JOE - ST. JOE CO

[thepupil]

http://staugustine.com/news/local-news/2014-01-09/st-joe-selling-rivertown-436-million

 

St. Joe sells Rivertown for $43MM (about 10,000 / acre )

 

Mr. Einhorn needs to re-evaluate his thesis and move on here. His recent quotes about the rest of JOE being worth $1500/acre after the timberland sale to the mormons are off base. He was absolutely correct that this was mismarked. At the time of his presentation Rivertown had a book value of about $75 million. But his original presentation also estimated the value of the developed lots at $6MM and the undeveloped lots as "non-economic".  It seems to me the facts have changed, given that JOE just sold the poster child of its bubblicious developments for $10K / Acre and by my estimate will hace between 34 and 44% of its MCap in net cash under Bruce Berkowitz's control, depending on the tax rate on the big land sale.

 

I am not particularly interested in being long JOE here, but it is getting more interesting.

 

Bullet points from original "Field of Schemes"

 

RiverTown is <5% developed

? Further development is non-economic

? 185 remaining developed lots at $31,250/ lot = $6 million in

value

? Carrying value is $74.5 million or $400,000/ developed lot

? 9 years of supply implies values not going up

[thepupil]

I find it interesting I am having a conversation with myself here relative to the SHLD thread (for the record I have a position in SHLD and find it fascinating too).

 

I understand that a net cash heavy, giant piece of land under the control of someone who many on this board admire may be less titillating of a discussion than the leveraged complex beast that is sears, but the sheer lack of interest despite very significant changes to the asset base and some surprisingly decent value realizations is surprising to me.

 

The  two stocks are quite similar, you have a investor/jockey chairman, lots of shorts and debate about value of assets, small data points that are dangerous to extrapolate but support higher valuations, etc. both of the jockeys are less than transparent (JOE did not even hint at what they would do with cash when they sold majority of their land)

 

It's probably because the lack of  multi bagger upside and inherent sleepiness/static-ness(looking for a better word) of cash and land. There just isn't much to discuss whereas SHLD provides plenty of fodder for bull and bear alike.

 

But considering JOE's ties to Berkowitz, LUK, and recent changes, it's just weird to me this thread and my super sweet spreadsheets that adjust JOEs liabilities get no love.

 

Starving for attention,

ThePupil

 

 

[CorpRaider]

I'm reading what you're putting down my man.  I know very little about this one other than seeing BB talk it up a few times.  I get that there is a new airport and lots of old geezers who need a warm place to croak. 

 

So, basically they just sold the purportedly worst, most stagnant development in their pipeline (that stalled out after the bubble burst) for much more than was anticipated by the shorts?  What's the EV per acre of remaining RE if you back out the cash?  I'd rather be in this one than Sears, if they can't even sell appliances over the last two years, they are in big trouble, imop.  But it does seem like ESL is trying to create something that would exist if Costco, TJX, AMZN and GGP all porked.  I'll try and start boning up on it so I can take a stab at offering you a semblance of intelligent responses. 

[jay21]

I find it interesting I am having a conversation with myself here relative to the SHLD thread (for the record I have a position in SHLD and find it fascinating too).

 

I understand that a net cash heavy, giant piece of land under the control of someone who many on this board admire may be less titillating of a discussion than the leveraged complex beast that is sears, but the sheer lack of interest despite very significant changes to the asset base and some surprisingly decent value realizations is surprising to me.

 

The  two stocks are quite similar, you have a investor/jockey chairman, lots of shorts and debate about value of assets, small data points that are dangerous to extrapolate but support higher valuations, etc. both of the jockeys are less than transparent (JOE did not even hint at what they would do with cash when they sold majority of their land)

 

It's probably because the lack of  multi bagger upside and inherent sleepiness/static-ness(looking for a better word) of cash and land. There just isn't much to discuss whereas SHLD provides plenty of fodder for bull and bear alike.

 

But considering JOE's ties to Berkowitz, LUK, and recent changes, it's just weird to me this thread and my super sweet spreadsheets that adjust JOEs liabilities get no love.

 

Starving for attention,

ThePupil

 

 

 

Just skimmed through the recent developments posted.  My interest is piqued.  Please keep posting thepupil.

[Kiltacular]

I find it interesting I am having a conversation with myself here relative to the SHLD thread (for the record I have a position in SHLD and find it fascinating too).

 

I understand that a net cash heavy, giant piece of land under the control of someone who many on this board admire may be less titillating of a discussion than the leveraged complex beast that is sears, but the sheer lack of interest despite very significant changes to the asset base and some surprisingly decent value realizations is surprising to me.

 

The  two stocks are quite similar, you have a investor/jockey chairman, lots of shorts and debate about value of assets, small data points that are dangerous to extrapolate but support higher valuations, etc. both of the jockeys are less than transparent (JOE did not even hint at what they would do with cash when they sold majority of their land)

 

It's probably because the lack of  multi bagger upside and inherent sleepiness/static-ness(looking for a better word) of cash and land. There just isn't much to discuss whereas SHLD provides plenty of fodder for bull and bear alike.

 

But considering JOE's ties to Berkowitz, LUK, and recent changes, it's just weird to me this thread and my super sweet spreadsheets that adjust JOEs liabilities get no love.

 

Starving for attention,

ThePupil

 

 

 

Just skimmed through the recent developments posted.  My interest is piqued.  Please keep posting thepupil.

 

+1

[mcliu]

I'm getting around $5,000 to $5,500/acre at the current stock price, is that somewhat close to what you guys are getting?

 

If so, isn't that a little pricey? I think even at $10,000/acre, it translates to around a 50% premium to current prices, but the return isn't attractive if this value is recognized over decades..

 

Does anyone have a good way of determining the value of the remaining land? Is it possible that it would be worth more than $10,000/acre?

[no_free_lunch]

thepupil,

 

You have done some great analysis and I have been following it.  However you threw this out there:

 

I am not particularly interested in being long JOE here, but it is getting more interesting.

 

Are you long now?

 

I have been following this one somewhat loosely since 2005 so I am definitely interested in the thread.

[thepupil]

no, I'm not long. As others have alluded to, the pro-forma EV/Acre for the remaining land, the majority of which is the West Bay project, is still not quite there yet. Because of the "story stock" and berkowitz "cultiness" of the stock i'm not sure if it will ever get to where i can comfortably pull the trigger. I am selling puts on it because of the built in "cash put". If JOE goes down 30% the implied EV/Acre goes down by much more because of all the cash

 

the way I divide JOE's assets

 

1. Rummell era "place making" developments and their remnants (Rivertown, Summercamp, Rivercamps, Watersound, Watercolor, probably some other names i'm forgetting since i am not home and am going of the top of my head here) - these in my opinion are the least exciting. Einhorn did a wonderful job showing that these were 1) mismarked and in need of impairment 2) never produced a high (or even positive) ROI.

 

2. raw timber (this is almost gone)

 

3. Bay County (and some walton county) land in the "path of progress" and remaining infill locations aka West Bay Sector. this is the most exciting and interesting. if you go through the bay county property appraiser you can click on lots of JOE land and see they own entire industrial parks, large plots of highway frontage land, even a 17 acre piece of land on the beach if my memory serve me correctly (its listed as a condo/timeshare development opp.) and then a huge city size block of land that they put the airport on.

 

4. cash managed (in a very restricted way) by berkowitz

 

 

the reason the Rivertown sale is nice is because it converts category 1 to category 4. There are still lots of lots and developments in category 1 that can be sold without much additional capex . As category 4 gets to be a bigger % then i become more interested.

 

ultimately i would like JOE to become more like what consolidated tomoka looks like. they slowly monetize their low basis land via tax efficient 1031 exchanges. the cool part is JOE has 180K near PCB acres to CTO's 11K near Daytona (we can call them the spring break stocks) and JOE has more cash and its in berkowitz's control so the potential is much greater for a large scaled up real estate and stock conglomerate.

 

but i'm not biting just yet.

 

[thepupil]

http://www.sec.gov/Archives/edgar/data/745308/000119312513087844/d461249d10k.htm#toc461249_10

 

Accordingly, we recorded a non-cash charge for impairment in 2011 of $374.8 million.

 

to expand just a little bit here. you'll see on page 31 of the 10-K, that JOE took a 375MM impairment charge in 2011, which included $87MM in Rivertown. You can then scroll down to page S-1 found after the footnotes to the statements. that has a schedule of JOE's investments by county after impairments.

 

It shows the total for St. Johns County at $15MM. Rivertown is in St. Johns County. I believe it is JOE's last remaining land in St. Johns. They just sold Rivertown for $43MM and looking at the SEC filing for the sale, I see that there was $11MM of debt assumed by the purchaser as well. So it is easy to conclude that the Rivertown sale represents a large writeup of an already impaired asset and a reduction in the small amount of debt that JOE carries.

 

If more of these can happen with the 380MM of already impaired investments in real estate, then more of the book value becomes cash + the large acreage around the airport (very low book value accumulated in the early days). Let's say they can get 200 or 300 or even 400 million from that in cash (would get you to $1B in cash) over the next few years and they use that to buy real estate via 1031 exchange at 50% leverage.

 

wouldn't the market look differently on a company with $2B ($1B equity) in cash flowing commercial real estate and a large land bank next to a decent sized city, + the bruce berkowitz factor. But now i'm dreaming.

 

Rivertown debt assumption:

 

Additionally, pursuant to the Sale Agreement, the Purchaser will be required to: (i) purchase certain RiverTown Community related impact fee credits from the Company following the closing as the RiverTown Community is developed (the “Impact Fee Contingent Purchase Price”), and (ii) assume the Company’s Rivers Edge Community Development District (“CDD”) obligations. As of September 30, 2013, the Company’s total outstanding CDD assessment was $11 million, of which $6 million had been recorded as a liability for the CDD assessments associated with platted property as of September 30, 2013.

[prevalou]

Thanks for your analysis thepupil. What makes you think that the bucket 1 is not valuable (watersound, watercolour for example). Is it based on Einhorn analysis or your own ?

[thepupil]

It is not that I do not think they have value. They made some good money developing a few of those. It  is just that I don't see any reason to believe that JOE is not a net destroyer of value developing residential communities. The Einhorn presentation showed that the real estate bubble tailwind did not even lead to development profits over time.

 

I don't want JOE to get into the "let's build this whole new city" game and that is a risk owning JOE. But if they go the low risk route of owning a mix of recurring revenue assets, entitling + permitting land, partnering with other developers and capital providers, maybe throw in some Berkowitz stock picking, i see a lot of potential.

 

I want more sales like Rivertown, the conversion of mistakes past to cash.

 

BTW, small potatoes, but if you look at the recent land sales in Bay county, St. Joe sold some marginal residential lots in Panama City area to a homebuilder  for $1.7MM, Bay county has a great property appraiser. You can go in and see all the sales in a month and sort by price to get the big ones. The interactive map even colors lots blue that have sold recently, which is a great way to quickly assess if JOE sold any of their bigger plots of land in the county.

 

There were a few notable ones in November. The aforementioned sale of some lots to a homebuilder ( i count 20 or so lots  in the "sand oak boulevard group") for 1.7MM and 40 odd acres ($40K/acre, and $80K ish per lot). That ain't timberland!

 

the second notable sale was not JOE land but was a $2MM sale to a church on 8 acres on panama city beach parkway. Just down the road JOE owns a 21 acre plot and a 23 acre plot (and by just down the road i mean a stone's throw away on the same side of the street) They also own several nice sized plots in this area of PCB, very close to the beach.

 

the third notable sale was a 7MM sale of land that abuts the bay. It was sold for close to $1MM/acre. This is where i get a bit "pie in the sky" but St. Joe owns the entire coastline of West Bay. Most of that is conservation land and it will not be fully developed for a very long time. But this is what i mean by "in the path of progress". You can also click around this plot and see JOE owns entire 640 acre sections along the bay.

 

Also check out some of JOE's commercial listings.

 

http://www.stjoecommercial.com/searchResults.aspx

 

Church

http://qpublic6.qpublic.net/fl_display_dw.php?county=fl_bay&KEY=34002-000-000

 

21 acre plot near the church

http://qpublic6.qpublic.net/fl_display_dw.php?county=fl_bay&KEY=33803-005-000

 

Sand Oak Group (group of blue lots and large piece of land adjacent) Link is to the large piece of land

http://qpublic6.qpublic.net/fl_display_dw.php?county=fl_bay&KEY=35291-050-000

 

Bay front land for 7.4MM (s

http://qpublic6.qpublic.net/fl_display_dw.php?county=fl_bay&KEY=27907-010-000

 

Sales list:

http://qpublic6.qpublic.net/fl_subdivision_dw.php?desc=false&SUBMIT=Start+Query&start=0&propertyType=All&saleVacant=All&saleQualification=All&endAcreage=&startAcreage=&endArea=&startArea=&endPrice=&startPrice=&endDate=11-2013&startDate=11-2013&rangeValue=&townshipValue=&sectionValue=&subName=&subNumber=&searchType=form&county=fl_bay&order=salePrice

[thepupil]

30 acres bordering Pier Park (Simon Properties Mall, a portion of this is owned in JV by JOE), the 16 acres they sold to Walmart in 2012 for $5MM.

 

I mean that could easily worth $10MM.

 

http://www.bing.com/maps/default.aspx?cp=30.214856~-85.864147&style=o&lvl=19&tilt=-90&dir=0&alt=-1500

 

JOE has lots of these little examples of "oh wow" that is worth a lot more than $5K/EV Acre, but they probably only add up to 1000 acres at most and JOE has 181K acres. So in the end it's all about West Bay and its transition from a bunch of timberland w/ an airport in the middle of it, to something more.

 

But if those little examples + legacy developments + the current cash keep growing, AND value is not destroyed, you will end up paying less and less for the West Bay dream over time.

 

Ending my spam for now and allowing others to chime in. Hopefully I've kicked and screamed enough to get everyone to start looking. My dream would be for JOE to get hated on in the market again and for it do drop to a level where one is paying for cash + infill already developed land and getting the West Bay for free.

 

But, i have a feeling all my work will be for nothing, if it never drops enough.

[CorpRaider]

I feel like I want more Berkowitz optionality/flexibility to run that cash before I'm really interested.

[prevalou]

good points, thepupil.

Concerning Watercolor, watersound, etc., i think that these properties too are more valuable than 5000 $ per acre and add to Joe value at this price.

[thepupil]

http://finance.yahoo.com/news/st-joe-company-reports-full-210100714.html

 

Very good results showing pickup in all of JOE's activities stock up 6%, but still don't want to pay for the development optionality, which they appear to be going after in a big way. Some mention of possible alternative uses of the coming big cash pile.

 

 

[Guest hellsten]

http://seekingalpha.com/article/2175173-the-st-joe-company-special-situation-with-potential-significant-capital-return

 

With almost 16M shares sold short, or ~45% of the stock float, the coming blow out earnings headline and likely return of capital has a great chance of an epic short covering rally as the true future value of St. Joe comes to light.

 

The bearish argument against the company will now rest on the fact that the company is slowly liquidating assets, and with only ~180,000 acres remaining, the company is running out of assets to sell. Unfortunately, this argument is flawed. Park Brady, the CEO of St. Joe, offered this insightful nugget on the Q3 2013 earnings call to provide perspective on the size of the remaining land holdings that the company will still retain:

 

Yeah. Let me just, first of all let me put 184,000 acres in perspective is that it's 287 square miles, it's four times the size of the Miami Fort Lauderdale area. It's over twice the size of the Atlanta region. So it's a very large piece of land that we still have. We spend a lot of the time in the last two years working on the highest and best value on each of our individual parcels including and what's in this mainly acreage.

 

This is why St. Joe has set aside almost 110,000 acres, of the remaining property the company owns, with the potential that the vast majority of that land might ultimately be used to create an enormous master planned active adult community. Luckily for St. Joe, the template for this community can be found across the US, with the most successful active adult community of all being found just outside of sleepy Ocala in the middle of Florida. The best way to describe the location of the Villages is pretty close to the middle of nowhere. It is smack dabbed in the center of the state, and an hour or more from any major city such as Orlando, Tampa, or Jacksonville. However, the Villages illustrates two important tenets that support what St. Joe is planning to do. The active adult market, referring to those aged 55 and older, is a vibrant booming market capitalizing on the 78 million baby boomers driving the demand for this active lifestyle later in life. Secondly, the Villages illustrates that, with the right planning, you can create this community in the middle of nowhere if you please and buyers will seek out the lifestyle and value offering. Over a 30+ year period, the developer of the Villages has become a billionaire in what is probably the most successful master planned residential community built during that period. The Villages have seen annual home sales over 3,000 per year at times, and the entity controlled by the developer reported over $500M in annual revenue as recently as 2011 at the height of the housing market crash.

 

For the first time in many years, there is a real vision for the future of St. Joe. The company is generating real earnings from its residential and resort lot sales. The leisure and resort business has seen consecutive years of double digit revenue growth as the economy continues to recover. The company has put in place a foundation for recurring revenue streams, that will generate an increasing amount of positive cash flow in the short term. At the same time, significant growth should being in the next 12 months as the company begins to actively develop and monetize its ~110,000 acre master plan community.

 

The company should have close to $800M of liquidity, which is far more than will be required to invest in its growth initiatives and upcoming development activity. I would suspect that the company could choose to return somewhere between $200M and $400M to shareholders via a stock buyback or one-time dividend. With ~92M shares outstanding and the stock trading at ~$18 a share, this would imply repurchasing between 11-22% of all outstanding shares. In this scenario, with the stock float as incredibly thin as it is and Berkowitz owning over 25% of the shares himself, it is hard not to imagine a significant squeeze occurring. If the company decides to issue a one-time dividend, the same squeeze will occur as the stock adjusts for those rushing to collect the yield the company would be paying out.

[Guest hellsten]

http://www.newsherald.com/news/business/st-joe-co-reveals-vision-for-its-bay-walton-communities-map-1.281877

 

St. Joe now wants to expand its West Bay Sector Plan 50,000 acres to the west, including 12,000 in Walton County, with a goal of building pocketed retirement communities similar to The Villages in Central Florida.

...

The St. Joe Co. has done its research when it comes to retirement, much of which stemmed from measuring the success of The Villages, a roughly 20,000-acre, age-restricted community northeast of Orlando.

...

“When the economy went south in 2006, The Villages were still selling 2,600 homes a year,” Brady said. “It’s recession-proof, steady, non-seasonal, and we know the demand’s there.”

...

“This step that we’re going through right now to expand the sector plan is very conceptual and very general,” Gonzalez said. “It’s a framework for 50 years plus, which is a long time.”

[accutronman]

A great quarter positioning JOE for growth in the retirement sector:

 

The St. Joe Company (JOE) today announced pretax income of $509.9 million for the quarter ending March 31, 2014 as compared to pretax loss of $(2.5) million for the quarter ending March 31, 2013. Net Income for the first quarter 2014 was $403.0 million, or $4.37 per share compared to a Net Loss of $(2.5) million, or $(0.03) per share for the first quarter of 2013.

 

During the quarter, the Company completed its previously announced sale of approximately 380,000 acres of the Company’s non-strategic timberlands and rural land to AgReserves, Inc., for approximately $562 million, which included $200 million in the form of a timber note (the “AgReserves Sale”). The Company recorded earnings of $511.1 million before income taxes for the quarter ended March 31, 2014 as a result of this sale.

[Sunrider]

hmm ... so they monitised some assets and now have about 1/3 of their market cap in cash if I read that right? I've had a small tracking position in this since the 2011 Berkowitz/Einhorn battle ... but I'm wondering if this is cheap enough to add to. The new MPC will take a very long time to develop and whilst they have a port, I'm not sure if that port is connected to anything (rail?) or how much more investment would be needed for this to really live up to the value Berkowitz implied when he said that it's the closest port to the Panama canal.

 

Any views?

 

Thank you - C.

[NomadicRiley]

Strange news on JOE today, according to Bloomberg they are in discussions to help provide a $400 loan to SHLD http://www.bloomberg.com/news/2014-09-19/sears-needs-10-times-loan-from-lampert-corporate-finance.html

 

Article points out that Berkowitz/Fairholme own large stakes in both. 

 

If I was a JOE shareholder, I'd be livid.

[merkhet]

Why would you be livid? It seems like a decent short-term secured loan.

[NomadicRiley]

Why would you be livid? It seems like a decent short-term secured loan.

 

Do you think there is any chance JOE would be interested in lending to a distressed retailer if Berkowitz did not own such a large stake?  I doubt they are currently reviewing loan applications from Radio Shack, Aeropostale, American Apparel or any of the other numerous distressed retailers.

 

JOE appears to risking their shareholder's assets on a loan that appears to be well outside their circle of competence and where the potential benefits of the loan occurring are much higher for their largest shareholder's other investment holdings than for the shareholders of JOE.

[CorpRaider]

They already own a load of the unsecured bonds. 

[merkhet]

Why would you be livid? It seems like a decent short-term secured loan.

 

Do you think there is any chance JOE would be interested in lending to a distressed retailer if Berkowitz did not own such a large stake?  I doubt they are currently reviewing loan applications from Radio Shack, Aeropostale, American Apparel or any of the other numerous distressed retailers.

 

JOE appears to risking their shareholder's assets on a loan that appears to be well outside their circle of competence and where the potential benefits of the loan occurring are much higher for their largest shareholder's other investment holdings than for the shareholders of JOE.

 

The loans are secured. Real estate is well within St. Joe's circle of competence. (One would hope -- it's a RE play after all.) Where's the risk on a short-term secured loan like this?

[Kraven]

Why would you be livid? It seems like a decent short-term secured loan.

 

Do you think there is any chance JOE would be interested in lending to a distressed retailer if Berkowitz did not own such a large stake?  I doubt they are currently reviewing loan applications from Radio Shack, Aeropostale, American Apparel or any of the other numerous distressed retailers.

 

JOE appears to risking their shareholder's assets on a loan that appears to be well outside their circle of competence and where the potential benefits of the loan occurring are much higher for their largest shareholder's other investment holdings than for the shareholders of JOE.

 

The loans are secured. Real estate is well within St. Joe's circle of competence. (One would hope -- it's a RE play after all.) Where's the risk on a short-term secured loan like this?

 

Conflicts of interest galore here.