JOE - ST. JOE CO

[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.

 

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?

 

If the loan comes due and SHLD can't fully repay it, now a decision has to be made if JOE should try to collect on the collateral securing the loan or agree to some extension/rollover.  JOE collecting would devastate the value of Berkowitz's SHLD holdings even though it may be in the best interest of JOE's shareholders leading to a situation where what's good for one of Berkowitz's holdings is bad for the other and vice versa. 

 

This would be very different if the loan was to an unaffiliated retailer like I mentioned above, they'd just collect the collateral and move on because there would be no conflict of interest.

[merkhet]

I agree that the conflict of interest is problematic.

 

I guess I don't see Berkowtiz rolling over on the loan without extracting something in return. Heck, I think part of the reason he's even doing the deal is that he wants to make sure he doesn't get screwed in some way.

[BargainValueHunter]

http://www.bloomberg.com/news/2015-01-27/st-joe-receives-sec-wells-notes-on-securities-violations.html

 

The investigation centers on “historical accounting and disclosure practices and real estate valuations” in financial results for 2010, 2009 and prior periods, the WaterSound, Florida-based company said Monday in the Securities and Exchange Commission filing. A Wells notice provides the company an opportunity to respond to issues raised in investigations that can lead to recommendations for civil penalties.

 

“At this time the company is unable to predict the outcome of the investigation, any potential enforcement actions or any other impact on the company that may arise as a result of such investigation,” St. Joe said in the filing.

 

Somebody is NOT having a good year...

 

The company’s biggest shareholder is Bruce Berkowitz’s Fairholme Capital Management, and Berkowitz is St. Joe’s chairman. Berkowitz declined to comment on the Wells notice, according to Daniel Schmerin, director of investment research for Miami-based Fairholme.

[peter1234]

This must be one of the longest Long-Short stories with Berkowitz and Einhorn on either sides for over 9 years.

;)

[CorpRaider]

Seems to be in the neighborhood of $4K per acre here.  Do I hear $3?  I hope someone asks BB about his long term plans for this as a vehicle for "permanent capital" in his scheduled conference call.

[BargainValueHunter]

Bruce Berkowitz must have a huge cabinet filled with Alka-Seltzer.

 

In addition to Sears and the GSEs his land via St. Joe may get absolutely walloped this weekend!

 

http://www.nhc.noaa.gov/storm_graphics/AT11/refresh/AL112017_5day_cone_no_line_and_wind+png/205803_5day_cone_no_line_and_wind.png

 

If you are in Florida STAY SAFE!!

 

 

[sjh]

st joe mainly owns land between tallahassee and destin, which is in the north-western part of florida. so he should be fine if the graphic predicts the storm accurately.

[sjh]

there is a recent interview with berkowitz - towards the end he basically says that st joe is his highest conviction bet at the moment. he also says that it can take decades to fully play out

 

https://youtu.be/jPaxIztRRCA

[BargainValueHunter]

st joe mainly owns land between tallahassee and destin, which is in the north-western part of florida. so he should be fine if the graphic predicts the storm accurately.

Looking at that map I don't see "should be fine" unless the storm takes an unexpected eastern turn.

 

I do agree that the eye won't pass over St. Joe land but the strongest Atlantic hurricane ever recorded doesn't need to pass directly overhead to cause extensive damage.

[T-bone1]

If the big "problem" with St. Joe is that almost all the land is inland, has no infrastructure, and is undeveloped, that should make them more-or-less immune from a hurricane...

[DooDiligence]

If the big "problem" with St. Joe is that almost all the land is inland, has no infrastructure, and is undeveloped, that should make them more-or-less immune from a hurricane...

 

St. Joe has some very nice waterfront / beachfront properties already developed.

 

The problem is that NWFL has a LOT of really CHEAP waterfront (some see this as an opportunity.)

 

You can get a smashing pad on the H2O for less than $700K (looking 4 a 2nd home?)

 

I still believe NWFL will eventually get a bump in values (it's too beautiful not to.)

 

10 years, 20 years WTFK when the area ever gets re-rated...

[T-bone1]

If the big "problem" with St. Joe is that almost all the land is inland, has no infrastructure, and is undeveloped, that should make them more-or-less immune from a hurricane...

 

St. Joe has some very nice waterfront / beachfront properties already developed.

 

The problem is that NWFL has a LOT of really CHEAP waterfront (some see this as an opportunity.)

 

You can get a smashing pad on the H2O for less than $700K (looking 4 a 2nd home?)

 

I still believe NWFL will eventually get a bump in values (it's too beautiful not to.)

 

10 years, 20 years WTFK when the area ever gets re-rated...

 

I don't disagree, but do they really own that much developed stuff (i.e. don't they sell the stuff they develop??)

[thepupil]

https://seekingalpha.com/article/4165121-st-joe-company-mired-swamp

 

Good work that highlights fairholme's increasing concentration in illiquid and just as sleepy as 5 years ago St. Joe.

 

It seems that something has to give. Fairholme will have to do something (sell to someone else, sell in open market, convert to closed end form / permanent capital in some way.

[Spekulatius]

The thesis seems Ok, but I wouldn’t short it anyways- the turnover is low enough that a short squeeze could be fabricated by someone’s. Also, Joe has cash on hand to do a tender for shares from Fairholme.

[oddballstocks]

I love the forgotten coast, it's a beautiful area for sure.  But it's called the forgotten coast for a reason, it's empty up there.  There's also a stigma attached to it.

 

If you visit West Palm it's a sunny version of NYC.  Miami, Tampa, Naples etc are all modern "eastern" cities.  People in Florida joke that the forgotten coast should really be part of Alabama.  And if you go there you'll see why.  Most plates are Alabama, Arkansas, Mississippi.

 

I had someone who saw my PA plate stop me and ask "what's it like up there?" I said it was nice and they said "Is it snowy all the time?" and I clarified that we have seasons, that the snow only falls for 2.5 months in the winter.  This guy's mind was blown and he said "I've never been up north, don't know what it's like"  Sure it's an anecdote, but there were people with him nodding along and their minds were blown too.

 

There are some nice retiree places, and then some college party areas.  But in most cases the place is empty, and that's the feature of it.

 

I prefer it, the beaches are a LOT better.  They're perfect white sand and they're empty.  My sentiment is similar to anyone I've talked to down there, everyone hopes that no one else finds out about it.

[DooDiligence]

I love the forgotten coast, it's a beautiful area for sure.  But it's called the forgotten coast for a reason, it's empty up there.  There's also a stigma attached to it.

 

If you visit West Palm it's a sunny version of NYC.  Miami, Tampa, Naples etc are all modern "eastern" cities.  People in Florida joke that the forgotten coast should really be part of Alabama.  And if you go there you'll see why.  Most plates are Alabama, Arkansas, Mississippi.

 

I had someone who saw my PA plate stop me and ask "what's it like up there?" I said it was nice and they said "Is it snowy all the time?" and I clarified that we have seasons, that the snow only falls for 2.5 months in the winter.  This guy's mind was blown and he said "I've never been up north, don't know what it's like"  Sure it's an anecdote, but there were people with him nodding along and their minds were blown too.

 

There are some nice retiree places, and then some college party areas.  But in most cases the place is empty, and that's the feature of it.

 

I prefer it, the beaches are a LOT better.  They're perfect white sand and they're empty.  My sentiment is similar to anyone I've talked to down there, everyone hopes that no one else finds out about it.

 

You must have spoken with that one guy/gal the new-casters always focus on after a storm.

Was she wearing a mumu and did she have those pink foam curlers in her hair?

We have lot's of those knuckleheads here.

 

I'll be having a BBQ at the Johnson's Beach pavilion, with a bunch of PSC theatre & music majors on 12 May for any who are interested.

 

I'll take underdeveloped beaches over Miami any day!

[thepupil]

The thesis seems Ok, but I wouldn’t short it anyways- the turnover is low enough that a short squeeze could be fabricated by someone’s. Also, Joe has cash on hand to do a tender for shares from Fairholme.

 

yea, i'm not shorting it, but think it's fascinating to watch the redemption cycle @ fairholme in conjunction with the increasing concentration in illiquid (JOE) and binary (Fannie prefs) bets. I'm amazed he still has $1B+ of client money.

 

 

[doughishere]

The thesis seems Ok, but I wouldn’t short it anyways- the turnover is low enough that a short squeeze could be fabricated by someone’s. Also, Joe has cash on hand to do a tender for shares from Fairholme.

 

yea, i'm not shorting it, but think it's fascinating to watch the redemption cycle @ fairholme in conjunction with the increasing concentration in illiquid (JOE) and binary (Fannie prefs) bets. I'm amazed he still has $1B+ of client money.

 

i wonder what the legal fees are running at for Fairholme this point regarding fannie and freddie.

[Ballinvarosig Investors]

If the big "problem" with St. Joe is that almost all the land is inland, has no infrastructure, and is undeveloped, that should make them more-or-less immune from a hurricane...

 

St. Joe has some very nice waterfront / beachfront properties already developed.

 

The problem is that NWFL has a LOT of really CHEAP waterfront (some see this as an opportunity.)

 

You can get a smashing pad on the H2O for less than $700K (looking 4 a 2nd home?)

 

I still believe NWFL will eventually get a bump in values (it's too beautiful not to.)

 

10 years, 20 years WTFK when the area ever gets re-rated...

There is no beach front acreage according to the report.

 

 

I also remember that Whitney Tilson and David Einhorn got stuck into Joe quite some time back - http://www.tilsonfunds.com/JOE-10-11.pdf

 

Honestly, when I look at Berkowitz, I really think that he has completely lost the plot. I always remember in interviews, he used to always talk about counting the cash, or trying to kill an investment thesis. When you look at what Fairholme owns, it's like he's going completely against his historical investment thesis. What's worse is that when performance suffered, he sold off good investments and doubled down on the crappy ones. For someone of his experience, it's actually incredible to watch him make one of the most basic mistakes that first time investors make. It's all the more incredible that he is a fiduciary, and he's gambling other people's money away.

 

Quite frankly, I don't see how this ends well for him or Fairholme.

[Spekulatius]

Quite frankly, I don't see how this ends well for him or Fairholme

 

It ends with him sailing on his yacht and his investors using public transportation.

[DooDiligence]

If the big "problem" with St. Joe is that almost all the land is inland, has no infrastructure, and is undeveloped, that should make them more-or-less immune from a hurricane...

 

St. Joe has some very nice waterfront / beachfront properties already developed.

 

The problem is that NWFL has a LOT of really CHEAP waterfront (some see this as an opportunity.)

 

You can get a smashing pad on the H2O for less than $700K (looking 4 a 2nd home?)

 

I still believe NWFL will eventually get a bump in values (it's too beautiful not to.)

 

10 years, 20 years WTFK when the area ever gets re-rated...

There is no beach front acreage according to the report.

 

 

 

https://www.joe.com

[thepupil]

And the counterargument

 

https://seekingalpha.com/article/4171694-draining-swamp-st-joe-company-evolved-ultimate-real-estate-moat

 

]

Draining_The_Swamp__How_The_St._Joe_Company_Has_Evolved_Into_The_Ultimate_Real_Estate_Moat_-_St_Joe_Co._NYSE_JOE___Seeking_Alpha.pdf

[Foreign Tuffett]

Land development / MPC companies need to reach a critical mass of development to catalyze value creation. St Joe hasn't yet reached this point, and it's unclear to me what would cause this to change in any reasonable time frame. I think Nitor is too bullish, and Kerrisdale is too bearish. It seems more likely that the company continues to slowly meander along, neither creating or destroying much value.

[DooDiligence]

Land development / MPC companies need to reach a critical mass of development to catalyze value creation. St Joe hasn't yet reached this point, and it's unclear to me what would cause this to change in any reasonable time frame. I think Nitor is too bullish, and Kerrisdale is too bearish. It seems more likely that the company continues to slowly meander along, neither creating or destroying much value.

 

Sounds about right.

 

I think that buying a nice waterfront home (high & dry if possible) anywhere in NW Florida is a much better investment.

[Gregmal]

Land development / MPC companies need to reach a critical mass of development to catalyze value creation. St Joe hasn't yet reached this point, and it's unclear to me what would cause this to change in any reasonable time frame. I think Nitor is too bullish, and Kerrisdale is too bearish. It seems more likely that the company continues to slowly meander along, neither creating or destroying much value.

 

Sounds about right.

 

I think that buying a nice waterfront home (high & dry if possible) anywhere in NW Florida is a much better investment.

 

I would definitely agree. Buy the actual real estate.

 

I've looked at JOE for a long time. I actually thought to myself about 6 months ago,"hey JOE is starting to look interesting". That said, it's basically just a larger CTO, with lower quality assets, in a less desirable area, with the same problems, and a decade plus of catching up to do. It's at best just a good trade vehicle here. I don't think you have much downside and you have Berkowitz implementing an aggressive buyback at your back. So trade the fluctuations, which is what I think any competent owner of this(outside of Bruce) is doing. The Kerrisdale thesis is basically just an updated version of Einhorn's short, and the SA article is basically just a wordy reiteration of the hopes and dreams that have gotten Fairholme stuck in quicksand.