FORESTAR RE GROUP (NYSE:FOR) filed Quarterly Report for the period ended 2010-09-30.
Forestar Re Group has a market cap of $648.1 million; its shares were traded at around $18.04 with and P/S ratio of 4.4. FOR is in the portfolios of John Keeley of Keeley Fund Management, Westport Asset Management, NWQ Managers of NWQ Investment Management Co, Arnold Schneider of Schneider Capital Management.
Highlight of Business Operations:In third quarter 2010, we sold about 14,100 acres of timber and timberland in Georgia and Alabama for $22,621,000 to East Coast Trading Co., Inc. in two separate transactions. These transactions generated net proceeds of $22,030,000, resulting in recognition of a $15,441,000 gain and $5,200,000 of deferred income tax expense. At third quarter-end 2010, the net proceeds from these transactions are held by a qualified intermediary as we plan to reinvest these proceeds in qualifying real estate, thereby deferring the gain for tax purposes under Internal Revenue Code Section 1031. As a result, the net proceeds are classified as a receivable pending reinvestment. We have until November 13, 2010 to identify qualified replacement properties, and until March 28, 2011 to acquire the identified properties. If we are unable to identify and close on the replacement properties within the required time periods, we will not be able to defer the gain for tax purposes and all deferred taxes related to these transactions will become currently payable.
At third quarter-end 2010, assets held for sale includes over 59,000 acres of undeveloped land with a carrying value of $13,517,000 and related timber with a carrying value of $7,848,000. We continue to actively market this land in accordance with these initiatives. Market conditions for timberland have deteriorated since second quarter 2009 due to increase investor return requirements, low consumer confidence and alternative investment options for buyers in the marketplace. As a result of these market conditions, additional time may be required to complete the sale of these assets.
In first nine months 2010, cost of sales includes a $900,000 non-cash impairment charge related to a residential real estate project located near Salt Lake City, Utah. In first nine months 2009, cost of sales includes a $3,050,000 non-cash impairment charge related to a condominium project in Austin, Texas.
In third quarter 2010, operating expenses principally consist of $1,718,000 in property taxes, $1,646,000 in professional services, $1,543,000 in employee compensation and benefits and $641,000 in depreciation. In third quarter 2009, operating expenses principally consist of $2,374,000 in property taxes, $1,312,000 in employee compensation and benefits, $729,000 in professional services and $555,000 in depreciation.
In first nine months 2010, operating expenses principally consist of $5,903,000 in property taxes, $4,674,000 in employee compensation and benefits, $3,080,000 in professional services and $2,089,000 in depreciation. In first nine months 2009, operating expenses principally consist of $7,881,000 in property taxes, $4,395,000 in employee compensation and benefits, $2,109,000 in professional services and $1,593,000 in depreciation. Property taxes decreased $1,978,000 principally due to selling about 130,000 acres of timberland in 2010 and 2009, professional services increased $971,000 primarily as a result of resourcing our multifamily business, and depreciation increased $496,000 principally due to improvements related to commercial operating properties.
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