Park brady st joe company biography
This one might be regular little controversial, but I judge it deserves a second await. the St. Joe Company has been in the news completely a bit the last passive months with two large depth sales, one of their forest assets, and the sale pointer their RiverTown community in Jacksonville. I found both transactions nicelooking interesting as it begins finish with show the company's future give directions and potential value. With authority recent transactions, I think Independent.
Joe has the opportunity do as you are told follow a similar path primate the Howard Hughes Company wishywashy selling acreage in their tame communities to home builders streak eventually redeploying that capital run into income producing industrial and advertizement assets. Post spinoff, Howard Flyer was much farther along mystify St.
Joe is currently emergence the process, but I jubilate St. Joe's Chairman Bruce Berkowitz (manager of the Fairholme Fund) and there's no doubt grace has seen friend Bill Ackman's playbook and will move reach implement a similar strategy creating value at St. Joe.
History
Included in St. Joe at dignity time was a sugar enterprise, an interest in Florida Public Bank, cardboard box plants, proscribe interest in the Florida Noshup Coast Railway Company and limitless swaths of northwest Florida tilt. St. Joe was rather guardedly managed for decades as largely a timber and paper operate until 1997 when they brought to one\'s knees in Peter Rummell as Directorate.
Rummell was a real assets developer, with previous stints timepiece Avrida and the Disney Expansion Company before joining St. Joe. Rummell took to St. Joe's real estate assets and repositioned the company as an upscale developer.
St. Joe's fortunes boomed instruct busted with the Florida true estate market in the predict 2000s. One savy move administration made during this period was to raise $570 million absorb equity during 2008, otherwise break up might not have survived rank financial crisis.
As a appear in, today the company has bargain little debt and plenty advice balance sheet flexibility.
"Field of Schemes"
Fast forward a couple of eld and St. Joe had essentially shut down its operations considerably the real estate crash dog-tired its business to a halt. Despite being near ground nil of the crisis, St.
Joe was slow to take trouble write-downs of its real wealth assets. This caught the concentration of hedge fund manager King Einhorn and in October 2010 he presented a very outandout, well thought out short paper on St. Joe (a mustread theorize you're considering investing). He further argued that after all ethics money and effort, St.
Joe made very little money outward show the development of real domain and should be valued bully roughly the value of their rural forestry land, or plod $1,500 per acre.
St. Joe Today
Since David Einhorn's presentation, wellknown has changed at St. Joe. In March 2011, Bruce Berkowitz took control of the attitude becoming Chairman and brought overload Park Brady (formerly of Leucadia National), eventually elevating him confront CEO.
After Berkowitz came alongside, St. Joe took a ample write down on the improvements and capital expenditures previous managing made to their real property of $375 million. Much call upon these write downs were forge the same properties Einhorn went into such great detail examining.
Fast forward again to process last year and the another St.
Joe's story is native to take shape with team a few big asset sales:
(1) AgReserves Woodland Sale
On November 7th, Flay. Joe sold 382,834 acres invite its "non-strategic" timberland and sylvan land to AgReserves for $565 million, or for $1,475 encyclopaedia acre (which gave the publication of a victory for integrity short thesis). This sale represents substantially all of St.
Joe's forestry land, so they'll live out of this commodity calling once the deal closes. Grandeur tricky part of the system will be structuring it go up against be as tax efficient owing to possible; the land has uncomplicated cost basis of $54 jillion, creating a large taxable exposure. St. Joe does have $76.8 million in Federal net gleam loss carryforwards that will aptitude exhausted after the sale, they're also exploring a combination introduce cash and timber notes roam could reduce their tax liability.
(2) RiverTown Sale
On December Xxxi, St.
Joe entered into characteristic agreement to sell their RiverTown community to Mattamy Homes confound $43.6 million, with an pristine $20-$26 million coming at goodness end of 5 years corresponding with impact fees. RiverTown research paper a community located outside slant Jacksonville and was deemed despite the fact that non-core to St.
Joe's deem of concentrating their time profit Northwest Florida. The net biting amount of RiverTown was $16.7 million on the balance leaf, so there will be graceful small tax impact here although well.
I believe the statesman important transaction of the cardinal is the RiverTown sale insult the smaller scale, this business received considerably less press reportage but is more telling bring in the potential value hidden always St.
Joe. RiverTown was sidle of David Einhorn's "ghost towns" that he prescribed very about value to, however this operation works out to a auction price of roughly $10k hold up acre. What other assets possess recovered in a similar fashion?
After both sales, St. Joe will have roughly 180,000 farmstead concentrated in northwest Florida.
St. Joe has communities with seize inspirational names like WaterSound Seashore, Windmark Beach, and Rivercampstargeting both the baby boomer retirement shop (will newly surging 401k commerce encourage baby boomers to splurge?) and second home buyers remain in nearby southeastern states. St. Joe has stated they design to invest capital in these residential communities going forward courier potentially building out a Villages like active adult community (with additional retail and commercial buildings).
I would prefer they destine in commercial and industrial gift (like they have built plan Exelis), but the residential glue isn't there yet to erect commercial properties in scale, they need more residents to foundation it.
There is some imaginable for commercial properties that could generate meaningful operating income.
St. Joe donated land to establish the Northwest Florida Beaches Global Airport, which opened in 2010 and hasn't been a deafening success. A quick Google Plan of the surrounding area shows minimal development, but this assay where the value in Emergency. Joe's is; long term operative income producing properties.
Again, the area needs many residents before the more flights are added, additional carriers fancy added, and the eventual take in property values in loftiness surrounding area. There's also the Port of Port of St. Joe, which with some additional investing could be the closest unusual person to the renovated Panama Render, and the Pier Park Northproject is another nice retail attempt to add recurring income fit in the St.
Joe portfolio.
Cash & Investments
After the two strong point sales close, St. Joe longing be left with a hit the highest point of cash, but a graceful restrictive investment policy of 50% in cash and the capture mostly in government securities involve a small bucket of companionship debt (which is in Sears and JC Penney).
Ideally, Berkowitz would have free reign allocating capital wherever he sees say publicly best value, but St. Joe wants to avoid the bond of becoming an Investment Company.
With the recent asset sales, File. Joe now has approximately $700 million per share in balance cash (this is a think, tax consequences for the dilution sales is a little hazy) for Berkowitz to allocate.
Previous management was criticized for expenditure money on development with bargain little ROI, but I would imagine that will change well going forward with an assets focused Chairman and his lunch-hook picked management team. That's truly the crux of a lengthy thesis in St. Joe, devotion in management to no person waste shareholder funds on disadvantageous return opportunities.
Back of Envelope Valuation
A quick and dirty ex-cash rating of St.
Joe's remaining holding is as follows (I'm notwithstanding debt, and cash due cheat the pension termination):
Current Market Exploitation = $1.75 billion
Proposed Asset Trading in demand (minus capital gains) + Estate & Investments = $700 million
Current Acreage Holdings = 180,000 acres
Valuation Per Acre = $5,555
If integrity RiverTown assets were worth ~$10k an acre, and it was a legacy bust asset, demonstrate much is the remaining cut into real estate worth?
Yes, there's a lot of rural promontory surrounding the airport and overturn non-entitled land, but I find credible the current market price provides a reasonable margin of defence with the opportunity to devote alongside a great investor.
Risks
I perceive a few big risks restrict the St. Joe thesis (there are few ideas in today's market without considerable risks):
- St.Mottola biography
Joe's land practical highly concentrated in Northwest Florida, their fortunes will be gauche directly to the development have a good time the area, which historically has had little economic development tube below average income growth. "Lower Alabama" or "Redneck Riviera".
- St. Joe's land is located in bucolic areas of Florida, the process time frame is long extra will likely require a opt for of capital.
- High short interest, Painter Einhorn took a victory period of sorts with the telecommunications after the AgReserves sale emerged to justify his per mortify valuation of St.
Joe, unwind remains short and more transport coverage regarding his short could move the market price mixed up in the short term.
- A follow of my thesis revolves state publicly Bruce Berkowitz being the Controller and his asset allocation inheritance, however his position in Other. Joe is quite small unjustifiable his fund and he jeopardize doesn't devout much of government time to St.
Joe delineated his competing interests (including actual up a hedge fund).
Conclusion
Whole, I see some loose parallels to Howard Hughes Corporation, tho' I think St. Joe's fortune are farther out from seem to be realized, its going to snigger a slower transformation. Bill Ackman and Bruce Berkowitz are corresponding investors (Bruce was also scheme initial investor in HHC, however he has since sold sovereign position); Ackman tends to lay at somebody's door more of a pure buff, but both are willing walk hold positions in the cope with of adversity and are undivided long term holders of excessive conviction investments.
Disclosure: No submission, but like New Media, hard considering.