If the real estate market is not in any type of a recovery, why is it that it appears St. Joe is on a bit of a rebound?
Source: Google Finance
Source: Google Finance
St Joe stock appears to rebounding, why?
- Thread starter wrobert
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Because they are being bought by Disney. I heard this a few weeks ago and figured if it was true the stock would be on the rise. I looked at the ticker and didn't see any change so I dismissed it as rumor. It may well be but think about it.
If they tried to acquire any large amount of land like they did secretly in Orlando 40 or so years ago people would know and prices would go through the roof.
What a coup for Disney. For the price of a relatively cheap stock they get tens of thousands of acres dirt cheap on which to build a park and housing, at the beach, next to a new international airport, a port for cruises, close to midwestern and southern drive-in markets, etc....
It is supposed to be announced in October.
Or it could be because they are advertising on this site.
If they tried to acquire any large amount of land like they did secretly in Orlando 40 or so years ago people would know and prices would go through the roof.
What a coup for Disney. For the price of a relatively cheap stock they get tens of thousands of acres dirt cheap on which to build a park and housing, at the beach, next to a new international airport, a port for cruises, close to midwestern and southern drive-in markets, etc....
It is supposed to be announced in October.
Or it could be because they are advertising on this site.
Because they are being bought by Disney. I heard this a few weeks ago and figured if it was true the stock would be on the rise. I looked at the ticker and didn't see any change so I dismissed it as rumor. It may well be but think about it.
If they tried to acquire any large amount of land like they did secretly in Orlando 40 or so years ago people would know and prices would go through the roof.
What a coup for Disney. For the price of a relatively cheap stock they get tens of thousands of acres dirt cheap on which to build a park and housing, at the beach, next to a new international airport, a port for cruises, close to midwestern and southern drive-in markets, etc....
It is supposed to be announced in October.
Or it could be because they are advertising on this site.
I had heard the Disney rumor but dismissed it. Since living here I am constantly hearing that Disney or Six Flags is going to buy some large plot of land. Personally, I wish they would since my wife loves to go to those places it would save me a bunch of money over the coming years. One of the large plots I hear they want is about 15 minutes from the house. I wonder if I will be able to see the fireworks every night?
Source: sowal and real estate salesperson(s)
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The Disney thing doesn't make a lot of sense to me understanding that they don't need 800,000 acres to build a new theme park. The name that I keep hearing from people inside is LUK. I have watched LUK grow from a market cap. of 2 Billion to 10.24 Billion compared to 4 Billion, and shrinking, for JOE. LUK has revenues as well which is something that JOE really doesn't have today. The purchase fits the bill for LUK's rules of the road.
A little off topic, buy maybe one of you business guys can clear this up for me. When a company wants to acquire a company, typically they pay a premium over the current stock price (Microsoft's attempt to buy Yahoo for example). Why wouldn't the company just buy as much stock as possible at current prices before making their bid? I understand the price of the stock would go up with a large purchase like that, but you'd still be able to acquire a substantial amount for lower than your ultimate purchase price (or so it would seem to me).
Big blocks bought for the acquisition of a company must be legally Noticed by the purchaser.
Where have you been?
There was a crash on Wall Street last week, a bank called Lehman Brothers went bust, another called Merrill Lynch was sold for a song, and the Treasury Secretary announced a $700 billion bail out funded by the US taxpayer (God bless you one and all!)
This caused stocks linked to finance and real estate (the base cause of the crash was billion dollar losses on toxic derivatives comprised of sub prime real estate loans) to bounce big. There was your rebound.
Down again today as the ramifications and consequences of this scarcely believable bail out are sinking in and the market waits to see what Congress will do next.
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You are right. An acquiring company can buy up to 4.9% for investment purposes. Anything at or above 5% they must file a 13_D with the SEC. They express their intent in the 13-D, such as investment only or they may increase from time to time. If they launch a tender offer, at a premium price, for the target company, it is completely legal for them to have bought the 4.9% at lower prices before they have declared their tender offer. Note: if you look at stock holdings at giant mutual fund cos such as Fidelity or Vanguard, you will see they have 13-D filings on many of their holdings. All entities must file a 13_D if they get to 5% or higher.
Where have you been?
There was a crash on Wall Street last week, a bank called Lehman Brothers went bust, another called Merrill Lynch was sold for a song, and the Treasury Secretary announced a $700 billion bail out funded by the US taxpayer (God bless you one and all!)
This caused stocks linked to finance and real estate (the base cause of the crash was billion dollar losses on toxic derivatives comprised of sub prime real estate loans) to bounce big. There was your rebound.
Down again today as the ramifications and consequences of this scarcely believable bail out are sinking in and the market waits to see what Congress will do next.
St. Joe was at $35 a month ago. It is at $39 right now. If it was being negatively impacted I would have expected it to be lower.
Source: Google Finance
St. Joe Company: A Clear Case of Overpromising
In a recent edition of Value Investor Insight, Robert Williamson, of Williamson McAree Investment Partners, explained why he has a short position in St. Joe Company (JOE).
[One] of your shorts, St. Joe Company [JOE], has both proponents and detractors in the value-investing community. Why are you among the latter?
RW: We spoke earlier about overpromising, and St. Joe is among the most promotional companies out there. After paring its business down, the company basically consists of about 610,000 acres of northwest Florida land for which it plans to define the best uses, secure entitlements and approvals, and then sell off to developers. To hear the company tell it, this land is a goldmine that you just can?t replicate. Having driven from Tallahassee to their main resorts on the Gulf of Mexico, I?m quite confident that in that first 80 miles or so of the drive, no one in my lifetime is going to want to live there. A lot of the land is just dead, forested area. We keep close tabs on land prices and activity in their existing developments and it?s clear the real estate market for them is abysmal. As an example, one residential lot in their WaterColor development ? which is beautiful, by the way ? has traded hands five times since 2003. It sold for $331,000 in 2003, got as high as $690,000 in 2004, and sold earlier this year for $200,000. That?s a 70% drop from the peak.
Two developments they were talking up a year ago were WindMark Beach, on the Gulf coast southwest of Tallahassee, and RiverTown, which is in Jacksonville. From our contacts in Florida, we?re told that there hasn?t been a single home started in either development this year. That tells you something about the vibrancy of the market. Just working off the existing unsold inventory of houses will take years, and that doesn?t even take into consideration all the existing lots which have been sold but don?t yet have houses. We could imagine St. Joe not having any meaningful sales outside of just raw acreage for two or three years.
The company has also made a lot of the fact that they donated land and expect to benefit greatly from a new airport in Panama City. I?ve been in and out of the existing airport and to me it seems perfectly fine and not terribly busy. In fact, traffic in that airport was down 7% in 2006, 5% in 2007 and so far this year is down another 10%. They think they need a new airport? If I were a local taxpayer I?d be a bit upset about that.
The shares cratered near the end of last year, but at a recent $37.25 are up nearly 18% in the past year. What downside do you see?
RW: The acreage can be broken into three buckets: 45,000 acres for primary and secondary home development that are already entitled, 95,000 acres that are intended to be entitled, and the rest which is timberland. For each piece we?ve done a discounted-cash-flow analysis, based on what we think are conservative assumptions about sale prices and margins. For the timberland, we assume they sell the entire inventory over a five-year period at 80% operating margins and a 15% tax rate. We assume prices start at $2,000 per acre and climb 3% annually, which is conservative given that they sold such land for an average $1,350 per acre in the second quarter. That gives a total value of $530 million for the rural acreage.
The entitled acres we assume are sold over a 20-year period, at 50% operating margins and a 35% tax rate. Here we assume prices start at $100,000 per acre and climb 3% annually. That values these acres at $700 million.
The last piece is the to-be-entitled acres, which we assume are sold starting at $70,000 per acre over a 30-year period, again with 50% operating margins and a 35% tax rate. That gives a value for the entitlement pipeline of $780 million. The company has no net debt, so our fair value adds up to about $2 billion, or $20 per share. The company can dress up quarterly operating results from time to time by selling timberland at their discretion, but we just see a big value hole here that will be tough to climb out of.
http://seekingalpha.com/article/93420-st-joe-company-a-clear-case-of-overpromising
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In a recent edition of Value Investor Insight, Robert Williamson, of Williamson McAree Investment Partners, explained why he has a short position in St. Joe Company (JOE).
[One] of your shorts, St. Joe Company [JOE], has both proponents and detractors in the value-investing community. Why are you among the latter?
RW: We spoke earlier about overpromising, and St. Joe is among the most promotional companies out there. After paring its business down, the company basically consists of about 610,000 acres of northwest Florida land for which it plans to define the best uses, secure entitlements and approvals, and then sell off to developers. To hear the company tell it, this land is a goldmine that you just can?t replicate. Having driven from Tallahassee to their main resorts on the Gulf of Mexico, I?m quite confident that in that first 80 miles or so of the drive, no one in my lifetime is going to want to live there. A lot of the land is just dead, forested area. We keep close tabs on land prices and activity in their existing developments and it?s clear the real estate market for them is abysmal. As an example, one residential lot in their WaterColor development ? which is beautiful, by the way ? has traded hands five times since 2003. It sold for $331,000 in 2003, got as high as $690,000 in 2004, and sold earlier this year for $200,000. That?s a 70% drop from the peak.
Two developments they were talking up a year ago were WindMark Beach, on the Gulf coast southwest of Tallahassee, and RiverTown, which is in Jacksonville. From our contacts in Florida, we?re told that there hasn?t been a single home started in either development this year. That tells you something about the vibrancy of the market. Just working off the existing unsold inventory of houses will take years, and that doesn?t even take into consideration all the existing lots which have been sold but don?t yet have houses. We could imagine St. Joe not having any meaningful sales outside of just raw acreage for two or three years.
The company has also made a lot of the fact that they donated land and expect to benefit greatly from a new airport in Panama City. I?ve been in and out of the existing airport and to me it seems perfectly fine and not terribly busy. In fact, traffic in that airport was down 7% in 2006, 5% in 2007 and so far this year is down another 10%. They think they need a new airport? If I were a local taxpayer I?d be a bit upset about that.
The shares cratered near the end of last year, but at a recent $37.25 are up nearly 18% in the past year. What downside do you see?
RW: The acreage can be broken into three buckets: 45,000 acres for primary and secondary home development that are already entitled, 95,000 acres that are intended to be entitled, and the rest which is timberland. For each piece we?ve done a discounted-cash-flow analysis, based on what we think are conservative assumptions about sale prices and margins. For the timberland, we assume they sell the entire inventory over a five-year period at 80% operating margins and a 15% tax rate. We assume prices start at $2,000 per acre and climb 3% annually, which is conservative given that they sold such land for an average $1,350 per acre in the second quarter. That gives a total value of $530 million for the rural acreage.
The entitled acres we assume are sold over a 20-year period, at 50% operating margins and a 35% tax rate. Here we assume prices start at $100,000 per acre and climb 3% annually. That values these acres at $700 million.
The last piece is the to-be-entitled acres, which we assume are sold starting at $70,000 per acre over a 30-year period, again with 50% operating margins and a 35% tax rate. That gives a value for the entitlement pipeline of $780 million. The company has no net debt, so our fair value adds up to about $2 billion, or $20 per share. The company can dress up quarterly operating results from time to time by selling timberland at their discretion, but we just see a big value hole here that will be tough to climb out of.
http://seekingalpha.com/article/93420-st-joe-company-a-clear-case-of-overpromising
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