Nice article on JOE;
moneycentral.msn.com
n the sunshine state
Originally a timber company created by part of the Dupont family, St. Joe is the largest private landowner in Florida. It has about 820,000 acres, or about 2% of the state, mostly in the Florida panhandle.
But here's the catch. Most of the land was bought for well under $10 an acre before World War II. So as St. Joe continues to pare the remnants of its timber business and focus on real estate development, it has one key edge. Its primary input, land, has a cost basis of virtually nothing.
"We start out with an enormous advantage over everyone else," says Peter Rummell, the company's chairman and chief executive. "Think of us as a manufacturer, and our raw material is free."
Figuring out how much profit that land might eventually generate as the land is developed and sold is a lot more complicated than it is with GenCorp. There's simply a lot more land. And St. Joe also has a bigger variety of projects on the horizon, including resort and retirement homes, single-family homes, beachfront properties, golf courses, marinas and commercial and industrial projects.
But here's one simple way to boil it all down. St. Joe has a market capitalization of $5 billion. Divide that by the 820,000 acres, and you see that the market puts a value of about $6,000 per acre on St. Joe's land, says Stephanie Tran, another analyst at Pirate Capital, which has a position in St. Joe. In contrast, land near St. Joe's turf goes for anywhere from $30,000 per acre for use as industrial parks to $600,000 per acre or more for premium lots.
The next great place
The bottom line: St. Joe will get much more than $6,000 per acre on average. Tran thinks much of St. Joe's land will easily fetch more than $100,000 an acre after it's entitled.
A lot hinges on whether St. Joe succeeds in making northwest Florida the "next great place" to live and vacation, as it likes to say. There are some signs the company is well on the way. For instance, the new Panama City airport, to be completed by 2009, could help draw more companies to the area.
In addition, a savvy national real estate developer has taken an interest in St. Joe's turf. Simon Property Group (SPG, news, msgs), one of the country's largest mall and shopping center developers, recently bought 93 acres from St. Joe for $286,000 apiece, with options on 125 more acres. Simon Property should be able to draw high-profile stores and businesses to the area. Analysts also think the waves of retired baby boomers looking to move south may put down roots in the panhandle.
What does all this mean for St. Joe's stock? Based in part on the huge gap between the $6,000 per acre value the market puts on St. Joe land and the $100,000 per acre much of the land could eventually fetch, Pirate Capital's Tran believes to stock could go for $150 a share in four or five years. |
