FOR - Forestar Group

[thepupil]

http://finance.yahoo.com/news/forestar-announces-director-nomination-agreements-110000937.html

http://investor.forestargroup.com/mobile.view?c=216546&v=203&d=1&id=2014974

 

two new board members, one picked by Carlson Capital and another by Cove Street, each have lots of real estate/land experience. So far that's 4 board members picked by the activists as well as lots of senior management turnover. they are clearly in control.

[thepupil]

hidden in an 8-k that was not accompanied by a press release, forestar agreed to sell its austin hotel w/ gross book value of $60MM and net book value of $30MM and book value net of debt of $16MM for $130MM ($116MM after debt).

 

Net of debt of $14MM, upon closing this will send Forestar $114MM of cash and represents a large increase and crystalization of book value.

 

Along with the the sale of midtown cedar hill , which converted $9MM of equity to $17MM of cash, these two transactions will convert about $25MM of equity to ~$130MM of cash and reduce single asset debt by $30MM, which dramatically de-risks the stock and bonds.

 

Net of a little cash burn, I expect cash to be up to $200MM+ after these sales close.

 

Also in an 8-K on 12/31 (which also didn't have a press release), they received a covenant amendment allowing them to repurchase stock with a portion of the proceeds.

 

Next up is an Austin apartment building marked around $60MM with $24MM of single asset debt. I expect that to be well bid, plus the rest of the multi-family.

 

Additionally there is a $60-$100MM of timber, most of which is marked at 1950's prices.

 

When these asset sales are complete, you will, in my opinion be creating the core lots in texas for a very large discount to book and market value, even with a likely big decline in texas RE prices.

 

https://www.bamsec.com/filing/140658716000068?cik=1406587

https://www.bamsec.com/filing/140658715000065?cik=1406587

 

[eclecticvalue]

I am surprised the stock is trading lower. Any reason?

[thepupil]

it owns lots in texas. no amount of good news changes that. It is difficult for me to think that "the market" was expecting $130MM for the Austin hotel. Maybe no one was surprised by that though. Or maybe it wasn't noticed. I don't know.

[thepupil]

http://finance.yahoo.com/news/forestar-group-reschedules-release-fourth-230000698.html;_ylc=X1MDMTE5Nzc4NDE4NQRfZXgDMQRfeXJpZAMwOWpxbzZkYmJ1Y3BrBGcDZFhWcFpEeHVjejVsTUdZMlpEZGlNQzFpWlRGaUxUTTJOVGt0WWpaa01TMDBaRGd4TXpSbFpEazFObVE4Wm1sbGJHUStabTl5BGxhbmcDZW4tVVMEb3JpZ19sYW5nA2VuLVVTBG9yaWdfcmVnaW9uA1VTBHBvcwMwBHJlZ2lvbgNVUwRzeW1ib2wDRk9S?.tsrc=applewf

 

Company rescheduling conference call to provide additional info on key initiatives. Hopefully this means another big asset sale at a decent price. Hopefully it does not mean, the people paying $120mm for that hotel are backing out lol.

 

 

[KJP]

pupil:

 

Assuming the Radisson deal closes and the remaining multi-family and timberland are sold, what are you expecting the remaining book value, cap structure, and on-going SG&A + interest to be?     

[thepupil]

marking oil and gas at zero (which would be a $300MM+ loss so FOR won't have to worry about taxes for a while), I see $435MM of equity post the two announced sales (note I have not adjusted for commissions, which will reduce proceeds by some amount; I'm not that precise).

 

$508MM of GAAP equity - all goodwill and energy

= $325MM of adjusted equity

+10MM from Midtown Cedar Hill ($33MM for $43MM, +$18MM cash after debt pay down)

+$100MM from Raddison sale($30MM for $130MM +$114MM cash after debt pay down)

 

$435MM post announced sales equity

$220MM of cash

real estate assets of $557MM

$85MM in JV's

 

Timber is on the books at $8MM plus the $2.5MM in TEMCO JV, so that's $11MM or so. Let's say they sell that for $80MM (mid point of my $60-$100MM).

 

$507MM equity

$300MM of cash

$557MM of RE assets

$85MM in JV's

 

About 1/2 the JV's are multi-family related, let's assume sale at book for those. Let's assume sale at book of Austin Eleven ($53MM).

Equity will be unchanged and cash would go to $390MM.

 

I think they'd pay down the $250MM of 8.5% of 2022, either call them @ 104.5 or sell the company for change of control at $101. Let's assume 104.5, so that will reduce equity by $10MM to $497MM.

 

$497MM equity

$500MM of RE

$40MM of land related JV's

they'd still have $130MM of cash after paying down the senior notes, all remaining debt would be low cost.

 

As for corporate overhead, it was running at $20MM / year. Multi-family sale should get rid of $5MM of that, $15MM is still too high and I expect it to continue to fall. Interest was run rate $30MM / year, that will go down by $21MM if they call the notes, so the $50MM of corp overhead and interest is likely to be cut to $34MM and I expect that to continue to drop. I think there is still a ton of fat.

 

Entitling and selling lots simply cannot cost that much! As the shareholders take over the company, I expect head count and cost structure to drop and think the run rate s,g,and a will go a lot lower.

 

You might respond: the running costs are still too high and creating this at 0.7X book isn't interesting because it's a texas (and atlanta area) lot owner. Texas economy is ablaze. that's a reasonable objection to the thesis.

 

I personally was small position in the teen's and am sizing up now that the credit risk is very much reduced by the asset sales and cash infusions.

 

I would point out that a good bit of these projects are at very low cost basis and that their book value may not at all be representative of their try value, so 0.7X book may be very cheap even with TX economy in trouble. Hidden Creek in California and the 3000 acres near lake houston at decades ago prices are good examples.

 

there are also some call options in the oil not being worth $0 and the water rights not being worth $0. the water rights are a big wildcard. my gut is I'm low on the timber. If that's $100MM+ the math changes nicely. they'll probably sell Eleven for more than book etc. share repurchases will also help and can be material portions of market cap given their improving financial condition.

 

they also have ~50MM of reimbursements related to developments that should be convertible to cash without much effort.

 

all the land in the entitlement process in georgia is a huge wildcard as well.

 

I wish I had more time to value the assets and more precision to answer your question. I am not a professional and have not done an asset by asset review of the company.

[KJP]

Thanks for your detailed response.  I'm in the same neighborhood.  Just to confirm, you included dilution from the TEU's in your .7x book number, right?  If you didn't then, I'm off somewhere.

 

What are the chances that O&G are really worth zero? 

[thepupil]

- 33.6MM shares out + 7MM or so from the TEU's off the top of my head = 41MM shares * 8.60 = $352MM market cap / $500MM ish of    pro-forma equity = 0.7X book ish

 

- I have no idea what the o&g is worth. probably > 0. it's just easy to start at zero and be surprised to the upside; market happiness = reality - expectations. there's a certain comfort with starting at 0, whether or not that's correct.

 

- I was way way way off on the hotel, so there are probably negative and positive surprises to come and I may be overly reliant on "book value"

 

I take a fluid and imprecise approach to this investment where I think I'm creating the core land for well below intrinsic value and think capital allocation/overhead will improve. But I have not done the work to say how much confidence i truly have.

 

there are a ton of variables. In my opinion, to use what is know a much maligned term on the pabrai related threads, I think FOR represents a  "high uncertainty and low risk" investment. with each sale of assets and each gain in control by those more aligned with shareholders, the outcome becomes more certain and so far with the prices they've been receiving, it becomes lower risk.

 

 

[BG2008]

http://finance.yahoo.com/news/forestar-group-reschedules-release-fourth-230000698.html;_ylc=X1MDMTE5Nzc4NDE4NQRfZXgDMQRfeXJpZAMwOWpxbzZkYmJ1Y3BrBGcDZFhWcFpEeHVjejVsTUdZMlpEZGlNQzFpWlRGaUxUTTJOVGt0WWpaa01TMDBaRGd4TXpSbFpEazFObVE4Wm1sbGJHUStabTl5BGxhbmcDZW4tVVMEb3JpZ19sYW5nA2VuLVVTBG9yaWdfcmVnaW9uA1VTBHBvcwMwBHJlZ2lvbgNVUwRzeW1ib2wDRk9S?.tsrc=applewf

 

Company rescheduling conference call to provide additional info on key initiatives. Hopefully this means another big asset sale at a decent price. Hopefully it does not mean, the people paying $120mm for that hotel are backing out lol.

 

Pupil,

 

Thanks for keeping us up to date on this name.  What's your view on the chance that they are reversing that hotel sale?  I'm pretty sure you're being facetious.

[thepupil]

I am being facetious. my imagination knows no bounds in terms of how my assumptions may be incorrect. I have no reason to believe that is happening.

[BG2008]

I am being facetious. my imagination knows no bounds in terms of how my assumptions may be incorrect. I have no reason to believe that is happening.

 

A year ago, when I was much more involved with this name, I had chatted with people who are from Texas.  They all told me that Austin is its own little ecosystem and less affected by oil prices.  That was one year ago and I haven't had conversations with others since.  Any thoughts on your end? 

[thepupil]

http://finance.yahoo.com/news/forestar-provides-additional-information-execution-110000091.html;_ylc=X1MDMTE5Nzc4NDE4NQRfZXgDMQRfeXJpZAMyMjkwMjI5YmRkaW5xBGcDZFhWcFpEeHVjejVqTURsbFlXTXpPQzA0WTJSbExUTm1OVEV0WVRCak1TMHdZVGMwTW1FME5UZGhPVEE4Wm1sbGJHUStabTl5BGxhbmcDZW4tVVMEb3JpZ19sYW5nA2VuLVVTBG9yaWdfcmVnaW9uA1VTBHBvcwMwBHJlZ2lvbgNVUwRzeW1ib2wDRk9S?.tsrc=applewf

 

- quantified s,g, and a reduction target (50%)

 

- sold a portion of timber for $2,200 an acre (I tend to use $1,000 -$1,500 in my valuation and musings above)

 

-radisson hotel $130mm (we already knew that from 8-k, but they had kind of hidden it)

 

- sold a little of the o+g for $21mm, $21mm > 0, therefore that's good! <--EDIT: only $5MM of this was in 4Q, I pay so little attention to the oil and gas, I didn't realize it was old news.

 

- providing additional disclosure on breakdown of land (where it is, what's undeveloped and entitled versus raw timber, etc. they are trying to make it more clear in my opinion

 

- bough back $20mm of the 8.5's of 2022, that's great

 

- guidance of 1600-1800 lot sales for 2016 is good (I think). At the run rate of $34K / lot that should be $58MM of gross margin, which could be nice if they hit their s,g,and a reduction and get rid of those nasty bonds. Lot margin may fall though, but it would take a giant miss for FOR to not be profitable for '16.

 

- all that being said, they can talk about labor and weather all they want, I'm sure Houston lot selling is slowing dramatically and it isn't because of the weather, the macro may trump the micro here despite all the positive execution; I don't think that will be the case but I don't think that the bear case, which is basically "dude this is a home builder / lot seller in Houston", has been disproven either.

[thepupil]

I am being facetious. my imagination knows no bounds in terms of how my assumptions may be incorrect. I have no reason to believe that is happening.

 

A year ago, when I was much more involved with this name, I had chatted with people who are from Texas.  They all told me that Austin is its own little ecosystem and less affected by oil prices.  That was one year ago and I haven't had conversations with others since.  Any thoughts on your end?

 

never really responded this, sorry. I have nothing unique to add. The Radisson print speaks for itself and I hope it bodes well for Eleven (the most valuable multi-family property up for sale). My whole thesis is "ya forestar is a TX/ houston lot-seller / developer but look at all this other shit they own". Austin property is part of the "other shit" whose beta to oil is certainly less than 1.

[KJP]

During the call, did management say that the company actually won't get a tax benefit from the oil & gas writeoff?  I didn't listen to the call, but have pasted below the somewhat garbled portion of the transcript from SeekingAlpha:

 

Jeff Bronchick

 

Hey just two quick questions, so is it correct to assume that all the write-offs from oil and gas can be used to shield gains on sales from real estate?

 

Chuck Jehl

 

No Ben, the oil and gas tax basis is approximate book basis. So the oil and gas assets when they're sold at estimated fair value there will be a tax book or pretty much an alignment there. So there would not be a large tax loss associated with oil and gas.

 

But there is -- as we look at non-core community development and other assets that we’re evaluating, one of our strategies with gains and gain properties is to look at high basis, tax basis properties as well. So we can have strategies to offset those gains with higher tax basis in particularly similar to Antioch California.

 

Phil Weber

 

May be I didn't answer that question correctly, the write offs that we had to date can be used to shield gain.

 

Jeff Bronchick

 

The right-offs of the oil and gas assets.

 

Phil Weber

 

Correct. When you just look at the big loss we just reported…

 

Chuck Jehl

 

And I’m saying no, the answer is that in the oil and gas business as you expand drilling and completion cost the most of now you deduct 100% of the IDCs and intangible drilling in the years, you spend it and we've not been drilling wells in the oil and gas business and participate as much as in the past.

 

So a lot of those deductions have been taken so for against current taxable income. So the tax basis approximate look on the oil and gas assets.

[thepupil]

A poster on VIC had the same question. He called IR for clarification. I'm not sure I should reproduce his comment, but effectively, the CFO did not answer the question in a very clear way.

 

The writedowns they have taken to date can not be used to offset tax gains because they more or less have offset a deferred tax liability that resulted from accelerated depreciation for tax purposes on those assets. But future writedowns / asset sales at prices  below book value can be used. That is strictly secondhand from a poster on VIC.

 

I think the there may be some confusion in that most FOR investors assume that oil and gas assets will be sold for massive losses, while that hasn't happened yet (only writedowns have happened).

 

I am waiting on the 10-K, which I presume will make the matter more clear.

[thepupil]

For non-investment reasons (funding some other things), I'm selling $10K of FOR 8.5% notes; they are offered through IB at $100.

 

They are very illiquid, and so I'm putting out an advertisement. I'm not going to try convince anyone here to buy them. You can do your own DD. I own the stock and strongly believe these are money good. They just aren't liquid. Come and get em

 

EDIT: Sold @ Par, thanks for doing business to whoever bought it.

[thepupil]

https://finance.yahoo.com/news/forestar-signs-agreement-sell-remaining-100000976.html

 

Sold all the non-core oil and gas for additional $60MM. Nice influx of cash, leaves them with just the royalty interest (not worth much at these gas prices) as their energy assets which won't require any real overhead, should realize a big loss for tax purposes, wasn't including anything for it in valuation so this leaves some more room to be wrong on the real estate.

[thepupil]

 

First Quarter 2016

 

•Sold Kansas / Nebraska oil and gas assets for $21.0 million

 

•Sold over 900 net acres and 9 producing wells in Bakken / Three Forks for $9.5 million

 

•Sold Music Row multifamily site for $15.0 million

 

•Sold 360° multifamily venture interest and received a development fee for a total of $15.1 million

 

•Retired $8.6 million of senior secured notes, reducing annual interest expense by $0.7 million

 

•Reduced SG&A by 24% compared with first quarter 2015

Subsequent Events - Second Quarter 2016

 

•Sold remaining Bakken / Three Forks oil and gas assets for $50.0 million - over 130 producing wells and nearly 8,100 net acres

 

•Sold Eleven, a stabilized multifamily community, for $60.2 million

 

•Sold Radisson Hotel & Suites for $130.0 million

 

•Engaged LandVest to market approximately 72,000 acres of timberland and undeveloped land, primarily in Georgia

 

Cash pouring in, selling things at good marks. Don't think we'd seen previously that they sold Eleven, their Austin multi-family and their most important/largest apartment building. They sold that for $60MM, 117% of book.

 

Net debt at $230MM as of end of Q1. Announced sales of Radisson, Oil and Gas, and Eleven will get that number down to almost nil ($30MM or so) and cash above $300MM. It's safe to say FOR is quite cash rich. They're buying back the 8.5%'s which is good (but only $9mm). That's the most obvious use of cash.

 

Here is the timber listing:

http://www.landvest.com/property/48494846/GA-and-AL

 

as a reminder, the timber is mostly held at 1950's legacy Temple-inland prices. The whole of the timber is on the BS at something like $14MM. the gains from selling the Radisson for $100MM more than book and the timber will make this a debt free land company at a nice discount to book.

 

don't have time to update exact numbers but so far so good.

 

[colinwalt]

@thepupil Many thanks for all of your excellent analysis / summaries - very much appreciated!

[thepupil]

thanks colin.

 

So as of Q1 we have

 

$498mm of shareholder equity with $97mm of that being oil and gas and intangibles/goodwill, so $400mm of tangible real estate equity.

 

We then add $50mm of cash for the oil and gas assets sold in q2 that gets us to $450mm tangible real estate and cash equity.

 

At the end of q1, there were $106mm assets held for sale which included:

$33mm Radisson----------> sold for $130mm gross, $112mm after debt +~$97mm to equity pre-tax

$51mm Eleven-------------> sold for $60mm gross, $35mm after debt    +~$9mm to equity pre-tax

$19mm Dillon---------------> not yet sold

$10mm Music Row--------->sold for $15mm                                            +~$5mm to equity pre-tax

 

These asset sales which have already happened will increase equity by about $110mm and increase cash by about $160mm.

 

I believe they will not need to pay taxes on the gains but am not an expert on this matter. They seem to not be factoring in their upcoming gains in removing the allowance on the DTA.

 

Note 14—Income Taxes

Our effective tax rate was 38 percent in first quarter 2016, which includes a three percent benefit for a partial release of our valuation allowance and a five percent detriment for goodwill due to the sale of oil and gas assets. Our effective tax rate was 35 percent in first quarter 2015, which included a two percent benefit for noncontrolling interests and a two percent detriment for share-based compensation benefits that will not be realized. Our effective tax rates also include the effect of state income taxes, nondeductible items and benefits of percentage depletion.

At first quarter-end 2016 and year-end 2015, we have a valuation allowance for our deferred tax assets of $95,389,000 and $97,068,000 for the portion of the deferred tax assets that we have determined is more likely than not to be unrealizable.

In determining our valuation allowance, we assessed available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax asset. A significant piece of objective evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2016, principally driven by impairments of oil and gas properties in 2015. Such evidence limits our ability to consider other subjective evidence, such as our projected future taxable income.

The amount of the deferred tax asset considered realizable could be adjusted if negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence, such as our projected future taxable income.

 

So pro-forma, I see equity at about $560mm before the sale of the low basis timber/lands in georgia.

 

One thing that I did not point out/missed is that while the timber is low basis, they actually have quite a bit of basis in their projects in Georgia. I assume there will be some writedowns here which will partially offset the gains on sale from timber.

 

Total book value for all assets in Georgia is $72mm. they own 71,000 acres.

 

this includes about 40,000 acres of raw timberland at 1950s prices and 20,000 HBU acres mostly 1950's prices, plus a bunch of projects on entitled land where all the cost basis is. I will assume no projects are viable and they sell this as raw timberland prices of 1000 acre - 2000 an acre.

 

This will be $70-$140mm of cash from $72mm of book, so that puts FOR at 75-85% of book with no net debt and pro-forma gross cash (before debt) somewhere in the $370mm - $440mm range before debt paydown and cash burn and a few call options (natural gas mineral rights, water rights, etc).

 

If we assume $370mm of cash and that they use $227mm to take out the bonds at $105, they'll have about $140mm for share repurchase / additional development projects with a fully undrawn $300mm revolver and the remaining debt being low cost OTM converts or project level non-recourse.

 

It's not as interesting as it was at $9 a few months ago and I'm lightening up a little after aggressively adding down there. I think I was a bit wrong and did not realize how much basis they ahd in their mothballed georgia projects, which was an oversight. Nevertheless, a profitable position so far on average cost thanks to the jan/feb swoon.

 

EDIT: they are sill selling lots and stuff in texas at good margins / profit, so that's good.

 

[thepupil]

http://finance.yahoo.com/news/forestar-announces-tender-offer-consent-113000972.html

 

 

Tender offer for all of the 8.5%'s

 

EDIT:

bought back 97% of the bonds

http://seekingalpha.com/pr/16526835-forestar-completes-tender-offer-consent-solicitation

 

[thepupil]

Item 1.01 Entry into a Material Definitive Agreement.

 

Subsidiaries of Forestar Group Inc. (the “Company”) are parties to three separate purchase and sale agreements (collectively, the “Agreements”) covering, in the aggregate, sale of approximately 58,505 acres of timberland in Georgia and Alabama, as follows:

 

 

 

 

 

 

 

   

 

 

 

1.

 

 

 

On November 9, 2016, subsidiaries of the Company entered into a definitive agreement with SPP Land, LLC (“SPP”) to sell to SPP approximately 26,319 acres of timberland in Georgia for $43,426,350. 

 

 

 

 

 

 

 

 

   

 

 

 

2.

 

 

 

On November 10, 2016, subsidiaries of the Company entered into a definitive agreement with an investment fund managed by Timberland Investment Resources, LLC (“TIR”) to sell to the investment fund approximately 12,043 acres of timberland in Georgia and Alabama for $23,730,828.

 

 

 

 

 

 

 

 

   

 

 

 

3.

 

 

 

On November 11, 2016, subsidiaries of the Company entered into a definitive agreement with a different investment fund managed by TIR to sell to the investment fund approximately 20,143 acres of timberland in Georgia for $37,422,762.

 

 

 

 

 

The transactions contemplated by the Agreements are expected to close in fourth quarter 2016, and the Company expects to receive approximately $104,579,940, in the aggregate, upon closing all three transactions. All Agreements require the purchase price to be paid in cash at closing, and there are no financing contingencies. Any minerals underlying the timberland and owned by subsidiaries of the Company will be conveyed.

 

 

 

 

The Agreements include customary representations, warranties, covenants and indemnities by the parties. The Agreements include customary purchase price adjustment provisions, within certain parameters, relating to title, casualty losses, recognized environmental conditions and, in the case of the TIR-managed investment funds, timber inventory. The Agreements contain certain termination rights for the parties, including (i) if any of the conditions to closing are not satisfied by the closing date, or (ii) if purchase price adjustments would exceed various thresholds.

 

 

long time without an update but thesis tracking well so far. just sold most of the timber for $104mm.

 

EDIT: This is $1,800 an acre, in the middle to upper middle of expected range. I believe this sale does not include the majority of their mothballed projects in GA and will be all low basis land, which means pre-tax equity should increase by something like $100mm. They had some sales in 3Q that had a lot of tax basis that will help offset some of the potential $30-$40mm tax hit, but I would need to put a lot of time into it to get to the exact post tax proceeds number.

 

Let's split $60 and $100mm and call it $80mm. So cash and equity will go to $180mm and $600mm respectively with no net liabilities. On 40mm shares counting the TEU's, the stock trades for $500mm after appreciating w/ close to 40% of market cap in cash (before corporate debt, which is now all low cost way OTM converts) and is still selling lots at a good gross margin.

 

The water assets are for sale which is a complete wildcard. No idea what those are worth.

 

There are still issues (scale, s,g, and a, slowdown in Texas, it's not as cheap) but not bad risk / reward from here, small - medium position for me.

[colinwalt]

 

The transactions contemplated by the Agreements are expected to close in fourth quarter 2016, and the Company expects to receive approximately $104,579,940, in the aggregate, upon closing all three transactions. All Agreements require the purchase price to be paid in cash at closing, and there are no financing contingencies. Any minerals underlying the timberland and owned by subsidiaries of the Company will be conveyed.

 

 

 

 

long time without an update but thesis tracking well so far. just sold most of the timber for $104mm.

 

Nice!

[thepupil]

Forestar Group Inc. to Be Acquired by Starwood Capital Group

Business Wire

AUSTIN, Texas -- April 13, 2017

Forestar Group Inc. (“Forestar” or the “Company”) (NYSE: FOR) today announced that it has entered into a definitive merger agreement (the “Merger Agreement”) with affiliates of Starwood Capital Group (“Starwood”) under which Starwood will acquire all of the outstanding shares of common stock of the Company for $14.25 per share in cash. The total transaction equity value is approximately $605 million.

The transaction price of $14.25 per share represents an 8.2% premium to the 90-day volume weighted average price of common stock of the Company.

“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,” said James A. Rubright, Chairman of the Board. “After conducting a thorough review assisted by highly experienced financial and legal advisors, the Board believes that engaging in the transaction with Starwood is the best option to maximize stockholder value.”

The Board of Directors of the Company has unanimously approved the merger agreement and has recommended approval of the merger by Forestar’s stockholders. The transaction is expected to close in the third quarter of 2017 and is contingent on the approval of Forestar’s stockholders, and is subject to the satisfaction or waiver of certain other closing conditions. The transaction is not subject to a financing condition.

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

First Quarter 2017 Financial Results

In light of today's announcement, the Company will not issue an earnings release for its first quarter 2017 or hold a conference call for analysts and investors to discuss its first quarter 2017 financial results.

About Forestar Group

Forestar is a residential and mixed-use real estate development company. At year-end 2016, we own directly or through ventures interests in 50 residential and mixed-use projects comprised of approximately 4,600 acres of real estate located in 10 states and 14 markets. In addition, we own interests in various other assets that have been identified as non-core that the company is divesting opportunistically over time. At year-end 2016, our remaining non-core assets principally include over 523,000 net acres of owned mineral assets principally located in Texas, Louisiana, Georgia and Alabama, 19,000 acres of timberland and undeveloped land (including mitigation banking), four multifamily assets and approximately 20,000 acres of groundwater leases in central Texas. On February 17, 2017, we sold our owned mineral assets for $85.6 million. Forestar operates in three business segments: real estate, mineral resources and other. Forestar’s address on the World Wide Web iswww.forestargroup.com.

About Starwood Capital Group

Starwood Capital Group is a private alternative investment firm with a core focus on global real estate, energy infrastructure and oil & gas. The Firm and its affiliates maintain 10 offices in four countries around the world, and currently have more than 2,200 employees. Starwood Capital Group has raised over $40 billion of equity capital since its inception in 1991, and currently manages more than $51 billion in assets. The Firm has invested in virtually every category of real estate on a global basis, opportunistically shifting asset classes, geographies and positions in the capital stack as it perceives risk/reward dynamics to be evolving. Over the past 26 years, Starwood Capital Group and its affiliates have successfully executed an investment strategy that involves building enterprises in both the private and public markets. Additional information can be found at starwoodcapital.com.

Cautionary Statement Regarding Forward Looking Statements

This document includes “forward-looking statements” within the meaning of the securities laws. The words “will,” “expect,” “believe,” “future” and similar expressions are intended to identify information that is not historical in nature.

This document contains forward-looking statements relating to the proposed transaction between Forestar and Starwood. All statements, other than historical facts, including statements regarding the expected timing of the closing of the transaction; the ability of the parties to complete the transaction considering the various closing conditions; the competitive ability and position of Starwood following completion of the proposed transaction; and any assumptions underlying any of the foregoing, are forward-looking statements. Such statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. You should not place undue reliance on such statements. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, that (1) one or more closing conditions to the transaction may not be satisfied or waived, on a timely basis or at all, including that the required approval by the shareholders of Forestar may not be obtained; (2) there may be a material adverse change of Forestar or the business of Forestar may suffer as a result of uncertainty surrounding the transaction; (3) the transaction may involve unexpected costs, liabilities or delays; (4) legal proceedings may be initiated related to the transaction; (5) changes in economic conditions, political conditions, changes in federal or state laws or regulation may occur; and (6) other risk factors as detailed from time to time in Forestar’s reports filed with the Securities and Exchange Commission (the “SEC”), including Forestar’s Annual Report on Form 10-K for the year ended December 31, 2016 which is available on the SEC’s Web site (www.sec.gov). There can be no assurance that the merger will be completed, or if it is completed, that it will close within the anticipated time period or that the expected benefits of the merger will be realized.

Neither Forestar nor Starwood undertakes any obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

Additional Information and Where to Find It

In connection with the proposed merger transaction, Forestar intends to file relevant materials with the SEC, including a preliminary proxy statement on Schedule 14A. Following the filing of the definitive proxy statement with the SEC, Forestar will mail the definitive proxy statement and a proxy card to each stockholder entitled to vote at the special meeting relating to the proposed merger. INVESTORS ARE URGED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors will be able to obtain the proxy statement, as well as other filings containing information about Forestar, free of charge, from the SEC’s Web site (www.sec.gov). Investors may also obtain Forestar’s SEC filings in connection with the transaction, free of charge, from Forestar’s Web site (www.Forestargroup.com) under the link “Investor Relations” and then under the link “Financial and SEC Reporting” and then under the tab “SEC Filings,” or by directing a request to Forestar, Charles D. Jehl, Chief Financial Officer.

Participants in the Merger Solicitation

The directors, executive officers and employees of Forestar and other persons may be deemed to be participants in the solicitation of proxies in respect of the transaction. Information regarding Forestar’s directors and executive officers is available in its definitive proxy statement for its 2017 annual meeting of stockholders filed with the SEC on March 28, 2017. This document can be obtained free of charge from the sources indicated above. Other information regarding the interests of the participants in the proxy solicitation will be included in the proxy statement when it becomes available. This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

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Forestar takeover(under?) by Starwood. @ $14.25.

 

Assuming no other bid, I view this as confirmation that I was

 

a) initially early and wrong on account of misjudging value of the Georgia assets

b) right when this thing was at $7 - $9 and had announced material asset sales at premiums.

 

Probably not a terrible bet to take that someone tries to either get a little more juice from the bid or maybe another bidder.

 

8% premium disclosed on the thursday before easter weekend is a little suspect.