Investment in Unconsolidated Ventures

In the past, the Company has participated in real estate ventures for the purpose of acquiring and developing residential, multifamily and mixed-use communities in which it may or may not have a controlling financial interest. GAAP requires consolidation of variable interest entities (VIEs) in which an enterprise has a controlling financial interest and is the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE. The Company examines specific criteria and uses judgment when determining whether a venture is a VIE and whether it is the primary beneficiary. The Company performs this review initially at the time it enters into venture agreements and reassesses upon reconsideration events.

At September 30, 2019, the Company had ownership interests in four ventures that it accounted for using the equity method. Combined summarized balance sheet and income statement information for these unconsolidated ventures follows:



	September 30,
	2019		2018
	(In millions)
Assets:
Cash and cash equivalents	$	1.6	$	10.2
Real estate	13.6		17.2
Other assets	0.1		0.1
Total assets	$	15.3	$	27.5
Liabilities and Equity:
Accounts payable and other liabilities	$	0.3	$	0.6
Equity	15.0		26.9
Total liabilities and equity	$	15.3	$	27.5

Forestar's investment in unconsolidated ventures	$	7.3	$	11.7



	Year Ended September 30, 2019		Nine Months Ended September 30, 2018		Year Ended December 31, 2017
	(In millions)
Revenues	$	1.9	$	22.2	$	65.7
Earnings	$	1.3	$	15.1	$	39.2
Forestar's equity in earnings of unconsolidated ventures	$	0.5	$	4.8	$	17.8

During fiscal 2019 and the nine months ended September 30, 2018, the Company made no further investments in these ventures and received $5.0 million and $4.3 million, respectively, in distributions. Distributions include both return of investments and distributions of earnings.

In the nine months ended September 30, 2018, the Company's equity in earnings from one of its unconsolidated ventures in which it owns a 37.5% interest, LM Land Holdings, LP, accounted for over 10% of the Company's consolidated pre-tax income. At September 30, 2018, LM Land Holdings, LP had $21.6 million in venture assets, $0.4 million in accounts payable and other liabilities, and $21.2 million in venture equity on its balance sheet. At September 30, 2018, the Company's investment in this venture was $8.9 million. In the nine months ended September 30, 2018, LM Land Holdings, LP recognized $17.4 million of revenues and generated $18.1 million in earnings, which includes $5.7 million of earnings related to the recognition of a deferred gain. The Company's share of these earnings was $6.4 million.

In the nine months ended September 30, 2018, the Company sold its ownership interest in eight of its unconsolidated ventures to Starwood as part of a strategic asset sale (See Note 3—Real Estate). In the nine months ended September 30, 2018, the Company also sold its interest in a residential venture in Atlanta, generating $11.0 million in net proceeds and a gain of $2.0 million. The Company also sold its interest in a multifamily venture near Denver, generating $19.2 million in net proceeds and a gain of $14.6 million.

In the nine months ended September 30, 2018, a venture in which the Company owns a 50% interest recognized a non-cash impairment charge of $3.0 million associated with a golf course near Atlanta. The Company's share of this non-cash impairment charge is included within equity in earnings of unconsolidated ventures in its consolidated statements of operations.

In fiscal 2017, a multifamily venture in which the Company owned a 30% interest sold a 320-unit multifamily project in Nashville for $71.8 million and recognized a gain of $19.0 million. The Company's share of earnings was $7.8 million and it received a distribution of $12.0 million as a result of this sale.

In fiscal 2017, a venture in which the Company owned a 50% interest benefited from the sale of 46 commercial acres in Houston for $9.7 million generating $6.6 million in earnings to the venture. The Company's pro-rata share of the earnings associated with this sale was $3.3 million and its pro-rata share of the total distributable cash was $4.3 million.