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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION

DATED MAY 19, 2017

[    ·    ], 2017

Dear Stockholder:

        You are cordially invited to attend a special meeting of stockholders of Forestar Group Inc., which we refer to as Forestar or the Company, to be held on [    ·    ], 2017, at [    ·    ] a.m. (Central time), at 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746.

        At the special meeting, you will be asked to consider and vote upon (1) a proposal to adopt the Agreement and Plan of Merger, dated as of April 13, 2017, as it may be amended from time to time, which we refer to as the merger agreement, among Terra Firma Merger Parent, L.P., which we refer to as Merger Parent, Terra Firma Merger Sub, L.P., which we refer to as Merger Sub and which is a wholly owned subsidiary of Merger Parent, and Forestar, pursuant to which Forestar will merge with and into Merger Sub (which we refer to as the merger) and Merger Sub will continue as a wholly owned subsidiary of Merger Parent, (2) a non-binding advisory proposal to approve specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger and (3) a proposal to adjourn the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement. Merger Parent and Merger Sub are affiliates of Starwood Capital Group.

        If the merger is completed, you will be entitled to receive $14.25 in cash, without interest and less applicable withholding taxes, for each share of Forestar common stock you own (unless you have properly exercised your appraisal rights with respect to such shares). The merger consideration represents a premium of approximately 8.2% over the volume weighted average trading price of Forestar's common stock for the 90-day period ending on April 13, 2017 of $13.17.

        Forestar's Board of Directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Forestar and its stockholders, and approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement. Forestar's Board of Directors unanimously recommends that you vote (i) "FOR" the proposal to adopt the merger agreement, (ii) "FOR" the proposal to approve, by non-binding advisory vote, specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger and (iii) "FOR" the proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

        The enclosed proxy statement provides detailed information about the special meeting, the merger agreement and the merger. A copy of the merger agreement is attached as Annex A to the proxy statement. The proxy statement also describes the actions and determinations of our Board of Directors in connection with its evaluation of the merger agreement and the merger. We encourage you to read the proxy statement and its annexes, including the merger agreement, carefully and in their entirety. You may also obtain more information about Forestar from documents we file with the Securities and Exchange Commission from time to time.

        Whether or not you plan to attend the special meeting in person, please complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or

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grant your proxy electronically over the internet or by telephone. If you attend the special meeting and vote in person by ballot, your vote will revoke any proxy that you have previously submitted. If you hold your shares in "street name," you should instruct your broker how to vote in accordance with the voting instruction form you will receive from your broker, bank or other nominee.

        Your vote is very important, regardless of the number of shares that you own. We cannot complete the merger unless the proposal to adopt the merger agreement is approved by the affirmative vote of the holders of a majority of the outstanding shares of Forestar common stock. The failure of any stockholder to vote in person by ballot at the special meeting, to submit a signed proxy card or to grant a proxy electronically over the internet or by telephone will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement. If you hold your shares in "street name," the failure to instruct your broker, bank or other nominee on how to vote your shares will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement.

        If you have any questions or need assistance voting your shares of Forestar common stock, please contact D. F. King & Co., Inc., our proxy solicitor, by calling 800-290-6431 toll-free.

        Thank you for your support of Forestar.

        Neither the U.S. Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved of the transactions described in this document, including the merger, or determined if the information contained in this document is accurate or adequate. Any representation to the contrary is a criminal offense.

        The accompanying proxy statement is dated [    ·    ], 2017 and, together with the enclosed form of proxy card, is first being mailed to Forestar stockholders on or about [    ·    ], 2017.

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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

        A special meeting of stockholders of Forestar Group Inc., which we refer to as "Forestar" or the "Company," will be held on [    ·    ], 2017, at [    ·    ] a.m. (Central time), at 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746, to consider and vote upon the following proposals:

1.

to adopt the Agreement and Plan of Merger, dated as of April 13, 2017, as it may be amended from time to time, among Terra Firma Merger Parent, L.P., which we refer to as Merger Parent, Terra Firma Merger Sub, L.P., which we refer to as Merger Sub, and Forestar;



2.

to approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger contemplated by the merger agreement; and



3.

to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

        Your vote is very important.    We cannot consummate the merger unless the proposal to adopt the merger agreement receives the affirmative vote of a majority of the outstanding shares of our common stock entitled to vote thereon.

        Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant a proxy electronically over the internet or by telephone prior to the special meeting to ensure that your shares of Forestar common stock will be represented and voted at the special meeting if you are unable to attend. Failure to complete, sign, date and return a signed proxy card, grant a proxy electronically over the internet or by telephone or to vote in person by ballot at the Company special meeting will result in your shares of Forestar common stock not being counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement. For more information concerning the special meeting, the merger agreement and the merger, please review the accompanying proxy statement and the copy of the merger agreement attached as Annex A thereto.

        Only stockholders of record as of the close of business on [    ·    ] are entitled to notice of the special meeting and to vote at the special meeting or at any adjournment or postponement thereof. A list of stockholders entitled to vote at the special meeting will be available in our offices located at 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746, during regular business hours for a period of at least 10 days before the special meeting and at the place of the special meeting during the meeting.

        Forestar's Board of Directors unanimously recommends that you vote (i) "FOR" the proposal to adopt the merger agreement, (ii) "FOR" the proposal to approve, by non-binding advisory vote, specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger and (iii) "FOR" the proposal to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

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QUESTIONS AND ANSWERS

        The following questions and answers are intended to address briefly some commonly asked questions regarding the special meeting, the merger agreement and the transactions contemplated thereby. These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer to the "Summary" preceding this section and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, all of which you should read carefully.

Q:

Why am I receiving this proxy statement?

A:

On April 13, 2017, Forestar entered into the merger agreement providing for the merger of Forestar with and into Merger Sub, with Merger Sub surviving the merger as a wholly owned subsidiary of Merger Parent. You are receiving this proxy statement in connection with the solicitation of proxies by the Forestar board of directors in favor of the proposal to adopt the merger agreement and to approve the other proposals to be voted on at the special meeting.

Q:

What is the proposed transaction?

A:

The proposed transaction is the acquisition of the Company by Merger Parent through the merger of the Company with and into Merger Sub pursuant to the merger agreement, with Merger Sub continuing as the surviving entity in the merger. Following the effective time of the merger, as a result of the merger, the Company will be part of Merger Sub and privately held as a wholly owned subsidiary of Merger Parent, and you will no longer own shares of Forestar common stock, only the right to receive the merger consideration. Merger Parent and Merger Sub are affiliates of Starwood.

Q:

What will I receive in the merger?

A:

If the merger is completed, you will be entitled to receive $14.25 in cash, without interest, and subject to any applicable withholding taxes, for each share of Forestar common stock that you own as of immediately prior to the effective time of the merger. For example, if you own 100 shares of Forestar common stock, you will be entitled to receive $1,425.00 in cash in exchange for your shares of Forestar common stock (less any amount that may be withheld with respect to any applicable withholding taxes). You will not be entitled to receive shares in the surviving entity or in Merger Parent or Starwood.

Q:

What will happen to the Company's outstanding equity awards?

A:

For information regarding the treatment of the Company's outstanding equity awards, see the section entitled "The Merger Agreement—Treatment of Company Equity Awards" beginning on page [    ·    ].

Q:

What is included in these materials?

A:

These materials include:

•

this proxy statement for the special meeting,

•

a proxy card (enclosed with this proxy statement),

•

a copy of the merger agreement (attached as Annex A to this proxy statement),

•

the written opinion of JMP (attached as Annex B to this proxy statement), and

•

the full text of Section 262 of the DGCL (attached as Annex C to this proxy statement).

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Q:

Where and when is the special meeting?

A:

The special meeting will take place at [    ·    ] a.m. (Central time), on [    ·    ], 2017 at 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746.

Q:

What proposals will be voted on at the special meeting?

A:

There are three proposals scheduled to be voted on at the special meeting:

•

the proposal to adopt the merger agreement;

•

the proposal to approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger; and

•

the proposal to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

Q:

What is the Forestar board of directors' voting recommendation?

A:

The Forestar board of directors recommends that you vote your shares:

•

"FOR" the proposal to adopt the merger agreement;

•

"FOR" the approval, on a non-binding advisory basis, of specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger; and

•

"FOR" the proposal regarding adjournment of the special meeting.

For a discussion of the factors that the Forestar board of directors considered in determining to recommend the adoption of the merger agreement, please see the section entitled "The Merger (Proposal 1)—Recommendation of the Forestar Board of Directors and Reasons for the Merger." In addition, in considering the recommendation of the Forestar board of directors with respect to the merger agreement, you should be aware that some of our directors and executive officers have interests that may be different from, or in addition to, the interests of Company stockholders generally. For a discussion of these interests, please see the section entitled "The Merger (Proposal 1)—Interests of the Company's Directors and Executive Officers in the Merger."

Q:

Who is entitled to vote at the special meeting?

A:

All shares owned by you as of the record date, which is the close of business on [    ·    ], may be voted by you. You may cast one vote per share of Forestar common stock that you held on the record date. These shares include shares that are:

•

held directly in your name as the stockholder of record; and

•

held for you as the beneficial owner through a broker, bank or other nominee.

On the record date, there were [    ·    ] shares of Forestar common stock issued and outstanding.

Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

A:

Many of our stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially.

•

Stockholder of Record.  If your shares are registered directly in your name with the Company's transfer agent, Computershare, you are considered, with respect to those shares, the stockholder

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of record, and this proxy statement was sent directly to you by the Company. As the stockholder of record, you have the right to grant your voting proxy directly to certain officers of Forestar or to vote in person at the special meeting.

•

Beneficial Owner.  If your shares are held in an account at a broker, bank or other nominee, like many of our stockholders, you are considered the beneficial owner of shares held in street name, and this proxy statement was forwarded to you by that organization. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares, and you are also invited to attend the special meeting, although only your broker, bank or other nominee will have the right to vote your shares at the special meeting, and only to the extent you have previously instructed it to do so.

Q:

What must I do if I want to attend the special meeting in person?

A:

Attendance at the special meeting is limited to individuals who were stockholders as of the record date. Registration and seating will begin at [    ·    ] a.m. (Central time). Each stockholder will be asked to present proof of identification, such as a driver's license or passport, prior to admission to the special meeting. Beneficial owners of shares held in "street name" will need to bring proof of share ownership as of the record date, such as a bank or brokerage firm account statement or a letter from the intermediary holding your shares. Cameras, recording devices and other electronic devices will not be permitted at the special meeting.

Q:

If I am a stockholder of record of the Company's shares, how do I vote?

A:

If you are a stockholder of record, there are four ways you can vote or have your shares voted by submitting a proxy:

•

by voting in person at the special meeting;

•

by submitting a proxy via the internet, at the internet address provided on the proxy card;

•

by submitting a proxy by telephone, by calling 800-690-6903; or

•

by submitting a proxy by mail, by completing, signing and dating the proxy card and returning it in the enclosed postage-paid envelope.

Q:

If I am a beneficial owner of shares held in street name, how do I vote?

A:

If you are a beneficial owner of shares held in street name, you will receive instructions from the holder of record as to how to vote your shares. You must follow the instructions of the holder of record in order for your shares to be voted. Telephone and internet voting also will be offered to stockholders owning shares through certain banks and brokers. If your shares are not registered in your own name and you plan to vote your shares in person at the special meeting, you should contact your broker, bank or other nominee to obtain a "legal proxy" or broker's proxy card and bring it to the special meeting in order to vote. Please note that if you hold your shares through broker, bank or other nominee, such nominee cannot vote your shares unless you have given your nominee specific instructions as to how to vote. In order for your vote to be counted, please make sure that you submit your vote to your broker, bank or other nominee.

Q:

Will my shares of Forestar common stock held in "street name" or another form of record ownership be combined for voting purposes with shares I hold of record?

A:

No. Because any shares of Forestar common stock you may hold in "street name" will be deemed to be held by a different stockholder of record than any shares of Forestar common stock you hold of record, any shares of Forestar common stock held in "street name" will not be combined for voting purposes with shares of Forestar common stock you hold of record. Similarly, if you own shares of Forestar common stock in various registered forms, such as jointly with your spouse, as

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trustee of a trust or as custodian for a minor, you will receive, and will need to sign and return, a separate proxy card or submit a proxy separately by telephone or internet with respect to those shares of Forestar common stock because they are held in a different form of record ownership. Shares of Forestar common stock held by a corporation or business entity must be voted by an authorized officer of the entity. Shares of Forestar common stock held in an individual retirement account must be voted under the rules governing such account.

Q:

What is the quorum requirement for the special meeting?

A:

A quorum is necessary to hold a valid special meeting. A quorum exists if the holders of a majority of the Company's capital stock issued and outstanding and entitled to vote at the special meeting are present in person or represented by proxy. If a quorum is not present at the special meeting, the special meeting may be adjourned or postponed from time to time until a quorum is obtained.

If you submit a proxy but fail to provide voting instructions or abstain on any of the proposals listed on the proxy card, your shares will be counted for the purpose of determining whether a quorum is present at the special meeting.

If your shares are held in "street name" by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, these shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the special meeting.

Q:

What happens if I do not give specific voting instructions?

A:

Stockholder of Record. If you are a stockholder of record and you submit a signed proxy card or submit your proxy by telephone or the internet, but do not specify how you want to vote your shares on a particular proposal, then the proxy holders will vote your shares in accordance with the recommendations of the Forestar board of directors on all matters presented in this proxy statement.

Beneficial Owner. If you are a beneficial owner of shares held in "street name," under the rules of the NYSE, the broker, bank or other nominee that holds your shares may generally vote on routine matters but cannot vote without instructions on non-routine matters. The proposals to (i) adopt the merger agreement, (ii) approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger and (iii) approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies, are considered non-routine matters under applicable rules. If the broker, bank or other nominee that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the broker, bank or other nominee that holds your shares will inform the representative counting votes that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a "broker non-vote." Therefore, we urge you to give voting instructions to your broker. Shares represented by such "broker non-votes" will not be counted in determining whether there is a quorum. A "broker non-vote" will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement.

Q:

What is the voting requirement to approve each of the proposals?

A:

Adoption of the merger agreement would require Company stockholders holding a majority of the shares of Forestar common stock outstanding at the close of business on the record date for the special meeting to vote "FOR" the proposal to adopt the merger agreement. A failure to vote your shares of Forestar common stock or an abstention from voting will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement. If your shares are held in "street name" by your broker, bank or other nominee and you do not instruct the nominee how to vote your

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shares, a "broker non-vote" will arise and will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement.

The approval, on a non-binding advisory basis, of the proposal regarding specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger requires the affirmative vote of a majority of the votes cast at the special meeting at which a quorum is present. Assuming a quorum is present at the special meeting, failure to vote your shares of Forestar common stock, an abstention from voting or a "broker non-vote" will have no effect on this proposal.

The affirmative vote of a majority of the votes cast at the special meeting, whether or not a quorum is present, is required to approve the proposal to approve the adjournment of the special meeting, if necessary or appropriate. A failure to vote your shares of Forestar common stock, an abstention from voting or a "broker non-vote" will have no effect on this proposal.

Q:

How do Forestar's directors and executive officers intend to vote?

A:

We currently expect that the Company's directors and executive officers will vote their shares in favor of the proposal to adopt the merger agreement and the other proposals to be considered at the special meeting; although they have no obligation to do so.

Q:

What effects will the merger have on the Company?

A:

Forestar common stock is currently registered under the Exchange Act, and is listed on the NYSE under the symbol "FOR." As a result of the merger, the Company will cease to be a publicly traded company and will be merged into Merger Sub, which will continue as the surviving entity following the merger as a wholly owned subsidiary of Merger Parent. Following the consummation of the merger, Forestar common stock will be delisted from the NYSE and deregistered under the Exchange Act.

Q:

When is the merger expected to be completed?

A:

We and Starwood are working toward completing the merger as quickly as possible. We cannot be certain when or if the conditions to the merger will be satisfied (or, to the extent permitted, waived). The merger cannot be completed until the conditions to closing are satisfied (or, to the extent permitted, waived), including the adoption of the merger agreement by Company stockholders. Pursuant to the terms of the merger agreement, the merger may not be completed prior to July 1, 2017, and assuming timely satisfaction of the closing conditions, we currently expect to complete the merger in the third quarter of 2017.

Q:

What happens if the merger is not completed?

A:

If the merger agreement is not adopted by the Company's stockholders, or if the merger is not completed for any other reason, the Company stockholders will not receive any payment for their shares of Forestar common stock in connection with the merger. Instead, the Company will remain a public company, and shares of Forestar common stock will continue to be registered under the Exchange Act, as well as listed and traded on the NYSE. Upon a termination of the merger agreement prior to consummation of the merger, under certain circumstances, we will be required to pay Merger Parent a termination fee of $20 million, and under certain other circumstances, Merger Parent will be required to pay a termination fee to us of $40 million. In addition, under certain circumstances, we will be required to reimburse Merger Parent for up to $3 million or $4 million, as applicable, of its transaction expenses. See the section entitled "The Merger Agreement—Termination—Termination Fees."

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Q:

What will happen if stockholders do not approve, on a non-binding advisory basis, the proposal on specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger?

A:

The inclusion of this proposal is required by the Securities and Exchange Commission rules; however, the approval of this proposal is not a condition to the completion of the merger and the vote on this proposal is an advisory vote and will not be binding on the Company or Merger Parent. If the merger agreement is adopted by the Company's stockholders and the merger is completed, the merger-related compensation may be paid to the Company's named executive officers even if stockholders fail to approve this proposal.

Q:

Can I revoke my proxy or change my vote?

A:

Yes. You may revoke or change your proxy for any reason by:

•

providing a written notice that is received before the meeting to Forestar's Secretary, Matthew S. Stark, at Forestar Group Inc., 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746;

•

delivering a valid, later-dated proxy either by telephone or online (your last delivery before the meeting begins will be counted); or

•

if you are a registered stockholder (or if you hold your shares in "street name" and have a proper legal proxy from your broker), attending the special meeting and voting in person.

Please note that simply attending the special meeting in person will not cause your previously granted proxy to be revoked. Shares held in "street name" may be voted in person by you at the special meeting only if you obtain a signed "legal proxy" from the stockholder of record giving you the right to vote the shares.

Q:

What happens if I do not vote or if I abstain from voting on the proposals?

A:

The requisite number of shares to approve the proposal to adopt the merger agreement is based on the total number of shares of Forestar common stock outstanding on the record date, not just the shares that are voted. If you do not vote or abstain from voting on the proposal to adopt the merger agreement, it will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement and will have no effect on the non-binding advisory proposal to approve specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger and the proposal regarding adjournment of the special meeting.

Q:

What happens if I sell my shares of Forestar common stock before completion of the merger?

A:

In order to receive the merger consideration, you must hold your shares of Forestar common stock through completion of the merger. Consequently, if you transfer your shares of Forestar common stock before completion of the merger, you will have transferred your right to receive the merger consideration in the merger.

The record date for stockholders entitled to vote at the special meeting is earlier than the consummation of the merger. If you transfer your shares of Forestar common stock after the record date but before the closing of the merger, you will have the right to vote at the special meeting although you will have transferred your right to receive the merger consideration in the merger.

Q:

Should I send in my stock certificates or other evidence of ownership now?

A:

No. After the merger is completed, you will receive a letter of transmittal and related materials from the paying agent for the merger with detailed written instructions for exchanging your shares

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of Forestar common stock evidenced by stock certificates for the merger consideration. If your shares of Forestar common stock are held in "street name" by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take in order to effect the surrender of your "street name" shares in exchange for the merger consideration. Do not send in your certificates now.

Q:

If I do not know where my stock certificates are, how will I get the merger consideration for my shares?

A:

If the merger is completed, the transmittal materials you will receive after the completion of the merger will include the procedures that you must follow if you cannot locate your stock certificates. This will include an affidavit that you will need to sign attesting to the loss of your stock certificates. You may also be required to post a bond as indemnity against any potential loss.

Q:

Am I entitled to exercise dissenters' or appraisal rights instead of receiving the merger consideration for my shares of Forestar common stock?

A:

Yes. In order to exercise your appraisal rights, you must follow the requirements set forth in Section 262 of the DGCL. Under Delaware law, if the merger is completed, stockholders of Forestar who do not vote in favor of adopting the merger agreement and who meet the other requirements set forth in Section 262 of the DGCL will have the right to receive payment of the fair value of their shares as determined by the Delaware Court of Chancery, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest to be paid on the amount determined to be fair value as determined by the court (subject, in the case of interest payments, to any voluntary cash payments made by the surviving entity pursuant to subsection (h) of Section 262 of the DGCL). Your appraisal rights are subject to a number of restrictions and technical requirements (including relating to the aggregate amount of shares of common stock owned by stockholders seeking appraisal). Appraisal rights will only be available to Forestar stockholders that deliver to Forestar a written demand for appraisal of their shares prior to the special meeting, do not vote in favor of the merger proposal, hold their shares continuously through the effective time of the merger, do not submit their shares for payment of the merger consideration, and otherwise comply with the statutory procedures and requirements set forth in Section 262 of the DGCL, which are summarized in this proxy statement. The amount determined by the Delaware Court of Chancery to be the fair value of Forestar stock as of the effective time of the merger could be more than, the same as, or less than the merger consideration a stockholder would be entitled to receive under the terms of the merger agreement. A summary of Section 262 of the DGCL can be found along with additional information about appraisal rights under the section entitled "Appraisal Rights". The discussion of appraisal rights contained in this proxy statement is not a full summary of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL that is attached as Annex C to this proxy statement. Because of the complexity of the DGCL relating to appraisal rights, if you are considering exercising your appraisal rights, we encourage you to seek the advice of your own legal counsel.

Q:

Will I be subject to U.S. federal income tax upon the exchange of Forestar common stock for cash pursuant to the merger?

A:

If you are a U.S. Holder, you will be required to recognize gain or loss for U.S. federal income tax purposes on the exchange of Forestar common stock for cash pursuant to the merger in an amount equal to the difference, if any, between the amount of cash you receive pursuant to the merger and your adjusted tax basis in your shares of Forestar common stock surrendered pursuant to the merger. A Non-U.S. Holder will generally not be subject to U.S. federal income tax with respect to the exchange of Forestar common stock for cash in the merger unless such Non-U.S. Holder exceeds certain ownership levels or has certain connections to the United States. Because

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particular circumstances may differ, you should consult your tax advisor to determine the U.S. federal income tax consequences relating to the merger in light of your particular circumstances and any consequences arising under the laws of any state, local or foreign taxing jurisdiction. A more complete description of the U.S. federal income tax consequences of the merger is provided under "The Merger—U.S. Federal Income Tax Consequences of the Merger."

Q:

What does it mean if I get more than one proxy card?

A:

If your shares of Forestar common stock are registered differently or are held in more than one account, you will receive more than one proxy or voting instruction form. Please complete and return all of the proxy cards you receive (or submit each of your proxies by telephone or the internet, if available to you) to ensure that all of your shares of Forestar common stock are voted.

Q:

How many copies should I receive if I share an address with another stockholder?

A:

Some banks, brokers and other nominee record holders may participate in the practice of "householding" proxy statements, annual reports and notices of internet availability of proxy materials. This means that a single set of our proxy materials may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of our proxy materials to you if you write or call our Secretary, Matthew S. Stark, at Forestar Group Inc., 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746, telephone: (512) 433-5200.

Q:

Who will count the vote?

A:

A representative of Broadridge Financial Solutions, Inc. will tabulate the votes.

Q:

Who will solicit and bear the cost of soliciting votes for the special meeting?

A:

Forestar will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic and facsimile transmission by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. Forestar has engaged D. F. King & Co., Inc., which we refer to as "D. F. King," to assist in the solicitation of proxies for the Forestar special meeting. Forestar estimates that it will pay D. F. King a fee of approximately $20,000, plus reimbursement of certain expenses. In addition, the Company may reimburse its transfer agent, brokerage firms and other persons representing beneficial owners of shares of Forestar common stock for their expenses in forwarding solicitation material to such beneficial owners.

Q:

Where can I find the voting results of the special meeting?

A:

Forestar will announce preliminary voting results at the special meeting and publish preliminary, or final results if available, in a Current Report on Form 8-K filed with the Securities and Exchange Commission within four business days after the special meeting.

Q:

Where can I find more information about Forestar?

A:

You can find more information about us from various sources described in the section entitled "Where You Can Find Additional Information."

Q:

Who can help answer my other questions?

A:

If you have more questions about the merger, or require assistance in submitting your proxy or voting your shares or need additional copies of the proxy statement or the enclosed proxy card,

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please contact D. F. King, which is acting as the proxy solicitation agent and information agent for the Company in connection with the merger, or the Company.

48 Wall Street
New York, New York 10005
Banks and brokers may call: 212-269-5550
Stockholders may call toll free: 800-290-6431
forestar@dfking.com
or
Forestar Group Inc.
6300 Bee Cave Road
Building Two, Suite 500
Austin, Texas 78746
Attention: Matthew S. Stark
(512) 433-5200

        If your broker, bank or other nominee holds your shares, you should also call your broker, bank or other nominee for additional information.

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FORWARD LOOKING STATEMENTS

        This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are predictions based on expectations and projections about future events, and are not statements of historical fact. Forward-looking statements include statements concerning business strategy, plans and prospects, among other things, including anticipated trends and developments in and management plans for our business and the markets in which we operate. In some cases, you can identify these statements by forward-looking words, such as "estimate," "expect," "anticipate," "project," "plan," "intend," "believe," "forecast," "foresee," "likely," "may," "should," "goal," "target," "might," "will," "could," "predict," and "continue," the negative or plural of these words and other comparable terminology. All forward-looking statements included in this proxy statement are based upon information available to us as of the filing date of this proxy statement, and we undertake no obligation to update any of these forward-looking statements for any reason. You should not place undue reliance on forward-looking statements. The forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement include the factors identified in Forestar's Annual Report on Form 10-K for the year ended December 31, 2016 under the heading "Risk Factors," as updated from time to time by Forestar's Quarterly Reports on Form 10-Q and other documents of Forestar on file or in this proxy statement filed with the Securities and Exchange Commission (the "SEC") by Forestar, including the following factors:

•

one or more closing conditions to the transaction may not be satisfied or waived, on a timely basis or at all, including that the required approval by the stockholders of Forestar may not be obtained or that holders of 20% or more of our common stock as of immediately prior to closing properly exercise appraisal rights;



•

there may be a material adverse change to Forestar or the business of Forestar may suffer as a result of uncertainty surrounding the transaction;



•

the transaction may involve unexpected costs, liabilities or delays;



•

legal proceedings may be initiated related to the transaction;



•

our exclusive remedy against the counterparties to the merger agreement with respect to any breach of the merger agreement is limited, in certain circumstances, to seeking payment by Merger Parent of a termination fee in the amount of $40 million (which amount is guaranteed by Merger Parent's sponsor), which may not be adequate to cover our damages; and



•

changes in economic conditions, political conditions, changes in federal or state laws or regulation may occur.

        There can be no assurance that the merger will be completed, or if it is completed, that it will close within the anticipated time period or that the expected benefits of the merger will be realized. Consequently, all of the forward-looking statements we make in this proxy statement are qualified by the information contained or incorporated by reference herein, including, but not limited to, (i) the information contained under this heading and (ii) the information contained under the headings "Risk Factors" and information in our consolidated financial statements and notes thereto included in our most recent filing on Form 10-K and subsequent periodic and interim report filings (see "Where You Can Find Additional Information" beginning on page [    ·    ]). No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

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THE SPECIAL MEETING

        We are furnishing this proxy statement to the Company's stockholders as part of the solicitation of proxies by the Forestar board of directors for use at the special meeting or any adjournment or postponement thereof. This proxy statement provides the Company's stockholders with the information they need to know to be able to vote or instruct their vote to be cast at the special meeting or any adjournment or postponement thereof.

Date, Time and Place of the Special Meeting

        This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the Forestar board of directors for use at the special meeting to be held on [    ·    ], 2017, at [    ·    ] a.m. (Central time), at 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746, or at any adjournment or postponement thereof.

        Attendance at the special meeting is limited to individuals who were stockholders as of the record date and their authorized representatives. Registration and seating will begin at [    ·    ] a.m. (Central time). Each stockholder will be asked to present proof of identification, such as a driver's license or passport, prior to admission to the special meeting. Beneficial owners of shares held in "street name" who desire to attend the special meeting, will need to bring proof of share ownership as of the record date, such as a bank or brokerage firm account statement or a letter from the intermediary holding your shares. Cameras, recording devices and other electronic devices will not be permitted at the special meeting.

        If you are a stockholder of record, you may vote in person at the special meeting by requesting a ballot when you arrive. You must bring valid picture identification such as a driver's license or passport and may be requested to provide proof of stock ownership as of the record date. If you are a beneficial owner of shares held in "street name" and wish to vote in person at the special meeting, you must obtain a "legal proxy" from the organization that holds your shares. A "legal proxy" is a written document that will authorize you to vote your shares held in "street name" at the special meeting. Please contact the organization that holds your shares for instructions regarding obtaining a "legal proxy."

Purposes of the Special Meeting

        One purpose of the special meeting is for our stockholders to consider and vote upon the proposal to adopt the merger agreement. Our stockholders must adopt the merger agreement in order for the merger to occur. If our stockholders fail to adopt the merger agreement, the merger will not occur. A copy of the merger agreement is attached as Annex A to this proxy statement, and the material provisions of the merger agreement are summarized in the section of this proxy statement entitled "The Merger Agreement."

        In addition, the Company is providing its stockholders with the opportunity to cast a non-binding advisory vote on specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger, the value of which is disclosed in the table in the section of this proxy statement entitled "The Merger (Proposal 1)—Interests of the Company's Directors and Executive Officers in the Merger." The non-binding advisory vote on specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger is separate and apart from the vote to adopt the merger agreement. Accordingly, a stockholder may vote to approve the executive compensation and vote not to adopt the merger agreement and vice versa. Because the vote on executive compensation is advisory in nature only, it will not be binding on either the Company or Starwood. Accordingly, if the merger agreement is adopted by the Company's stockholders and the merger is completed, the merger-related compensation may be paid to the Company's named executive officers even if stockholders fail to approve the proposal.

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        Our stockholders are also being asked to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

        This proxy statement and the enclosed form of proxy are first being mailed to our stockholders on or about [    ·    ], 2017.

Record Date and Quorum

        The holders of record of Forestar common stock as of the close of business on [    ·    ], the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting. On the record date, [    ·    ] shares of Forestar common stock were outstanding.

        The presence at the special meeting, in person or represented by proxy, of the holders of record of a majority of the Company's capital stock issued and outstanding and entitled to vote at the close of business on the record date will constitute a quorum, permitting the Company to conduct its business at the special meeting. Once a share is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting. However, if a new record date is set for an adjourned special meeting, then a new quorum will have to be established. Proxies received but marked as abstentions will be included in the calculation of the number of shares considered to be present for the purpose of determining a quorum at the special meeting. "Broker non-votes," described below under the sub-heading "—Voting; Proxies; Revocation—Providing Voting Instructions by Proxy," will not be included in the calculation of the number of shares considered to be present for the purpose of determining a quorum at the special meeting.

Required Vote

        Each share of Forestar common stock outstanding at the close of business on the record date is entitled to one vote on each of the proposals to be considered at the special meeting.

        For the Company to complete the merger, Company stockholders holding a majority of the shares of Forestar common stock outstanding at the close of business on the record date and entitled to vote thereon must vote "FOR" the proposal to adopt the merger agreement. A failure to vote your shares of Forestar common stock or an abstention from voting will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement. If your shares are held in "street name" by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, this will be deemed a "broker non-vote," which will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement.

        The approval, on a non-binding advisory basis, of the proposal regarding specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger requires the affirmative vote of a majority of the votes cast at the special meeting at which a quorum is present. Assuming a quorum is present, a failure to vote your shares of Forestar common stock, an abstention from voting or a "broker non-vote" will have no effect on this proposal.

        The affirmative vote of a majority of the votes cast at the special meeting, whether or not a quorum is present, is required to approve the proposal to approve the adjournment of the special meeting, if necessary or appropriate. A failure to vote your shares of Forestar common stock, an abstention from voting or a "broker non-vote" will have no effect on this proposal.

        As of the record date, there were [    ·    ] shares of Forestar common stock outstanding.

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Voting by the Company's Directors and Executive Officers

        At the close of business on May 15, 2017, directors and executive officers of the Company were entitled to vote 1,320,959 shares of Forestar common stock, or approximately 3.2% of the shares of Forestar common stock issued and outstanding on that date. We currently expect that the Company's directors and executive officers will vote their shares representing 3.2% of the outstanding shares of Forestar common stock in favor of the proposal to adopt the merger agreement and in favor of the other proposals to be considered at the special meeting, although they have no obligation to do so.

Voting; Proxies; Revocation

Attendance

        All holders of shares of Forestar common stock as of the close of business on [    ·    ], the record date, including stockholders of record and beneficial owners of Forestar common stock registered in the "street name" of a broker, bank or other nominee, are invited to attend the special meeting. If you are a stockholder of record, please be prepared to provide proper identification, such as a driver's license or passport. If you hold your shares in "street name," you will need to provide proof of ownership, such as a recent account statement or voting instruction form provided by your broker, bank or other nominee or other similar evidence of ownership, along with proper identification.

Voting in Person

        Stockholders of record will be able to vote in person at the special meeting. If you are not a stockholder of record, but instead hold your shares of Forestar common stock in "street name" through a broker, bank or other nominee, you must provide a "legal proxy" from the organization that holds your share in order to be able to vote in person at the special meeting.

Providing Voting Instructions by Proxy

        To ensure that your shares of Forestar common stock are voted at the special meeting, we recommend that you provide voting instructions promptly by proxy, even if you plan to attend the special meeting in person.

Shares of Forestar Common Stock Held by Record Holder

        If you are a stockholder of record, you may provide voting instructions by proxy using one of the methods described below.

•

Via the internet.  You can submit a proxy over the internet at www.proxyvote.com by following the instructions on the proxy card.



•

By Telephone.  You can submit a proxy by telephone by calling 800-690-6903 and following the instructions on the proxy card.



•

By Mail.  You can submit a proxy by mail by signing, dating and mailing the enclosed proxy card.

        If you submit a signed proxy card or submit your proxy by telephone or the internet, but do not specify how you want to vote your shares on a particular proposal, then the proxy holders will vote your shares in accordance with the recommendations of the Forestar board of directors on all matters presented in this proxy statement. With respect to any other matters properly presented for a vote at the special meeting, the proxy holders will vote your shares in accordance with their best judgment. If you fail to return your proxy card and you are a holder of record on the record date, unless you attend the special meeting and vote in person, the effect will be that your shares of Forestar common stock will not be considered present at the special meeting for purposes of determining whether a quorum is present at the special meeting, will have the same effect as a vote against the proposal to adopt the

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merger agreement and, assuming a quorum is present, will not affect the proposal, on a non-binding advisory basis, to approve specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger, or the vote regarding the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies.

Shares of Forestar Common Stock Held in "Street Name"

        If your shares are held in the name of a bank, broker or other holder of record, you will receive instructions from the holder of record as to how to vote your shares. You must follow the instructions of the holder of record in order for your shares to be voted. Telephone and internet voting also will be offered to stockholders owning shares through certain banks and brokers. If your shares are not registered in your own name and you plan to vote your shares in person at the special meeting, you should contact your broker or agent to obtain a "legal proxy" or broker's proxy card and bring it to the special meeting in order to vote.

        In accordance with the rules of the NYSE, brokers, banks and other nominees who hold shares of Forestar common stock in "street name" for their customers do not have discretionary authority to vote the shares with respect to the proposal to adopt the merger agreement, the non-binding advisory proposal to approve specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger, or the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies. Accordingly, if brokers, banks or other nominees do not receive specific voting instructions from the beneficial owner of such shares, they may not vote such shares with respect to these proposals. Under such circumstances, a "broker non-vote" would arise. "Broker non-votes," if any, will not be considered present at the special meeting for purposes of determining whether a quorum is present at the special meeting, will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement and, assuming a quorum is present, will have no effect on the proposal to approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger or on the adjournment proposal. Thus, for shares of Forestar common stock held in "street name," only shares of Forestar common stock affirmatively voted "FOR" the proposal to adopt the merger agreement will be counted as a vote in favor of such proposal.

Revocation of Proxies

        Any person giving a proxy pursuant to this solicitation has the power to revoke and change it at any time before it is voted. If you are a stockholder of record, you may revoke your proxy at any time before the vote is taken at the special meeting by:

•

submitting a new proxy with a later date, by using the telephone or internet proxy submission procedures described above, or by completing, signing, dating and returning a new proxy card by mail to Forestar;



•

attending the Company special meeting and voting in person; or



•

delivering a written notice of revocation by mail to Forestar's Secretary, Matthew S. Stark, at Forestar Group Inc., 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746.

        Please note, however, that only your last-dated proxy will count. Attending the Company special meeting without taking one of the actions described above will not in itself revoke your proxy. Please note that if you want to revoke your proxy by mailing a new proxy card or by sending a written notice of revocation to Forestar, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by Forestar before the Company special meeting.

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        If you hold your shares in "street name" through a broker, bank or other nominee, you will need to follow the instructions provided to you by your broker, bank or other nominee in order to revoke your proxy or submit new voting instructions.

Abstentions

        An abstention occurs when a stockholder attends a meeting, either in person or by proxy, but abstains from voting. Abstentions will be included in the calculation of the number of shares of Forestar common stock present or represented at the special meeting for purposes of determining whether a quorum has been achieved. Abstaining from voting will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement and will have no effect on the non-binding advisory proposal to approve specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger or the adjournment proposal.

Adjournments and Postponements

        Although it is not currently expected, the special meeting may be adjourned or postponed if necessary or appropriate, including for the purpose of soliciting additional proxies. In the event that a sufficient number of shares of Forestar common stock is present or represented, in person or by proxy, and voted in favor of the proposal to adopt the merger agreement at the special meeting such that the Company stockholder approval shall have been obtained, the Company does not anticipate that it will adjourn or postpone the special meeting.

        The special meeting may be adjourned by the affirmative vote of the holders of a majority of the votes cast in respect of shares of Forestar common stock present in person or represented by proxy at the special meeting and entitled to vote at the special meeting or as otherwise permitted by law. Any adjournment or postponement of the special meeting will allow the Company's stockholders who have already sent in their proxies to revoke them at any time before their use at the special meeting that was adjourned or postponed.

Solicitation of Proxies

        The Forestar board of directors is soliciting your proxy, and the Company will bear the cost of this solicitation of proxies. This includes the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic and facsimile transmission by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. Forestar has engaged D. F. King & Co., Inc., which we refer to as "D. F. King," to assist in the solicitation of proxies for the Company special meeting. Forestar estimates that it will pay D. F. King a fee of approximately $20,000, plus reimbursement of certain expenses. In addition, the Company may reimburse its transfer agent, brokerage firms and other persons representing beneficial owners of shares of Forestar common stock for their expenses in forwarding solicitation material to such beneficial owners.

Anticipated Date of Completion of the Merger

        Assuming timely satisfaction of necessary closing conditions, including the approval by our stockholders of the proposal to adopt the merger agreement, we anticipate that the merger will be consummated in the third quarter of 2017.

Householding of Special Meeting Materials

        We may send a single copy of this proxy statement to any household at which two or more stockholders reside in accordance with SEC rules, unless we have received contrary instructions. Each

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stockholder in the household will continue to receive a separate proxy card. This process, known as "householding," reduces the volume of duplicate information received at your household and helps to reduce our expenses.

        If, at any time, you no longer wish to participate in "householding" and would prefer to receive a separate proxy statement, please notify your broker or direct your written request to Forestar's Secretary, Matthew S. Stark, at Forestar Group Inc., 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746, or by telephone at (512) 433-5200. We will promptly deliver upon written or oral request a separate copy of the proxy statement to a stockholder at a shared address to which a single copy of the proxy statement was delivered. Stockholders who currently receive multiple copies of the proxy statement at their addresses and would like to request "householding" of their communications should contact their broker.

Other Information

        You should not return your stock certificate or send documents representing Forestar common stock with the proxy card. If the merger is completed, the paying agent for the merger will send to you a letter of transmittal and related materials and instructions for exchanging your shares of Forestar common stock for the merger consideration.

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THE MERGER (PROPOSAL 1)

        The description of the merger in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated by reference herein. This summary does not purport to be complete and may not contain all of the information about the merger that is important to you. You are encouraged to read the merger agreement carefully and in its entirety.

Proposal 1: Adoption of the Merger Agreement

        We are asking you to adopt the merger agreement. For a summary of and detailed information regarding this proposal, see the information about the merger agreement throughout this proxy statement, including the information set forth under "The Merger Agreement." A copy of the merger agreement is attached as Annex A to this proxy statement.

        Approval of this proposal requires the affirmative vote of the Company stockholders holding a majority of the shares of Forestar common stock outstanding at the close of business on the record date and entitled to vote thereon. A failure to vote your shares of Forestar common stock or an abstention from voting will have the same effect as a vote against the proposal to adopt the merger agreement.

        The Forestar board of directors unanimously recommends that stockholders vote "FOR" the proposal to adopt the merger agreement.

Parties Involved in the Merger

Forestar Group Inc.

        Forestar Group Inc., which we refer to as "Forestar," the "Company," "we," "us," or "our," is a residential and mixed-use real estate development company. In our core community development business we own, directly or through ventures, interests in 49 residential and mixed-use projects comprised of 4,400 acres of real estate located in 10 states and 14 markets. In addition, we own interests in various other assets that have been identified as non-core that the Company is divesting opportunistically over time. In first quarter 2017, we had revenues of $22.3 million and net income of $25.2 million. Forestar's principal executive offices are located at 6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746, and our telephone number is (512) 433-5200.

        Forestar is a Delaware corporation and Forestar common stock, par value $1.00 per share, trades on the New York Stock Exchange, which we refer to as the "NYSE," under the symbol "FOR."

        Additional information about Forestar is contained in our public filings, which are incorporated by reference herein. See "Where You Can Find Additional Information."

Terra Firma Merger Parent, L.P.

        Terra Firma Merger Parent, L.P., which we refer to as "Merger Parent," is a newly formed Delaware limited partnership formed by affiliates of Starwood Capital Group, which we refer to as "Starwood." Merger Parent was formed in connection with the merger.

        Starwood Capital Group is a private alternative investment firm with a core focus on global real estate, energy infrastructure and oil & gas. The Firm and its affiliates maintain 10 offices in four countries around the world, and currently have more than 2,200 employees. Starwood Capital Group has raised over $40 billion of equity capital since its inception in 1991, and currently manages more than $51 billion in assets. The firm has invested in virtually every category of real estate on a global basis, opportunistically shifting asset classes, geographies and positions in the capital stack as it perceives risk/reward dynamics to be evolving. Over the past 26 years, Starwood Capital Group and its

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affiliates have successfully executed an investment strategy that involves building enterprises in both the private and public markets. Starwood Capital Group's principal executive offices are located at 591 West Putnam Avenue, Greenwich, Connecticut 06830, and its telephone number is (203) 422-7773.

Terra Firma Merger Sub, L.P.

        Terra Firma Merger Sub, L.P., which we refer to as "Merger Sub," is a newly formed Delaware limited partnership and a wholly owned subsidiary of Merger Parent. Merger Sub was formed in connection with the merger.

Certain Effects of the Merger

        If the merger agreement is adopted by the Company's stockholders and certain other conditions to the closing of the merger are either satisfied or waived, the Company will be merged with and into Merger Sub with Merger Sub being the surviving entity in the merger.

        Upon the consummation of the merger, each share of Forestar common stock issued and outstanding immediately before the effective time of the merger (other than shares owned or held in treasury by Forestar or any direct or indirect wholly owned subsidiary of Forestar or owned by Merger Parent or any direct or indirect wholly owned subsidiary of Merger Parent, which in each case will be cancelled for no consideration, and other than shares with respect to which the stockholder has properly exercised its appraisal rights) will be cancelled and converted into the right to receive $14.25 in cash, without interest, and subject to any applicable withholding taxes.

        Forestar common stock is currently registered under the Exchange Act and is listed on the NYSE under the symbol "FOR." As a result of the merger, the Company will cease to be a publicly traded company and Merger Sub, which will be the surviving entity in the merger, will remain a wholly owned subsidiary of Merger Parent. Following the consummation of the merger, Forestar common stock will be delisted from the NYSE and deregistered under the Exchange Act, in each case in accordance with applicable law, rules and regulations.

Background of the Merger

        The Forestar board of directors continuously evaluates Forestar's strategic direction and business with a goal of maximizing stockholder value. On December 8, 2014, the Company issued a press release approved by its board of directors announcing that Forestar's board of directors, working together with its management team and financial advisor, was exploring strategic alternatives to enhance stockholder value. Thereafter, on May 12, 2015, the Company announced that, as a result of its review of strategic alternatives, the board had approved and initiated a plan to focus on growing the Company's core real estate business, including harvesting cash flows from its non-core oil and gas business by significantly reducing capital expenditures and operating costs.

        On June 15, 2015, the chief executive officer of a publicly traded real estate operating company ("Party A") sent a letter to the Company's chief executive officer to express an interest in discussing a potential combination of the Company and Party A, but no price or valuation was specified.

        On July 15, 2015, the chief executive officer of the Company participated in a telephone conference with the chief executive officer of Party A to elaborate on the Company's focus on the plan announced on May 12, 2015.

        On August 6, 2015, the chief executive officer of Party A sent another letter to the chief executive officer of the Company, copying the Company's board of directors, reiterating Party A's desire to consider a combination of the two companies and outlining the potential benefits of a combination. The letter did not include any indicative valuation of the Company. Forestar's closing stock price was $12.92 on August 6, 2015.

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        On August 11, 2015, the Forestar board of directors held an in-person meeting, with members of Forestar management in attendance. Representatives of the Company's then-financial advisor (which was not JMP) were also present during a portion of the meeting. Forestar management provided an overview of Party A and its strategy and certain financial information. The Company's financial advisor summarized certain considerations with a possible combination of Party A and the Company, including relative trading activity and implied historical exchange ratios. After discussion among the board of directors, management and its financial advisor, the board of directors determined to direct management to inform Party A that the Company was not interested in pursuing a transaction, among other reasons due to the fact that the Company and Party A were pursuing different real estate strategies as Party A was focused on acquiring and holding income producing properties and the Company was principally a land developer for single-family communities. After the meeting, Forestar's chief executive officer sent a letter to the chief executive officer of Party A advising that the Company's board of directors had determined that exploration of a business combination with Party A at this time was not in the best interests of Forestar and its shareholders.

        On September 28, 2015, among other management and board of directors changes, the Company announced the appointment of Phillip J. Weber as its new chief executive officer, and that James A. Rubright would be Forestar's non-executive chairman effective December 31, 2015. On October 2, 2015, the Company announced the appointment of Charles D. Jehl as the new chief financial officer of the Company.

        On October 22, 2015, Forestar's management team held introductory meetings with a publicly traded real estate investment firm ("Party B") to explore Party B acquiring Forestar's community development portfolio or all of the equity interests in the Company. This meeting arose out of discussions between a representative of Forestar and a representative of Party B who had a pre-existing personal relationship. Forestar and Party B entered into a confidentiality agreement on November 13, 2015, and Party B initiated due diligence of the Company. Shortly thereafter, Party B informed the Company it would not proceed with a transaction due to Party B's belief that Party B would not be able to offer a price at which the Company would be willing to transact.

        The board of directors of Forestar held an in-person meeting on November 10, 2015, with members of Forestar management in attendance. At the meeting, in connection with the board of directors' plan to focus on the core business, the board of directors determined to engage financial advisors to commence the sales process for certain non-core assets, including specifically the sale of its hotel property in Austin, Texas, and its oil and gas working interest assets in North Dakota. Forestar's closing stock price was $13.37 on November 10, 2015.

        In early December 2015, Bruce F. Dickson, then the Company's chief real estate officer, met with representatives of a private residential and commercial real estate company ("Party C") to discuss possible strategic alternatives between Forestar and Party C. This meeting was arranged at the request of the Company as it continued to evaluate its strategy for the community development business.

        During the last two months of 2015 and in 2016 prior to the ultimate engagement of JMP as the Company's financial advisor in August 2016, the Forestar management team met with several potential financial advisors and invited JMP and four other potential financial advisors to prepare materials and presentations for the Forestar board of directors regarding such firms' views on Forestar's business and alternatives. Throughout 2016 and 2017, the Company continued to pursue its initiatives to reduce operating costs, exit certain non-core assets and focus on maximizing stockholder value. As the Company narrowed its core business to community development and continued to divest certain non-core assets, Forestar management also worked with various advisors to consider future alternatives for Forestar in light of the business challenges facing Forestar and the Company's future financial plan and prospects.

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        On January 7, 2016, the Forestar board of directors held a telephonic meeting, with members of Forestar management in attendance. Mr. Weber provided an update on ongoing initiatives with respect to the Company's non-core assets, and Mr. Jehl provided information regarding net asset value scenarios for the Company as well as a review of its core business. The board of directors discussed these reviews and the status of the core community development business, and discussed the strategic direction of the Company.

        On January 19 and January 20, 2016, Mr. Weber, Mr. Dickson and Michael Quinley, the Company's president—community development, met with representatives of Party C to introduce Mr. Weber and Mr. Quinley to the Party C representatives and to further discuss possible strategic alternatives between Forestar and Party C. Party C had executed a confidentiality agreement with Forestar on January 12, 2016. Thereafter, the parties determined not to proceed with further discussions regarding a transaction due to a perceived lack of strategic alignment between the parties as Party C was focused on growing its multifamily business, which Forestar was considering for opportunistic exit over time.

        On January 26, 2016, the Forestar board of directors held a telephonic meeting, with members of Forestar management in attendance. At the meeting, the board of directors determined the Company's multifamily business was non-core, and to opportunistically exit Forestar's multifamily portfolio and no longer allocate capital to new projects in that business.

        On February 8 and February 9, 2016, the Forestar board of directors held an in-person meeting, which members of Forestar management attended. At the meeting, a potential financial advisor made a presentation to the board of directors regarding the advisor's observations regarding the Company, its market positioning, and the Company's strategic alternatives. The board of directors engaged in a discussion regarding the Company's strategic alternatives, and in furtherance of the objective to focus on the Company's core community development business the board of directors directed management to commence the process to market its timberland assets and to begin the process to determine potential values for legacy oil and gas and mineral assets. Forestar's closing stock price was $8.60 on February 9, 2016.

        In April 2016, a representative of a private real estate investment firm ("Party D") discussed with Mr. Quinley Party D's potential interest in an acquisition of the Company's community development business in the course of Mr. Quinley's regular business interactions with such representative. Mr. Quinley had been acquainted with the Party D representative for over 30 years during which both Mr. Quinley and the Party D representative had been employed by various firms associated with Atlanta-area real estate development activities or providing services thereto. After initial discussions, Party D executed a confidentiality agreement with Forestar on April 19, 2016, and Mr. Quinley had additional discussions with the Party D representative during May 2016.

        In late April 2016, a representative of a private investment firm ("Party E") contacted a member of the Forestar board of directors (who is no longer a member of the board of directors) with whom the Party E representative was already acquainted to inquire about a potential transaction with the Company. The Forestar director spoke with the representative of Party E regarding Forestar and its business (without sharing any material non-public information). The director suggested that the Party E representative contact Mr. Weber if Party E was interested in engaging in further discussions regarding a potential transaction with the Company, and no further contact from Party E was received by the Company in regard to a potential transaction.

        The Forestar board of directors held a regularly scheduled in-person meeting on May 9 and May 10, 2016, with members of Forestar management and representatives of two potential financial advisors (neither of which were the potential financial advisor that presented at the February 8 and February 9, 2016 board of directors meeting) and Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden"), the Company's legal counsel, in attendance (with the two potential financial advisors and

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Skadden in attendance for part of the meeting). At the meeting, Mr. Weber reviewed the evolution of considerations and decisions since October 2015 related to the Company's portfolio of assets, and discussed with the board of directors certain historical financial information and pro forma community development information. Representatives of the first potential financial advisor joined the meeting to discuss their recommendations, including strategic alternatives, repurchasing or refinancing indebtedness, valuation considerations for the Company's community development business and their recommendation to initiate a tender offer for the Company's 8.500% senior secured notes due 2022. The second potential financial advisor then joined the meeting to discuss the Company's net asset value, potential deleveraging alternatives and recommendations on strategic alternatives. After the presentations by the two potential financial advisors, Mr. Weber advised the board of directors that the Company had been approached by a financial advisor (which was not a financial advisor that the board of directors was considering retaining) representing a publicly traded company, the identity of which had not been disclosed to Mr. Weber, that was interested in engaging in discussions with the Company. The board of directors discussed the strategic alternatives for the community development business and considerations regarding the financial advisor the Company may want to engage. Representatives of Skadden joined the meeting to discuss and respond to questions from the directors regarding their fiduciary duties with respect to the exploration of strategic alternatives. After discussion of the various presentations and alternatives presented to the board of directors, the board of directors determined to initiate a cash tender offer and consent solicitation for the Company's senior secured notes, and to continue to focus on the Company's core community development business. Forestar's closing stock price was $12.43 on May 10, 2016.

        After the board of directors meeting, the financial advisor that had contacted Mr. Weber prior to the board of directors meeting about potentially engaging in discussions with the Company disclosed to Mr. Weber the identity of the advisor's client, a publicly traded homebuilder ("Party F"). On May 11, 2016, Mr. Weber and Mr. Quinley had an in-person meeting with representatives of Party F to discuss Forestar and Party F and whether the parties would be interested in a potential transaction or other strategic business arrangement.

        On May 18, 2016, Mr. Weber, Mr. Jehl and Mr. Quinley had a follow-up meeting with representatives of Party F to discuss further whether the parties would be interested in a potential transaction or other strategic business arrangement.

        On May 27, 2016, the Company entered into a confidentiality agreement with Party F, which agreement included a "standstill" provision (which "standstill" expired in accordance with its terms on February 27, 2017).

        On June 1, 2016, Mr. Weber, Mr. Jehl, David M. Grimm, then the Company's chief administrative officer and general counsel, and Mr. Quinley met with representatives of Party F, including Party F's financial advisor, and the parties discussed a potential strategic alliance and other potential business arrangements. In the days following, the parties and their advisors continued to discuss a potential transaction.

        On June 6, 2016, Party F delivered a draft term sheet to Forestar proposing an equity investment by Party F in Forestar. The term sheet provided for a proposed investment in Forestar by Party F to acquire a combination of common stock representing 19.9% of the fully diluted Forestar common shares outstanding prior to the issuance at a purchase price equal to the market value per share, and convertible preferred stock representing an additional 20% of the fully diluted Forestar common shares outstanding on an as-converted basis. The term sheet provided that Party F would have proportional representation on the Company's board of directors and on a newly formed investment committee composed of Forestar management and Party F representatives, and Party F would have certain veto rights at the board of directors level and on the investment committee. The term sheet also provided that the Company would use the proceeds of the investment to pursue lot development projects in

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which Party F would have rights to purchase a significant portion of the lots, and the parties would also enter into an agreement providing Party F with preferential rights to acquire developed lots from the Company at market prices.

        On June 13, 2016, Mr. Quinley met with representatives of Party D and discussed Party D acquiring Forestar's community development portfolio.

        On June 16, 2016, the Forestar board of directors held a telephonic meeting, with members of Forestar management in attendance. Mr. Weber reviewed the fact that several parties had previously expressed an interest in Forestar's community development business (such as Party B, Party C and Party D), and discussed Party F's proposal and the status of conversations with Party F. In light of the potential interest in the community development business and the Party F proposal, Forestar management recommended to the board of directors that the Company would benefit from engaging a financial advisor to assist with the identification and evaluation of strategic alternatives, and noted that the Company had been in contact with several potential firms. Following discussions, the board of directors authorized Forestar management (i) to continue discussions with potential financial advisors with a goal of identifying a firm for recommendation to the board of directors and (ii) to continue discussions with Party F to enable Party F to better understand the value of the Company for purposes of its potential strategic investment and address other aspects of Party F's proposal.

        During June and July 2016, Forestar management reached out to and met with potential financial advisors regarding the Company. On June 21, 2016, Mr. Weber and Mr. Jehl held a telephone conference with representatives of JMP to invite JMP to attend the August 2016 meeting of the Company's board of directors for discussions regarding the Company's strategic alternatives.

        On June 23, 2016, Mr. Jehl and other Forestar employees participated in a conference call with Party F and its financial advisor to discuss the potential strategic investment and Forestar's financial position.

        On June 29, 2016, Mr. Weber, Mr. Jehl and Mr. Quinley met with representatives of Party D to introduce Mr. Weber and Mr. Jehl and continue the discussions regarding Party D's potential acquisition of Forestar's community development portfolio.

        On July 13, 2016, Forestar management, in furtherance of the process authorized by the board of directors to evaluate potential financial advisors, authorized JMP, in contemplation of potential formal engagement, to reach out to five initial parties to discuss possible interest in a potential transaction with Forestar (with respect to the community development business or otherwise), including two private investment firms ("Party G" and "Party H"), a real estate investment firm ("Party I"), a private owner and developer of mixed-use, master-planned communities ("Party J"), and a non-U.S. publicly traded real estate firm ("Party K").

        On July 14, 2016, Mr. Weber, Mr. Jehl, Mr. Grimm and Mr. Quinley met with representatives of Party F at Party F's corporate offices to further discuss the potential strategic investment by Party F in Forestar.

        Party H executed a confidentiality agreement with Forestar on July 21, 2016.

        On July 22, 2016, Mr. Weber met with representatives of Party F at its corporate offices to discuss valuation considerations with respect to Forestar and the terms of the potential strategic investment by Party F.

        On July 26, 2016, Forestar delivered to Party F a revised draft of the term sheet regarding Party F's potential strategic investment in the Company, consistent with the general feedback to the term sheet from the board of directors at the June 16, 2016 meeting. The term sheet contemplated an acquisition of 19.9% of the Company's common stock at an unspecified premium to the market price and eliminated the proposed preferred stock investment, and, among other changes to Party F's proposed term sheet, limited Party F's board of directors veto rights and removed Party F's investment committee veto rights and added a five-year customary standstill that limited Party F's ability to acquire more than 25% of the Company's common stock or to take certain other actions. Forestar's closing stock price was $12.24 on July 26, 2016.

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        On July 27, 2016, Party G and Party K each executed a confidentiality agreement with Forestar.

        On August 1, 2016, Mr. Rubright met with representatives of Party F at his home to further discuss the potential strategic investment by Party F in Forestar.

        On August 4, 2016, Party F delivered to the Company a revised draft of the term sheet regarding Party F's proposed strategic investment in the Company. The revised term sheet contemplated an acquisition by Party F of 19.9% of the Company's common stock, and convertible preferred stock that, together with the common stock, would result in Party F owning 25% of the fully diluted Forestar common shares outstanding on an as-diluted basis, at a purchase price of $13.75 per share in each case. Among other changes to the Forestar July 26, 2016 draft term sheet, the revised draft (i) included expanded board of directors veto rights, (ii) reinstated certain of Party F's veto rights on the investment committee and (iii) provided for a more limited two-year standstill agreement that allowed Party F to acquire up to 30% of the Company's common stock.

        The Forestar board of directors held an in-person meeting on August 8 and August 9, 2016, with members of Forestar management in attendance. Representatives of JMP and another potential financial advisor were also in attendance for portions of the meeting. As the board of directors was evaluating which financial advisor it would engage, Forestar management invited JMP and the other potential financial advisor to attend portions of the board of directors meeting, and each of JMP and the other financial advisor separately joined the meeting to discuss potential strategic alternatives that the Company might wish to consider and valuation matters. JMP discussed with the board of directors three potential options for the Company: sale, liquidation or status quo with growth, and discussed the five parties contacted for preliminary outreach in July, as well as additional potential transaction parties. After discussion of the various alternatives presented and considerations regarding the appropriate financial advisor, the board of directors decided to engage in a process to explore a potential sale of the Company and approved the engagement of JMP to assist with the process (at no time did JMP participate in any discussions of the board of directors regarding JMP's engagement). The Forestar board of directors' selection was based on JMP's reputation and experience and familiarity with Forestar and its business. The Forestar board of directors also discussed Party F's most recent proposal. The board of directors determined that the proposed investment construct was problematic to Forestar because the proposed Party F governance rights were excessive in comparison to the proposed level of investment. Shortly after the board of directors meeting, Forestar management informed Party F of these conclusions and the fact that the Company intended to engage JMP to explore strategic alternatives. Thereafter, Party F advised Forestar management that Party F was not interested in participating in a formal process with other parties. Forestar's closing stock price was $12.16 on August 9, 2016.

        On August 11, 2016, Party I executed a confidentiality agreement with Forestar.

        JMP was formally engaged on August 18, 2016 pursuant to the approval granted by the board of directors in the August 8 and August 9, 2016 meeting. Forestar's closing stock price was $12.25 on August 18, 2016. Beginning on August 18, 2016 and through September, at the direction of the Company and consistent with direction of the board of directors to initiate a potential sale process, JMP reached out to, or continued engagement with, 18 parties (including Parties A - K mentioned above, other than Party E, in light of their lack of response to the prior discussions, and Party D, who Forestar management was dealing with directly at the time) to solicit interest in an acquisition of Forestar, including several parties that had reached out to JMP or Forestar inquiring about a possible transaction. The contacted parties included public and private strategic acquirors, including national homebuilders, and private investment firms.

        On September 6, 2016, Forestar opened an electronic data room for potential acquirors that had executed confidentiality agreements.

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        On September 14, 2016, a non-binding indication of interest was received from Party D based on the prior discussions between Party D and Forestar management. The indication of interest consisted of an offer to purchase only Forestar's community development assets for $250 million. Forestar management had informed Party D that JMP had been retained by Forestar to assist it with evaluating strategic alternatives for the Company as a whole. Also on that day, Party J executed a confidentiality agreement with Forestar and was granted access to the electronic data room shortly thereafter.

        On September 22, 2016, at the direction of the Company, JMP transmitted a process letter to the 10 parties included in the initial outreach group (including Party B and Parties G -K) that had expressed an interest in a potential transaction inviting them to submit by no later than October 7, 2016 initial indications of interest to acquire Forestar. Forestar's closing stock price was $11.67 on September 22, 2016.

        On September 28, 2016, Forestar executed a confidentiality agreement with Party J with respect to information to be provided to Forestar by Party J.

        Throughout late September and October 2016, JMP and the Company's management held various telephone conferences and in-person meetings with the various parties considering a transaction to provide further information on Forestar and its business.

        From September 26, 2016 to October 6, 2016, Mr. Weber, Mr. Jehl, Mr. Quinley, Mr. Burleson, the Company's Executive Vice President—Real Estate, West Region, other Forestar employees and representatives of JMP held telephone or in-person conferences with each of Party H, Party J, Party G and a private investment firm ("Party L") to provide information regarding Forestar and its business. Party L had initially inquired about purchasing the Company's receivables from the Cibolo Canyons Special Improvement District, but Party L subsequently contacted JMP to be involved in the potential sale process. Party L executed a confidentiality agreement with Forestar on October 5, 2016 and was granted access to the electronic data room shortly thereafter.

        On October 7, 2016, Party G submitted an initial non-binding indication of interest for Forestar for an all-cash acquisition of Forestar at a preliminary valuation of $14.00 per share.

        On October 11, 2016, Mr. Jehl, Mr. Quinley, Mr. Burleson and other Forestar employees and representatives of JMP held separate telephone conferences with representatives of a publicly traded homebuilder ("Party M") and a publicly traded real estate investment trust ("Party N") to provide an overview of Forestar and its community development business by project and market, each of whom had been part of the initial outreach group contacted by JMP. Party M had executed a confidentiality agreement with Forestar on September 29, 2016 and Party N had executed a confidentiality agreement with Forestar on September 26, 2016, and each were granted access to the electronic data room shortly after executing such confidentiality agreements.

        On October 14, 2016, Party J submitted an initial non-binding indication of interest. The indication of interest provided for a non-cash, all-stock private-to-public merger transaction pursuant to which Party J and Forestar would merge with Forestar as the surviving corporation, and Forestar stockholders would own approximately 13%-14% of the merged company. The offer implied a valuation of Forestar of approximately $600 million to $625 million based on Party J's proposed valuation of itself (a price per share of $14.05 to $14.64). Party J indicated that it would consider including a cash portion of the purchase price if Forestar preferred such a structure. In response to Party J's initial indication of interest, JMP requested that Party J provide financial information to support the valuation of Party J included in its initial indication of interest.

        On October 18, 2016, Party F withdrew its earlier offer that had valued the Company at $13.75 per share, informing the Company that it was not interested in an acquisition of the entire company and that it did not wish to participate in the potential sale process. Party F indicated that it would not work on a potential strategic investment in the Company until the potential sale process was concluded. Also

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on that day, Party J provided initial diligence information in response to Forestar's request to provide financial information to support the Party J valuation included in its initial indication of interest.

        On October 19, 2016, the Forestar board of directors held a telephonic meeting, with members of Forestar management and representatives of JMP and Skadden in attendance (with JMP in attendance for part of the meeting). The representative of Skadden reviewed with the members of the Forestar board of directors their fiduciary duties. JMP summarized the status of the potential sale process to date, noting that of the parties that had been contacted as part of the initial outreach group or that had otherwise engaged in discussions with Forestar as noted above, nine (including Party A) had either declined to participate in the process or had withdrawn from the process after executing a confidentiality agreement with the Company. Four of the parties had submitted initial indications of interest: Party F (at a value of $13.75 per share, which offer had been withdrawn on October 18, 2016), Party D (at an implied value of $5.87 per share for the community development business only), Party G (at a value of $14.00 per share) and Party J (at an implied value of $14.05 to $14.64 per share based on Party J's valuation of itself included in its indication of interest). The board of directors engaged in discussion with the JMP representatives regarding the process and the parties that had indicated, or were expected to indicate based on discussions with JMP, interest in a transaction with Forestar. Forestar's closing stock price was $11.20 on October 19, 2016.

        Also on October 19, 2016, an initial non-binding indication of interest was received from Party N, which contemplated that Party N would contribute a master planned community land portfolio to Forestar in exchange for Forestar common stock, preferred equity, or other consideration to be determined. Party N did not include an indicative valuation in its indication of interest. After discussions between representatives of the Company and Party N regarding the proposed transaction, including the possibility of Party N providing debt financing to an acquiror of the Company, the parties concluded that a transaction involving Forestar and Party N was not a strategic fit given Party N's proposed transaction structure, and Party N did not continue in the potential sale process.

        On October 24, 2016, Mr. Jehl, Mr. Quinley, Mr. Burleson and other Forestar employees and representatives of JMP held a telephone conference with representatives of a private community developer ("Party O") to provide an overview of Forestar and its community development business by project and market. Party O had executed a confidentiality agreement with Forestar on October 11, 2016 and was granted access to the electronic data room shortly thereafter.

        Also on October 24, 2016, consistent with the discussions at the October 19, 2016 meeting of the Forestar board of directors, Forestar management instructed JMP to initiate an expanded outreach to six additional potential acquirors, including Starwood, a private real estate developer ("Party P") and investment firms and publicly traded real estate companies. In the days following, JMP reached out to all six parties to solicit their interest in participating in the potential sale process. On that same day, JMP transmitted a detailed request list to Party J for financial information so that Forestar, with the assistance of its advisors, could assess Party J's proposed valuation of itself.

        Starwood executed a confidentiality agreement with Forestar on October 24, 2016 and was granted access to the electronic data room shortly thereafter.

        On October 26, 2016, Mr. Burleson and other Forestar employees and representatives of JMP held a telephone conference with representatives of Party L to provide an overview of Forestar and its community development business by project and market.

        Also on October 26, 2016, Mr. Weber and Mr. Jehl and representatives of JMP met with representatives of Party G to discuss the potential sale process and the progress made by Party G to date, including the terms of its indication of interest. The parties discussed arranging project level tours for representatives of Party G in November 2016.

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        On the same day, Mr. Weber and Mr. Jehl and representatives of JMP also met with Party O and discussed Party O's continued interest in purchasing the Company or its community development assets.

        On October 27, 2016, Party J provided additional high level financial due diligence information. Forestar, in consultation with JMP, did not consider such information sufficient to assess Party J's proposed valuation of itself. At the Company's direction, JMP communicated to Party J the need for additional due diligence materials in order for the Company to assess Party J's proposed valuation of itself.

        On November 1, 2016, Party G informed JMP that it wanted to introduce another private investment firm into the process ("Party Q") to evaluate the potential transaction as a potential partner with Party G. Representatives of JMP spoke with representatives of Party Q and Party Q executed a confidentiality agreement on November 4, 2016 and was granted access to the electronic data room shortly thereafter. Party Q began to work with Party G to evaluate the potential transaction as potential partners.

        On November 7, 2016, Party O submitted an initial non-binding indication of interest for an all-cash acquisition of the Company at $14.50 per share.

        The Forestar board of directors met at an in-person meeting on November 7 and November 8, 2016, with members of Forestar management and representatives of JMP in attendance (with JMP in attendance for part of the meeting). Forestar management and JMP provided an update of the potential sale process, including an overview of the six additional parties contacted, and an overview of potential strategic alternatives for the Company. Forestar's closing stock price was $11.35 on November 7, 2016.

        On November 9, 2016, Party P executed a confidentiality agreement with Forestar and was granted access to the electronic data room shortly thereafter.

        In November 2016, based on discussions at the board of directors meeting on November 7 and November 8, 2016, Forestar determined to invite Starwood and Party P (based on discussions with such parties) and Party G and Party Q, Party J and Party O (based on the terms of the initial indications of interest submitted by, and discussions with, such parties) to participate in the second round of the potential sale process. Such parties were included in the second round of the potential sale process based on the potential benefit to the Company's stockholders of the participation of such parties in light of their perceived interest level in and ability to consummate a transaction and in the interest of furthering a competitive process. Forestar determined not to invite Party D into the second round due to the lower valuation and structural impediments to a transaction compared to the other prospective acquirors. During the course of the second round of the potential sale process, the Company arranged various site tours and telephone conferences at the request of the potential acquirors in connection with their due diligence, as detailed below.

        On November 11, 2016, Mr. Jehl and other Forestar employees and Forestar's external tax counsel participated in a conference call with Party G in which the parties discussed structuring alternatives for a potential transaction.

        On November 15, 2016, Mr. Jehl, Mr. Quinley, Mr. Burleson and other Forestar employees and representatives of JMP held a telephone conference with representatives of Starwood to provide an overview of Forestar and its community development business by project and market.

        From November 16 to November 18, 2016, Mr. Weber, Mr. Jehl, Mr. Quinley, Mr. Burleson, representatives of JMP and other Forestar employees held in-person meetings, and Forestar representatives conducted project tours for, representatives of Party G and Party Q. Forestar provided Party G and Party Q with additional information regarding Forestar and an update on the core business and status of the non-core business and dispositions.

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        From November 28 to December 1, 2016, Mr. Weber, Mr. Jehl, Mr. Quinley, Mr. Burleson, representatives of JMP and other Forestar employees held in-person meetings, and Forestar representatives conducted project tours for, representatives of Starwood. In addition, Forestar provided additional information and an update on the core community development business and the status of the non-core asset divestitures.

        On December 2, 2016, Mr. Burleson met with representatives of Party P, with Mr. Jehl and other Forestar employees and representatives of JMP joining by telephone conference. Forestar provided an overview of Forestar and its community development business by project and market. Also on that day, at the direction of the Company, JMP contacted three additional parties that had expressed interest in providing financing to Party O in the potential sale process.

        On December 6, 2016, Party P submitted an initial, non-binding indication of interest for an all-cash acquisition of Forestar at a price of $15.00 per share.

        On December 13, 2016, at the direction of the Company, JMP transmitted a second round process letter to Starwood and Party G and Party Q, Party J, Party O and Party P, which were the only parties that continued to express an interest in pursuing a transaction with the Company, inviting such parties to submit final offers by no later than January 20, 2017.

        Also on December 13, 2016, Mr. Weber, Mr. Jehl, Mr. Burleson, representatives of JMP and other Forestar employees held in-person meetings, and Forestar representatives conducted project tours for, representatives of Party P. On the same day, Forestar provided Party P with additional information regarding Forestar and an update on the core business and status of the non-core business and dispositions, and the parties discussed the terms of Party P's indication of interest.

        On December 14, 2016, Mr. Jehl and other Forestar employees and Forestar's external tax counsel participated in a conference call with Party P in which the parties discussed structuring alternatives for a potential transaction.

        On December 15, 2016, Mr. Weber and Mr. Jehl had a meeting with Mr. Mike Moser, the chief executive officer of Starwood Land Ventures, L.L.C. ("Starwood Land"), an affiliate of Starwood, in which the parties continued to discuss the potential transaction between Forestar and Starwood. Forestar management reviewed business and financial information with Mr. Moser. Mr. Moser expressed interest in pursuing a transaction and adding the Forestar community development business to Starwood Land's existing platform.

        On December 19, 2016, Mr. Jehl participated in a conference call with representatives of Party P to discuss historical costs and projected SG&A assumptions and employee census information.

        On December 22, 2016, Starwood Land submitted a preliminary, non-binding indication of interest for an all-cash acquisition of the Company at a price of $15.00 per share, subject to approval by Starwood's investment committee.

        On December 29, 2016, Mr. Jehl and other Forestar employees and Forestar's external tax counsel participated in a conference call with Party J in which the parties discussed structuring alternatives for a potential transaction.

        On December 30, 2016, at the direction of the Company, JMP transmitted a draft merger agreement prepared by Skadden to Starwood, Party G and Party Q, Party J, Party O and Party P, and requested that the parties submit a revised draft of the merger agreement with their final offers to be submitted no later than January 20, 2017.

        On January 3, 2017, Mr. Jehl participated in a telephone conference with representatives of Party G and Party Q to provide an update on the non-core asset divestitures and SG&A discussions.

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        Also on January 3, 2017, Party O informed the Company that it would not be submitting a final offer because Party O was only interested in purchasing the community development assets of Forestar and not the equity of the Company (including the Company's liabilities), and Party O had not yet been able to arrange financing for a transaction.

        On January 4, 2017, Mr. Weber and Mr. Jehl met with representatives of Party P to discuss an acquisition of Forestar and to provide a presentation regarding Forestar's water assets.

        On January 4 and January 6, 2017, Mr. Jehl, Mr. Burleson and other Forestar employees participated in telephone conferences with Mr. Moser and Mr. Craig Campbell, the President, West Region of Starwood Land, to discuss due diligence matters.

        On January 5, 2017, the Forestar board of directors held a telephonic meeting, with members of Forestar management and representatives of JMP and Skadden in attendance (with JMP in attendance for part of the meeting). The representatives of JMP provided an update on the potential sale process and engagement with the remaining parties, including property tours and significant meetings, and an overview of the expected final round bids based on discussions with the interested parties. The representative of Skadden reviewed with the members of the Forestar board of directors their fiduciary duties with respect to the potential sale process.

        On January 6, 2017, Mr. Jehl and other Forestar employees and Forestar's external tax counsel participated in a follow-up conference call with Party P to continue discussing the structuring options for the transaction.

        On January 10, 2017, Mr. Jehl, Mr. Burleson and other Forestar employees participated in telephone conferences with Party G and Party Q to discuss due diligence matters and an overview of the West region assets.

        On January 12, 2017, Mr. Weber and Mr. Jehl and representatives of JMP met with Mr. Moser and Mr. David Baker, a Vice President of Starwood, in Austin, Texas, to discuss financial and business due diligence matters for the potential transaction between the Company and Starwood.

        On January 13, 2017, based on feedback from the remaining parties regarding the status of due diligence in light of the January 20, 2017 deadline for final offers, the Company determined to extend the deadline for final offers from January 20, 2017 to January 27, 2017, and thereafter JMP informed the remaining parties of the extended deadline.

        On January 16, 2017, Mr. Weber participated in a conference call with a representative of Party P to discuss the possible acquisition of Forestar by Party P.

        On January 19, 2017, Party G and Party Q informed JMP that they would not be submitting a final offer for the acquisition of Forestar because based on their additional due diligence reviews of the Company, the valuation of the Company would be substantially lower than the values provided in Party G's initial indication of interest. Party P also informed JMP that it would not be submitting a final offer for Forestar for the same reasons but it expressed an interest in acquiring solely the Company's community development assets if a transaction for sale of the entire Company was not consummated.

        On January 27, 2017, Party J submitted its second non-binding offer for a merger of Forestar and Party J, which continued to reflect a stock-for-stock merger pursuant to which Party J would acquire Forestar and become a public company. The offer included a proposed value of Party J within the range provided in its initial indication of interest, and Forestar stockholders would own approximately 15% of the merged company. Party J did not submit a revised draft of the merger agreement with its offer.

        On January 28, 2017, the Forestar board of directors held a telephonic meeting, with members of Forestar management and representatives of JMP in attendance (with JMP in attendance for part of the meeting). The representatives of JMP provided an update on the potential sale process, identifying the parties that had withdrawn from the process and that only Party J had provided a final offer and

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that the January 27, 2017 deadline for such offers had passed, and that Party J continued to propose a stock-for-stock transaction without supplying necessary data for the Company to assess Party J's own valuation. After consultation with JMP, the board of directors determined that, in addition to Party J, the Company should continue to engage with Starwood to encourage submission of a final offer and with Party G and Party Q with the goal of encouraging Party G and Party Q to reengage in the potential sale process and submit a final offer. Forestar's closing stock price was $13.00 on January 27, 2017.

        On January 31, 2017, JMP had a telephone conference with representatives of Party J to discuss their offer and to request the necessary information for the Company to assess the proposed valuation of Party J.

        On February 1, 2017, Party J provided additional financial due diligence information consisting primarily of a third party liquidation analysis at a value substantially below Party J's proposed valuation in its final offer, and which Forestar, in consultation with JMP, did not consider sufficient to substantiate Party J's proposed valuation of itself.

        On February 8, 2017, Starwood submitted its non-binding second offer, which included an offer to acquire the Company for a price of $13.65 per share and proposed a 30-day exclusivity period to continue its due diligence and execute transaction documents, followed by a post-signing due diligence period of 30 days, with Starwood having the right to terminate the merger agreement in its sole discretion during such 30-day diligence period. Starwood indicated to Forestar management that it had reduced the offer price from $15.00 per share price included in Starwood Land's initial indication of interest as a result of findings during the course of its due diligence investigation of the Company, including, among other things, the fact that a greater percentage of the Company's residential lots were under contract than Starwood had initially assumed and Starwood's belief that obtaining entitlements for one of the Company's assets was less feasible or likely to take longer than Starwood had initially assumed.

        On February 13 and February 14, 2017, the Forestar board of directors held an in-person meeting, with members of Forestar management and representatives of JMP and Skadden in attendance (with JMP and Skadden in attendance for part of the meeting). JMP informed the board of directors that JMP had reached out to Party G after the January 28, 2017 board of directors meeting to encourage Party G and Party Q to reengage in the potential sale process and submit a final offer, and Party G had declined on behalf of both such parties. In addition to the offers from Starwood and Party J, the board of directors discussed the Company's 2016 performance, historical community development results and projected performance, key performance indicators, inventory of lots, historical and projected SG&A targets. The board of directors also reviewed potential net asset value scenarios, which scenarios compared net asset values in the event of the Company's dissolution and winding up of its affairs or the continuation of the Company's business plan at different levels of investment (which scenarios are set forth in the section entitled "The Merger (Proposal 1)—Projected Financial Information—Alternative Net Asset Value Scenarios"). The Skadden representative reviewed with the board of directors the process and potential timing for the Company to dissolve or wind up its affairs under Delaware law. JMP and Forestar management reviewed with the board of directors the potential recoveries for stockholders under management's estimates of asset values, liabilities and carry costs, including sensitivities on a per share basis depending on the estimated sales price of the Company's community development business. The board of directors engaged in a discussion of the offers from Starwood and Party J and the other strategic options available to the Company on a going-forward basis, including the potential sale of the community development portfolio combined with liquidation of the remaining non-core assets and dissolution and winding up of the Company's affairs. JMP noted that, based on Party J's valuation of Party J's stock included in Party J's second offer and the due diligence materials provided by Party J, the implied per share value of the Party J offer was in a range of $10.96 per share to $16.00 per share. The board of directors discussed that, as a private company, Party J's valuation of itself was subject to various assumptions which would require significant additional due diligence to assess, as well as other considerations with respect to Party J's stock merger

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proposal, including the fact that the Company's stockholders would own less than 20% of the merged entity. The representative of Skadden reviewed with the members of the Forestar board of directors their fiduciary duties in the context of the two offers. Following discussion by the board of directors, the board of directors directed Forestar management to continue to engage with Starwood and Party J, and to continue to request the due diligence items from Party J necessary for the Company to further assess the valuation of Party J in light of the proposed stock-for-stock transaction structure. The board of directors directed JMP to inform Starwood that it should raise its offer price in order to remain competitive on value and if it desired to enter into an exclusivity agreement with the Company. Forestar's closing stock price was $13.25 on February 13, 2017.

        On February 16, 2017, representatives of JMP held a telephonic meeting with Starwood in which it was conveyed to Starwood that the Forestar board of directors had determined that Starwood's $13.65 per share offer was insufficient and that the Forestar board of directors was unwilling to grant an exclusivity period longer than 30 days or a "diligence out" allowing Starwood to unilaterally terminate the merger agreement.

        On the same day, JMP sent a supplemental detailed due diligence request list to Party J and participated in a telephone conference with representatives of Party J to discuss the requests and the need for the information to allow Forestar to further assess the value of Party J's offer. Later that day, Party J informed JMP that it was withdrawing from the potential sale process, and did not give a reason for the withdrawal.

        On February 21, 2017, Starwood submitted another non-binding indication of interest to the Company, increasing its offer price from $13.65 per share to $14.25 per share, and proposing a 30-day exclusivity agreement to complete due diligence and negotiate the transaction documents. On the same day, Kirkland & Ellis LLP ("Kirkland"), Starwood's legal counsel, delivered a revised draft of the merger agreement to Skadden.

        On February 24, 2017, the Forestar board of directors held a telephonic meeting, with members of Forestar management and representatives of JMP and Skadden in attendance (with JMP in attendance for part of the meeting). JMP provided a process update and overview, and noted that with Party J's refusal to provide the requested diligence information and withdrawal from the potential sale process, Starwood was the sole party that remained in the potential sale process. JMP reviewed Starwood's revised offer of $14.25 per share, which was the highest cash final offer received by the Company. The representative from Skadden discussed the proposed exclusivity agreement and several points in the revised draft of the merger agreement submitted by Starwood. After discussion, the board of directors directed Forestar management to seek improvement of certain terms in the merger agreement, including regarding termination fees, interim operating covenants, closing conditions and the outside date for the merger, as a condition to entering into the exclusivity agreement with Starwood.

        Following the board of directors meeting, representatives of JMP reached out to Starwood to discuss the matters raised at the meeting to seek improvement to certain terms in exchange for Forestar agreeing to enter into an exclusivity agreement with Starwood.

        On February 27, 2017, the Forestar board of directors held a telephonic meeting, with members of Forestar management and representatives of JMP and Skadden in attendance (with JMP in attendance for part of the meeting). JMP reported on its discussions with Starwood, including Starwood's requirement of a 30-day exclusivity period in order to continue pursuing a transaction. JMP updated the board of directors on Starwood's response to issues raised with respect to certain terms in the merger agreement and Skadden summarized the proposed exclusivity agreement. After discussion, the board of directors authorized Forestar management to enter into a 30-day exclusivity agreement with Starwood and to continue the negotiation of the merger agreement during this period. Later that day, Forestar and Starwood entered into a 30-day exclusivity agreement, with the exclusivity period expiring on March 29, 2017. Forestar's closing stock price was $13.45 on February 27, 2017.

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        During the exclusivity period, Starwood and its advisors worked to complete its due diligence of Forestar, including via access to an electronic data room provided by Forestar, while Starwood's and Forestar management and advisors worked to finalize the merger agreement and other definitive transaction documents.

        On March 3, 2017, Skadden provided Kirkland with a revised draft of the merger agreement. On March 18, 2017, Kirkland provided Skadden with a revised draft of the merger agreement. On March 24, 2017, Skadden provided Kirkland with a revised draft of the merger agreement. During this period, representatives from Skadden and Kirkland engaged in numerous telephonic meetings to discuss the merger agreement.

        On March 27, 2017, the Forestar board of directors held a telephonic meeting, with members of Forestar management and representatives of JMP and Skadden in attendance (with JMP in attendance for part of the meeting). JMP provided an update on the progress of Starwood's due diligence process and that Starwood continued to seek information and desired to perform additional analysis but that Starwood's advisors had made substantial progress in their due diligence review. JMP noted that Starwood had originally requested a 21 day extension to the exclusivity period, but after further discussion between Starwood and Forestar, had reduced its request to an extension to April 14, 2017. The representative of Skadden provided an overview of the status of negotiation of the merger agreement, including significant open items. Following discussion among the directors, the board of directors authorized extending the exclusivity period to April 14, 2017.

        During the period from March 27, 2017 to April 13, 2017, Forestar's and Starwood's management and advisors worked to finalize the definitive transaction documents and Starwood's due diligence review of Forestar.

        On April 3, 2017, Kirkland provided Skadden with a revised draft of the merger agreement, which included consents of various counterparties to Forestar joint ventures as a closing condition to the merger. Forestar and Starwood and their representatives discussed the approach to these consents over the next several days and determined to seek to obtain certain consents prior to the execution of the merger agreement if possible.

        On April 6, 2017, Skadden provided Kirkland with a revised draft of the merger agreement.

        On April 10, 2017, Kirkland provided Skadden with Starwood's proposal on the key remaining open issues in the merger agreement, including the joint venture counterparty closing condition, termination fees and expense reimbursement triggers and amounts and expanding the divestiture condition. Later that day, Skadden and Kirkland discussed and negotiated the open issues, and Kirkland provided Skadden with drafts of the Starwood equity commitment letter and limited guarantee.

        From April 10 through April 13, 2017, representatives of the Company and Starwood further negotiated, and reached resolution on, certain open points in the merger agreement, which included, among others, the lack of the joint venture counterparty consents condition, termination fees and expense reimbursement triggers and amounts and the scope of the divestiture condition, and the terms and conditions of the Starwood limited guarantee.

        On April 12, 2016, Forestar's board of directors held a telephonic meeting to consider the Starwood offer and the terms of the merger agreement. Forestar management and representatives of JMP and Skadden were in attendance (with JMP in attendance for part of the meeting). Skadden's representative reviewed the director fiduciary duties and other legal matters, and provided an overview of the status of the terms of the merger agreement and the resolution of certain issues, including that the parties had obtained consents from certain joint venture counterparties and that the associated closing condition had been removed from the merger agreement. Skadden's representative noted that certain issues remained open in the merger agreement, including with respect to termination fees and expense reimbursement amounts and triggers, and the board of directors provided guidance to Forestar

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management and Skadden as to the acceptable approach to such issues. After discussing the transaction with Forestar management and the representatives of JMP and Skadden, the board of directors determined to reconvene the following afternoon to consider approval of the transaction. The board of directors directed Skadden to discuss and attempt to resolve with Kirkland the remaining open points, including the triggers for the expense reimbursement provisions. Representatives of Skadden and Kirkland held telephonic meetings to discuss these open issues and finalized the merger agreement.

        On April 13, 2017, Starwood informed the Company that the Starwood investment committee met that morning to consider the transaction and approved the merger.

        In the afternoon of April 13, 2017, the Forestar board of directors convened a telephonic meeting to consider the Starwood offer and the terms of the merger agreement. Forestar management and representatives of JMP and Skadden were in attendance (with JMP in attendance for part of the meeting). Skadden's representatives reviewed the director fiduciary duties and other legal matters and the terms of the merger agreement, and confirmed that all open issues with respect to the merger agreement and other transaction documents had been satisfactorily resolved, including with respect to termination fees and expense reimbursement amounts and triggers. JMP provided an overview of the potential sale process, including that 29 parties had either been contacted or contacted the Company or JMP during the process that launched in August 2016 (or had been in previous contact with Forestar as discussed above), that 22 parties had executed a confidentiality agreement in relation to a potential transaction (none of which contained a "standstill" provision, except for the confidentiality agreement with Party F, as noted above), that 8 parties had submitted initial indications of interest and were invited to conduct further due diligence and that two parties (Starwood and Party J) had submitted final offers, with Party J subsequently withdrawing its offer. JMP reviewed with the board of directors JMP's financial analysis of the $14.25 per share consideration to be received in the merger and rendered to the board of directors an oral opinion, confirmed by delivery of a written opinion dated April 13, 2017, to the effect that, as of that date and based on and subject to the various assumptions and limitations set forth in its opinion, the $14.25 per share consideration to be received by the holders of Forestar common stock (other than Merger Parent and its affiliates) in the merger was fair, from a financial point of view, to such holders. After discussing the proposed transaction and considering the presentations by Skadden and JMP, the Forestar board of directors unanimously determined the merger with Merger Parent to be advisable and in the best interests of Forestar's stockholders, determined to approve the merger agreement and resolved to recommend adoption of the merger agreement by Forestar's stockholders. Following the meeting, Forestar confirmed to Starwood that it had obtained its required board approval and the merger agreement was executed by the parties in the evening of April 13, 2017.

        Later on April 13, 2017, the parties issued a press release announcing the execution of the merger agreement.

Recommendation of the Forestar Board of Directors and Reasons for the Merger

Recommendation of our Board of Directors

        The Forestar board of directors, after considering the various factors described below, (i) unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable, fair to and in the best interests of Forestar and its stockholders, (ii) declared the merger agreement advisable under Delaware law and (iii) unanimously approved, adopted and authorized the merger agreement and the transactions contemplated by the merger agreement, including the merger.

        Forestar's Board of Directors unanimously recommends that you vote (i) "FOR" the proposal to adopt the merger agreement, (ii) "FOR" the proposal to approve, by non-binding advisory vote, specified compensation that may be paid or become payable to the Company's named executive officers in connection with the merger and (iii) "FOR" the proposal to approve the adjournment of the special

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meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

Reasons for the Merger

        In evaluating the merger, the merger agreement and the other transactions contemplated by the merger agreement, our board of directors consulted with our management team and our outside legal and financial advisors and, in reaching its decision to approve the merger, the merger agreement and the other transactions contemplated by the merger agreement, our board of directors considered a number of factors, including the following material factors which it viewed as supporting its decision to approve and recommend approval of the merger and the adoption of the merger agreement by our stockholders:

•

the fact that the price proposed by Starwood reflected extensive negotiations between the parties and their respective advisors, and represented what in the judgment of the board of directors of the Company was the highest value final offer that the Company received for the shares of Company Common Stock after a competitive solicitation of interest;



•

the fact that the Company considered a variety of strategic alternatives over an extensive approximately two year period;



•

the fact that the Company sought offers to purchase from a broad group of potential bidders, including financial sponsors and strategic bidders, 22 of whom entered into confidentiality agreements with the Company and received information related to the Company, and of all such bidders, Starwood's offer was the highest value final offer and the only transaction reasonably capable of execution in the judgment of the board of directors of the Company;



•

the fact that the merger consideration of $14.25 per share to be received by the Company stockholders in the merger represents a premium of 8.3% over the Company's 90-day volume weighted average price for the period ended April 12, 2017;



•

the Company's current and historical financial condition, results of operations, competitive position, strategic options and prospects, as well as the Company's future financial plan and prospects;



•

the perceived challenges and risks, and the general and administrative costs, of continuing as a stand-alone public company and the assessment by the board of directors of the Company that no other internally developed alternatives were reasonably likely in the near term to create greater value for the Company's stockholders than the merger, taking into account business, competitive, industry and market risks;



•

the financial analyses presented by JMP Securities LLC, which we refer to as "JMP," as well as the oral opinion of JMP delivered to our board of directors on April 13, 2017, and subsequently confirmed by delivery of a written opinion by JMP, dated April 13, 2017, as to the fairness, from a financial point of view and as of the date of the opinion, to holders of the Company's common stock (other than Merger Parent and its affiliates) of the $14.25 per share consideration, which opinion was based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, as more fully described under "—Opinion of Forestar's Financial Advisor", and in considering JMP's opinion, our board of directors noted that JMP had informed the board of directors on January 3, 2017, and reaffirmed to the board of directors prior to execution of the merger agreement, that during the two year period ended April 13, 2017, JMP had not been engaged by Forestar or Starwood Land Ventures, and there was no potential engagement pending with such persons, other than in its role as financial advisor to the Company in connection with the merger, and that JMP believed that it did not have any relationships with Starwood that would prevent JMP from acting independently as the Company's financial advisor in connection with the merger;

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•

the current state of the economy and uncertainty surrounding forecasted economic conditions both in the near term and the long term, generally, and within our industry in particular which could reduce revenue generated by our projects;



•

the fact that the merger consideration is all cash, which provides liquidity and certainty of value to the Company's stockholders and does not expose them to the potential execution risks associated with our business, the achievability of our financial projections and the risk associated with the possibility that even if our strategic plan is successfully executed, the market may not reflect such execution in our stock price;



•

the fact that the termination fee of $20 million payable by us in certain circumstances was viewed by our board of directors, after consultation with our advisors, as reasonable and not likely to preclude any other party from making a competing acquisition proposal;



•

the fact that the expense reimbursement of $3 million or $4 million, as applicable, payable by us if the merger agreement is terminated in certain circumstances was viewed by our board of directors, after consultation with our advisors, as reasonable;



•

the reasonable likelihood that the merger and the other transactions contemplated by the merger agreement would be completed based on, among other things, Starwood's size, financial liquidity and proven ability to complete large acquisition transactions on agreed terms, its extensive ownership, development and operating experience in the real estate industry and the $40 million termination fee Merger Parent would be required to pay us if, under certain circumstances, the merger agreement were terminated prior to consummation of the merger;



•

the lack of a financing condition for the merger, the amount to be committed by SOF-X U.S. Holdings pursuant to the equity commitment letter that would, together with the Company's cash on hand, cover the aggregate consideration to be paid pursuant to the merger, and the guarantee of SOF-X U.S. Holdings of certain payment obligations of Merger Parent under the merger agreement;



•

the Company's ability, under circumstances described in the merger agreement, to provide information to and engage in discussions or negotiations with a third party that makes an unsolicited bona fide acquisition proposal if the board of directors, prior to taking any such actions, determines in good faith that such acquisition proposal either constitutes a superior proposal or could reasonably be expected to lead to a superior proposal and the fact that none of the confidentiality agreements entered into by the Company in the potential sales process contains a "standstill" provision that remains effective;



•

the ability of our board of directors, under circumstances described in the merger agreement, to withdraw, modify or amend the board's recommendation that the Company's stockholders vote to adopt the merger agreement, subject to payment of a termination fee of $20 million if the merger agreement is terminated in such case;



•

our ability to terminate the merger agreement, under certain circumstances, in order to enter into a definitive agreement providing for a superior proposal if our board of directors determines, after consultation with advisors and after taking into account any changes to the terms of the merger agreement proposed by Merger Parent, that the superior proposal continues to constitute a superior proposal, upon payment of a termination fee of $20 million;



•

the terms and conditions of the merger agreement, which were reviewed by our board of directors in consultation with our advisors, and the fact that such terms were derived from arm's-length negotiations among the parties;

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•

the belief of Forestar's board of directors that there are a limited number of potential purchasers of the Company based on, among other things, strategic fit and financial ability;



•

the fact that the merger agreement would be subject to adoption by our common stockholders, and our common stockholders would be free to reject the merger by voting against the merger for any reason, including if a higher offer were to be made prior to the stockholders meeting (although we may be required to pay expense reimbursement of up to $4 million in such circumstances or, if we subsequently were to enter into a definitive agreement relating to and/or consummate an acquisition proposal, a termination fee of $20 million under certain circumstances); and



•

the fact that stockholders who do not vote to adopt the merger agreement and who follow certain prescribed procedures are entitled to appraisal rights under Delaware law.

        Our board of directors also considered the following potentially negative factors in its deliberations concerning the merger, the merger agreement and the other transactions contemplated by the merger agreement:

•

the fact that the merger would preclude our common stockholders from having an opportunity to participate in any future performance of our assets, future earnings growth, future appreciation of our common share value or future dividends that could be expected if our strategic plans were successfully implemented;



•

the fact that receipt of the all-cash merger consideration would generally be a taxable transaction for U.S. federal income tax purposes;



•

the risk that the merger could be delayed or not completed;



•

the fact that, although our board of directors has determined that the merger is advisable and in the best interests of the Company and our stockholders and reflects the best price reasonably available in a sale of the Company at this time, and despite the fact that we conducted an extensive marketing process, with the assistance of our financial advisor, there can be no assurances that another alternative would not have resulted in a higher amount per share than the price payable pursuant to the merger;



•

the significant costs involved in connection with entering into and completing the merger and the substantial time and effort of management required to complete the merger, which may disrupt the Company's business operations;



•

the restrictions on the conduct of our business prior to the completion of the merger, which could delay or prevent us from undertaking acquisition, development, redevelopment, disposition and other business opportunities that may arise pending completion of the proposed transactions and generally change the manner in which we have conducted our business and operations in the past;



•

the risk that the pending transactions or failure to complete the merger may negatively impact our relationships with our lenders, stockholders, joint venture partners and other business partners, and may divert attention away from the day-to-day operation of our business;



•

the risk that the conditions to the merger may not be satisfied, including if holders of 20% or more of our common stock properly exercise appraisal rights;



•

our inability to solicit competing acquisition proposals and the possibility that the $20 million termination fee payable by us upon the termination of the merger agreement under the circumstances described in the merger agreement could discourage other potential bidders from making a competing bid to acquire us;

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•

the fact that our exclusive remedy in the event the merger agreement is terminated by Merger Parent in certain circumstances would be limited to a reverse termination fee payable by Merger Parent in the amount of $40 million; and



•

the fact that some of our directors and executive officers may have interests in the merger and the other transactions contemplated by the merger agreement that are different from, or in addition to, those of our common stockholders.

        The foregoing discussion is not meant to be exhaustive, but summarizes the material factors considered by the Forestar board of directors in its consideration of the merger. After considering these and other factors, the Forestar board of directors concluded that the potential benefits of the merger outweighed the uncertainties and risks. In view of the variety of factors considered by the Forestar board of directors and the complexity of these factors, the Forestar board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the foregoing factors in reaching its determination and recommendations. Moreover, each member of the Forestar board of directors applied his or her own personal business judgment to the process and may have assigned different weights to different factors. Based upon the totality of the information presented to and considered by the Forestar board of directors, the Forestar board of directors unanimously approved the merger agreement and the consummation of the merger in accordance with the terms and subject to the conditions of the merger agreement and recommends that Forestar stockholders adopt the merger agreement.

Opinion of Forestar's Financial Advisor

        The Company has retained JMP as its financial advisor in connection with the merger. In connection with this engagement, Forestar requested that JMP evaluate the fairness, from a financial point of view, to holders of Forestar common stock (other than Merger Parent and its affiliates) of the $14.25 per share consideration to be received by such holders in the merger. On April 13, 2017, at a meeting of Forestar's board of directors at which the merger was approved, JMP rendered to the board an oral opinion, confirmed by delivery of a written opinion dated April 13, 2017, to the effect that, as of that date and based on and subject to the matters described in its opinion, the $14.25 per share consideration to be received by the holders of Forestar common stock (other than Merger Parent and its affiliates) in the merger was fair, from a financial point of view, to such holders.

        The full text of JMP's written opinion, dated April 13, 2017, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference. The description of JMP's opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of JMP's opinion. JMP's opinion was provided to Forestar's board of directors (in its capacity as such) in connection with its consideration of the merger. JMP's opinion did not address the underlying decision of Forestar to proceed with or effect the merger or the relative merits of the merger as compared to any alternative strategy or transaction that might exist for Forestar. JMP's opinion does not constitute a recommendation as to how Forestar's board of directors or any shareholder should act or vote with respect to the merger or any other matter. Forestar's stockholders are urged to read carefully JMP's opinion in its entirety.

        For purposes of its opinion, JMP:

•

reviewed the financial terms and conditions of a draft dated April 12, 2017 of the merger agreement;



•

reviewed certain publicly available business and financial information relating to Forestar, including Forestar's audited financial statements for the years ended December 31, 2016, 2015 and 2014;

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•

reviewed certain financial projections provided to JMP by Forestar relating to Forestar and its community development projects, as well as to the estimated sale value of Forestar's multifamily assets (as summarized in "—Projected Financial Information"), and certain other historical and current financial and business information provided to JMP by Forestar, including certain third party appraisals and other purchase price information from letters of intent and draft purchase agreements provided to JMP by Forestar relating to certain other real estate assets of Forestar;



•

held discussions regarding the operations, financial condition and prospects of Forestar with the senior management of Forestar;



•

reviewed, for informational purposes, the premiums paid in certain publicly announced mergers and acquisitions transactions in certain real estate industries;



•

reviewed the current and historical trading prices and volume of Forestar common stock;



•

considered the results of Forestar's efforts, with JMP's assistance, to solicit indications of interest and definitive proposals from certain third parties with respect to a possible acquisition of Forestar; and



•

performed such other studies, analyses and inquiries and considered such other factors as JMP deemed appropriate.

        In arriving at its opinion, JMP, with Forestar's consent, (i) relied upon and assumed the accuracy and completeness of all information from public sources or which was provided to JMP by or on behalf of Forestar or otherwise reviewed by JMP, without independent verification, (ii) did not assume any responsibility for independently verifying such information, and (iii) relied on the assurances of the senior management of Forestar that it was not aware of any facts or circumstances that would make such information inaccurate or misleading. In addition, with Forestar's consent, JMP did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of Forestar (with respect to any of its community development projects or otherwise), nor was JMP furnished with any such evaluations or appraisals except as described above. With respect to the financial projections referred to above and any other forecasts or forward-looking information, JMP assumed, at the direction of the senior management of Forestar, that such projections, forecasts and information were reasonably prepared and reflected the best currently available estimates and good faith judgments of such management as to the expected future results of operations and financial condition of Forestar and the other matters covered thereby, and JMP relied on such information in arriving at its opinion. With respect to the third party appraisals and other purchase price information from letters of intent and draft purchase agreements referred to above, JMP assumed, at the direction of the senior management of Forestar, that such third party appraisals and other purchase price information represented reasonable estimates of the values of the assets of Forestar to which they relate, and JMP relied on such information in arriving at its opinion.

        In addition, in arriving at its opinion, JMP assumed, with Forestar's consent, that (i) all material information JMP requested from Forestar during the scope of its engagement had been provided to JMP fully and in good faith, (ii) the merger would be consummated in accordance with the terms and conditions set forth in the merger agreement (the final terms and conditions of which JMP assumed would not differ in any respect material to JMP's analysis from the aforementioned draft that JMP reviewed), without any waiver, modification or amendment of any material terms or conditions, (iii) the representations and warranties made by the parties to the merger agreement were and would be true and correct in all respects material to JMP's analysis, (iv) all governmental and third party consents, approvals and agreements necessary for the consummation of the merger would be obtained without any adverse effect on Forestar or the merger, and (v) the merger would not violate any applicable federal or state statutes, rules or regulations.

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        JMP's opinion did not constitute legal, regulatory, accounting, insurance, tax or other similar professional advice and did not address (i) the underlying decision of Forestar to proceed with or effect the merger, (ii) the terms of the merger (other than the $14.25 per share consideration to the extent expressly addressed in JMP's opinion) or any arrangements, understandings, agreements or documents related to the merger, (iii) the fairness of the merger (other than with respect to the $14.25 per share consideration to the extent expressly addressed in JMP's opinion) or any other transaction to Forestar's equity holders or creditors or any other person or entity, including, without limitation, the fairness of any consideration to be paid in connection with the merger to the holders of any other class of securities, creditors or other constituencies of Forestar or the fairness of the $14.25 per share consideration relative to any such consideration, (iv) the relative merits of the merger as compared to any alternative strategy or transaction that might exist for Forestar, or the effect of any other transaction which Forestar may consider in the future, (v) the tax, accounting or legal consequences of the merger, or (vi) the solvency, creditworthiness, fair market value or fair value of any of Forestar, Merger Parent or their respective assets under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters. JMP's opinion expressed no opinion as to the fairness of the amount or nature of any compensation to any officers, directors, or employees of any party to the merger, or any class of such persons, relative to the $14.25 per share consideration to be received by the holders of Forestar common stock in the merger.

        JMP's opinion was necessarily based on business, economic, monetary, market and other conditions as they existed and could be reasonably be evaluated on, and the information made available to JMP as of, the date of JMP's opinion. Subsequent developments may affect JMP's opinion, and JMP assumed no responsibility for updating or revising its opinion based on circumstances or events occurring after the date of the opinion (regardless of the closing date of the merger). JMP has not been engaged to amend, supplement or update its opinion at any time. JMP expressed no view or opinion as to the prices at which Forestar common stock may be purchased, sold or exchanged, or otherwise be transferable, at any time. JMP also expressed no view or opinion as to the prices at which any of the real estate assets of Forestar may be purchased, sold or exchanged, or otherwise be transferable, at any time. Forestar imposed no other instructions or limitations on JMP with respect to the investigations made or procedures followed by JMP in rendering its opinion.

        In preparing its opinion, JMP performed a variety of financial analyses, including those described below. This summary of the analyses is not a complete description of JMP's opinion or the analyses underlying, and factors considered in connection with, JMP's opinion, but summarizes the material analyses performed and presented in connection with such opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. JMP arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole, and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. Accordingly, JMP believes that its analyses must be considered as a whole and selecting portions of its analyses and factors without considering all analyses and factors could create a misleading or incomplete view of the processes underlying its analyses and opinion.

        In its analyses, JMP considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of Forestar. No company, business or transaction reviewed is identical to Forestar or the merger. An evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or other values of the companies, businesses or transactions reviewed.

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        The estimates contained in JMP's analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, JMP's analyses are inherently subject to substantial uncertainty.

        JMP was not requested to, and it did not, recommend the specific consideration payable in the merger. The type and amount of consideration payable in the merger was determined through negotiations between Forestar and Merger Parent and the decision of Forestar to enter into the merger agreement was solely that of Forestar's board of directors. JMP's opinion was only one of many factors considered by Forestar's board of directors in its consideration of the merger and should not be viewed as determinative of the views of Forestar's board of directors or management with respect to the merger or the consideration to be received in the merger.

        The following is a summary of the material financial analyses provided to Forestar's board of directors in connection with JMP's opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand JMP's financial analyses, the tables must be read together with the text of each summary. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of JMP's financial analyses.

        Net Asset Valuation Analysis.    JMP performed a net asset valuation analysis of Forestar based on (i) financial projections provided to JMP by Forestar relating to Forestar's community development projects as well as the estimated sale value of Forestar's multifamily assets (as summarized in "—Projected Financial Information"), (ii) certain purchase price information from letters of intent and draft purchase agreements provided to JMP by Forestar relating to certain other real estate assets of Forestar held for sale, including mineral, water and timberland assets and other undeveloped land assets held for sale, and (iii) book values as of December 31, 2016 for Forestar's other assets and liabilities provided to JMP by Forestar. With respect to Forestar's community development projects, JMP calculated a range of implied present values of approximately $271.635 million to $299.069 million for the projected cash flows that Forestar's community development projects were forecasted by Forestar to generate using a blended discount rate of 23.0% to 27.0%, which reflected project-by-project adjustments based on project type, project lifecycle, project activity status and other market specific adjustments (weighted by the projected cash flows of each community development project) to an initial discount rate range of 19.5% to 23.5% selected by JMP based on review of industry surveys, industry research and industry experience. With respect to Forestar's multifamily assets, JMP calculated a range of implied present values of approximately $43.697 million to $54.686 million for the potential estimated net proceeds that Forestar forecasted could be generated by Forestar from the sale of such assets. Other real estate asset values were based on certain third party appraisals and other purchase price information provided to JMP by Forestar. This analysis indicated the following approximate implied per share equity value reference range for Forestar, as compared to the $14.25 per share consideration to be received in the merger.

        Discounted Cash Flow Analysis.    JMP performed a discounted cash flow analysis of Forestar based on financial projections provided to JMP by Forestar relating to Forestar (as summarized in "—Projected Financial Information"). Using discount rates ranging from 13.1% to 16.1% which were selected by JMP taking into account a weighted average cost of capital calculation. JMP calculated (i) a

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range of implied present values of the projected unlevered free cash flows of Forestar that Forestar was forecasted to generate from calendar year 2017 through calendar year 2026 as summarized in "—Projected Financial Information" and (ii) a range of implied present values of implied terminal values for Forestar derived by applying a range of perpetuity growth rates of 2.5% to 0.5% selected by JMP to Forestar's estimated unlevered free cash flows for the 12-month period ending December 31, 2026. This analysis indicated the following approximate implied per share equity value reference range for Forestar, as compared to the $14.25 per share consideration to be received in the merger:

        Premiums Paid in Selected Historical M&A Transactions.    JMP reviewed for informational purposes (and not as part of JMP's financial analysis with respect to its opinion) the implied premiums paid in 27 selected acquisitions of publicly traded U.S. equity REITs and homebuilders relative to the closing stock prices of the acquired companies one day, five days and 30 days prior to public announcement of the relevant transaction and relative to the volume weighted average stock prices of the acquired companies during the 30-day, 60-day, 90-day and 180-day periods (except as otherwise noted) ended on the last trading day prior to public announcement of the relevant transaction. The selected acquisitions consisted of completed transactions consummated between January 1, 2007 and April 12, 2017 with at least 50% cash consideration and announced equity transaction values of between $250 million and $5 billion. The medians of the implied premiums paid in the selected acquisitions reviewed by JMP were then compared to the implied premiums paid in the merger based on the $14.25 per share consideration to be received in the merger relative to the closing stock prices of Forestar on April 12, 2017, April 7, 2017 and March 12, 2017 and relative to the volume weighted average stock prices of Forestar during the 30-day, 60-day, 90-day and 180-day periods ended April 12, 2017, as follows:

        JMP also reviewed with Forestar's board of directors for informational purposes (and not as part of JMP's financial analysis with respect to its opinion), among other things, the implied premiums paid in the merger based on the $14.25 per share consideration to be received in the merger relative to the closing stock prices of Forestar on August 18, 2016 (the date of JMP's formal engagement by Forestar with respect to the potential sale process) and on the dates 30, 60, 90 and 180 days prior to April 12, 2017, which implied premiums were 16.3%, 9.6%, 9.6%, 9.6% and 28.5%, respectively.

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        Miscellaneous.    Under the terms of JMP's engagement, Forestar has agreed to pay JMP for its financial advisory services in connection with the merger an aggregate fee currently estimated to be approximately $5.2 million, a portion of which became payable upon JMP's engagement, a portion of which was payable upon delivery of JMP's opinion and approximately $4.2 million of which is contingent upon completion of the merger. In addition, Forestar has agreed to indemnify JMP against certain claims and liabilities related to or arising out of its engagement. JMP may seek to provide financial advisory services to Forestar, Merger Parent, Starwood or their respective affiliates in the future, for which JMP would expect to receive compensation. In the ordinary course of business, JMP and its affiliates may actively trade or hold the securities of Forestar for their own account or for the account of their customers and, accordingly, may at any time hold a long or short position in those securities.

        Forestar selected JMP as its financial advisor in connection with the merger based on JMP's reputation and experience and familiarity with Forestar and its business. JMP is a nationally recognized investment banking firm which provides capital raising, mergers and acquisitions transaction and other strategic advisory services to corporate clients. JMP's opinion was approved by a JMP Securities LLC fairness opinion committee.

Projected Financial Information

        Forestar does not, as a matter of course, publicly disclose long-term projections as to future financial performance due to, among other reasons, the unpredictability of the underlying assumptions and estimates, though Forestar has in the past provided investors with annual lot sale volume guidance among other items, which it may update from time to time during the relevant year. However, in connection with the evaluation of the proposed merger, Forestar provided its board of directors and/or certain bidders, including Starwood, with certain non-public, unaudited prospective financial information prepared by Forestar's management, as summarized below, which we refer to as the "Forecasts." As noted below, certain Forecasts were also provided to JMP for use in connection with its financial analyses summarized under "—Opinion of Forestar's Financial Advisor".

        The Forecasts were not prepared with a view to public disclosure and are included in this proxy statement only because such information was made available as described above. The Forecasts were not prepared with a view to compliance with generally accepted accounting principles as applied in the United States, which we refer to as GAAP, the published guidelines of the SEC regarding projections and forward-looking statements or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither the Company's independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information. The Forecasts included in this proxy statement have been prepared by, and are the responsibility of, Forestar's management, and are subjective in many respects.

        Although a summary of the Forecasts is presented with numerical specificity, they reflect numerous assumptions and estimates as to future events made by Forestar's management, which it believes were reasonable at the time the Forecasts were prepared, taking into account the relevant information available to management at such time. However, this information is not fact and should not be relied upon as being necessarily indicative of actual future results. Important factors that may affect actual results and cause the Forecasts not to be achieved include general economic conditions, interest rates, accuracy of certain accounting assumptions, timing of development expenditures, demand for residential lots and new housing, changes in actual or projected cash flows, competitive pressures, including from existing and potential new real estate supply, and changes in tax or other laws, governmental policies or regulations. In addition, the Forecasts do not take into account any circumstances or events occurring

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after the date that they were prepared and do not give effect to the merger. As a result, there can be no assurance that the Forecasts will be realized, and actual results may be materially better or worse than those contained in the Forecasts. The inclusion of this information should not be regarded as an indication that the Forestar board of directors, Forestar's management, Starwood, JMP, their respective representatives or any other recipient of this information considered, or now considers, the Forecasts to be material information of Forestar, or necessarily predictive of actual future results nor should it be construed as financial guidance, and it should not be relied upon as such. The summary of the Forecasts is not included in this proxy statement in order to induce any stockholder to vote in favor of the proposal to adopt the merger agreement or any of the other proposals to be voted on at the special meeting or to influence any stockholder to make any investment decision with respect to the merger or Forestar, including whether or not to seek appraisal rights with respect to the shares of Forestar's common stock.

        The Forecasts should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding Forestar contained in Forestar's public filings with the SEC. The Forecasts are forward-looking statements. For information on factors that may cause Forestar's future results to materially vary, see "Forward-Looking Statements" beginning on page [    ·    ].

        Except to the extent required by applicable federal securities laws, we do not intend, and expressly disclaim any responsibility to update or otherwise revise the Forecasts to reflect circumstances existing after the date when Forestar prepared the Forecasts or to reflect the occurrence of future events or changes in general economic of industry conditions, even in the event that any of the assumptions underlying the Forecasts are shown to be in error.

        In light of the foregoing factors and the uncertainties inherent in the Forecasts, stockholders are cautioned not to place undue reliance on the Forecasts included in this proxy statement.

        Certain of the measures included in the Forecasts may be considered non-GAAP financial measures, as noted below. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Forestar may not be comparable to similarly titled amounts used by other companies.

Community Development Project Cash Flows

        The following table presents the estimated future net cash flow data prepared by Forestar's management for the Company's community development business from January 1, 2017—October 31, 2034. This data does not include any cash flows generated from non-core asset sales or any other sources other than the community development business. The net cash flows include direct project related carry costs, but excludes SG&A costs not directly associated with the projects, interest expense on corporate debt and income taxes. It does not give effect to the merger and related transactions.

        The Company has historically prepared this data for internal business purposes and updated the information quarterly to reflect business activity in the prior quarter. The Company made the data available to JMP in connection with its analyses and to all parties in the potential sale process that

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executed confidentiality agreements, including Starwood, for purposes of evaluating Forestar's community development business.

Alternative Net Asset Value Scenarios

        The following table represents net asset value scenarios that were prepared by Forestar's management and presented to the Forestar board of directors in February 2017 as the board of directors considered the various strategic alternatives for Forestar, including the potential bulk sale of the community development assets, sale of the remaining non-core assets and subsequent liquidation of the Company. As noted above, the Company made a number of assumptions and estimates in preparation of the prospective financial information, including assumptions regarding the sales prices of non-core assets and SG&A costs. The potential scenarios depicted in the table below were (a) a bulk sale of community development assets in September 2017 and the sale of the remaining non-core assets by year-end 2017, (b) a bulk sale of the community development assets in December 2019 and the sale of the remaining non-core assets by year-end 2017, (c) a portfolio run-off based on the execution of Forestar's existing business plan with no new acquisitions assumed and the sale of the remaining non-core assets by year-end 2017, (d) a plan to continue operating Forestar as a standalone public company executing the existing business plans with additional investment in the business to maintain approximately 1,800 lots sold per year on average over the next five years and the sale of the remaining non-core assets by year-end 2017, and (e) a plan to continue operating Forestar as a standalone public company executing the existing business plans with additional investment in the business to maintain approximately 2,500 lots sold per year on average over the next five years and the sale of the remaining

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non-core assets by year-end 2017. This financial data was not provided to Starwood or other potential acquirors.

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2017 - 2026 Financial Model

        The following table presents selected unaudited prospective financial data for the 12 months ended December 31, 2017 through December 31, 2026 for Forestar as provided to JMP in April 2017 in connection with its financial analyses summarized under "—Opinion of Forestar's Financial Advisor." This financial data generally incorporates and reflects the financial information included in "Community Development Project Cash Flows" above, except for changes relating to updated timing assumptions with respect to three community development projects to reflect developments after the preparation of the financial information included in "Community Development Project Cash Flows" above. The data does not give effect to the merger and related transactions. This financial data was not provided to Starwood or other potential acquirors.

        For use in connection with its financial analyses summarized under "—Opinion of Forestar's Financial Advisor", JMP Securities arithmetically calculated projected unlevered free cash flow for 2017 - 2026 using the information contained in the prospective 2017-2026 financial model prepared by Forestar's management, as follows (in millions): 2017: $183.1; 2018: $76.8; 2019: $52.8; 2020: $73.2; 2021: ($3.9); 2022: $36.8; 2023: $28.1; 2024: $26.8; 2025: $2.4; 2026: $24.8. Unlevered free cash flow is defined for purposes of the Forecasts as net cash flow generated excluding debt repayment and interest expense, interest income and tax benefit of interest tax deductible. Calculation also excludes consolidated venture cash flows due to third parties. Unlevered free cash flow is a non-GAAP financial measure and should not be considered as an alternative to revenue or net income as a measure of operating performance or net change in cash flow as a measure of liquidity. The foregoing estimates of unlevered free cash flows were calculated solely for purposes of the discounted cash flow analysis in connection with JMP's opinion, and none of Forestar, Starwood or JMP assumes any responsibility for any use of such estimates, or reliance on such estimates, for any other purpose.

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Interests of the Company's Directors and Executive Officers in the Merger

        In considering the recommendation of the Company's board that you vote to adopt the merger agreement, you should be aware that the Company's directors and current and former executive officers have interests in the merger that are different from, or in addition to, those of the Company's stockholders generally. The Company's board was aware of and considered those interests, among other matters, in reaching its decisions to (i) approve the merger and (ii) resolve to recommend that the Company's stockholders adopt the merger agreement. Stockholders should take these interests into account in deciding whether to vote "FOR" the proposal to adopt the merger agreement. These interests are described in more detail below, and certain of them are quantified in the narrative below and, for the executive officers, in the Golden Parachute Compensation table in the "—Merger-Related Compensation for the Company's Named Executive Officers" section below.

Overview

        Certain directors hold unvested stock options that will vest and become payable upon consummation of the merger. The non-employee directors otherwise have no interests in the merger that are different from, or in addition to, those of the Company's stockholders generally, though the directors do also hold fully vested restricted stock units and, together with the executive officers of Forestar, will be entitled to receive indemnification, advancement of expenses and exculpation from the surviving entity and coverage under directors' and officers' liability insurance policies following the merger. See "The Merger Agreement—Indemnification and Insurance" below.

        Each of the Company's current executive officers (Messrs. Phillip J. Weber, Charles D. Jehl and Michael Quinley) hold unvested equity awards that will vest and become payable upon consummation of the merger, and each will be entitled to certain severance benefits upon and by reason of a qualifying termination of employment following the merger. Mr. David M. Grimm, the Company's former Chief Administrative Officer & General Counsel, holds unvested equity awards that will vest and become payable upon and by reason of consummation of the merger, and he is also party to a Separation Agreement and Release that will provide him additional benefits by reason of consummation of the merger. Mr. Bruce F. Dickson, the Company's former Chief Real Estate Officer (together with Messrs. Weber, Jehl, Quinley and Grimm, the "named executive officers") holds performance-based equity awards that will become payable upon consummation of the merger, but he is not entitled to any other compensation or benefits by reason of the merger.

        Following execution of the merger agreement, Starwood has engaged in discussions with certain employees of the Company regarding the terms of the potential employment of such employees after the closing with an entity affiliated with an investor in Merger Parent, which entity will provide certain services to the surviving entity.

        These interests are described further below.

Equity Award Acceleration

        Pursuant to the merger agreement, each Company equity incentive compensation award that is outstanding immediately prior to the merger will be cancelled and of no further force or effect as of the effective time of the merger and, in exchange for the cancellation of such equity award, whether or not such equity incentive compensation award was vested as of the effective time of the merger, the holder will receive the merger consideration for each underlying share of Company common stock (in the case of stock options, less the aggregate exercise price, but not less than $0). With respect to market-leveraged stock units, whose underlying share number generally depends on the Company's stock price at the end of the applicable performance period, the number of underlying shares will be based on the merger consideration.

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        Several of our directors hold unvested equity awards in the form of stock options (in addition to restricted stock units that will either vest by reason of service before consummation of the merger or cease to be of effect at the time of the merger). The number of options (based on holdings as of May 15, 2017) and their value (based on the excess of the merger consideration over the applicable exercise price) are set out in the table below as applicable.

        In addition, each named executive officer holds market-leveraged stock units, and each of our named executive officers other than Mr. Dickson hold unvested stock options and time-based restricted stock units. The value of those various awards is reflected in the Golden Parachute Compensation table in the "—Merger-Related Compensation for the Company's Named Executive Officers" section below.

Change in Control/Severance Agreements with Current Executive Officers

        Each of our current executive officers is a party to a Change in Control/Severance Agreement with the Company that provides certain payments and benefits upon a qualifying termination of the executive officer's employment by the Company without "cause" (as defined below) or by the executive for "good reason" (as defined below) within two years following a "change in control" of the Company (which would include consummation of the merger). Upon such a qualifying termination of employment, the executives would be entitled to:

•

a prorated current cycle annual incentive bonus if the termination is before the end of the first half of the cycle or a full annual incentive bonus if termination is during the second half of the cycle (in each case, assuming achievement of performance goals at the target level);



•

any earned but unpaid incentive compensation that has been allocated or awarded to the executive for a completed bonus cycle preceding the date of termination (presently $0);



•

lump sum cash severance payment equal to two times their highest base salary during the three-year period prior to the change in control plus two times the target annual bonus during the year of the termination, or if higher, the actual bonus in any of the three fiscal years preceding the termination;



•

health and welfare benefits for two years at no greater cost to the executive;



•

full acceleration of vesting of all unvested or restricted equity or equity-based awards, including stock options, stock appreciation rights, restricted shares, restricted stock units, market-leveraged stock units, and performance stock units (though, in regard to awards outstanding immediately before consummation of the merger, such acceleration will occur by reason of the consummation of the merger without regard to any subsequent employment termination);



•

a lump sum payment equal to two years' match and contributions under the Company's 401(k) plan plus two years' contributions under the Company's Supplemental Executive Retirement Plan ("SERP"), assuming, in each case, that the executive made the maximum permissible

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contributions and earned compensation at the highest rate of compensation during the three-year period prior to the termination;

•

three years (two years in the case of Mr. Jehl) of additional service credit under the SERP (though no such additional service credit will increase the executives' benefit under that plan);



•

reimbursement for outplacement services for one year not to exceed 15% of the sum of the applicable executive's highest base salary during the three years preceding the termination and his target bonus for the year of the termination, or if higher, the actual bonus in any of the three fiscal years before the termination; and



•

two years' continuation of current perquisites.

        The agreements with Messrs. Jehl and Quinley include gross-up provisions in the event the executive is required to pay excise tax on these amounts, but only if their value exceeds 110% of the amount that would not be subject to excise tax; otherwise the amount would be reduced to the maximum amount that would not trigger the excise tax. Mr. Weber is not entitled to any excise tax gross-up; however, if any amounts payable to him would be subject to excise tax, the amount payable to him would be reduced to the extent such reduction would provide him with a greater after-tax benefit.

        For purposes of the Change in Control/Severance Agreement, "cause" generally means (i) the willful and continued failure by the executive officer to substantially perform his or her duties with the Company after a written demand for substantial performance is delivered by the board of directors of the Company or (ii) the willful engaging by the executive officer in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise.

        For purposes of the Change in Control/Severance Agreement, "good reason" generally means (i) a material reduction in the executive officer's authority, duties, or responsibilities, which for purposes of the Change in Control/Severance Agreement, shall include only the assignment to the executive officer of any duties substantially inconsistent with the executive officer's status as a senior executive officer of the Company or a material adverse alteration in the nature or status of the executive officer's responsibilities from those in effect immediately prior to the change in control (including, as applicable and without limitation, the executive officer ceasing to be an executive officer of a public company), (ii) a material diminution in base salary as in effect immediately prior to the change in control, (iii) relocation of the executive officer's principal place of employment to a location more than fifty miles from the Company's headquarters immediately prior to the change in control or (iv) any other action of inaction that constitutes a material breach of certain successor employer obligations or employee benefits continuation provisions of the Change in Control/ Severance Agreement. Any such "good reason" must be asserted by the executive officer in a notice of termination given within ninety days following the date of the first act or failure to act constituting such "good reason."

        The Golden Parachute Compensation table in the "—Merger-Related Compensation for the Company's Named Executive Officers" section below quantifies the payments and benefits that may be provided under the Change in Control/Severance Agreements upon a qualifying termination of employment following consummation of the merger. In addition, pursuant to the terms of a separate employment agreement with the Company, upon a termination of employment for any reason before October 21, 2017, Mr. Weber would be subject to a two-year noncompetition and employee/customer nonsolicitation restrictive covenant.

Separation and Release Agreement with Mr. Grimm

        On April 13, 2017, the Company and Mr. Grimm entered into a Separation Agreement and Release pursuant to which Mr. Grimm's employment with the Company terminated effective April 14, 2017. Pursuant to that agreement, Mr. Grimm provided a release of claims against the Company, agreed to certain other restrictive covenants and cooperation undertakings, and also agreed to provide

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consulting services to the Company on an as-needed basis during the 90-day period following his departure (or if earlier, through consummation of the merger) in consideration for a monthly consulting fee of $25,000, pro-rated if applicable for any partial month of service.

        Upon and by reason of his employment termination, the Company agreed to provide Mr. Grimm termination benefits in the form of a lump-sum cash payment of $550,000, reimbursement for medical continuation costs for one year and for the cost of converting his Company-provided life and AD&D insurance to a personal policy (provided that such reimbursement obligations will cease to the extent he acquires other employer-provided coverage), and reimbursement for outplacement expenses of up to $25,000 to the extent incurred not more than six months following his termination.

        Upon consummation of the merger, the Company will provide to Mr. Grimm the payments and benefits that would have been provided to him (based on his compensation levels in effect upon his employment termination) pursuant to the Change in Control/Severance Agreement that was in effect between him and the Company immediately before his termination as if he had experienced a qualifying termination of employment thereunder immediately following consummation of the merger, less the termination benefits provided to him under the Separation Agreement and Release. Mr. Grimm's Change in Control/Severance Agreement was substantially identical to the Change in Control Severance Agreement applicable to Mr. Jehl, as described above under "—Change in Control/Severance Agreements with Current Executive Officers." The amounts that would become payable to Mr. Grimm under his Separation Agreement and Release by reason of the consummation of the merger are set out in the Golden Parachute Compensation table in the "—Merger-Related Compensation for the Company's Named Executive Officers" section below.

Indemnification and Insurance

        Pursuant to the terms of the merger agreement, members of the Forestar board of directors and executive officers of Forestar will be entitled to certain ongoing indemnification and coverage under directors' and officers' liability insurance policies following the merger. Such indemnification and insurance coverage is further described in the section entitled "The Merger Agreement—Indemnification and Insurance."

Merger-Related Compensation for the Company's Named Executive Officers

        In accordance with Item 402(t) of Regulation S-K, the Golden Parachute Compensation table below sets forth the estimated amount of compensation that is based on or that otherwise relates to the merger and that may be payable to the Company's "named executive officers" identified above, who are those individuals listed in the "Summary Compensation Table" that is part of the Company's most recent securities filing for which disclosure was required under Item 402(c) of Regulation S-K (its proxy statement for the 2017 annual meeting). These amounts have been calculated assuming the merger was consummated on May 15, 2017 (the latest practicable date prior to the filing of this proxy statement), equity incentive compensation award holdings as of such date and, for purposes of determining equity award values, the per-share merger consideration (a per-share cash value of $14.25). The amounts in the table below do not include amounts that are already vested without regard to the merger (such as vested equity awards and benefits under the Company's Supplemental Executive Retirement Plan) or amounts that may be granted following the date of this proxy statement.

        Other than the amounts shown in the "Equity" column of the table and the amounts shown for Mr. Grimm, which amounts will become payable upon and solely by reason of consummation of the merger, the amounts set out in the table below are payable only if there shall occur a qualifying termination of employment within two years following consummation of the merger (a termination of Messrs. Weber, Jehl or Quinley by the Company without "cause" or by such executive for "good

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reason") and were determined as if such executive experienced a qualifying termination of employment as of the date of the merger's consummation.

        See the section above captioned "—Interests of the Company's Directors and Executive Officers in the Merger" for further information about the compensation disclosed in the table below. The amounts indicated below are estimates of amounts that might become payable to the named executive officers and the estimates are based on multiple assumptions that may not prove correct, including assumptions that are based on information not currently available. Accordingly, the actual amounts, if any, received by a named executive officer (other than Mr. Dickson) may differ in material respects from the amounts set forth below.

Golden Parachute Compensation

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Financing

        Merger Parent and Merger Sub have represented to the Company that Parent will have sufficient funds at the closing of the merger, taken together with our cash on hand, to pay all cash amounts required to be paid by Merger Parent and Merger Sub under the merger agreement.

        Merger Parent anticipates that the funds needed to close the merger will be funded through a combination of equity financing from SOF-X U.S. Holdings, L.P., an affiliate of Starwood, which we refer to as "SOF-X U.S. Holdings," in an amount up to $476.48 million and our cash on hand.

        The consummation of the merger is not subject to any financing conditions, although funding of the equity financing is subject to the satisfaction of the conditions set forth in the commitment letter under which the equity financing will be provided.

Equity Financing

        Merger Parent has entered into an equity commitment letter with SOF-X U.S. Holdings, dated April 13, 2017, pursuant to which SOF-X U.S. Holdings has committed to contribute to Merger Parent, at or prior to the closing of the merger, up to $476.48 million.

        The obligation of SOF-X U.S. Holdings to fund the equity financing contemplated by the equity commitment letter is subject to (i) the satisfaction or waiver in writing by Merger Parent and Merger Sub of all conditions to the obligations of Merger Parent and Merger Sub to consummate the transactions contemplated by the merger agreement and (ii) the contemporaneous consummation of the closing of the merger.

        The obligation of SOF-X U.S. Holdings to fund the equity financing commitment generally will terminate upon the earliest to occur of (a) the valid termination of the merger agreement in accordance with its terms; (b) the closing of the merger; (c) the funding of the equity financing commitment by SOF-X U.S. Holdings or its assigns; and (d) the Company or any of its equityholders, affiliates or subsidiaries, directly or indirectly, asserting any claim against SOF-X U.S. Holdings or any related party other than a claim against any related party under the merger agreement or against SOF-X U.S. Holdings under the limited guarantee.

Limited Guarantee and Remedies

        In connection with the merger agreement, SOF-X US Holdings has agreed to, subject to the terms and conditions of a limited guarantee, absolutely, unconditionally and irrevocably guarantee to Forestar the payment of certain amounts required under the merger agreement by Merger Parent including with respect to: (i) the payment of the $40 million Parent termination fee in accordance with the terms of the merger agreement; and (ii) certain indemnification and reimbursement obligations in accordance with the merger agreement, in each case, as, when and to the extent due under the merger agreement. The limited guarantee will terminate on the earlier of (a) the closing of the merger, (b) the payment in full of the guaranteed obligations (as specified in the limited guarantee) and (c) 120 days following a termination of the merger agreement in accordance with its terms (except as to payments for which a claim has been made prior to such termination).

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        We cannot seek specific performance to require Merger Parent and Merger Sub to perform their respective obligations under the merger agreement, including to complete the merger, and our exclusive remedy for the failure of Merger Parent and Merger Sub to complete the merger is to seek payment of the $40 million Parent termination fee and certain indemnification and reimbursement obligations, as supported by the limited guarantee described above. See "The Merger Agreement—Termination—Termination Fees—Merger Parent Termination Fee."

U.S. Federal Income Tax Consequences of the Merger

        The following discussion is a summary of the U.S. federal income tax consequences of the merger to holders of shares of Forestar common stock that are converted into the right to receive cash pursuant to the merger. This discussion is based upon the Code, Treasury regulations promulgated thereunder, court decisions, published positions of the Internal Revenue Service (the "IRS") and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. Any such change or differing interpretation could affect the accuracy of the conclusions set forth herein. This discussion is limited to holders who hold their shares of Forestar common stock as "capital assets" within the meaning of the Code (generally, property held for investment purposes). This summary does not describe any tax consequences arising under the laws of any state, local or foreign tax jurisdiction and does not consider any aspects of U.S. federal tax law other than income taxation (e.g., state, gift or alternative minimum tax or the Medicare net investment income surtax). In addition, this summary does not address the U.S. federal income tax consequences to holders of shares who exercise appraisal rights under Delaware law. For purposes of this discussion, a "holder" is a U.S. Holder, a Non-U.S. Holder or both, as the context may require.

        This discussion is for general information only and does not address all of the tax consequences that may be relevant to holders in light of their particular circumstances, including:

•

holders who may be subject to special treatment under U.S. federal income tax laws, such as: financial institutions, tax-exempt organizations, S corporations or any other entities or arrangements treated as partnerships or pass-through entities for U.S. federal income tax purposes (and investors therein), insurance companies, mutual funds, dealers in stocks and securities, traders in securities that elect to use the mark-to-market method of accounting for their securities, regulated investment companies, real estate investment trusts, certain expatriates or former long-term residents of the United States or holders subject to the alternative minimum tax;



•

holders holding shares as part of a hedging, constructive sale or conversion, straddle or other risk reducing transaction;



•

holders who received their shares of Forestar common stock in a compensatory transaction; and



•

U.S. Holders whose "functional currency" is not the U.S. dollar.

        If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of Forestar common stock, the tax treatment of a person treated as a partner in such partnership for U.S. Federal income tax purposes will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding the shares of Forestar common stock and partners therein should consult their tax advisors regarding the tax consequences of the merger.

        We have not sought, and do not intend to seek, any ruling from the IRS with respect to the statements made and the conclusions reached in the following summary. No assurance can be given that the IRS will agree with the views expressed in this summary or that a court will not sustain any challenge by the IRS in the event of litigation.

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U.S. Holders

        For purposes of this discussion, a "U.S. Holder" is a beneficial owner of shares of Forestar common stock that is for U.S. federal income tax purposes:

•

an individual who is a citizen or resident of the United States;



•

a corporation (or other entity classified as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;



•

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or



•

a trust (i) if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust or (ii) that has made a valid election under applicable Treasury regulations to be treated as a U.S. person.

        The receipt of cash by a U.S. Holder in exchange for shares of Forestar common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, such U.S. Holders will recognize gain or loss equal to the difference, if any, between the amount of cash received and such U.S. Holder's adjusted tax basis in the shares surrendered pursuant to the merger. A U.S. Holder's adjusted tax basis in its shares of Forestar common stock will generally equal the amount that such U.S. Holder paid for the shares. Such gain or loss will generally be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder's holding period in such shares exceeds one year at the time of the completion of the merger. A reduced tax rate on capital gain will generally apply to long-term capital gain of a non-corporate U.S. Holder. There are limitations on the deductibility of capital losses. If a U.S. Holder acquired different blocks of shares at different times and different prices, such U.S. Holder must determine its adjusted tax basis, gain or loss and holding period separately with respect to each block of shares.

Non-U.S. Holders

        For purposes of this discussion, a "Non-U.S. Holder" is a beneficial owner of shares of Forestar common stock that is not a U.S. Holder or an entity or arrangement treated as a partnership or other pass-through entity for U.S. federal income tax purposes.

        Any gain recognized by a Non-U.S. Holder as a result of the merger will generally not be subject to U.S. federal income tax unless:

•

such gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States), in which case such gain will generally be subject to U.S. federal income tax at rates applicable to U.S. Holders, and if such Non-U.S. Holder is a corporation, such gain may also be subject to a branch profits tax at a rate of 30% (or a lower rate under an applicable tax treaty);



•

such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of the merger and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a rate of 30% (or a lower rate under an applicable tax treaty) and may be offset by certain U.S. source capital losses (provided such Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses); or



•

we are or have been a U.S. real property holding corporation ("USRPHC") at any time within the shorter of the five-year period preceding the merger and such Non-U.S. Holder's holding

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period (the "Relevant Period") with respect to such holder's shares of Forestar common stock. We believe that we are currently a USRPHC for U.S. federal income tax purposes. As such, as long as our common stock continues to be regularly traded on an established securities market in the United States, within the meaning of applicable Treasury regulations, a Non-U.S. Holder will not be subject to U.S. federal income tax on any gain recognized as a result of the merger if such Non-U.S. Holder has not held (actually or constructively) more than 5% of our outstanding common stock at any time within the Relevant Period. If a Non-U.S. Holder has held (actually or constructively) more than 5% of our outstanding common stock at any time within the Relevant Period, any gain recognized as a result of the merger will generally be subject to U.S. federal income tax at rates applicable to U.S. Holders.

        HOLDERS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES AND ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.