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The St. Joe Company: Special Situation With Potential Significant Capital Return

The St. Joe Company: Special Situation With Potential Significant Capital Return | Timberland Investment | Scoop.it

St. Joe is a company you probably have not heard of, unless you spend time following the epic battles of high profile fund managers who take opposing stakes in companies and then wage public battles about who has taken the correct position.
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The bullish and bearish arguments both center around the valuation, both present and future, of the over 550K acres of land and real estate assets that St. Joe owned predominantly in the Panhandle of Northwest Florida.
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First, let's first consider the ~385K acre land sale to AgReserves of primarily non-core timberland. The bearish argument previously espoused has been that the bulk of the over 550K acres owned by St. Joe was only worth close to $1,500 per acre. Many bears might look at this land sale, and cry victory, considering the ~$560M sales price valued the land at about $1,475 per acre.


However, St. Joe has consistently stated that this land was a non-core holding. Spend just a few minutes looking at a map of Florida and you will see the bulk of this land is completely rural, and so far away from ever being developed, that it certainly is more valuable as timberland. I would argue that the bears should eat crow based on St. Joe having the foresight to complete this transaction.
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In FY 2013, St. Joe generated $9.6M in net income from timber sales related to the land sold to AgReserves. Instead of arguing what this land was worth, I think the market is overlooking the fact that St. Joe took an asset and sold it for almost 60x the earnings that asset generated in the prior year. When you assume that, after taxes, this asset sale will generate close to $500M in cash for St. Joe, the company would simply have to earn a return of 3% a year on this cash to generate 50% more earnings than the asset was previously generating as timberland.

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St. Joe Timberlands Certify Half a Million Acres to SFI Standard

St. Joe Timberlands Certify Half a Million Acres to SFI Standard | Timberland Investment | Scoop.it

The Sustainable Forestry Initiative® (SFI®) Inc. is pleased to announce that over half a million acres of timberland owned by The St. Joe Company have recently been certified to the SFI Standard. The majority of the timberlands are located in Northwest Florida and have become a proof point for responsible forest management certification to the SFI Standard.

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St. Joe Announces an Agreement to Sell 382,834 Acres of Non-Strategic Lands

St. Joe Announces an Agreement to Sell 382,834 Acres of Non-Strategic Lands | Timberland Investment | Scoop.it

The St. Joe Company (NYSE: JOE) (the “Company”) today announced that it has entered into a sales agreement (the “Sales Agreement”) with AgReserves, Inc., a Utah corporation, to sell approximately 382,834 acres of its non-strategic timberland and rural land in Northwest Florida for $565 million. The final price is subject to an adjustment set forth in the Sales Agreement. This proposed transaction does not include land within the Company’s existing residential or commercial real estate segments or its resorts, leisure or leasing segment, nor include any land for which the Company had plans to develop or use in these types of operations in the foreseeable future.

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The land to be sold includes the majority of the Company’s timberlands in Bay, Calhoun, Franklin, Gadsden, Gulf, Jefferson, Leon, Liberty and Wakulla counties and had an aggregate carrying value of approximately $54 million at October 31, 2013. AgReserves, Inc. is assuming agreements and contracts existing on the purchased timberlands and intends to maintain timber and agricultural uses of the lands.

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The transaction was unanimously approved by the board of directors of the Company and by AgReserves Inc., and is subject to customary closing conditions, including regulatory approvals, and the approval of the shareholders of the Company. The transaction is expected to close in the first quarter of 2014. Following the sale, the Company will own approximately 184,000 acres of land concentrated primarily in Northwest Florida, which includes lands used or intended to be used in its real estate development operations.

Sam Radcliffe's insight:

$1,475 per acre, considerably lower than some other big southern transactions recently. I am not familiar with the precise character of these lands.

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St. Joe's Overvalued Asset Base

St. Joe's Overvalued Asset Base | Timberland Investment | Scoop.it
The St. Joe Company (JOE) is a real estate development company in Northwest Florida whose operations had been hit hard in the 2008 downturn. JOE's stock price has recovered from the mid-teen lows it saw in early and mid-2012, as housing has experienced a broad recovery over the past 6 months throughout the U.S. and specifically Florida. Despite the stock's run-up to $22/share, JOE's overhyped asset base consists of secluded rural land in Northwest FL, undeveloped residential lots in vacant communities, and primarily empty commercial acreage that is dependent on the success of a relocated Panama City airport. As detailed in this report, we believe the market is currently baking in a best case scenario. The current stock price is not justified even after assuming a relatively aggressive asset valuation of JOE's real estate holdings.

Timberland / Rural Land:

The company's historical strategy here is to gradually sell down this undeveloped land while making a gain on the sale. JOE has noted that land values have been so depressed in the past few years that it is going to pare back on substantial land sales until the "market recovers".
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What this tells us is the range of price/acre values for both raw land and timberland real estate is approximately $1,250-$2,050 per acre. This yields an average value of $890 million for its raw land and timberland. We think this valuation is more than fair (as it relates to today) as this goes back a decade, and prices are clearly not back up to historic averages, or else JOE would be selling down these properties at a decent clip.
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The St. Joe Company Reports First Quarter 2012 Results

The St. Joe Company Reports First Quarter 2012 Results | Timberland Investment | Scoop.it

Revenue for the first quarter of 2012 declined to $30.5 million compared to $73.4 million in the first quarter of 2011. The $42.9 million decline in revenue is due to one-time revenue generated by a timber deed transaction that was executed in the first quarter of 2011. That particular transaction added $54.5 million of revenue and $50.3 million in pre-tax gain to the 2011 first quarter results. Excluding the timber deed transaction, adjusted revenue grew 61%, from $18.9 million in the first quarter of 2011 to $30.5 million in the first quarter of 2012.

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Timberland Investment Resources Certify Over 600,000 Acres to SFI Standard

Timberland Investment Resources Certify Over 600,000 Acres to SFI Standard | Timberland Investment | Scoop.it

Today, over 600,000 acres of timberland managed by Timberland Investment Resources, LLC (TIR) have been certified to the Sustainable Forestry Initiative® (SFI®) standard.  TIR's investment footprint spans 14 states, with a significant presence in the southeastern U.S.  Their certification builds on the SFI Forest Partners® Program's previous successes in South Carolina and Florida, as well as the ongoing work with a wide range of medium-sized private and public landowners, and manufacturing facilities.  These certified lands, in addition to the over 500,000 acres recently announced by the St. Joe Company, put the SFI Forest Partners Program well on the road to achieving its 2014 milestone of certifying 5 million acres of forestland to the SFI standard.

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Fund manager David Einhorn says he was vindicated by a recent sale of 383,000 acres of Florida land

Fund manager David Einhorn says he was vindicated by a recent sale of 383,000 acres of Florida land | Timberland Investment | Scoop.it

For three years activist hedge-fund manager David Einhorn has been locking horns with St. Joe Co. , one of the largest property owners in Florida, over the value of the company's extensive land holdings.


Now Mr. Einhorn is claiming victory.


Last week, St. Joe said it had reached a deal to sell 382,834 acres, or the majority of its rural land, to AgReserves, Inc., a land-development arm of the Church of Jesus Christ of Latter-day Saints, for $565 million. The deal values the forest land at $1,476 an acre.


Mr. Einhorn has long been arguing that the market has been overvaluing St. Joe's land holdings. His estimated value: $1,500 an acre.

In an interview Monday, Mr. Einhorn said he was vindicated. "This transaction crystallizes the value of St. Joe," he said.


Mr. Einhorn has held a short position in St. Joe's stock since 2006, meaning he profits if St. Joe's share price falls.

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St. Joe Explores Opportunities To Sell Timber And Rural Lands

St. Joe Explores Opportunities To Sell Timber And Rural Lands | Timberland Investment | Scoop.it
The St. Joe Company (NYSE:JOE), a real estate developer and manager in Florida is exploring potential opportunities to sell timber land, rural land, and/or related timber rights, according to its latest Form 8K filing with the Securities and Exchange Commission (SEC).

The real estate company is the largest private landowner in Northwest Florida with 567,000 acres of land. Majority of its land that are not under development are used for growing and selling timber. Hedge fund manager, Bruce Berkowitz of Fairholme Capital Management is the largest shareholder of The St. Joe Company (NYSE:JOE). He serves as chairman of the board of the company. The hedge fund owns around 27 percent or more than 25 million shares of the outstanding shares of the company as of March 2013.


According to the company, it is considering the idea of selling some of its assets because of certain expressions of interests and timber market conditions. The St. Joe Company (NYSE:JOE) emphasized that the assets it is planning to sell are those “not strategic to the company’s core real estate development activities.”


“From time to time, the company has, and will continue to, evaluate opportunistic transactions with respect to such assets. At this point in time, the company cannot determine whether any of these potential opportunities will result in a signed agreement or a closed transaction,” wrote The St. Joe Company (NYSE:JOE) in its filing.

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St. Joe Upgraded to Outperform

St. Joe Upgraded to Outperform | Timberland Investment | Scoop.it

We have recently upgraded the long-term recommendation for The St. Joe Company ( JOE ), a publicly held real estate company, from Neutral to Outperform, primarily due to its strong future growth prospects.


Based in Jacksonville, Florida, St. Joe is one of the largest real estate developers of Northwest Florida. Over the years, the company has developed successful residential and commercial projects and related infrastructure, which in turn has attracted regional and national businesses to the area that contributed to the regional growth and prosperity.

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