Forestar Group Inc. Reports Full Year and Fourth Quarter 2011 Results

Forestar Group Inc. (NYSE: FOR):

Building Momentum by Increasing Oil Production, Proven Reserves and Residential Lot Sales

“We are well positioned to accelerate value realization of our oil and gas resources by growing production and reserves, a key driver of future earnings and cash flow. Executing our strategy to drive exploration and production is clearly demonstrated in Louisiana given the significant growth in production and proven reserves. In addition, our increased residential lot sales reflect our ability to grow market share despite depressed housing starts. Residential real estate conditions in the major markets of Texas continue to experience declining finished lot inventories and minimal new development activity, which should benefit Forestar given our well positioned portfolio of over 50 active communities and significant experience in these markets,” said Jim DeCosmo, president and chief executive officer of Forestar Group Inc.

Full Year 2011 Significant Highlights

Minerals – Oil & Gas

Oil production up over 32% compared with 2010
Year-end 2011 proven reserves of 17.9 Bcfe, up 26% compared with 2010
Year-end 2011 PV-10 proven reserves* up 81% or $36.7 million compared with 2010
36 additional oil and gas wells completed; 530 total producing wells at year-end
Exercised working interest options in three oil wells in Louisiana
68,000 net mineral acres put in play through leases, seismic and exploration agreements

Real Estate

Sold 1,117 developed residential lots, a 39% increase compared with 2010 – over 1,350 lots under option contracts at year-end
Received $8.7 million from Cibolo Canyons Special Improvement District
Sold over 17,100 acres of undeveloped land for $40.5 million through our retail sales program
Invested $63 million in segment; investments expected to exceed return criteria and deliver near-term cash flow and earnings
Initiated construction of 289-unit multifamily residential community in Austin, Texas

*These are Non-GAAP financial measures. The reconciliation between GAAP and Non-GAAP measures is provided in the tables following this press release, and on the investor relations section of the company’s website.

Strategic Initiatives

Sold 57,000 acres of timberland in Georgia, Alabama and Texas for $87 million, effectively completing our timberland sales initiatives
Repurchased almost one million shares of our common stock

Strategic Acquisition

On February 20, 2012, we entered into definitive agreements to acquire for a net investment of $23.5 million, the entire interest in certain assets from the CL Realty and TEMCO ventures, two ongoing ventures with Cousins Properties. The acquisition price for these real estate assets is approximately 50% of the ventures’ book basis prior to the sale. After this purchase we will own 100% of the ventures’ interest in 17 residential and mixed-use real estate projects. These communities include over 1,200 fully developed lots, almost 4,900 planned lots, and over 475 commercial acres. Over 70% of these residential lots and commercial acres are located in the major markets of Texas, relatively speaking, some of the healthiest markets in the U.S. During 2011, these projects generated sales of 456 residential lots and 20 commercial acres for $19.8 million. Our share of CL Realty and TEMCO pre-tax loss was ($32.5) million in 2011, and was principally due to non-cash asset impairment charges associated with entering into agreements to acquire certain assets from these ventures in first quarter 2012.

Full Year 2011 Financial Results

As reported net income of $7.2 million, or $0.20 per share, after-tax, includes
Non-cash impairments of ($29.4) million, or ($0.82) per share, after-tax
Gain on sale of timberland of $40.2 million, or $1.12 per share, after-tax

Forestar Group Inc. (NYSE: FOR) today reported full year 2011 net income of $7.2 million, or $0.20 per diluted share, compared with full year 2010 net income of $5.1 million, or $0.14 per diluted share. Full year 2011 results include an after-tax gain of $1.12 per diluted share from the sale of 57,000 acres of timberland, compared with an after-tax gain of $0.51 per diluted share from the sale of about 24,000 acres of timberland in 2010. Full year 2011 results also include pre-tax charges of $45.2 million from non-cash asset impairments, compared with $11.3 million in 2010.

Fourth Quarter 2011 Financial Results

As reported net loss of ($22.9) million, or ($0.65) per share, after-tax, includes
Non-cash impairments of ($28.9) million, or ($0.82) per share, after-tax

The company reported a fourth quarter 2011 net loss of ($22.9) million, or ($0.65) per share, compared with net income of $2.4 million, or $0.07 per diluted share in fourth quarter 2010. Fourth quarter 2011 results include pre-tax charges of $44.5 million from non-cash asset impairments, which represents an after-tax charge of ($0.82) per share. Fourth quarter 2010 results include an after-tax gain of $0.24 per diluted share, from the sale of over 9,800 acres of timberland for approximately $16.2 million and an after-tax charge of ($0.19) per share from non-cash asset impairments.

Forestar manages its operations through three business segments: Mineral Resources, Real Estate and Fiber Resources.

MINERAL RESOURCES

Fourth Quarter 2011 Significant Highlights

Oil production up almost 80% compared with fourth quarter 2010
Year-end 2011 proven reserves of 17.9 Bcfe, up 26% compared with 2010
Year-end 2011 PV-10 proven reserves* up 81% or $36.7 million compared with 2010

Mineral Resources Segment Financial Results:

($ in millions)

4Q 2011

4Q 2010

FY 2011

FY 2010

Segment Revenues $6.8 $6.4 $24.6 $24.8 Segment Earnings $3.7 $6.1

$16.0 1

$22.8

1 Includes $3.9 million in costs associated with the development of our water resource initiatives

Mineral resources segment earnings declined in fourth quarter 2011 compared with fourth quarter 2010 principally due to lower lease bonus revenues and increased costs associated with developing our water initiatives as a result of our acquisition of a water resources company in fourth quarter 2010.

REAL ESTATE

Fourth Quarter 2011 Significant Highlights

Sold 309 finished residential lots, up 65% compared with fourth quarter 2010
Sold 13,200 acres of undeveloped land through our retail sales program for approximately $30.4 million, or $2,300 per acre
Received $6.6 million from Cibolo Canyons Special Improvement District

Real Estate Segment Financial Results:

($ in millions)

4Q 2011

4Q 2010

FY 2011

FY 2010

Segment Revenues $46.4 $14.3 $106.2 $68.3 Segment Earnings (Loss) ($25.0) ($5.5) ($25.7) ($4.6)

Fourth quarter 2011 real estate segment earnings were down compared with fourth quarter 2010 principally due to non-cash asset impairment charges of $44.5 million. Fourth quarter real estate segment results also include the sale of 13,200 acres of land for approximately $30.4 million. Full year 2011 real estate segment results include non-cash impairment charges of $45.2 million principally related to projects located near Atlanta, Georgia, Denver, Colorado, the Texas gulf coast, and entering into agreements to acquire certain assets from CL Realty and TEMCO ventures.

FIBER RESOURCES

Fourth Quarter 2011 Significant Highlights

Sold 49,700 tons of fiber
Recreational leasing activity remains strong, almost 99% of available land leased

Fiber Resources Segment Financial Results:

($ in millions)

4Q 2011

4Q 2010

FY 2011

FY 2010

Segment Revenues $0.9 $2.1 $4.8 $8.3 Segment Earnings $0.1 $1.2 $1.9 $5.1

Fourth quarter 2011 fiber resources segment results declined compared with fourth quarter 2010 principally due to reduced harvest volumes associated with the sale of over 74,000 acres of timberland during 2011 associated with our near-term strategic initiatives and retail land sales program. Recreational leasing activity remained strong during the quarter, with almost 99% of available land leased for recreation.

OUTLOOK

“Through the successful execution of our strategy to increase exploration, production and reserves, our Louisiana mineral interests have benefited from increased seismic, leasing and drilling activity. In addition to delivering significant increases in oil and gas royalties, this activity is creating opportunities to enhance value creation through investments in working interests. During 2011, we exercised working interest options to participate in three oil wells in Beauregard Parish, Louisiana. Going forward, we expect to participate in additional working interest investments, which provide Forestar with an additional low-cost, low-risk opportunity to realize the greatest value from every acre by securing a greater interest in oil and gas production.

“Natural gas prices continued to remain under pressure, principally due to increased production and mild temperatures which have resulted in record levels of inventory. As a result, we have experienced lower demand for mineral leases in East Texas as operators target capital investments toward drilling wells to hold existing leases. Longer-term, we are more positive on the outlook for natural gas given the abundance of domestic supplies which reduces the potential for geopolitical risk. In addition, natural gas is currently over 80% cheaper than oil on an energy equivalent basis.

“We continue to see improving housing fundamentals in our Texas markets, driven by continued tightening of finished residential lot inventories and relatively stable market demand. In addition, we remain confident that underlying fundamental demand for single and multifamily housing will improve as markets recover from the economic downturn.

“During 2011 we sold 57,000 acres of timberland, effectively completing the sale of 176,000 acres of timberland associated with our near-term strategic initiatives. In addition, excluding $26.5 million of non-recourse debt associated with the acquisition of a multifamily project during fourth quarter 2010, we have reduced debt over $150 million since first quarter 2009, and repurchased almost two million shares of our common stock since second quarter 2010. Through the successful execution of our strategic initiatives, we have transformed our balance sheet and increased financial flexibility, positioning the company to take advantage of growth opportunities. Going forward we are focused on accelerating value realization of our real estate and natural resources, optimizing our transparency and disclosures, and raising our net asset value through strategic and disciplined investments,” concluded Mr. DeCosmo.

The Company will host a conference call on February 22, 2012 at 10:00 am ET to discuss results of fourth quarter and full year 2011. The meeting may be accessed through webcast or conference call. The webcast may be accessed through Forestar’s website at www.forestargroup.com. To access the conference call, listeners calling from North America should dial 1-800-659-1942 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-617-614-2710. The password is Forestar. Replays of the call will be available for two weeks following completion of the live call and can be accessed at 1-888-286-8010 in North America and 1-617-801-6888 outside North America. The password for the replay is 91247359.

About Forestar Group

Forestar Group Inc. operates in three business segments: real estate, mineral resources and fiber resources. At year-end 2011, the real estate segment owns directly or through ventures almost 147,000 acres of real estate located in nine states and twelve markets in the U.S. The real estate segment has 16 real estate projects representing almost 27,600 acres currently in the entitlement process, and 75 entitled, developed and under development projects in seven states and eleven markets encompassing over 16,400 acres, comprised of approximately 27,100 residential lots and over 2,400 commercial acres. The mineral resources segment manages about 595,000 net acres of oil and gas mineral interests located principally in Texas, Louisiana, Alabama, and Georgia. Also included in the mineral resources segment is a 45% nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes from approximately 1.4 million acres in Texas, Louisiana, Georgia and Alabama and about 17,800 acres of groundwater leases in central Texas. The fiber resources segment includes the sale of wood fiber and management of our recreational leases. Forestar’s address on the World Wide Web is www.forestargroup.com.

Presentation of Information in this News Release

Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). PV-10 is the estimated future net cash flows from estimated proved reserves discounted at an annual rate of 10% before giving effect to income taxes. The company believes PV-10 is useful to investors because it is based on prices, costs and discount factors which are consistent from company to company, while the standardized measure is dependent on the unique tax situation of each individual company. PV-10 is not intended to represent the current market value of our estimated oil and natural gas reserves.

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.

FORESTAR GROUP INC. (UNAUDITED)

Business Segments

Fourth Quarter Full Year 2011 2010 2011 2010 (In thousands,

except per share)

(In thousands,

except per share)

Revenues

Real estate $ 46,354 $ 14,333 $ 106,168 $ 68,269 Mineral resources 6,800 6,403 24,584 24,790 Fiber resources 853 2,116 4,821 8,301 Total revenues $ 54,007 $ 22,852 $ 135,573 $ 101,360

Segment earnings (loss)

Real estate (a) $ (25,020 ) $ (5,517 ) $ (25,704 ) $ (4,634 ) Mineral resources 3,731 6,143 16,023 22,783 Fiber resources 103 1,158 1,893 5,058 Total segment earnings (loss) (21,186 ) 1,784 (7,788 ) 23,207 Items not allocated to segments General and administrative (b) (4,286 ) (3,903 ) (20,110 ) (17,341 ) Share-based compensation (6,668 ) (4,226 ) (7,067 ) (11,596 ) Gain on sale of assets - 13,166 61,784 28,607 Interest expense (4,079 ) (3,884 ) (17,012 ) (16,446 ) Other non-operating income 291 474 368 1,164 Income (loss) before taxes (35,928 ) 3,411 10,175 7,595 Income tax (expense) benefit 13,048 (963 ) (3,021 ) (2,470 ) Net income attributable to Forestar Group Inc. $ (22,880 ) $ 2,448 $ 7,154 $ 5,125 Net income (loss) per common share: Basic $ (0.65 ) $ 0.07 $ 0.20 $ 0.14 Diluted $ (0.65 ) $ 0.07 $ 0.20 $ 0.14 Weighted average common shares outstanding: Basic 35.2 35.2 35.4 35.9 Diluted 35.2 35.8 35.8 36.4

At Year-End

Supplemental Financial Information:

2011 2010 (In thousands) Borrowings under credit facility 130,000 125,000 Other debt (c) 91,587 96,589 Total debt $ 221,587 $ 221,589

(a) Real estate segment results include non-cash impairment charges of $44.5 million in fourth quarter 2011 and $45.2 million during full year 2011.

(b) 2011 general and administrative expenses include $3.2 million paid to outside advisors related to private debt offerings which were withdrawn due to the deterioration in terms available to us in the capital markets.

FORESTAR GROUP INC.

MINERAL RESOURCES SEGMENT

PERFORMANCE METRICS

Fourth Quarter Full Year MINERAL RESOURCES 2011 2010 2011 2010 Leasing Activity Acres Leased 320 5,200 8,100 16,900 Average Bonus / Acre $ 57 $ 371 $ 279 $ 457 Delay Rental Revenues $ 512,900 $ 84,000 $ 992,200 $ 2,167,600 Royalties1 Natural Gas Production (MMcf) 373.6 504.8 1,622.0 1,796.4 Average Natural Gas Price ($ / Mcf) $ 3.93 $ 3.94 $ 3.95 $ 4.26 Oil Production (Barrels) 49,700 27,800 151,900 115,400 Average Oil Price ($ / Barrel) $ 102.19 $ 74.84 $ 96.84 $ 73.09 MMcfe Production2 671.8 671.8 2,533.4 2,489.1 Average Price ($ / MMcfe) $ 9.75 $ 6.06 $ 8.34 $ 6.46 Well Activity3 Net Acres Held By Production 32,000 29,700 32,000 29,700 Wells Drilled 20 3 36 22 Producing Wells 530 494 530 494

1 Includes our share of activity from a venture in which we own a 50% interest. Our share of venture natural gas production activity is 95 MMcf and 493 MMcf in fourth quarter and full year 2011, and 227 MMcf and 573 MMcf in fourth quarter and full year 2010.

2 MMcfe - Million Cubic Feet Equivalent (converting oil to natural gas at 6 Mcfe / Bbl)

3 Wells are owned and operated by third-party lessees / operators

FOURTH QUARTER 2011MINERAL RESOURCES PIPELINE1

Forestar’s mineral resources segment includes approximately 595,000 net mineral acres principally located in Texas, Louisiana, Alabama and Georgia.

State

Availablefor Lease

Leased 2

Held byProduction 2

Total Texas 196,000 29,000 27,000 252,000 Louisiana 120,000 19,000 5,000 144,000 Georgia 157,000 - - 157,000 Alabama 40,000 - - 40,000 California 1,000 - - 1,000 Indiana 1,000 - - 1,000 Total 515,000 48,000 32,000 595,000

1 Includes ventures

2 Acres leased and held by production exclude 379 net mineral acres leased and 29 net mineral acres held by production in Colorado

FORESTAR GROUP INC. FIBER RESOURCES SEGMENT PERFORMANCE METRICS Fourth Quarter Full Year FIBER RESOURCES 2011 2010 2011 2010 Fiber Sales * Pulpwood Tons Sold 44,100 97,300 266,200 392,900 Average Pulpwood Price / Ton $ 9.31 $ 8.77 $ 8.69 $ 9.93 Sawtimber Tons Sold 5,600 53,400 56,800 144,300 Average Sawtimber Price / Ton $ 22.17 $ 15.75 $ 16.13 $ 17.94 Total Tons Sold 49,700 150,700 323,000 537,200 Average Price / Ton $ 10.76 $ 11.24 $ 10.00 $ 12.08 Recreational Activity Average Acres Leased 139,300 201,800 174,500 208,100 Average Lease Rate / Acre $ 8.83 $ 8.31 $ 8.80 $ 8.32

*The majority of our fiber sales were to Temple-Inland Inc. at market prices.

Note: Sales of fiber in fourth quarter and full year 2011 were impacted by the sale of over 74,000 acres of timberland associated with our strategic initiatives and retail land sales program since year-end 2010.

FORESTAR GROUP INC. REAL ESTATE SEGMENT PERFORMANCE METRICS Fourth Quarter Full Year REAL ESTATE 2011 2010 2011 2010 Owned, Consolidated & Equity Method Ventures: Residential Lots Sold 309 187 1,117 804 Revenue per Lot Sold $ 43,300 $ 49,100 $ 47,400 $ 49,500 Commercial Acres Sold 2.4 1.1 26.4 17.8 Revenue per Commercial Acre Sold $ 547,200 $ 174,100 $ 193,700 $ 90,100 Undeveloped Acres Sold 13,200 1,100 17,120 5,800 Revenue per Acre Sold $ 2,300 $ 2,600 $ 2,400 $ 3,500 Owned & Consolidated Ventures: Residential Lots Sold 109 86 567 442 Revenue per Lot Sold $ 62,700 $ 59,200 $ 56,700 $ 55,100 Commercial Acres Sold - 1.1 4.0 2.4 Revenue per Commercial Acre Sold - $ 174,100 $ 185,300 $ 146,000 Undeveloped Acres Sold 13,200 1,100 17,100 5,800 Revenue per Acre Sold $ 2,300 $ 2,600 $ 2,400 $ 3,500 Ventures Accounted For Using the Equity Method: Residential Lots Sold 200 101 550 362 Revenue per Lot Sold $ 32,700 $ 40,500 $ 37,700 $ 42,600 Commercial Acres Sold 2.4 - 22.4 15.4 Revenue per Commercial Acre Sold $ 547,200 - $ 195,200 $ 81,300 Undeveloped Acres Sold - - 20 - Revenue per Acre Sold - - $ 3,000 - FOURTH QUARTER 2011 REAL ESTATE PIPELINE Real Estate Undeveloped

InEntitlementProcess

Entitled

Developed &UnderDevelopment

TotalAcres*

Undeveloped Land Owned 95,631 102,667 Ventures 7,036 Residential Owned 24,867 8,578 589 38,810 Ventures 4,329 447 Commercial Owned 2,723 1,063 523 5,189 Ventures 590 290 Total Acres 102,667 27,590 14,560 1,849 146,666 Estimated Residential Lots 24,091 3,020 27,111

* In addition, Forestar owns a 58% interest in a venture which controls approximately 16,000 acres of undeveloped land in Georgia.

FORESTAR GROUP INC.

REAL ESTATE PROJECTS

A summary of projects in the entitlement process (a) at year-end 2011 follows:

Project

County

Acres (b)

California

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

Georgia

Ball Ground Cherokee 500 Crossing Coweta 230 Fincher Road Cherokee 3,890 Fox Hall Coweta 960 Garland Mountain Cherokee/Bartow 350 Home Place Coweta 1,510 Martin’s Bridge Banks 970 Mill Creek Coweta 770 Serenity Carroll 440 Waleska Cherokee 100 Wolf Creek Carroll/Douglas 12,230 Yellow Creek Cherokee 1,060

Texas

Lake Houston Harris/Liberty 3,700 San Jacinto Montgomery 150

Total

27,590

(a) A project is deemed to be in the entitlement process when customary steps necessary for the preparation of an application for governmental land-use approvals, 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.

FORESTAR GROUP INC. REAL ESTATE PROJECTS

A summary of our entitled,(a) developed & under development projects at year-end 2011 follows:

Residential Lots (c) Commercial Acres (d) Project County Interest

Owned(b)

Lots Sold Since

Inception

Lots

Remaining

Acres Sold Since

Inception

Acres Remaining(f) Projects we own

California

San Joaquin River Contra Costa/

Sacramento

100% - - - 288

Colorado

Buffalo Highlands Weld 100% - 164 - - Johnstown Farms Weld 100% 115 497 2 7 Pinery West Douglas 100% - - - 111 Stonebraker Weld 100% - 603 - -

Texas

Arrowhead Ranch Hays 100% - 259 - 6 Barrington Kingwood Harris 100% 6 174 - - Caruth Lakes Rockwall 100% 362 - - - Cibolo Canyons Bexar 100% 697 778 68 82 Harbor Lakes Hood 100% 202 247 2 19 Hunter’s Crossing Bastrop 100% 381 109 38 71 La Conterra Williamson 100% 83 417 - 58 Maxwell Creek Collin 100% 725 274 10 - Oak Creek Estates Comal 100% 99 548 13 - The Colony Bastrop 100% 424 724 22 31 The Gables at North Hill Collin 100% 203 - - - The Preserve at Pecan Creek Denton 100% 339 455 - 7 The Ridge at Ribelin Ranch Travis 100% - - 195 - Westside at Buttercup Creek Williamson 100% 1,370 144 66 - Other projects (9) Various 100% 2,264 63 207 23

Georgia

Villages of Burt Creek Dawson 100% - 1,715 - 57 Towne West Bartow 100% - 2,674 - 121 Other projects (13) Various 100% - 2,834 - 705

Missouri and Utah

Other projects (2) Various 100% 467 87 - - 7,737 12,766 623 1,586 Projects in entities we consolidate

Texas

City Park Harris 75% 1,185 126 50 115 Lantana Denton 55% (e) 769 1,491 - - Light Farms Collin 65% - 2,501 - - Stoney Creek Dallas 90% 111 643 - - Timber Creek Collin 88% - 614 - - Other projects (4) Various Various 6 203 16 148 2,071 5,578 66 263 Total owned and consolidated 9,808 18,344 689 1,849 Projects in ventures that we account for using the equity method

Georgia

Seven Hills Paulding 50% 644 443 26 113 The Georgian Paulding 38% 289 1,052 - - Other projects (3) Various Various 1,712 75 3 -

Texas

Bar C Ranch Tarrant 50% 279 920 - - Entrada Travis 50% - 821 - - Fannin Farms West Tarrant 50% 323 58 - 12 Harper’s Preserve Montgomery 50% 69 1,656 - 72 Lantana Denton Various (e) 1,447 85 16 42 Long Meadow Farms Fort Bend 19% 858 937 107 192 Southern Trails Brazoria 40% 497 539 - - Stonewall Estates Bexar 25% 280 108 - - Summer Creek Ranch Tarrant 50% 806 468 - 79 Summer Lakes Fort Bend 50% 405 725 56 - Village Park Collin 50% 373 198 3 2 Waterford Park Fort Bend 50% - 210 - 90 Other projects (2) Various Various 298 226 - 15

Florida

Other projects (3) Various Various 599 246 - - Total in ventures 8,879 8,767 211 617 Combined Total 18,687 27,111 900 2,466

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

(b) Interest owned reflects our net 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. Lots remaining represent vacant developed lots, lots under development and future planned lots and are subject to change based on business plan revisions.

(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 22 partnerships in which our voting interests range from 25% to 55%. We account for three of these partnerships using the equity method and we consolidate the remaining partnerships.

(f) Excludes acres associated with commercial and income producing properties.

A summary of our significant commercial and income producing properties at year-end 2011 follows:

Interest Project County Market Owned (a) Type Acres Description Broadstone Memorial Harris Houston 100% Multifamily 9 401 unit luxury apartment Radisson Hotel Travis Austin 100% Hotel 2 413 guest rooms and suites Palisades West (b) Travis Austin 25% Office 22 375,000 square feet Las Brisas Williamson Austin 59% Multifamily 30 414 unit luxury apartment Promesa (c) Travis Austin 100% Multifamily 16 289 unit luxury apartment (construction in progress)

(a) Interest owned reflects our total equity interest in the project, whether owned directly or indirectly.

(b) Our 25% interest in Palisades West LLC was sold on January 20, 2012.

FORESTAR GROUP INC.CALCULATION OF NON-GAAP FINANCIAL MEASURES(UNAUDITED)

In our full year and fourth quarter 2011 earnings release and conference call presentation materials furnished to the Securities and Exchange Commission on Form 8-K on February 22, 2012, we used certain non-GAAP financial measures. The non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP financial statements and the accompanying reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of our business. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

The following table shows a reconciliation of PV-10 (discounted future net cash flows before income taxes) to the standardized measure of discounted future net cash flows (the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles, or GAAP). PV-10 is an estimate of the present value of future net cash flows from proved developed reserves after deducting estimated severance and ad valorem taxes, but before deducting any estimates of future income taxes. The estimated future net cash flows are discounted at an annual rate of 10%. A reconciliation of PV-10 to the standardized measure of discounted future net cash flows as computed under GAAP is illustrated below:

($ in 000’s)

Year-End 2011* Year-End 2010* PV – 10 (discounted future net cash flows before income taxes) $ 81,919 $ 45,267 Less: discounted future income taxes (effective tax rate of 38%) (25,713 ) (14,130 ) Standardized measure of discounted future net cash flows $ 56,206 $ 31,137

The undiscounted value represents an estimate of future net cash flows from proved developed reserves after deducting estimated severance and ad valorem taxes, but before deducting estimates of future income taxes. A reconciliation of undiscounted future net cash flows before income taxes to the undiscounted future net cash flows after income taxes is illustrated below:

($ in 000’s)

Year-End 2011* Year-End 2010* Undiscounted future net cash flows before income taxes $ 133,729 $ 77,464 Less: undiscounted future income taxes (effective tax rate of 38%) (41,835 ) (24,112 ) Undiscounted future net cash flows after income taxes $ 91,894 $ 53,352

We believe both PV-10 and undiscounted values are important for evaluating the relative significance of our oil and gas interests and that the presentation of the non-GAAP financial measures provides useful information to investors because they are widely used by professional analysts and sophisticated investors in evaluating oil and gas companies. Because there are many unique factors that can impact an individual company when estimating the amount of future income taxes to be paid, we believe the use of a pre-tax measure is valuable for evaluating our mineral assets.

* Includes our share of proved developed reserves in equity-method ventures

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