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Edited Transcript of FOR earnings conference call or presentation 2-Mar-17 3:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Forestar Group Inc Earnings Call

AUSTIN Mar 2, 2017 (Thomson StreetEvents) -- Edited Transcript of Forestar Group Inc earnings conference call or presentation Thursday, March 2, 2017 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Chuck Jehl

Forestar Group Inc. - CFO, Treasurer

* Phil Weber

Forestar Group Inc. - CEO

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Conference Call Participants

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* Mark Weintraub

Buckingham Research Group - Analyst

* Albert Sebastian

Prospect Advisors LLC - Analyst

* Lee Matheson

Broadview Capital Management - Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Forestar Group fourth-quarter 2016 earnings conference call. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Chuck Jehl, Chief Financial Officer for Forestar. Sir, you may begin.

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [2]

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Thanks and good morning. I would like to welcome each of you who have joined us by conference call or webcast this morning to discuss an update on Forestar's key initiatives and fourth-quarter and full-year 2016 results. I'm Chuck Jehl, Chief Financial Officer of Forestar. Joining me on the call today is Phil Weber, our Chief Executive Officer.

This call is being webcast, and copies of the earnings release and presentation slides are now available on the Investor Relations section of our website at forestargroup.com.

Before we get started, let me remind you to please review the warning statements in our press release and on our slides, as we will make forward-looking statements during this presentation.

Now let me turn the call over to Phil to provide an update on our key initiatives.

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Phil Weber, Forestar Group Inc. - CEO [3]

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Thank you for joining us this morning. First let me start by thanking David Grimm, who, after 25 years of loyal service to Forestar and its predecessor company, Temple-Inland, will be retiring at the end of March. David has provided outstanding counsel and advice, has unimpeachable integrity, and has worked hard for over a quarter of a century to always do what is right. David, thanks again. We wish you much luck and success on the next chapter in your professional life.

To state the obvious, 2016 was a transformative year for Forestar. We were successful in making exceptional progress on all of our key initiatives. We substantially reduced costs. We simplified the Company through the strategic sale of $482 million in non-core assets. We delivered near-record levels on both lot sales and margins in our core community development business. And we substantially strengthened our balance sheet by eliminating $278 million of debt in 2016 and $323 million in debt in third quarter 2015, reducing our debt to cap to its lowest level in the company's history.

Let me add some additional details and make a few key points on each of the areas I just mentioned. As reflected on slide 3, our transformative results speak for themselves. First, since our peak run rate in 2015, we've taken action to eliminate nearly $60 million of SG&A, from $87 million, to a targeted 2018 full-year run rate of $28 million once all non-core assets are sold. A $60 million decrease represents a reduction of nearly 68%. As part of our ongoing cost elimination, at the end of March, we will reduce our workforce by an additional 34%. Following this reduction we will have reduced our headcount by over 70% since our peak in 2014.

Second, we sold $482 million in non-core assets in 2016. These strategic sales capitalize on strong interest by better owners of these assets that were willing, in many cases, to pay a market premium or above the Company's internal NAV for these assets. These non-core asset sales helped reduce debt and SG&A that was supporting them, simplify the Company, and will enable us to focus our remaining leaner resources on our core community development business.

Third, in 2016, we achieved very positive results in our core community development business, with our second-highest total lots sold since our spin-off in 2018 at 1,940 lots, and our third highest margin per lot year. We ended 2016 with a very strong fourth quarter, and we start 2017 with a strong order book with 2,100 lots under contract for sale to builders.

Fourth point here: we paid down $278 million of debt during the year, taking our debt to cap to 16% from 46% at the end of the third quarter 2015. With reductions since Q3 of 2015, annual interest expense has been reduced by $23 million, going forward, and we exited 2016 with $266 million in consolidated cash on our balance sheet. And as you saw in the 8-K we filed a week ago, we started off 2017 very strong with the successful strategic sale of our remaining mineral assets for $85.6 million. This non-core sale allows us to further reduce SG&A costs.

Before I turn it over to Chuck, who will walk through the rest of our presentation, I want to close with one last point. It is quite obvious that Forestar has now generated a significant amount of net cash and significantly decreased leverage, largely through these non-core asset sales. As I stated before, the Board and management fully appreciates the time value of money, and know you are interested, or, in some cases, anxious about next steps.

You can have confidence that the Board and management remain focused on maximizing shareholder value, and are actively and constructively working towards that end.

With that, I'll turn it over to Chuck.

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [4]

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Thank you, Phil. We move to slide 4. In addition to the accomplishments that Phil discussed on slide 3, let's turn to slide 4 and do an overview of our assets. We're very focused on delivering value from our core community development business, and continue to make good progress marketing and selling our remaining nine non-core assets.

Our core community development business is producing much-needed finished lots in several of the top homebuilding markets in the country. It represents 50 real estate developments in 10 states and 14 markets in which we have developed lots for national, regional, and local homebuilders in 2016. Builder demand for our residential lots in our key communities remains steady.

Now let me turn to our nine remaining non-core assets. Timberland and undeveloped land: with the completion of the bulk sale in fourth-quarter 2016 of 58,300 acres for nearly $1,800 an acre, we have approximately 19,000 acres of remaining timberland and undeveloped land to sell -- 11,000 acres in Georgia, 8,000 acres in Texas. These remaining acres represent three transactions, of which two are under contract, and we are finalizing negotiations on the third one.

Now let me turn to multifamily. We have four remaining assets in multifamily. The Westlake site in Austin is under contract and expected to close in the third-quarter 2017. The remaining three communities are and lease-up mode, and we are discussing potential exit strategies with our partners as we get closer to stabilization.

Acklen in Nashville, which is nearly 86% occupied and nearly 90% leased, was listed for sale on February 21, 2017. HiLine, near Denver, is 82% occupied and 84% leased. And finally, Elan in Houston is 65% occupied and 72% leased.

Last example on the non-core assets you'll note on slide 4 is we are also under contract for the sale of our permitted Central Texas water assets, and are in the due diligence period with a buyer. As you can see, we are very focused on completing our key initiatives to sell non-core assets. We made good progress in 2016. And with the sale of our mineral interest assets, we certainly have carried that focus and momentum forward into 2017.

Now let's turn to Q4 2016 and full-year 2016 results. Forestar reported net income from continuing operations of $43.2 million or $1.02 per share in fourth-quarter 2016, compared with $33.3 million or $0.79 per share in fourth quarter 2015. Net income from discontinued operations, net of taxes, was $0.6 million in fourth-quarter 2016 or $0.01 per share and a net loss of $39.5 million in fourth-quarter 2015 or a loss of $0.93 per share. So, after discontinued operations, Forestar reported net income of $43.7 million or $1.03 per share in fourth-quarter 2016 compared with a net loss of approximately $6.2 million or $0.14 per share in fourth-quarter 2015.

Now, let's turn to full-year 2016 results. Forestar reported net income from continuing operations of $75.5 million or $1.78 per share compared with a loss of $26.9 million or 79% loss per share in 2015. Loss from discontinued operations, net of taxes, was $16.9 million in 2016 or a loss of $0.40 compared with a net loss of $186.1 million in 2015 or a loss of $5.43 per share. So, all-in, after disc ops, full-year 2016 net income was $58.6 million or $1.38 per share compared with a net loss of approximately $213 million or a loss of $6.22 per share in 2015.

Now let's look at an overview and turn to the next slide of our segment results. Real estate segment earnings were $12.9 million in fourth-quarter 2016 compared with $37.9 million in fourth-quarter 2015. Full-year 2016 real estate segment earnings were $121.4 million compared to $67.7 million in full-year 2015. I will provide additional details on our real estate segment results in a moment.

Let me turn to mineral resources. Mineral resources segment earnings were $0.7 million in fourth-quarter 2016 compared to $1 million in fourth-quarter 2015. Mineral resources earnings in full-year 2016 were $3.3 million compared to $4.2 million in full-year 2015. Earnings were down year-over-year in mineral resources, primarily due to lower oil and gas production volumes and prices, and lower drilling activity on our acreage.

As mentioned earlier, we sold our mineral assets in February of this year for $85.6 million. With this sale, we have now divested substantially all of our remaining oil and gas assets.

Now, let me turn to our other segment results, which were a loss of $3.7 million in fourth-quarter 2016 compared with a loss of $0.1 million in fourth-quarter 2015. Full-year 2016 other segment results were a loss of $4.6 million compared with a loss of $0.6 million in full-year 2015.

Earnings were negatively impacted year-over-year due to a $3.9 million goodwill non-cash impairment charge related to our water interest in Central Texas which we have under contract to be sold; as well as the deferral of timber harvest activity as a result of our initiative to sell our timberland and undeveloped land.

Let's turn to the next slide, slide 7, and do a deeper dive into our real estate segment, our core business. Q4 2016 segment results, again, I mentioned were $12.9 million compared to $37.9 million in fourth-quarter 2015. I would like to point out, fourth-quarter 2015 results benefited from $9.3 million in earnings from selling Midtown's Cedar Hill multifamily property and higher levels of undeveloped land sales from our retail sales program.

Significant items for Q4 of 2016 are as follows. We sold 835 residential lots at an average price of $67,600 per lot, with an average gross profit of $21,500 per lot, which included 235 bulk lot sales from non-core community development projects. Excluding these non-core sales, our average price per lot was $78,900 with an average gross profit of $29,300 per lot. We also sold 1,481 residential tract acres for approximately $4,300 per acre, and 178 commercial tract acres for approximately $7,400 per acre from these non-core projects.

Our Q4 2016 non-core projects sales generated significant tax losses to offset tax gains in 2016.

Now let me turn to full-year 2016 segment results and give you a recap. Again, full-year 2016 segment earnings were $121.4 million compared with $67.7 million in 2015. 2016 earnings benefited from combined gains of $117.9 million as a result of executing our key initiatives to opportunistically divest non-core assets. These gains were partially offset by non-cash impairment charges of $56.5 million related to six non-core community development projects in two multifamily sites. These impairments were a result of our key initiative to review our entire portfolio of assets, which resulted in business plan changes, inclusive of cash tax savings considerations.

Non-core asset sales, both community development and multifamily, provided approximately $117 million in tax losses that were utilized to offset tax gains in 2016. Minimized income taxes paid and reduced our annual carry cost by over $3 million as we transformed our Company.

Other significant items for full-year 2016. As Phil mentioned, we sold 1,940 residential lots at an average price of $68,200 per lot with an average gross profit of $23,400. Again, excluding the 235 bulk lot sales from non-core projects sold in the fourth quarter, our average price for full-year 2016 would be $72,200 with an average profit of $26,500. We sold over 14,900 acres of undeveloped land and timberland from -- in our retail sales program at an average price of $2,450 per acre. In total, we sold approximately 73,000 acres of undeveloped land and timberland from both the bulk timberland transaction and as well as from our retail land program, at a combined average price for 2016 of $1,925 per acre.

Now let me turn to the final slide before we take questions, and give a brief update -- a little more color on community development and our lot sales, and lots under contract, on slide 9.

As Phil mentioned, we ended 2016 and began 2017 with over 2,100 lots under option contract, of which 1,600 of these lots are either developed or under development. We have over 6,000 additional future lots to be developed, located in our key markets where we are already selling to current homebuilders, and many of the lots are located in some of the strongest housing markets.

As Phil mentioned earlier, we started 2017 with a strong order book of lots under contract for sale to builders. Our key states and markets continue to have inventory levels that reflect markets with a balance between supply and demand. Those are our prepared comments for the presentation.

And we'd now like to open the call up for a few questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions). Mark Weintraub, Buckingham Research.

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Mark Weintraub, Buckingham Research Group - Analyst [2]

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First question was you had noted in your opening remarks that, in many cases, in the sale of the non-core assets, you had gotten above what the internal NAV had been. Can you tell us, in total, would that have been true -- would have you been roughly in line, above or below, if you looked at all the sales you did in 2016 relative to where your internal NAVs would have been?

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Phil Weber, Forestar Group Inc. - CEO [3]

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I'd have to do the quick math. Let me give you three specific examples where I believe we sold above our internal math: the hotel, the minerals, and then certainly our retail land sales, where we averaged $2,450 per acre. So I think -- let us get back to you on your specific question. If you add them all up, did a total of more than (multiple speakers) be three examples of where -- of what I was citing to.

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Mark Weintraub, Buckingham Research Group - Analyst [4]

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Okay. And second, on the real estate lots that you have remaining, it looked like you changed the presentation -- the format a little bit differently. I think you used tell us the number of lots that were entitled and/or underdevelopment, et cetera. Now you shifted it to acreage; unless I missed something. It's very possible. I haven't seen it. But do you have kind of the old way you used to report it? What number of lots, as opposed to acreage, would be classifiable as developed or under development versus entitled?

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [5]

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So Mark, as we've talked about in the past, we have two projects that are in the entitlement process in California: Terraces at Hidden Hills and then Hidden Creek Estates. Those were the only two we are currently working on in the entitlement process. Lake Houston was previously in that category, a legacy tract that we were working on in Houston that is now part of the timberland and undeveloped land that's in the remaining 8,000 acres in Texas.

So, in the 10-K that will be filed tomorrow, you are obviously familiar with it; we have a statistical table of all of our future lots and units. And we have approximately 10,200 future lots, either -- various stages: under development, developed, and then future planned that are in the portfolio.

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Mark Weintraub, Buckingham Research Group - Analyst [6]

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And I guess the question -- and I'm sorry if it wasn't clear -- but of that 10,200, historically you used to tell us what percentage was developed and under development versus what would've been classified as entitled.

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [7]

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Yes. So the 1,600 that I mentioned earlier, that's developed and under development. And those were entitled and either ready to be sold in their finished state or we're in the process of finishing them. So, 1,600 lots of the roughly 10,000 in the total inventory.

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Mark Weintraub, Buckingham Research Group - Analyst [8]

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Got it, okay. And just curiosity -- I think you had reclassified some land in Houston from -- in the entitlement process just to timberlands. Maybe just a little color on that.

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [9]

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Yes, that's the Lake Houston project I was just talking about, Mark. That's the 3,700 roughly acres that was the third project that's historically been in Lake Houston. And our analysis around the Houston market, as well as finished lots there and demand, we basically decided that it was better use to not entitle that and develop it over time and sell that as land today.

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Mark Weintraub, Buckingham Research Group - Analyst [10]

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Okay. And then lastly --

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [11]

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And Mark, it's actually under -- that's one of the ones that's actually under contract to be sold that we'll actually come out with more information and color in the coming months.

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Mark Weintraub, Buckingham Research Group - Analyst [12]

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Okay, great. And then lastly, maybe a bit more color. I know you had indicated that supply/demand in your real estate markets was relatively balanced in terms of lots, et cetera. How have things been changing? I guess it certainly felt, at least in the conversations I had with builders, that the market has been weakening. But it sounds like most areas in Texas have actually started to improve. And I just was hoping to get a little bit more color on developments as you see them more recently, and where you are thinking things may be going.

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Phil Weber, Forestar Group Inc. - CEO [13]

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Mark, this is Phil. I'll start with just a comment on Texas. The Real Estate Center at Texas A&M recently came out with statistics showing that the state's inventory level remained consistent with the prior year, ending at 3.3 months of inventory at the end of December 2016. And according to them, a market balance between supply and demand has between 6 and 6.5 months of inventory. So that's Texas overall.

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [14]

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Yes, one thing I'd point out, Mark, is of our 1,940 lots that we sold this year, when I did the math, over 80% of those were sold from Texas markets. So, we've not seen -- Houston went through, obviously with the energy impacts; but Houston has still got positive job growth. I think we've got a slide in the back of the deck where we support the stable demand in our key markets. And all the Texas markets, and even some of the Southeast markets, have higher job growth than the national average. And with Houston even being impacted, there is still positive growth.

So we've not seen any -- we've not had any builders walk contracts or even -- we've got good earnest money deposits and the demand is there; and had nobody pushing back on not taking lots down.

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Mark Weintraub, Buckingham Research Group - Analyst [15]

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Okay. I guess what I was trying to ferret out was my sense from having spoken with builders was that previously, there had been increasing concern, particularly in Houston, but in many of the Texas markets. And then in more recent conversations, I thought I had been picking up more optimism again. Obviously oil and energy was doing a bit better.

I guess when I'm hearing you, it just sounds like nothing really changed all that much, and it's not that different today than it was yesterday. But it wasn't that bad yesterday. So that's why I was just trying to get that nuance (multiple speakers).

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [16]

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We'd agree with that concept, yes, absolutely.

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Mark Weintraub, Buckingham Research Group - Analyst [17]

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Okay, thank you.

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Operator [18]

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Albert Sebastian, Prospect Advisors.

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Albert Sebastian, Prospect Advisors LLC - Analyst [19]

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A few questions, and I'm really going to focus on slide 4, overview of assets. Can you just give a little bit more granularity in terms of the two communities in entitled in California in terms of where they are located, where we stand in the process of getting them entitled, and how many lots potentially that are there?

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [20]

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Yes, I'll start, Al. This is Chuck. The two communities are near LA; a little I guess Calabasas in one, and the other is near the San Simeon Valley, 730 acres in total. We continue -- we've owned these assets for several years. And entitlements in California, as you know, are challenging. Our team is working very hard and focused on getting these and obtaining these entitlements, and we feel like we've made good progress.

The Hidden Creek asset, which is the larger of the two, at 700 acres -- yes, it's planned for about 188 lots if we -- once we receive and move forward and obtain the entitlements. The other -- the Terrace at the Hidden Hills is a little under 30 acres. And it's actually being planned for more of an assisted living type product, not a residential mixed-use.

The team is very focused on those assets and obtaining those -- the opportunity there with the entitlements, and moving forward with our business plan. But it's work in progress.

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Albert Sebastian, Prospect Advisors LLC - Analyst [21]

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Okay. And in terms of under timberland and undeveloped land, the 11,000 acres in Georgia and the 8,000 acres in Texas, I assume those are really -- those acres are kind of HBU type land that is -- they are not going to be sold to an institutional buyer. Or is it being marketed to an institutional buyer? Or is it being marketed more towards a retail buyer that wants to have some sort of recreational use, or what?

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [22]

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The Lake Houston property, which is one of the Texas -- that's more speculative, I think, for longer-term, hold for development down the road for somebody. The remaining Georgia timberland, I'd say that that would be more institutional versus retail, being it's an 11,000 acre package which still is a sizable package in the Southeast. So that would be my comments on that.

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Albert Sebastian, Prospect Advisors LLC - Analyst [23]

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And finally, on the water assets: the 20,000 surface acres, the groundwater lease on the 20,000 surface acres in Central Texas, are there any precedent transactions that might give us an indication of value for those?

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Phil Weber, Forestar Group Inc. - CEO [24]

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That is one of the challenges we face. It is certainly an emerging market, as we've talked about, and there is not really any good comps. The biggest private groundwater transaction was several years ago. You are probably familiar with Boone Pickens sold his water rights to -- 211,000 surface acres to a municipal water supply company in the Panhandle of Texas. But otherwise, there's not a lot of transactions and comps for private groundwater transactions.

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Albert Sebastian, Prospect Advisors LLC - Analyst [25]

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Is there a book value associated with those assets?

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [26]

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Yes, there is, Al. What you saw with my opening comments or our comments that we impaired the goodwill that was on the books for that Central Texas water asset in the fourth quarter. And we'll file the K tomorrow, likely, so there will be some more color on the remaining book value associated with the Central Texas water assets.

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Albert Sebastian, Prospect Advisors LLC - Analyst [27]

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And when did you -- you purchased those assets, if I remember correctly.

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [28]

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You are remembering right. I believe it was in 2010, we acquired Sustainable Water Resources, which was -- is an acquisition in 2010, that's correct.

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Albert Sebastian, Prospect Advisors LLC - Analyst [29]

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Okay, okay. And you are saying that you have subsequently written down the goodwill associated with that acquisition?

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [30]

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That's correct.

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Albert Sebastian, Prospect Advisors LLC - Analyst [31]

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Thank you.

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Operator [32]

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(Operator Instructions). Lee Matheson, Broadview Capital Management.

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Lee Matheson, Broadview Capital Management - Analyst [33]

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I appreciate, in your opening comments, the remark about being cognizant of time value of money, and use of proceeds, and what have you. Can you give us some color in -- just in terms of what the Board is thinking from a timing perspective? I mean presumably the Board would've met yesterday or the day before to approve the quarter; the cash would come in at that point, the $75 million of proceeds from the oil and gas transaction, which would've left you in a very flush position at -- and presumably the ability to make a decision on use of proceeds at the Board meeting the other day.

What is the timing -- or what are the issues that are going through the Board's head in terms of not necessarily what to do with the proceeds, but when?

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Phil Weber, Forestar Group Inc. - CEO [34]

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Thank you for your question. I will reinforce what I said in my remarks. It's an active -- they are actively and constructively working. Just to give you some color -- and this will come out and our proxy that will be filed shortly. Our Board met 14 times last year. And so we are -- the Board is very engaged. The board is -- and management are actively and constructively working very closely. And when we have, and are ready to report something, we will. But we're not ready to do that right now.

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Lee Matheson, Broadview Capital Management - Analyst [35]

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Okay. And in terms of just to be clear on the range of outcomes that the Board is considering would include a meaningful share repurchase, a meaningful dividend. Are acquisitions on the table? Or are you simply looking at how to most effectively and accretively return capital to shareholders, at this point?

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Phil Weber, Forestar Group Inc. - CEO [36]

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I think I've said on previous calls that everything is on the table. But again, the key focus is, we are focused on maximizing shareholder value. And the Board is actively and constructively working with management towards that end.

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Lee Matheson, Broadview Capital Management - Analyst [37]

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Okay, okay. And from a timing perspective, what is the -- pretty soon you are going to run out of assets to sell. And I think at that point, one presumes you will act on the excess capital. What's your -- I mean if -- given the four out of nine non-core assets are already on the market or under contract, would it be safe to assume that we could see something on sort of a next step of this corporation in the next three months?

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Phil Weber, Forestar Group Inc. - CEO [38]

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Well, let me make a couple points. From day one, what we said we were focused on reducing cost which we are continuing to do. We focused mostly on SG&A in that area. We've now, with the sale of a lot of the non-core assets, we are able to focus more time on our core business, where there's some value engineering and some cost savings that we think we can generate and increase margins in our core business. So we are focused on cutting costs.

We still have, as we've identified, nine non-core assets that we are trying to sell. And there's work that goes with those. But we have our core business that we are focused on maximizing the value of our core business on an ongoing basis. So that remains our three priorities. And when we have some additional color to give you on the larger question that you are asking, we will share that with you as soon as we can.

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Lee Matheson, Broadview Capital Management - Analyst [39]

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Okay. And then just in terms of, let's just say, hypothetically you get everything sold that you want to get sold, and you get the SG&A down to the $28 million run rate, what would be -- when you guys model it, what does the core business look like on kind of a normalized basis from a cash generation standpoint?

Is it -- would we assume a couple thousand -- 1,500 lots a year at a $30,000 gross margin, per, and then back out the SG&A from that? And then when do you start putting money back into this business, in terms of building back up the land bank to stretch out the, call it, the longer end of the DCF tail here?

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [40]

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Lee, this is Chuck. So I think as you think about the business with the non-core sales in 2016 and rolling into 2017, even in our disclosures there's a lot of non-core that is in the results. So if you think about the 1,800 to 2,000 lots range, and getting SG&A down to $28 million, I think we've got good disclosures around average price, around historical margins. And you can actually put into your model some of that information that's in the public disclosures, and run that.

And as Phil said, we are very focused on cost, in both SG&A support cost as well as what it takes to develop and manufacture lots. So I think there is adequate disclosures in the market and in our filings that you can take that and model that.

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Lee Matheson, Broadview Capital Management - Analyst [41]

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Yes, got it, okay. And then just based on the existing core community land assets, how -- sort of what's -- add an 1,800 to 2,000 lot annual velocity, how many years of inventory would you -- do you feel you have?

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [42]

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Well, as I said in response to Mark's question earlier, when we file our K later this week, or soon, we've got 10,000 lots and units in the portfolio. And you can make your assumptions on an annual lot sale velocity, and do the math.

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Lee Matheson, Broadview Capital Management - Analyst [43]

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Yes okay. Okay. We look forward to hearing some clarity on what you guys are going to do with a monstrous amount of cash. Thanks, guys.

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Operator [44]

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Thank you. I'm showing no further questions at this time.

I'd like to turn the call back over to Chuck Jehl for closing remarks.

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Chuck Jehl, Forestar Group Inc. - CFO, Treasurer [45]

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Okay. Thank you for joining us this morning and for your interest in Forestar, and hope everyone has a great day. Thank you.

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Operator [46]

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Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.