Forestar Group Inc (FOR) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Forestar Group fourth quarter and full year 2015 earnings conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, today's conference is being recorded.

I would like to introduce your host for today's conference, Miss Anna Torma.

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 previously announced key initiatives and fourth quarter and full year 2015 results.

I'm Anna Torma, Senior Vice President Corporate Affairs. Joining me on the call today is Phil Weber, Chief Executive Officer, Chuck Jehl, Chief Financial Officer, and Michael Quinley, President, Community Development. 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 our slides as we will make forward-looking statements during the presentation. In addition, this presentation includes non-GAAP financial measures, the required reconciliation to GAAP financial measures can be found at the back of our earnings release and slides and on our website.

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

Okay. Thank you, Anna, and thank you for joining us this morning.

We told you three month ago it was a new day, a new team and we were focused on changing Forestar. Forestar has made significant progress on all four of our key initiatives, which we will highlight today.

Our first initiative is to reduce costs across the entire organization. We have taken actions to eliminate over $30 million in SG&A cost in 2016 as compared to 2015 actual spending. We expect to achieve additional savings as we exit non-core assets resulting in Forestar having reduced its SG&A by over 50%.

Our second initiative is to review our entire portfolio of assets. We have assigned NAVs to every asset in the portfolio using multiple assumptions and scenarios. The Board and management are using this NAV analysis to guide capital allocation decisions and as a tool for exiting non-core assets.

Our third initiative is to review our capital structure and fourth quarter 2015 we purchased and retired over $19 million in senior secured notes, which will reduce our annual interest cost by $1.6 million.

Our fourth initiative is to provide additional information. Based on our review of our portfolio of assets we have discontinued entitlement efforts on eight projects in Georgia and determined 12 previously entitled Georgia properties are not likely to be developed in the near-term. We have classified these acres within our non-core undeveloped land.

Now let me turn to the next slide and provide additional information on the cost reductions made across the entire organization. For 2016 budgeting we use zero based budgeting. We started from scratch and evaluated every dollar we spend. To-date we have taken actions to eliminate over $30 million in annual SG&A costs.

In 2015 SG&A totaled approximately $87 million. By exiting the previously identified non-core assets the Radisson, Kansas, Nebraska and the first set of multifamily assets, we estimate it will reduce faculty year 2016 SG&A to approximately $56 million.

We are targeting an annualized run-rate of $39 million once all the initiatives, announced previously and the initiatives we are announcing today, are fully implemented. Or another way to say this, Forestar is on track to eliminate greater than 50% of 2015 full year expenses going forward. These cost savings, once fully implemented, include an over 50% reduction in our workforce compared to our peak headcount in 2014.

And let me just close on this initiative by saying we're not done yet and we will continue to evaluate how we can further lower costs. Okay. Shifting over to give you more detail now on exiting specific non-core assets.

In November we announced that we intended to sell the Radisson Hotel, exit the Oil and Gas business with the exception of our legacy mineral interests, sell 11 of our award winning urban core apartment communities in Austin and review selling non-core community development projects.

In Oil and Gas, we closed yesterday on the sale of our remaining Kansas and Nevada oil and gas properties for $21 million. Chuck Jehl, on the Denver team, has done a terrific job on this sale in a very challenging market and challenging market conditions. So Chuck thank you and your team for a great job. Sale of all non-core oil and gas assets should allow Forestar to realize an estimated $3 million in annual operating expenses and corporate G&A savings.

Shifting to the Radisson Hotel, we previously-announced that the Radisson Hotels under contract for $130 million and in an all cash transaction. We are anticipating closing that sale in the second quarter. The pre-tax net of debt proceeds to Forestar are expected to be over $110 million.

In multi-family we announced we are opportunistically exiting our multifamily portfolio. We are actively engaged in the process of selling five our remaining nine multifamily communities. We expect to close on the sale of our interest in our completed Denver 360 venture, or we have also referred to as Peak View before, at the end of the first quarter. The buyer is our existing venture partner.

Additionally 11 is being marketed by CBRE, initial offers are expected this week. Three assets Dylan in Charlotte, Music Row in Nashville and Pressler, a site we own in Austin, are being, made by HFF. Interest is strong and we will provide updates as we execute transactions.

In addition to these five assets we anticipate taking Acklen, our completed Nashville venture property, to market in the second quarter. That would leave only our Littleton, Colorado venture property, our Austin Westlake site, and Elan, our joint venture in Houston with Gray Star. Combined we have approximately $30 million invested in these three assets and we expect no meaningful additional investment going forward in those three assets.

We expect dispositions on these assets to start late this year or early next year. Let me now give you an update on our non-core community development assets. The review of our Community Development portfolio led to a decision to exit several non-core communities. This group includes our Texas coast properties, two projects near Denver, and our Antioch, California industrial site.

In addition, on eight projects in Georgia totaling 20,000 acres, we discontinued entitlement efforts as we determined we were unlikely to develop these projects in the near-term. Furthermore, we identified 12 additional entitled projects in Georgia, which represented nearly 4,000 potential future planned lots, as non-core and clarified them as entitled undeveloped land. We will share updates on these non-core community development assets as we make progress.

Last, in terms of exiting non-core assets, after review with our Board Forestar has commenced a process to opportunistically exit up to 89,000 acres of timberlands. That portfolio's comprised of roughly 14,000 acres of timberland in Texas, over 49,000 acres of industrial timberland in Georgia and Alabama and the previously mentioned combined roughly 25,000 acres of discontinued entitlement and entitlement in process assets in Georgia.

Forestar's interviewing intermediaries to advise us on this sale process. We will provide more color as we make progress on exiting this timberland portfolio. So to close, over all we have made very significant progress in a short period of time. We have lots of additional work to do. We will continue to work hard and move with urgency to continue to maximize shareholder value.

Now let me turn it over to Chuck to review the fourth quarter and full year 2015 results. Following Chuck's report Michael Quinley will provide you with an update in guidance on the 2016 plan for our community development business and following Michael we will open it up for questions.

With that I will turn it over to you, Chuck.

Alright. Thank you, Phil. I would also like to welcome everyone joining us this morning. I'll provide a review of our fourth quarter and full year 2015 financial results.

Forestar reported a net loss of $6.2 million dollars or $0.18 per share in fourth quarter 2015 compared with a net loss of approximately $11.8 million or $0.34 per share in fourth quarter 2014. Fourth quarter 2015 results include special items of $21.5 million after-tax, principally associated with non-cash asset impairments charges related to our oil and gas properties driven primarily by lower oil prices and the likelihood these non-core assets will be sold.

Fourth quarter 2015 special items include a $10.8 million after-tax cost associated with property impairments and $13.6 million associated with unimproved leasehold impairment, principally Bakken Three Forks asset in North Dakota and a $2.9 million after-tax benefit associated with change in our deferred tax asset valuation allowance in the quarter. Excluding these special items in the fourth quarter 2015 net income was $15.3 million or $0.45 per share compared with $11.4 million or $.32 per share in fourth quarter 2014.

Now let me (inaudible) comments on full year 2015. Forestar reports net loss of $213 million or $6.22 per share compared with net income of $16.6 million or $0.38 per share in 2014. Full year financial results were negatively impacted by approximately $205 million in special items including a deferred tax asset valuation allowance and asset impairment charges related to non-core oil and gas assets.

Our after-tax basis full year 2015 special items include a deferred tax asset valuation charge allowance of $96 million, principally as a result of impairment charges recorded in oil and gas and in our Company being in a three year cumulative loss position. $69.6 million improved property impairments and $37.4 million in unimproved lease hold impairments, primarily related to oil and gas assets in the Bakken Three Forks and a central Kansas in Kansas-Nebraska, which Phil announced, we sold yesterday. And $22.2 million in severance charges related charges in the year.

As a result, excluding special items, full year 2015 net loss was approximately $7.8 million or $0.23 per share compared with net income of $41.1 million or $0.94 per share in 2014. Now let's turn to segment results.

Our real estate segment earnings were $37.9 million in fourth quarter 2015 compared to $30 million in fourth quarter 2014. Full year 2015 real estate segment earnings were $67.7 million compared with $96.9 million in full year 2014. I will provide some additional comments and details on our real estate segment in a moment.

Oil and Gas segment results in fourth quarter 2015 were a loss of $38.4 million compared with a loss of $39 million in fourth quarter 2014. These include approximately $37.6 million in non-cash impairment charges, which we have discussed. Excluding these charges, fourth quarter 2015 oil and gas segment results were a loss of approximately $800,000.

As a result of our initiatives to lower operating expense and significantly reduce capital expenditures in our Oil and Gas segments the segment generated approximately $5..6 million in positive net cash flow in fourth quarter 2015 as compared to just under $24 million negative cash flow in fourth quarter 2014. Oil and gas segment results for full year 2015 were a loss of $184.4 million compared with a loss of $22.7 million in 2014.

This includes approximately $164.8 million in non-cash impairments charges in 2015 and $37.7 million in non-cash charges in 2014. Again, from a cash perspective full year 2015, our oil and gas segment generated $7.5 million in positive cash flow compared with approximately $44 million in negative cash flow in 2014. Going forward we are well-positioned to generate positive cash flow in this business as we execute exiting these non-core assets.

Other Natural Resources results were essentially break even in fourth quarter 2015 compared to $3.3 million in fourth quarter 2014. Full year 2015 other natural resource loss was $0.6 million compared to segment earnings of $5.5 million in 2014. Fourth quarter and full year 2014 results include $2.7 million and $3.4 million in gains related to termination of a timber (inaudible).

Now let's look at fourth quarter 2015 real estate sales activity in greater detail. Fourth quarter 2015 real estate segment earnings, again, were $37.9 million, which is up $7.9 million compared to fourth quarter of last year. We sold our Midtown Cedar Hill multi-family community for $42.9 million, which generated $9.3 million in earnings and reduced our consolidated debt by approximately $24.2 million.

In addition we sold 59 acres of residential tract acres from our City Park project in Houston for $110,500 per acre and we sold seven commercial tract acres for over $491,000 per acre. We sold 7,267 acres of undeveloped land for $2,200 per acre and in closing on the quarter we sold 363 residential lots with average gross profit of approximately $35,000 per lot. Now let's turn to the full year real estate sales activity.

Full year 2015 real estate segment earnings were $67.7 million compared to $96.9 million in 2014. Full year real estate segment earnings were lower compared to 2014, primarily due to gain on sale of assets of $26 million in 2014 compared to $1.6 million in 2015, lower undeveloped land sales year-over-year, and decreased lot sale activity. In addition to the Midtown Cedar Hills sale we previously discussed other full year 2015 sales activity follows.

Full year we sold 63 commercial tract acres for an average price of $248,300 per acre, we sold 1,062 residential tract acres, principally to builders, for nearly $10,600 per acre capitalizing on builder demand to take down phases of undeveloped lots. For full year we sold nearly 14,000 acres of undeveloped land for about $2,300 per acre.

And on the lot front we sold 1,472 lots in full year 2015, which is down approximately 25% from 2014 levels excluding bulk sales in 2014. Primarily due to wet weather conditions and construction delays in several of our markets in 2015. Even the lot sales volume was down in 2015, our average gross profit per lot was $34,400 which was up 34% year-over-year due to mix of products sold.

Now I would like to turn the call over to Michael Quinley, President of our Communities Development business, who will provide an update on our core communities development business.

Thanks, Chuck, and good morning to everyone on the call.

In our core Community Development business we primarily identify and purchase sites, entitle and develop the sites and sell lots to our homebuilder customers so they can build homes. We are a valuable resource for builders who often do not have access to capital or who want to acquire a larger site that cannot be accommodated by their balance sheet or that do not have the internal land development expertise required.

In 2015 I'm pleased to report that for the first time in four years we have acquired more new inventory than we sold. We acquired five new sites for $28 million, which represents a combined 933 planned or future lots in Charlotte, Nashville, Atlanta and Tucson. Several of these sites were fully entitled and are, therefore, expected to have lots on the ground by late 2016 or early 2017.

We also invested about it $21 million in six ventures with 1,069 planned housing units and/or lots located near Madison, Wisconsin, Salt Lake City, Raleigh-Durham and in Tucson. The majority of these investments are land development and homebuilding joint ventures with respected homebuilders within the respected MSAs. In total we replaced over 2,000 units or lots and these units or lots support our initiative to diversify our Community Development platform to other strong markets outside of Texas, which, historically, has been a 60% to 70% of our portfolio.

We ended 2015 with over 1,300 lots in backlog located in 25 communities, which is actually up modestly from our fourth quarter of 2014. Now option contracts with builders for lots generally include a 10% to 15% cash earnest money deposit. We did not see any builder option terminations in our markets in the fourth quarter of 2015 or to-date in 2016 so we remain optimistic about the underlying demographics supporting our demand for homeownership in all of our markets.

Now looking forward to 2016 we anticipate lot sales to be in the 1,600 to 1,800 range with lower lot margins driven byproduct mix. We expect lot sales to increase in Nashville, Charlotte, and Dallas as newer neighborhoods begin to deliver lots. In addition, we are marketing an approximately 330 acres of commercial tracts of which 263 acres is our Antioch industrial site in California.

Now let me spend just a few minutes talking about Texas and more specifically a brief discussion on Houston. We continue to closely monitor the Texas housing markets for signs ever slowing and continue to see stable conditions throughout the state. As the chart on the left indicates, finished vacant new home inventories in Texas remain within the equilibrium at about two months of supply.

Job growth continues to outpace the national average in most Texas markets. Houston is seeing slower job growth than the national average, but the combination of low housing inventories and solid job growth should continue to drive steady demand in our communities. Although the Houston market finished 2015 as the top single family market for new home sales in the country, the over all market in Houston is slowing with housing starts in the fourth quarter down 8.9% compared to the previous year.

Let's be clear. Even with the downturn housing starts in Houston registered 27,590 units on an annualized basis at the end of fourth quarter 2015 only 3,000 fewer units than it had the year before. For 2016, according to Metro Study, Houston starts are expected to (inaudible) approximately 10%, suggesting a range of around 24,000 to 25,000 starts, which is still strong in absolute terms.

Builders and developers appear to be behaving rationally as is evidenced by the inventories remaining relatively tight. At the end of 2015 finished vacant new home inventory registered 2.3 months of supply, still below the 10 year average of 2.4 months, while vacant developed lot inventory continued to register well below equilibrium at 18.1 months of supply. Further, vacant developed lot inventory in key growth submarkets in Houston remains constrained registering between 15 and 16 months of supply.

Now, certain submarkets in Houston, primarily the west and the far north, have experienced more softening as a results of lower oil prices than others. Forestar's exposure in these submarkets is minimal. In fact, 77% of all of our finished lots or our lots under development in the Houston portfolio are already under contract.

I would like to thank you again for joining us this morning and for your interest in Forestar and now we would like to open up the call for a few questions.

Thank you. (Operator Instructions). Our first question comes from the line of Steve Chercover with D.A. Davidson. Your line is now open. Please go ahead.

Thank you. Good morning everyone. So starting with Oil and Gas, the rationale for buying Credo, as I understand it, was to become a producer so you could quantify and discuss you legacy Oil and Gas reserves in Texas. So did you accomplish that task? And I know you're going to continue to collect royalties, but can you quantify how it might look?

Hi Steve. How you doing? It's Chuck. As we acquired Credo in 2012, you know, that was definitely one of the strategies of leveraging our minerals and our base there. You know, a lot has changed since 2012.

We made the decision to exits the working interest asset. We made the decision that our legacy minerals are a core asset. We've got a team of three to four people that are really qualified to continue to promote those minerals as we exit the working interest asset.

With we see that as a nice cash flow stream for us and a low risk business and can promote those minerals and, as gas prices and oil prices recover in the future, can see a value-added there in that business. So we look forward to working on those minerals in the future with the team we have in place.

So but will you quantify the proven and probable reserve there?

You know, historically on our minerals before we acquired Credo it was more just prove, develop, producing reserves that we will disclose and the probables and possibles we're not historically disclosed, but we have got 500 plus royalty wells we have interest in on our acreage and, you know, 590,000 acres that we own across Texas, Alabama, Louisiana and Georgia. So we will continue to promote that and work that to do the best we can. It's obviously a challenging commodity price environment today.

Sure. But it will be a decent annuity. It will fluctuate with the price of oil and gas. And since Kansas and Nebraska sold for $21 million and, as I understand it, was not nearly as productive or maybe more exploratory than the Bakken, it's to say that the Bakken is going to have significant value? Perhaps not what you paid for it, but there's value?

Yes. I mean we believe there's obviously value to the Bakken and we hired Tudor, Pickering and Holt, as you know we announced back in November, Energy Investment Bank out of Houston that's well-versed I think this space an particularly the Bakken.

So, yes, we're rung a process right now and in the middle of that process and as we move forward and get closer to a decision there we'll announce our intentions, but I don't think it's in the best interest today to talk about where we are in that process. But, yes, Kansas-Nebraska was more of, as you said, an exploratory play and I'm really proud of the team in Denver and the good work to sell those assets and the Bakken, more of a resource play and less exploratory more development than exploratory so.

So if we're in the middle of the process, three months into it, does that mean we should expect a response or a definitive agreement three month from now?

Steve, this is Phil. No. I wouldn't read into that. I mean we are in the process and I think our view is similar to the sales Kansas-Nevada assets we'll give you more guidance when we've taken action and Tudor, Pickering, Holt has added a lot of value to us and we're in the process and we'll give you more color when we have taken action.

That's perfect. I was trying to parse words like a hedge fund guy. And then maybe I missed this, but what are we going to do with the money received from the Radisson sale? Is that going to be debt repayment, share repurchase or some blend?

Yes. I would say that in terms of capital allocation decisions going forward we have a heavy focus. right now. on reducing costs and exiting the non-core assets. that we've identified previously and today. and as we complete those sales you will see us take action and through those actions we'll provide more color on potential capital allocations. Similar to Kansas-Nebraska, which we didn't talk a whole lot about, you know, I think you will see and get the guidance people are looking for when we take action.

Okay. And promise this will be my last question. What's going on with the water rights?

Well, the water rights, you know, as we have disclosed we have two significant projects that we have permitted now, one in central Texas and one in east Texas, and the projection for the state of Texas is to go from 27 million people to 50 million people per the State Office of Demographics. And the water infrastructure in the state, that's mostly surface water right now, can supply the existing population fairly well if we don't go into a drought and so it is a longer term asset and we believe that in the future, and I don't want too put a timetable on the future, conjunctive ground water use, along with surface water, will be used by the large municipality and so there will be an opportunity for Forestar or the owners of those assets to be part of the water supply system in Texas in the future.

Great. Thank you very much.

Thank you. And our next question comes Mark Weintraub with Buckingham Research Group. Your line is now open. Please go ahead.

Yes. Good morning. This is actually [Brendan Munson] on for Mark. Two questions for you. First one is actually a two parter. So any additional color on what precipitated the decision to stop the entitlement process on the Georgia land and since you have you have concluded the Georgia lands are no longer going to be developed is there any reason that we should be thinking of these 20,000 acres differently than your other timberland acreage?

Yes. Hi. This is Michael. We went through an evaluation process of, kind of, where those entitlements were perfected and we have decided that as we starts to look at the growth of around Atlanta these were just not in the areas that where we thought it was the best for investment for the shareholders.

As it relates to how they're valued as any different than regular timberlands, yes, we view these as kind of timberland plus. A lit bit of HBU. They may have good road frontage, they may have some other attribute that will allow us to market them as a premium, a little better than just pure timberland.

Okay. That's great. Thanks. And.

I'll add some more color do that. So in my remarks I mentioned that when we're looking we have just begun the process of exiting the timber portfolio, but we're kind of thinking about it in really in kind of three different buckets.

You have got the 14,000 acres in Texas, then you have the 49,000 acres of timberlands in Georgia and Alabama that is really industrial and then there's the 25,000, some of which is the discontinued entitlement in process assets in Georgia. so we're going to look at what's best and we could package those that's why we're intermediary that will add some value to us. We're going to look at what's the best way to market those. It could be to one buyer, could be to where you create one large package, but then have a series of smaller packages that have higher value to them.

So we're going to be very strategic about how we do this and I can tell you there's lots of interest from folks. You know, when we made the changes in September we got lots of calls from people saying if you're going to exit your timber, let me know. So we know that community. I would further add that Ashton Hudson, who just joined our Board, has a lot of experience notice timber area, is a great addition to our Board, and so we're going to be very thoughtful about how we do it and maximize the value that we realize.

Okay. Great. Appreciate the did detail there. And then last one and then I'll jump off. Any update on the Hidden Creek project following capping of the Porter Ranch gas leak?

We continue to work on that project through the entitlement phase and as we get further along with that, we'll be able to bring that out and discuss more guidance on that.

Thank you. And our next question comes for from the line of Steve O'Hara with Sidoti. Your line is now open. Please go ahead.

Hi. Good morning. I think you said you had assigned NAVs to the portfolio. I was wondering if you would be willing to, maybe, comment in terms of your estimated NAV and then how that might drive your capital allocation decisions and what you can do in terms of repaying debt or buying stock as some of these non-core assets are sold. Thank you.

Yes. Steve, good morning. I don't think it's in the best interest for the shareholders for us to disclose what our entity level NAV calculations are and as we have gone through today and as we have said, you know, we have a heavy focus on exiting non-core assets and so, as a seller, I'm also reluctant to put out into the market what I think the value of those assets are because I want a buyer who maybe is a better owner and places a higher value on those assets to make a bid for what it's worth to them.

We might have a very different view in our NAV calculation of what asset is, I'm not going it comment on the amount, but if you look at Kansas-Nebraska, I think it was a good example of we're not in that business. It's not a core business for us. The buyer is in that business, it's a core business for them, they have, probably, different assumptions that they're using. They're maybe looking at a different horizon for owning that asset than we could and so that's kind of the process that we're going to go through and I don't think it's in the best interests for us to publish the NAV.

Okay. I assumed that was the answer, but I figured I had to ask it in anyway.

Sure.

And then in terms of your ability to repay debt or re buy, repurchase some of the debt, you know, maybe what's the desire or the ability to do that and versus, maybe, the desire to grow, you know, the I'll say core businesses as well? If you could just talk about that briefly answered then that's it for me thank you.

Yes, sure. Let ma take the second part of it first. I think one of our goals today, and Michael, I think, did a terrific job of giving you some pretty specific guidance on the core community development business of what we see 2016 looking like, 1,600 to 1,800 lot sales, you know, which is a positive increase over last year and kind of our view of that business is the fundamentals of that business are stable and positive moving forward.

In terms of the first part of your question, you know, again, our heavy focus is on exiting the non-core assets and as we get sales proceeds from those, you know, we will take action that's in the best interest of the shareholders. I don't think it's in the best interest of the shareholders to telegraph any specific strategies for those proceeds right now.

Okay. Thank you.

Thank you. And our next question comes from the line of Edward Okine with Basso. Your line is now open. Please go ahead.

Thank you. My questions have been answered. Thank you.

Thank you. And we'll move on. Our next question comes from the line of Kevin (inaudible) with Prospector. Your line is now open. Please go ahead.

Hello. Maybe you already answered this one, but with the ongoing cost cuts what should we think about in terms of.

Kevin, I'm sorry, we can't hear you.

Can you hear me?

Yes, a little bit better.

Alright. Sorry. With the ongoing cost cuts what should we expect in terms of 2016 G&A not allocated to segments and, sort of directionally, how should we think about that once all of the non-core asset sales are completed?

Yes, Kevin. This is Chuck. The slide that Phil walked through earlier, as we look at, you know, as we exit a lot of the cost restrictions are contingent upon the timing of exiting certain non-core asset and that's across the organization. The segments as well as G&A, but on the 2016 estimate of $56 million, you know, our G&A unallocated is a little under $20 million in that $56 million estimate provided and that's down from about $27 million in 2015 actuals.

And as we kind of look forward in the target that number is about $17 million of the $39 million target that Phil discussed earlier. So, and again that target timing is really dependent on our execution of the non-core assets and in the further reduction of those costs.

Thank you.

You're welcome.

Thank you and question comes from the line of David Spier with Nitor Capital. Your line is now open. Please go ahead.

Hi. Good morning everyone. It looks like you guys are off to a solid start so far in executing the plan that's been laid out. So in regards to the, I just wanted to clarify, the Kansas-Nebraska asset sale, I just want to confirm that sale closed subsequent to Q4 so the cash hasn't shown up in numbers yet, right.

Yes. That's right, David. It actually closed yesterday.

Got it okay. So it's not, obviously, it's not in the numbers that were just put out.

No. It's not in the $96 million that's in the release at year-end cash on the balance sheet.

Got it. So then following the closing of Radisson and the Oil and Gas sales is there any idea of how much cash the Company could be sitting with?

Yes. I mean as Phil talked about earlier, I think we'll provide more details on cash on hands as we, and in our initiatives to strategies an allocation of capital as we execute the sales but, you know, I don't think today, you know, as we complete the sales we'll announce that, but doing that prematurely, I think, would be getting ahead a little bit.

Got it. Alright, well, I mean, it just looks like by, at least our numbers, I mean, you should be sitting with something well over at least $200 million, but again that's our numbers. I would just like to make the following point in terms of capital allocation. Seems like you guys could do a significant buyback here so I think that should be something of a priority right behind the debt reduction.

So I just wanted to mention something that I guess could be repeated to Board, but it seems like you are more than capable of being able to execute that. And then just the last question is any idea of what the book value on the remaining residential commercial end is?

The book value on the remaining commercial?

Yes. The investment base book value.

Yes. We're actually going to, David, going to be filing our 10-K later this week so that information will be in the K when it comes out.

Got it. Alright. Well, thanks, guys. I appreciate it.

You bet. Thank you.

Thank you. And our next question comes productivity line of Ben Claremon with Cove Street Capital. Your line is now open. Please go ahead.

Good morning. This is Jeff Bronchick and Ben. How are you?

Hi, Ben. Hi, Jeff.

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?

No, Ben, the Oil and Gas tax basis is, approximates book basis so, you know, the Oil and Gas assets when they're sold, you know, estimated fair value there will be a tax book or pretty much in 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, you know, 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 particular similar to Antioch, California.

Maybe I didn't ask that question correctly. The write-offs that we have had to-date can be used to shield gains?

The write-offs of the Oil and Gas assets?

Correct. You just look (inaudible).

Yes.

The big loss you just reported those losses.

Yes. Right.

Can be used to shield-.

And I'm saying, no. The answer is that in the oil and gas business as you expend drilling and completion costs you deduct 100% of the IDCs and intangible drilling in the year you spend it and we have not been drilling wells in the oil and gas business and participating as much as in the past so a lot of those deductions have been taken so far against current taxable income. So it's the tax basis approximates book, you know, on the oil and gas assets.

Got it. Thanks, guys.

You're welcome.

Thank you. And our next question comes Robert Howard with [Garnett] Research. Your line is now open. Please go ahead.

Hi. I just wanted to ask a question, kind of, maybe a big picture thing. You know, you guys were talking about all these asset sales and you have been reducing all these cost and just wanted to get a feel for, you know, after all of this process is done over the next year or so what do you want Forestar to look like?

I mean is it just going to be just developing land, are there going to be any assets that you're going to be sort of saying hey, we want to hold these long-term so we have some supplemental income stream to, kind of, get us through the up and down times? What are you thinking of for big picture?

Yes. Rob, thank you. This is Phil. As I said, we have heavy focus on reducing costs and exiting the non-core assets and I don't want to minimize. That's a lot of work and, as we have said, with the multifamily portfolio, you know, we have five assets we're marketing, we have a strategy on the remaining three, four, and the Radisson Hotel is under contract it hasn't closed yet. There's work to be done.

So we're just beginning the process for exiting the timber and so we have a lot of work to do there and as we complete the sales, then I think we will be able to give more guidance on what our strategies will be moving forward. And if you look at Forestar from a year ago, basically we have taking action on almost all of the assets that we owned, other than the legacy mineral assets and the core Community Development business ,and when I took this job, on my first call I said, our core business is lot development and Michael gave you a lot of guidance today on what we're going to be doing in 2016 in that business.

So it's kind of, I view it as kind of two tracts of exiting the non-core assets and we gave you the guidance of the plan for 2016 in the core business. Chuck gave you some guidance on the legacy mineral assets, as he said, the goal is to reduce the costs to where those are producing positive cash flow for us without a lot of expenses. The royalty interest. So it's a really good place to be. And as we make progress on non-core, we will quickly get to having to make decisions on core going forward.

Okay. So is there going to be, I guess you envision there being any, or I guess you have the mineral assets you're saying that will kind of be something that will be bringing in income. I guess, one thing I am kind of thinking about is, obviously, the markets real estate development there's good times and bad times and is there going to be anything that, kind of, gives you an income stream to sort of help you get through that?

You're talking about selling your timberlands and that's something that would, you know, help provide income stream, you know, during a wait and those types of things. I mean do you envision there being any type of asset that you're going to be kind of holding on to help sort of stabilize things?

Well, I think near-term I think we're looking somewhat at the legacy mineral assets would fall into that category of there's not a lot of operating expense to them. There's not a lot of people expense to them, but having said that, you know, one of the criterion that we have used on everything is are there better owners of assets that we own that place a higher value on them than Forestar does or can and so I don't want to be definitive on the future of the legacy mineral asset because it is entirely possible that somebody who places a much higher value on those it would be in the best interests of Forestar for us also to potentially exit those.

It's not our near-term plan to do that and with the core Community Development I think we have given un the guidance we want to give you for 2016 and, you know, which is a positive increase over next year. We think the fundamentals of the business are solid, but as we work through this year, as we make decisions and working with our Board and getting guidance from our Board, we will share those strategies with you going forward.

Okay. Thanks for your time.

Thank you, sir.

Thank you. And our next question comes from the line of Albert Sebastian with Prospect Advisors. Your line is now open. Please go ahead.

Good morning.

Morning, Al.

What are your NOLs at year-end?.

Al, our NOLs will be a little under $38 million going forward. It will be announced in the 10-K letter this week.

Okay. You sold about almost 14,000 acres of un developed land in 2015. When you take a look at the, you know, the un developed land that you're going to be selling, you've got the three buckets. Which buckets of this 14,000 acres sold, which buckets does it fall? Is it timberlands or higher and better use or what is it?

Al, this is Michael. It was a blending throughout last year just like we try to do every year we're about maximizing that value so I would tell you that of those 14,000 acres we sold it would be just a blend across all three buckets.

Al, we did have one sale in the fourth quarter that was out of the timberland bucket that was about 7,000 acres.

That's correct.

So of the 14,000 about half of it I would say, was in the industrial timberland.

Okay. You say in the fourth quarter you had 7,000 acres that were sold out of the timberland bucket?

Right. I think my KPI (inaudible) earlier about 7,267 total acres in fourth quarter. About 6,900 of that was a bulk transaction. So that would have been from our retail bucket or our timber plus.

Okay. The higher and better use timberland.

Yes.

Okay. That'll do it for me. Thank you.

Thanks, Al.

Thank you. And I'm showing no further questions. At this time, ladies and gentlemen, thank you for participating in today's conference. You may all disconnect. Everyone have a great day.