total interest in the project, whether owned directly or indirectly, which may be different than our economic interest in the project.














10

Information on Execution of Key Initiatives and Third Quarter 2016 Financial Results November 9, 2016 Exhibit 99.2

 
Notice to Investors This presentation contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are typically identified by words or phrases such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” and other words and terms of similar meaning. These statements reflect management’s current views with respect to future events and are subject to risk and uncertainties. We note that a variety of factors and uncertainties could cause our actual results to differ significantly from the results discussed in the forward-looking statements, including but not limited to: general economic, market, or business conditions; changes in commodity prices; opportunities (or lack thereof) that may be presented to us and that we may pursue; fluctuations in costs and expenses including development costs; demand for new housing, including impacts from mortgage credit rates or availability; lengthy and uncertain entitlement processes; cyclicality of our businesses; accuracy of accounting assumptions; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond our control. Except as required by law, we expressly disclaim any obligation to publicly revise any forward-looking statements contained in this presentation to reflect the occurrence of events after the date of this presentation. 2

 
Key Initiatives Reducing Costs Across the Entire Organization* • Actions taken to eliminate over $50MM in annualized SG&A • Decreased headcount by over 50% compared to 2014 peak • Implemented zero based budgeting Reviewing Entire Portfolio of Assets • Executed $425MM in non-core asset sales • Radisson Hotel - $130MM • 5 multifamily assets - $157MM • Oil and gas working interests - $81MM • Undeveloped land sales - $50MM • 108 commercial acres – Antioch, CA project - $7MM • Completed multiple NAV scenarios for every asset Reviewing Capital Structure • Reduced outstanding debt by over $320MM • Annual interest expense will be reduced by approximately $23MM going forward Providing Additional Information • Reclassified approximately 24,000 acres in Georgia associated with 12 entitled and 8 entitlement in process projects to monetize near term as HBU timberland The Year of Transformation 3 Significant Progress Since 9/30/15 *Expect full cost savings realization once all non-core assets are sold.

 
Overview of Assets CORE Minerals and Water 590,000 net fee mineral acres principally in Texas, Louisiana, Georgia and Alabama 45% non-participating royalty interest in groundwater rights on 1.4 million surface acres Groundwater leases on 20,000 surface acres in Central Texas – Under Contract* Multifamily Downtown Edge site in Austin – Under Contract* Westlake site in Austin – Under Contract* Acklen venture in Nashville completed - 80% occupied / 85% leased HiLine venture in Littleton completed – 74% occupied / 78% leased Elan 99 venture in Houston completed – 46% occupied / 56% leased Timberland and Undeveloped Land 70,000 acres, primarily in Georgia 4,000 acres, primarily in Texas Community Development 55 entitled, developed or under development projects in 11 states and 15 markets – 7,000 acres Three communities in entitlement (CA and TX) – 4,430 total acres NON-CORE 4 * Contracts may provide termination rights to buyers so closings cannot be assured.

 
Third Quarter 2016 Results 5 ($ in Millions, except per share data) Revenues * $47.2 $32.2 Net Income (Loss) – Continuing Operations $16.8 ($57.3) Net Income (Loss) Per Share – Continuing Operations $0.40 ($1.67) Net Income (Loss) $9.7 ($164.2) Net Income (Loss) Per Share $0.23 ($4.79) Segment Earnings (Loss) * Real Estate $15.0 $5.2 Mineral Resources* 1.2 0.1 Other (0.2) (0.1) Total Segment Earnings $16.0 $5.2 Note: Q3 2016 weighted average diluted shares outstanding were 42.3 million compared with 34.3 million in Q3 2015 * Excludes oil & gas working interests which are now classified as discontinued operations Q3 2016 Q3 2015

 
Real Estate Segment - Earnings Reconciliation Q3 2016 $1.4 $1.1 $5.2 $11.0 $4.1 $2.0 $0.1 ($7.6) ($1.2) $(1.1) $15.0 $0 $5 $10 $15 $20 $25 $30 Q3 2015 Undeveloped Land Sales Opex Mitigation Banking Lot Sales Interest Income Gain on Asset Sales Impairment Residential & Commercial Tract Sales Multifamily Properties Q3 2016 Segment Earnings Reconciliation Q3 2015 vs. Q3 2016 ($ in millions) Q3 2016 Sales Activity / Highlights* • Residential lot sales – 332 lots • ~ $70,000 average price per lot • $26,100 gross profit per lot • Commercial tract sales – 110 acres • ~ $76,200 per acre • Includes 108 acres of Antioch, California project for $7 million • Residential tract sales – 243 acres • ~ $26,800 per acre • Sold ~ 6,500 acres of undeveloped land, generating $12.8 million in earnings • Average price $2,410 per acre • Sold $3.0 million in mitigation credits • Incurred $7.6 million in non-cash impairments, primarily multifamily site under contract 6 *Includes ventures

 
Lot Sales and Lots Under Contract 7 0 500 1,000 1,500 2,000 2,500 Q 11 2 Q 21 2 Q 31 2 Q 41 2 Q 11 3 Q 21 3 Q 31 3 Q 41 3 Q 11 4 Q 21 4 Q 31 4 Q 41 4 Q 11 5 Q 21 5 Q 31 5 Q 41 5 Q 11 6 Q 21 6 Q 31 6 Re sid en tia l L ot s Developed Lots Lots Under Development > 2,080 Lots Under Option Contract Continue to target 2016 residential lot sales of 1,600 – 1,800 lots Includes ventures $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 0 500 1,000 1,500 2,000 2,500 3,000 3,500 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E Bulk Lot Sales Lot Sales Average Lot Margin Average Lot Margin Excl. Bulk Sales Annual Lot Sales and Average Lot Margin • Highest number of lots under option contract in over 5 years • Represents over 70% of our total developed lots and lots under development

 
8 For questions, please contact: Charles D. Jehl Chief Financial Officer Forestar Group Inc. 6300 Bee Cave Road Building Two, Suite 500 Austin, TX 78746 512-433-5229 [email protected]

 
9 Appendix

 
Real Estate Segment KPI’s Q3 2016 Q3 2015 YTD Q3 2016 YTD Q3 2015 Residential Lot Sales Lots Sold 332 301 1,105 1,109 Average Price / Lot $69,970 $76,623 $68,573 $75,019 Gross Profit / Lot $26,100 $30,593 $24,921 $34,193 Commercial Tract Sales Acres Sold 110 2 120 56 Average Price / Acre $76,187 $28,037 $99,800 $216,997 Undeveloped Land Sales Acres Sold 6,501 4,616 13,898 6,595 Average Price / Acre $2,410 $2,190 $2,460 $2,411 Segment Revenues ($ in Millions) $45.3 $28.0 $127.8 $100.2 Segment Earnings ($ in Millions) $15.0 $5.2 $108.5 $29.7 10 Includes ventures

 
Stable Market Demand in Key Markets *Source: Bureau of Labor Statistics September 2016 vs. September 2015 Austin 2.8% Dallas / Fort Worth 3.8% Houston 0.5% San Antonio 2.2% Atlanta 3.0% Charlotte 2.0% Nashville 2.8% U.S. Average 1.7% Job Growth vs. National Average* Job growth in our key markets holding well above U.S. average (excluding Houston) Finished Vacant Home Inventories Below Equilibrium** **Source: Metrostudy • Equilibrium: Balanced supply and demand for Finished Vacant housing for an MSA as measured by months of supply. • For Texas markets, equilibrium is 2.0 to 2.5 months of supply. • Finished Vacant months of supply for 3Q 16 in Forestar Texas markets dropped slightly below equilibrium. 11 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 0 5,000 10,000 15,000 20,000 25,000 30,000 Finished Vacant Housing Inventory Months of Supply 3Q Forestar Texas Markets

 
Mineral Resources Segment KPI’s Q3 2016 Q3 2015 Minerals Oil Produced (Barrels) * 20,400 30,100 Average Price / Barrel $43.23 $46.16 Natural Gas Produced (MMCF) ** 205.5 242.5 Average Price / MCF ** $1.95 $2.45 Total BOE 54,700 70,500 Average Price / BOE $23.47 $28.13 Segment Revenues ($ in millions) $1.4 $2.5 Segment Income ($ in millions) $1.2 $0.1 * Includes Natural Gas Liquids ** Includes our share of venture production: 36 MMcf in Q3 2016, 47 MMcf in Q3 2015 12 Note: Excludes oil and gas working interest assets now classified as discontinued operations

 
Non-Core Community Development Projects Update 13 • Sales could trigger up to approximately $110 million in tax losses to offset tax gains from other non-core asset sales • Reduces annual carry costs by $2.6 million, once sold Community Location Status* Interest Owned** Developed Lots Undeveloped Lots Commercial Acres Remaining San Joaquin River Antioch Sold 108 acres 100% --- --- 180 The Colony Austin Under Contract 100% 91 1,357 5 Caracol TX Coast Under Contract 75% 49 9 14 Tortuga Dunes TX Coast Under Contract 75% 95 39 4 Somerbrook Kansas City Under Contract 100% 12 210 --- Buffalo Highlands Denver Marketing 100% --- 164 --- Stonebraker Denver Marketing 100% --- 603 --- 247 2,382 203 ** Interest owned reflects our total interest in the project, whether owned directly or indirectly, which may be different than our economic interest in the project. * Contracts may provide termination rights to buyers so closings cannot be assured.

 
Multifamily Communities Update Multifamily Development Projects – Q3 2016 ($ in millions) Project Market FOR Ownership Units % Complete Status Target Sale Date W ho lly O w ne d Downtown Edge Site Austin 100% n/a n/a Q4 2016 Westlake Site Austin 100% n/a n/a Q3 2017 Current Market Range Cap Rate*** Ve nt ur es Acklen Nashville 30% 320 100% 85% leased 4.50% - 5.00% HiLine Denver 25% 385 100% 79% leased 4.75% - 5.25% Elan 99* Houston 90% 360 100% 57% leased 5.75% - 6.25% * FOR is limited partner and not developer of this project 14 Under Contract** Under Contract** ** Contracts may provide termination rights to buyers so closings cannot be assured. *** Management Estimate

 
0 10 20 30 40 50 60 70 80 90 100 2015 2016E 2017E Target Annual SG&A Costs Corporate G&A Segment Operating Costs Project Level Expenses Cost Reductions SG&A costs in 2016 and target are estimates and actual results may vary depending on the timing of completion of non-core asset sales. $87 million $ in M illi on s $60 million Other Corporate Costs 21% Corporate Employee Costs 25% Project Level Expenses 22% Other Segment Operating Costs 12% Segment Employee Costs 20% $7 MM $8 MM $7 MM$7 MM $4 MM Actions Taken to Eliminate Over $50 million in Annual SG&A Costs $33 million 15 Target SG&A Cost - $33 million $38 million

 
16 For questions, please contact: Charles D. Jehl Chief Financial Officer Forestar Group Inc. 6300 Bee Cave Road Building Two, Suite 500 Austin, TX 78746 512-433-5229 [email protected]

 

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