St. Joe Should Climb 25% - Barron's

Short sellers are betting Florida real-estate developer St. Joe (JOE) will continue to sag. They assume the Sunshine State's depressed real-estate market won't recover until at least 2010. This week's Barron's magazine notes some prominent value investors, who have recently taken big stakes in St. Joe, apparently disagree.

They argue St. Joe recently payed off all its outstanding debt and eliminated its dividend, putting it in "a great position to take advantage of the growth in the marketplace." An upcoming airport should boost tourism to the Gulf Coast of Florida, where it owns 700,000 acres.

St. Joe is exiting its building business in order to focus on its specialty -- entitled land (construction-ready property sold to developers). It already has almost 39,000 residential units in various stages of development, and 12.3M square-feet of commercial land, all of which sit on its balance sheet at below-market-value prices. St. Joe is also looking to increase joint-ventures in which it receives a share of a development's future cash-flow.

Analysts note that its north Florida portfolio is more comparable to Alabama -- which is already prospering -- than to south Florida.

Shares, at about $40, equate to just over $10,000/acre for its prime land. St. Joe averaged $266,000/acre for its commercial land sales in 2007. Barron's thinks shares could rise 25% over the coming 12 months.

=================

Note that St. Joe averaged $1,500/acre for its rural land sales in 2007. Still, Clyde Milton thinks its shares, up from $27 in November, are a bit pricey at these levels. He's somewhat disconcerted by the company's recent ploy of selling 3,000 acres in an online auction.

Comments

[R. Richard ...:]

Some of JOE's lands are rable and can be put to temporary use in crops. Soy is big in So. AL.

2008 Apr 27 11:30 AM

[R. Richard ...:]

That should have been arable - and am LONG JOE

2008 Apr 27 11:31 AM

[tl:]

Why are some of its holdings sitting "on its balance sheet at below-market-value prices"? Who determines what "market value" is?

2008 Apr 27 09:57 PM

[Gaucho:]

Well that is the signal I needed. When Barons is pumping the big boys are dumping. I am already short JOE. They had a large stock sale for 35 when the stock was well over 40. Does that sound like a company on its way up. Florida is at the center of the housing crash. It will not return to building for 5-10 years IMHO. The property values will NEVER in real terms return to 2006 value.

Joe has a lot of overvalued property on the books that it is paying taxes on and will be holding for years. The recent sales of 1500 per acre and the recent (desperate) ploy of selling 3,000 acres in an online auction does not bode well for this company.

2008 Apr 27 10:15 PM

[Greg in Al:]

As an owner of Real Estate of Florida panhandle real estate, I feel we are a long way from climbing out of this mess. Growth will be stagnant for years. Look at the gross overbuilding of Panama City Beach. Value of my condo has fallen 50% from the bubble highs in early 2005.

2008 Apr 28 09:03 AM

[jjason:]

Sorry but this article does not tell us what the company is worth. For example, what kind of land does the company own? If it is true that rural land was sold for $1,500.00 per acre then how much rural land does the firm still own? And what about lots or subdivisions?

Too often, articles tell us nothing about important fundamentals and balance sheet items. And, I could care less what Barron's says if Barron's does not provide data. Too many analysts have been wrong about many of the stocks that relate to the housing industry.

2008 Apr 28 02:17 PM

[pc beaher:]

Joe is a very unique company, and this is why so many people have a hard time determining it’s worth.

Think about it this way, if Joe’s 700,000 (or whatever it is today) acres were owned by 1.5 million people, most of the land would already be developed and it would be like any other city or county and the land would be worth much more. Because one company owns the everything, most of the property remains undeveloped and is pretty much useless (today).

The idea that Joe will get a residual income from the properties it develops does not work well with buyers. I went to a one of Joe’s new up and coming developments and could not stomach the fees to own a single family home there. It simply wasn’t worth it.

Fees were higher than condo fees. Just to live in a house in a standard neighborhood, you had to pay $400 a month which gets the grass cut and pays the garbage pickup. If you want to access the exclusive beach club, you have to chalk up another $20,000 and then pay an extra $200 per month.

This kind of business model works if the development is within walking distance to the beach, however when the development is 5 miles for the beach, this will not work.

I suppose we’ll have to wait and see how well Joe plays the cards with the Panama City Beach airport.

This is the best place for Joe to make $$ right now. Joe did a great job by selling the Pier Park property to Simon. I expect Pier Park to win awards. St. Joe is doing good things there. The problem is how can you replicate this 1000 times? Or will this take 10,000 years?

2008 Apr 28 04:15 PM