Forestar Real Estate Group Inc. Reports Fourth Quarter and Full Year 2007 Results

AUSTIN, Texas--(Business Wire)--
Forestar Real Estate Group Inc. (NYSE: FOR) today reported
essentially break-even results in fourth quarter 2007. Net income for
full year 2007 was $24.8 million, or $0.69 per proforma diluted share.

"The spin-off of Forestar Real Estate Group Inc. as an independent
company from Temple-Inland Inc. was completed December 28, 2007," said
Jim DeCosmo, president and chief executive officer of Forestar Real
Estate Group. "Forestar is focused on maximizing long-term shareholder
value through entitlement and development of real estate, realization
of value from natural resources and accelerated growth through
strategic and disciplined investment.

"Results for Forestar Real Estate Group are reported in two
business segments: real estate and natural resources. Forestar real
estate includes about 373,000 acres of land owned directly or through
ventures located in ten states and thirteen markets. Forestar natural
resources includes 622,000 net acres of oil and gas mineral interests.
In addition, Forestar sells wood fiber from its land primarily located
in Georgia.

"Our 2007 value creation activities include:

-- Entitling approximately 1,700 acres, representing over 900
residential lots, and moving nearly 4,300 acres into the
entitlement process

-- Negotiating 58% ownership interest in Ironstob, LLC venture
with the Jones Company which includes 17,000 acres of
undeveloped land

-- Entering into an agreement with Marriott, TPC, and Miller
Global for the development of a Marriott resort hotel, spa and
two TPC golf facilities at our Cibolo Canyons mixed-use
development near San Antonio, Texas

-- Acquiring nearly 3,700 acres, representing 5,500 estimated
residential lots and 140 commercial acres

-- Leasing to oil and gas companies approximately 30,000 net
mineral acres for exploration and production activities

-0-
*T
Real Estate
----------------------------------------------------------------------

4th Qtr. 4th Qtr. 3rd Qtr. Year Year
Segment Earnings 2007 2006 2007 2007 2006
---------------------- -------- -------- --------- -------- ----------
($ in Millions) ($0.2) $15.4 $13.0 $39.5 $70.3
---------------------- -------- -------- --------- -------- ----------
*T

Fourth quarter 2007 segment earnings were negatively impacted by
$3.9 million impairment expense principally associated with a
commercial golf club operation in Granbury, Texas.

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*T
Sales Activity
----------------------------------------------------------------------

Q4 2007 Full Year 2007
--------------------------- -------------------------
Sales Price Sales Price
------------- ------------- ----------- -------------
Undeveloped Land 693 acres $5,900/acre 2,617 acres $6,700/acre
Residential Lots 309 lots $45,900/lot 1,707 lots $52,900/lot
Commercial Acres 23 acres $390,600/acre 198 acres $261,200/acre
---------------- ------------- ------------- ----------- -------------
*T

Including joint-venture activity, 693 acres of undeveloped land
were sold during fourth quarter 2007 at an average sales price of
approximately $5,900 per acre.

Residential development activity for all wholly and
partially-owned projects during fourth quarter 2007 included the sale
of 309 lots at an average price of approximately $45,900 per lot.

Commercial activity for all wholly and partially-owned projects
during fourth quarter 2007 included the sale of 23 acres at an average
price of $390,600 per acre.

Real Estate Pipeline

Forestar's real estate segment includes about 373,000 acres of
land owned directly or through ventures located in ten states and
thirteen markets.

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*T
In Developed &
Entitlement Under Total
Real Estate Undeveloped Process Entitled Development Acres(a)
------------- ----------- ------------ -------- ------------ ---------

Undeveloped
Land
Owned 320,458
Ventures 7,363 327,821

Residential
Owned 24,814 7,885 445
Ventures 870 4,905 1,363 40,282

Commercial
Owned 2,906 658 324
Ventures 585 288 4,761

Total Acres 327,821 28,590 14,033 2,420 372,864
----------- ------------ -------- ------------ ---------

----------------------------------------------------------------------
Estimated Residential
Lots 24,760 5,090 29,850
----------------------------------------------------------------------

(a) Total acres excludes Forestar's 58% ownership interest in
Ironstob, LLC venture with Jones Company which controls approximately
17,000 acres of undeveloped land.
*T

Entitlement Activity

At year end 2007, Forestar has 24 real estate projects
representing over 28,000 acres in the entitlement process, including
ventures. During fourth quarter 2007, two projects, representing 741
acres were entitled, which include over 290 residential lots.

"Our real estate operation continues to focus on maximizing
long-term shareholder value through the entitlement process," said Mr.
DeCosmo. "During 2007, nearly 4,300 acres of undeveloped land were
moved into entitlement. In addition, seven projects, comprising
approximately 1,700 acres were entitled in 2007, which represent over
900 residential lots."

Including venture activity, Forestar currently has approximately
14,033 acres of entitled land, representing approximately 24,760
residential lots and 1,243 commercial acres.

Development Activity

Forestar has 2,420 acres developed and under development directly
or through ventures, which represent 5,090 lots and 612 commercial
acres.

In 2007, Forestar entered into an agreement with Marriott, TPC,
and Miller Global for the development of a 1,002 room Marriott resort
hotel, spa and two TPC golf facilities at our 2,800 acre Cibolo
Canyons mixed-use development near San Antonio, Texas.

"Forestar is focused on investment in development where market
conditions support lot sales to homebuilders," said Mr. DeCosmo.

Venture Activity

During fourth quarter 2007, the company entered into the Ironstob,
LLC venture with The Jones Company, Ltd. of Dallas, Georgia. The
venture controls approximately 17,000 acres of undeveloped land in
Georgia owned by The Jones Company. This land is located principally
in Paulding County, and is subject to a long-term timber lease with
Forestar Real Estate Group. Forestar is the venture's managing member
with 58% ownership and Atlanta-based Bullock-Mannelly Partners will
serve as the local operating manager. "This venture further improves
our company's strategic land positions in Georgia, and provides
significant long-term value for our shareholders," said Mr. DeCosmo.

Investment Activity

During 2007, Forestar invested $54.4 million in nine real estate
projects, which include 3,600 acres of residential and 140 acres of
commercial property. Seven of the nine projects acquired were in the
major markets of Texas.

"Forestar continues to examine opportunities to acquire discounted
real estate assets," said Mr. DeCosmo.

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*T
Natural Resources
----------------------------------------------------------------------

4th Qtr. 4th Qtr. 3rd Qtr. Year Year
Segment Earnings 2007 2006 2007 2007 2006
------------------------- -------- --------- -------- ------- --------
($ in Millions) $7.5 $2.8 $8.3 $26.5 $33.0
*T

Fourth quarter 2007 segment earnings include a $2.2 million gain
from the partial termination of a timber lease with the Jones Company
in connection with the formation of the Ironstob venture.

Mineral Activity

Forestar owns 622,000 net acres of oil and gas mineral interests
in Texas, Louisiana, Alabama and Georgia.

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*T
Mineral Value Chain YE 2007 Net Acres 2007 Revenues
---------------------- ----------------- -------------

Royalty Interest 25,000 $13.1 million

Leased 77,000 $7.7 million

Available for Lease(a) 520,000
-----------------

Total 622,000 $20.8 million
---------------------- ----------------- -------------

(a) Includes approximately 46,000 net acres subject to a lease option.
*T

During 2007, Forestar leased 30,000 net mineral acres generating
$7.7 million from lease bonuses and delay rental payments. In
addition, Forestar received royalty interest revenues from 331
producing wells owned and operated by third parties on its mineral
acres, up from 294 active wells at year end 2006. During 2007, our
share of oil and gas produced related to our royalty interests was
over 87,000 barrels of oil and approximately 500,000 MCF of natural
gas.

"Forestar continues to benefit from high oil and gas prices," said
Mr. DeCosmo.

Fiber Sales Activity

During 2007 Forestar generated $13.7 million in revenues from the
sale of approximately 1.2 million tons of fiber, the majority of which
was sold to Temple-Inland Inc. at market prices.

Comments

In announcing fourth quarter and full year 2007 results, Mr.
DeCosmo said, "Despite challenging market conditions for our real
estate segment, we remain committed to maximizing long-term
shareholder value through entitlement and development of real estate
and realization of value from natural resources.

"In addition, we are also committed to increasing the value of our
land through economic development activities. During 2007, we hired
Glenn Cornell, former Commissioner of the Georgia Department of
Economic Development, as senior vice president of economic development
in Georgia. Glenn brings more than 40 years of statewide business and
economic development experience, including leadership positions in
government, banking, and real estate. We believe his unique
qualifications will assist in the execution of Forestar's strategy to
maximize and grow long-term shareholder value."

"Forestar's management team is excited about our spin-off from
Temple-Inland, and is committed to executing our strategy to deliver
long-term value for shareholders," concluded Mr. DeCosmo.

The Company will host a conference call on February 6, 2008 at
11:00 am EST to discuss results of fourth quarter and full year 2007.
The meeting may be accessed through webcast or by conference call. The
webcast may be accessed through Forestar's Internet site at
www.forestargroup.com. To access the conference call, listeners
calling from North America should dial 1-800-638-5439 at least 15
minutes prior to the start of the meeting. Those wishing to access the
call from outside North America should dial 1-617-614-3945. The
password is Forestar. Replays of the call will be available for two
weeks following the completion of the live call and can be accessed at
1-888-286-8010 in North America and at 1-617-801-6888 outside North
America. The password for the replay is 88089998.

About Forestar Real Estate Group

Forestar Real Estate Group Inc. operates in two business segments:
real estate and natural resources. The real estate segment owns
directly or through ventures about 373,000 acres of real estate
located in ten states and thirteen markets in the U.S. The real estate
segment has 24 real estate projects representing over 28,000 acres
currently in the entitlement process and over 75 active development
projects in eight states and 12 markets encompassing approximately
16,000 acres, comprised of about 30,000 residential lots and
approximately 1,900 commercial acres. The natural resources segment
manages about 622,000 net acres of oil and gas mineral interests,
sells wood fiber from its land primarily located in Georgia, and
leases land for recreational uses. Forestar's address on the World
Wide Web is www.forestargroup.com.

Forward-looking Statements

This release contains "forward-looking statements" within the
meaning of the federal securities laws. These statements reflect
management's current views with respect to future events and are
subject to risk and uncertainties. We note that a variety of factors
and uncertainties could cause our actual results to differ
significantly from the results discussed in the forward-looking
statements. Factors and uncertainties that might cause such
differences include, but are not limited to: general economic, market,
or business conditions; the opportunities (or lack thereof) that may
be presented to us and that we may pursue; fluctuations in costs and
expenses including development costs; demand for new housing,
including impacts from mortgage credit availability; lengthy and
uncertain entitlement processes; cyclicality of our businesses;
accuracy of accounting assumptions; competitive actions by other
companies; changes in laws or regulations; and other factors, many of
which are beyond our control. Except as required by law, we expressly
disclaim any obligation to publicly revise any forward-looking
statements contained in this news release to reflect the occurrence of
events after the date of this news release.

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*T
FORESTAR REAL ESTATE GROUP
UNAUDITED

Business Segments
----------------------------------------------------------------------

Fourth Quarter Full Year
--------------------- -------------------
2007 2006 2007 2006
--------- --------- -------- --------
(In thousands, (In thousands,
except per share) except per share)
Revenues
-------------------------
Real estate $ 27,462 $ 35,154 $ 142,729 $ 180,151
Natural resources 8,151 6,958 35,257 45,409
--------- --------- -------- --------
Total revenues $ 35,613 $ 42,112 $ 177,986 $ 225,560

Segment earnings
-------------------------
Real estate $ (223) $ 15,439 $ 39,507 $ 70,271
Natural resources 7,481 2,784 26,531 33,016
--------- --------- -------- --------
Total segment
earnings 7,258 18,223 66,038 103,287
Expenses not allocated to
segments
General and
administrative (5,158) (3,675) (17,413) (14,048)
Share-based
compensation 481 (361) (1,397) (1,275)
Interest expense (2,768) (1,549) (9,229) (6,229)
Other non-operating
income (expense) 251 71 705 79
--------- --------- -------- --------
Income before taxes 64 12,709 38,704 81,814
Income (taxes) benefit 42 (4,774) (13,909) (29,970)
--------- --------- -------- --------
Net income $ 106 $ 7,935 $ 24,795 $ 51,844
========= ========= ======== ========

Proforma diluted earnings
per share:
-------------------------
Net income $ - $ n/a $ 0.69 $ n/a
========= ========= ======== ========

Proforma average diluted
shares outstanding 36.0 n/a 36.1 n/a

Reconciliation of Non-
GAAP Financial Measures:
-------------------------

Weighted avg. shares
outstanding - basic 35.4 35.4
Proforma dilutive effect
of stock options 0.6 0.7
-------- --------
Proforma weighted avg.
shares outstanding -
diluted 36.0 36.1

Full Year
-------------------
Supplemental Financial
Information 2007 2006
------------------------- -------- --------
($ in thousands)

Borrowings under credit
facility $ 175,000 $ 110,506
Other debt(a) 91,015 50,611
-------- --------
Total Debt $ 266,015 $ 161,117

(a) Consists principally of consolidated venture non-recourse debt.
*T

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*T
A summary of projects in the entitlement process(a) at year-end 2007
follows:

Project
Project County Acres(b)
---------- ------------------ ------------

California
----------

Hidden Creek Estates Los Angeles 700
Terrace at Hidden Hills Los Angeles 30

Georgia
----------

Ball Ground Cherokee 500
Burt Creek Dawson 970
Corinth Landing Coweta 850
Crossing Coweta 230
Fincher Road Cherokee 1,060
Fox Hall Coweta 930
Garland Mountain Cherokee/Bartow 350
Genesee Coweta 720
Grove Park Coweta 150
Home Place Coweta 1,500
Jackson Park Jackson 690
Lithia Springs Haralson 120
Mill Creek Coweta 770
Pickens School Pickens 420
Serenity Carroll 440
Waleska Cherokee 150
Wolf Creek Carroll 12,230
Yellow Creek Cherokee 1,060

Texas
----------
Lake Houston Harris/Liberty 3,700
San Jacinto Montgomery 150
Entrada(c) Travis 240
Woodlake Village(c) Montgomery 630
------------

Total 28,590
============

(a) A project is deemed to be in the entitlement process when
customary steps necessary for the preparation and submittal of an
application, like conducting pre-application meetings or similar
discussions with governmental officials, have commenced, or an
application has been filed. Projects listed may have significant
steps remaining, and there is no assurance that entitlements
ultimately will be received.

(b) Project acres, which are the total for the project regardless of
our ownership interest, are approximate. The actual number of acres
entitled may vary.

(c) We own a 50% interest in these projects.
*T

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*T
A summary of activity within our entitled,(a) developed and under
development projects at year-end 2007 follows:

Interest
Project County Owned(b)
---------------------------- ------------ ------------

Projects we own

California
----------------------------
San Joaquin River Contra Costa 100%

Colorado
----------------------------
Buffalo Highlands Weld 100%
Johnstown Farms Weld 100%
Pinery West Douglas 100%
Stonebraker Weld 100%
Westlake Highlands Jefferson 100%

Texas
----------------------------
Arrowhead Ranch Hays 100%
Caruth Lakes Rockwall 100%
Cibolo Canyons Bexar 100%
Harbor Lakes Hood 100%
Harbor Mist Calhoun 100%
Hunter's Crossing Bastrop 100%
Katy Freeway Harris 100%
La Conterra Williamson 100%
Maxwell Creek Collin 100%
Oak Creek Estates Comal 100%
The Colony Bastrop 100%
The Gables at North Hill Collin 100%
The Preserve at Pecan Denton
Creek 100%
The Ridge at Ribelin Ranch Travis 100%
Westside at Buttercup Williamson
Creek 100%
Other projects (10) Various 100%

Georgia
----------------------------
Towne West Bartow 100%
Other projects (9) Various 100%

Missouri and Utah
----------------------------
Other projects (3) Various 100%

Projects in entities we
consolidate

Texas
----------------------------
City Park Harris 75%
Lantana Denton 55%(e)
Light Farms Collin 65%
Stoney Creek Dallas 90%
Timber Creek Collin 88%
Other projects (6) Various Various

Tennessee
----------------------------
Youngs Lane Davidson 60%

Total owned and consolidated

Projects in ventures that we
account for using the
equity method

Georgia
----------------------------
Seven Hills Paulding 50%
The Georgian Paulding 38%
Other projects (5) Various Various

Texas
----------------------------
Bar C Ranch Tarrant 50%
Fannin Farms West Tarrant 50%
Lantana Denton Various(e)
Long Meadow Farms Fort Bend 19%
Southern Trails Brazoria 40%
Stonewall Estates Bexar 25%
Summer Creek Ranch Tarrant 50%
Summer Lakes Fort Bend 50%
Village Park Collin 50%
Waterford Park Fort Bend 50%
Other projects (3) Various Various

Florida
----------------------------
Other projects (3) Various Various

Total in ventures
Combined Total

Residential Lots (c) Commercial Acres (d)
-------------------- ---------------------

Lots Sold Acres Sold
Since Lots Since Acres
Project Inception Remaining Inception Remaining
--------------------------- --------- ---------- ---------- ----------

Projects we own

California
---------------------------
San Joaquin River - - - 285

Colorado
---------------------------
Buffalo Highlands - 164 - -
Johnstown Farms 115 699 - -
Pinery West - - - 115
Stonebraker - 603 - 13
Westlake Highlands - 21 - -

Texas
---------------------------
Arrowhead Ranch - 232 - 5
Caruth Lakes 245 404 - -
Cibolo Canyons 466 1,283 64 81
Harbor Lakes 197 252 - 14
Harbor Mist - 1,393 - 36
Hunter's Crossing 308 183 23 83
Katy Freeway - - 38 -
La Conterra - 509 - 60
Maxwell Creek 594 429 - -
Oak Creek Estates - 648 13 -
The Colony 380 1,045 22 50
The Gables at North Hill 193 90 - -
The Preserve at Pecan
Creek 156 663 - 9
The Ridge at Ribelin
Ranch - - 179 22
Westside at Buttercup
Creek 1,239 289 66 -
Other projects (10) 2,879 128 233 48

Georgia
---------------------------
Towne West - 2,674 - 121
Other projects (9) - 1,777 - 40

Missouri and Utah
---------------------------
Other projects (3) 775 242 - -
--------- ---------- ---------- ----------
7,547 13,728 638 982
Projects in entities we
consolidate

Texas
---------------------------
City Park 873 438 50 115
Lantana 346 2,004 - -
Light Farms - 2,501 - -
Stoney Creek 1 753 - -
Timber Creek - 654 - -
Other projects (6) 997 387 24 23

Tennessee
---------------------------
Youngs Lane - - - 16
------------------------------------------
2,217 6,737 74 154

--------- ---------- ---------- ----------
Total owned and
consolidated 9,764 20,465 712 1,136

Projects in ventures that
we account for using the
equity method

Georgia
---------------------------
Seven Hills 627 453 26 -
The Georgian 287 1,098 - -
Other projects (5) 1,844 188 3 -

Texas
---------------------------
Bar C Ranch 175 1,006 - -
Fannin Farms West 236 207 - -
Lantana 1,764 84 3 77
Long Meadow Farms 598 1,508 24 186
Southern Trails 250 812 - -
Stonewall Estates 114 138 - -
Summer Creek Ranch 793 1,695 - 374
Summer Lakes 294 850 48 3
Village Park 335 234 - 5
Waterford Park - 493 - 37
Other projects (3) 282 247 - 37

Florida
---------------------------
Other projects (3) 473 372 - -
--------- ---------- ---------- ----------

Total in ventures 8,072 9,385 104 719
========= ========== ========== ==========
Combined Total 17,836 29,850 816 1,855
========= ========== ========== ==========

(a) A project is deemed entitled when all major discretionary land-use
approvals have been received. Some projects may require additional
permits for development.

(b) Interest owned reflects our equity interest in the project,
whether owned directly or indirectly. There are some projects that
have multiple ownership structures within them. Accordingly, portions
of these projects may appear as owned, consolidated and/or accounted
for using the equity method.

(c) Lots are for the total project, regardless of our ownership
interest.

(d) Commercial acres are for the total project, regardless of our
ownership interest and are net developable acres, which may be fewer
than the gross acres available in the project.

(e) The Lantana project consists of a series of 21 partnerships in
which our voting interests range from 25% to 55%. We account for
eight of these partnerships using the equity method and we
consolidate the remaining partnerships.
*T

Forestar Real Estate Group Inc., Austin
Chris L. Nines, 512-433-5210

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