Forestar Group Inc · NYSE:FOR
Forestar — Investor Presentation (February 2009)
33 slides from Forestar's investor presentation, Feb 18, 2009
Slide 1: Investor Presentation February 2009
Investor Presentation Investor Presentation February 2009
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains "forward-looking statements" within the meaning of the federal securities laws. 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 unc
Slide 3: Table of Contents
Table of Contents I. Near Term Strategic Initiatives II. Company Overview III. Real Estate IV. Natural Resources V. Financial Highlights
Slide 4: I. Near Term Strategic Initiatives
I. Near Term Strategic Initiatives
Slide 5: Near Term Strategic Initiatives
Generate significant cash flow, principally from sale of approximately 175,000 acres of HBU timberlands Reduce debt $150 million Repurchase up to 20% of outstanding common shares Reduce investment in development Lower operating costs Improve minerals transparency and disclosure Near term strategic i
Slide 6: Value Creation - A Timing Issue
Value Creation - A Timing Issue 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Return Years to Value Realization 115K - 140K Acres 160K - 185K Acres Entitle and Develop HBU Timberland Return Cost of Capital
Slide 7: Forestar Land Stratification
Forestar Land Stratification
Slide 8: HBU Timberland Sale Initiatives
HBU Timberland Sale Initiatives Market Segment Acres Actual 2007 Institutional 75,000 - 125,000 Special Use / Conservation 40,000 - 50,000 Retail - Small Tract 30,000 - 50,000 Total HBU Timberland Sales 175,000 HBU timberland sales are ready for market and structured to maximize interest across buye
Slide 9: Lower Costs / Reduce Investment in Development
Lower Costs / Reduce Investment in Development Further reduce low-cost operation Reduce operating and general and administrative costs ("start-up" professional and contract services) Reduce cash investment in development* Historical average (2006 - 2008) = $90 million per year 2009 - excluding commi
Slide 10: Improve Minerals Transparency
Improve Minerals Transparency Value Chain Acres Disclosure Present Value Held by Production 25,000 Net Proven Gas - MMCF Oil - Barrels Proven Reserves Leased 121,000 Drilling Activity Acres by Play Reserve Additions Available for Lease 476,000 Leasing Activity Acres by Play Future Bonus + + = Net As
Slide 11: Strategy
Strategy Generate significant cash flow, principally from sale of approximately 175,000 acres of HBU timberlands Reduce debt $150 million Repurchase up to 20% of outstanding common shares Move acres up the value chain by moving land located in growth corridors but not yet entitled, through the entit
Slide 12: II. Company Overview
II. Company Overview Forestar is focused on creating significant value for shareholders, customers, partners and employees by generating the greatest benefit from each and every acre of our land
Slide 13: Key Investment Highlights
Key Investment Highlights Diversified and Unique Real Estate Portfolio Portfolio located in some of the healthiest markets Low Basis, Valuable Portfolio of Assets Consistent Cash Flow from Natural Resources, Primarily Minerals Disciplined Investment Criteria Strategy Driven, Proven Management Team w
Slide 14: 2008 Year End Snapshot
2008 Year End Snapshot Real Estate (51%)1 365,000 acres of low basis land 108 total projects located in 10 states and 13 markets 25 projects, almost 34,000 acres, currently in entitlement process 5 commercial & condo projects Radisson Hotel (Austin, TX) Palisades West - Commercial Office (Austin, TX
Slide 15: Cibolo Canyons - San Antonio, Texas
Cibolo Canyons - San Antonio, Texas Residential 1,747 lots - 537 sold* Multiple builders 1st and 2nd move-up, custom Empty nester / active adult, condo Commercial 145 acres - 64 sold* Multi-family and retail Resort and Golf Course JW Marriott's Largest Resort 1,002 rooms 140,000 sq. ft. meeting spac
Slide 16: Company History
Company History Oil & gas leasing activity begins Lumbermen's Investment Corporation ("LIC") incorporates Temple-Inland and Cousins Properties form Temco Associates, a venture to develop residential sites in Georgia Development of Georgia real estate organization 165,000 acres of undeveloped land ar
Slide 17: III. Real Estate Overview
III. Real Estate Overview Forestar is committed to maximizing long-term shareholder value through entitlement activity. Securing entitlements creates the largest proportional increase in real estate value and requires minimal capital investment
Slide 18: Focused on Growth Corridors
Focused on Growth Corridors Population Density Change 2000-2030 Forestar Growth Corridors I-85 Atlanta Charlotte Raleigh Birmingham I-35 Dallas Austin San Antonio I-5 Sacramento San Francisco Los Angeles San Diego Houston Denver Phoenix Salt Lake Nashville Florida - SE Coast Washington, D.C. Active
Slide 19: National Housing Market Issues
National Housing Market Issues Source: Moody's Economy.com Atlanta 40 - $174.2 Note: Projects and investment as of 4th Qtr. 2008 ($ in millions) Forestar Projects and Investment by Market 100 = 20% down, 30 yr fixed mortgage = 25% of income Less than 100 100-150 More than 150 Affordability Salt Lake
Slide 20: Residential Lot Sales Activity
Residential Lot Sales Activity Historical residential lot sales activity has been principally located in major markets of Texas, resulting in steadily improving residential lot prices since 2004 * Excludes bulk sale of 117 lots at Parks of Deer Creek project located near Fort Worth, Texas during 200
Slide 21: Real Estate Pipeline - 4th Qtr 2008
Real Estate Pipeline - 4th Qtr 2008 Real Estate Undeveloped In Entitlement Process Entitled Developed and Under Development Total Acres* Undeveloped Land Owned 307,996 314,873 Ventures 6,877 314,873 Residential Owned 28,578 7,939 753 44,249 Ventures 1,080 4,641 1,258 44,249 Commercial Owned 4,062 1,
Slide 22: Atlanta - Forestar's Largest Market
Atlanta - Forestar's Largest Market Atlanta, GA 9th largest metropolitan statistical area in the U.S. Population of 5.0 million, will double by 2025 A leader in new building permit activity Home to 12 Fortune 500 companies World's busiest airport Assets and Performance 300,000 acres of low basis lan
Slide 23: Investment Discipline
Investment Discipline Acquisition and development activity driven by return on cost discipline Target 35% Return On Cost (ROC), including proforma interest carry Historical returns1 Residential projects: 20%+ IRR, 35%+ ROC Commercial projects: 30%+ IRR, 40%+ ROC Development example: 288 acres 819 lo
Slide 24: IV. Natural Resources
IV. Natural Resources Value creation opportunity and recurring cash flow
Slide 25: Minerals - A Strategic Focus
Minerals - A Strategic Focus Value Royalty Interest Leased Available for Lease 25,000 121,000 476,000 18-27% of production revenues Additional participation in production revenues $100-$400 / acre upfront payment; up to 3 year lease Focus on increasing leasing activity Business development focus Dev
Slide 26: Western Minerals - Prolific Production Region
Western Minerals - Prolific Production Region Texas and Louisiana Total net acres: 365,000 Available for lease: 228,000 Leased: 112,000 Held by production: 25,000 15% of the continental U.S. gas production 10 active oil and gas plays Note: Net acres as of 4th Qtr. 2008
Slide 27: Eastern Minerals - Regional Oil and Gas Activity
Eastern Minerals - Regional Oil and Gas Activity Alabama and Georgia Total net acres: 257,000 Available for lease: 248,000 Leased: 9,000 Held by production: --- Note: Net acres as of 4th Qtr. 2008
Slide 28: Fiber Resources
Fiber Resources Value Enhanced Real Estate Values Fiber Sales Land Maximize fiber sales while enhancing real estate and conservation values Sold 1.1 million tons of fiber in 2008 principally to Temple-Inland at market prices ($11 million) Consistent cash flow 340,000 acres owned with timber 18,000 a
Slide 29: V. Financial Highlights
V. Financial Highlights FORESTAR
Slide 30: Financial Summary - Segment Earnings
Financial Summary - Segment Earnings ($ in millions) 2006 2007 2008 Revenues Real Estate $180 $143 $99 Mineral Resources 28 21 48 Fiber Resources 18 14 13 Total Revenues $226 $178 $160 Segment Earnings Real Estate $70 $40 $9 Mineral Resources 26 18 44 Fiber Resources 7 8 9 Total Segment Earnings $10
Slide 31: Financials - Debt Capacity
Financials - Debt Capacity Senior credit facility includes $175mm term loan and $290mm revolving line of credit Includes $100mm sublimit available for letters of credit and $25mm swing line sublimit Matures December 2010 ($ in millions) Q4 2008 Senior Credit Facility $465 Borrowings Under Senior Cre
Slide 32: Near Term Initiatives
Near Term Initiatives Generate significant cash flow, principally from sale of approximately 175,000 acres of HBU timberland (-) Reduce debt $150 million (-) Repurchase up to 20% of outstanding common shares (-) Reduce investment in development (-) Lower operating expenses + Improve Minerals Transpa
Slide 33: Forestar
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Forestar Group — Investor Presentation (February 2009) on 6ix