Author Topic: JOE - ST. JOE CO  (Read 31981 times)

thepupil

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Re: JOE - ST. JOE CO
« Reply #20 on: November 18, 2013, 07:26:55 PM »
Under the current agreement, berkowitz controls the cash but is very restricted. I would recommend all longs and shorts to play around with the property appraiser's websites for bay, gulf, and Franklin county.

 I was short in the past and have recently spent some time going through the remaining developments in an effort to perhaps go long ( I like the idea of a st joe holdco) but just couldn't get comfortable paying $1B for the remaining land and development operations. If I had $10 billion dollars i wouldn't buy the land around Panama City beach and a few subdivisions for $1B. So I'm not going to do it on a micro level.

Going through the einhorn presentation and reviewing the value destruction that took place in the Rummell days is saddening. It's a much slimmer company now but I still can't help be scared that they did this sale to "focus on their core business of development".
 

In April 2013, the Company engaged Fairholme Capital Management, L.L.C. (“Fairholme”), to serve as an
investment adviser to the Company. As of September 30, 2013, Fairholme owns approximately 27% of the Company's common stock. Mr. Bruce Berkowitz is the Managing Member of Fairholme and the Chairman of the Company's Board of Directors. Fairholme will receive no compensation for their services as the Company's investment advisor.

Pursuant to the terms of the Investment Management Agreement (the “Agreement”) with Fairholme, Fairholme agreed to supervise and direct the investments of an investment account established by the Company in accordance with the investment guidelines and restrictions approved by the Investment Committee of the Company's Board of Directors, which were set forth in the Agreement. The investment guidelines require that, as of the date of any investment, (i) at least 50% of the investment account be held in cash, investment grade cash equivalents or U.S. treasury securities, (ii) no more than 50% of the investment account be held in corporate debt securities, which may be investment grade or non-investment grade, and (iii) no more than 10% of the investment account be invested in securities of any one issuer (excluding the U.S. Government). The investment account may not be invested in equity securities. As of September 30, 2013, the investment account included $2.4 million of money market funds, $125.0 million of U.S. treasury securities and $21.1 million of corporate debt securities, which were non-investment grade. Money market funds are recorded in Cash and cash equivalents and U.S. treasury securities and corporate debt securities are recorded in Investments on the Company's Condensed Consolidated Balance Sheets.


Junto

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Re: JOE - ST. JOE CO
« Reply #21 on: November 18, 2013, 08:46:54 PM »
Here is a hypothetical:

Let's say that their developments are worth the entire amount of all the PP&E on the books. Now, let's say that the land they sold was on the books for nothing and they pay no taxes on the $565mm gain. (I am doing this to create a best case scenario). Book value is ~1.1b and the market cap is ~1.65 making the price to book ~1.5

That's higher than BH, BRK, MKL, LUK, and a ton of others, that are sitting on assets that have proven cash flows. Granted- I think we can all agree that Berkowitz isn't going to sit on the cash forever like a lot of the other cash shells seem to do. I would love to see him make JOE into a holding company conglomerate sort of thing- he could do some really neat things.

As a side note, does anyone find it crazy that BH and BRK are trading for the same price to book?

Points well taken. With rough numbers, reaffirming your point

9/30 Equity Value is $557,936,000 before non-controlling interests, with 92,302,299 shares outstanding = $6.04/share
We know value of sold assets is $54 million and sold for $565 million. For simple purposes, $511 million gain on book.
Federal Net Operating Loss carry forward of $85.2 million. Valuation Allowance if $91.1 million so if I am reading the 10-Q right gross estimated operating loss carry forward of $176.2 million so tax shield at a simple 35% tax rate of roughly $503 million.
Revised Equity Value $1,064,000,000/92,302,229 = $11.52 of which ($22,831+146,051 + 26,404 + 506,000) = $701,286,000 or$7.60/share is cash

Now here is where it gets interesting. The CEO is non-committal on the intent of the funds after closing whether they take the lump sum or spread it over time on an installment sale. It is obvious the liquidity is not needed for the future development plans for the business and the ROI is probably not there compared to alternative investments outside the existing business model. In other words, I would be surprised if they doubled down on the existing strategy instead of moving into a new frontier.   

Short interest 10/31 is 13,183,640 or 14.30% of float and 54 days to cover.

What is stopping Berkowitz from exerting pressure on the board to make a transformation change of the business model when more than half the book value is in cash and the prospects of better returns are elsewhere? The stock is set for a squeeze and if not, I am comfortable trusting Berkowitz with the cash. It is a small position in any case so the risk / reward is there for me in this market.

Hard to pay up for insurance in this market as the rates will kill the book value in mark-to-market and opportunity cost on not realizing the losses may turn out to be worse. Rotate short duration is the key right now (5 years max).

I guess we will see.

FCharlie

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Re: JOE - ST. JOE CO
« Reply #22 on: November 19, 2013, 03:18:43 AM »
So in theory, Berkowitz, after this transaction closes, could put $500 million to work.... $250 million in treasuries, $250 million in corporate debt. Knowing Berkowitz, he'd probably load up on the debt of Sears, JC Penny, & Freddie & Fannie.

Seems like the cash pile could perform better with Berkowitz managing it than it would have done being managed for timber sales.

It's a shame he doesn't have full control. Either way, the fact that he has some control over the cash makes JOE much more interesting to me.


thepupil

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Re: JOE - ST. JOE CO
« Reply #23 on: November 19, 2013, 05:38:42 AM »
I agree that is interesting and think Berkowitz will make sure that cash is deployed well. It is also likely he tries to change the cash management agreement to have more control.

I just have issues with the non-cash/fixed income portion of the book and the implied price thereof (about $1B). Rivertown still appears to be quite vacant. Summercamp Beach is in Franklin County which is still a real estate wasteland from what i can tell on the property appraiser. Very few have built and we are several years into the recovery. Venture Crossings has been very slow.

You can buy Berkowitz through Fairholme or Fairholme Income although he has said in past JOE could be used to hold things he could not buy elsewhere (although  I don't know how Berkowitz starting a hedge fund will impact that, maybe he'll combine JOE with that like ESL/SHLD).

 I think to own JOE you still have to trust the land development vision because you are still paying for that. There is a lot to look through and poke around in the property appraisers, but it was really hard for me to see JOE in any other light than a bunch of marginal land and developments that will take decades and tons of capital to develop.

But I definitely wouldn't short it. Too much Berkowitz optionality.

Summercamp Beach
http://qpublic6.qpublic.net/qpmap4/map.php?county=fl_franklin&parcel=35-06S-03W-1000-0000-0358&extent=1971489+333904+1972141+334392&layers=parcels+parcel_sales+aerials+roads

Rivertown
http://gis2.sjcpa.us/imf/imf.jsp?site=map&qlyr=parcels&qry=webgeodata.LOADER.parcel04.PIN%3D%27000702%200130%27&qhlt=true&qzoom=true&qbuf=250

Venture Crossings/Rivercamps
http://qpublic6.qpublic.net/qpmap4/map.php?county=fl_bay&parcel=32611-612-000&extent=1553757+473061+1554609+473781&layers=parcels+parcel_sales+roads
http://www.bing.com/maps/default.aspx?cp=30.292299~-85.819397&style=o&lvl=19&tilt=-90&dir=0&alt=-1500


thepupil

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Re: JOE - ST. JOE CO
« Reply #24 on: November 21, 2013, 10:36:33 AM »
http://www.businessinsider.com/david-einhorn-robin-hood-conference-2013-11

I've attached my worksheet i created this past week. If you assume a 35% tax rate on JOE's land sale, JOE will have ~$6/share in cash,investments, and pension receivables. If they pay zero (by taking additional impairments or deferring by means of a 1031 exchange), I get to ~$8.

I get real liabilities of $50MM vs. the $100MM on the balance sheet since some of the debt is defeased ( I don't include the pledged treasuries in my calculation of cash + investments) and there is a large deferred revenue liability that will go away soon.

I am unsure if JOE is worth the current price but I think Einhorn's argument that it is worth $7.00 is overly pessimistic.



thepupil

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Re: JOE - ST. JOE CO
« Reply #25 on: January 09, 2014, 04:38:45 PM »
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

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Re: JOE - ST. JOE CO
« Reply #26 on: January 11, 2014, 10:17:33 AM »
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

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Re: JOE - ST. JOE CO
« Reply #27 on: January 11, 2014, 11:03:18 AM »
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. 
« Last Edit: January 11, 2014, 11:43:22 AM by CorpRaider »

jay21

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Re: JOE - ST. JOE CO
« Reply #28 on: January 11, 2014, 11:17:53 AM »
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.
@jay_21_

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Re: JOE - ST. JOE CO
« Reply #29 on: January 11, 2014, 02:55:12 PM »
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