Another article about St. Joe in The Atlantic. The reporter went to some of St. Joe’s properties and found ghost towns. This is a very good and extensive article (for anyone living in a cave; Bruce Berkowitz is the Chairman and largest shareholder of St. Joe, and David Einhorn is short the company. Both Einhorn and Berkowitz have crushed the market since their funds' inception.)
Einhorn’s argument seems compelling when you’re sitting in SummerCamp Beach’s empty restaurant, or walking, as I did the following day, through the vacant streets of WindMark Beach, his “favorite” of the St. Joe properties. Here, about an hour southeast of Panama City, everything has been laid out for a bustling community that has yet to arrive: stunning beaches, roads and boardwalks, even street lamps, and benches where neighbors can sit after a stroll. Only instead of houses, the streets are lined with neat rows of signs that name the owners of the empty lots, inviting writerly comparisons with grave markers.
The development’s commercial street looked to me more promising, at first; every building seemed to have a twee sign out front—and also a for lease sign in an empty window. Next to the main strip, a few houses had actually been built here and there—large, airy, comfortable-looking. But surrounded as they are by forlorn lots, they are somehow even more disturbing than the empty, waiting cul-de-sacs; the effect is that of one gleaming, pearly-white tooth jutting out of otherwise empty gums.
As Einhorn points out, speculators—or their bankers—own many of those empty lots and buildings, and they are eager to unload. This will undercut St. Joe’s ability to sell its remaining lots at the prices it needs to get. Meanwhile, taxes must be paid, a sales office must be maintained, headquarters must be subsidized. Unless people start coming, and building, one can argue that St. Joe’s real estate at WindMark isn’t so much an asset as a liability: to cover the carrying costs of residential land that can’t be sold, the company will have to continue selling off actually valuable rural land, until there’s nothing left. Walking through that commercial ghost town, I find it hard to disagree.
Below is a brief excerpt followed by a link to the full article:
Two of Wall Street's savviest value investors, Bruce Berkowitz and David Einhorn, pride themselves on their rigorous analysis. Now they're locked in a scorched-earth dispute over the value of some Florida real estate. How could they look at the same facts and reach such wildly different conclusions, and what does that say about the “value” of value investing?
You know a real-estate development is in trouble when the Hertz GPS denies that one of its major streets even exists. You really know it’s in trouble when Google Maps also shrugs, and asks if you wouldn’t like to know more about a similarly named town in Costa Rica.
I had gone to the Florida Panhandle to find out more about an outfit named the St. Joe Company. It sounds like the sort of place that makes designer coffee cake or handcrafted pine furniture, but until recently it was the largest landowner in Florida, a former timber barony that has spent the past decade or so transforming itself into a real-estate developer. Its current roster of developments covers acres of some of the world’s most beautiful beachfront property: sugar-white sand and emerald-green waters unfolding along a pristine, undeveloped coastline. If heaven has beaches, this is what they look like.
I was visiting the beaches because they seemed to hold the key to a very public dispute over the value of St. Joe Company’s assets, and its stock price, that was taking place between two money managers named David Einhorn and Bruce Berkowitz. Both are fairly famous “value investors” of the Warren Buffett school—that is, they rely on analyses of stocks’ fundamentals to reveal stocks that are exceptionally cheap, or outrageously expensive. Both had put rather a lot of money where their mouths were, and that money was talking, loudly. Einhorn’s money was shorting the stock, practically screaming that the company was way overvalued. Meanwhile, Berkowitz’s nearly 30 percent stake in St. Joe Company was proclaiming that the company’s best days were yet to come—and it was speaking not only for Berkowitz, but for all the individual investors who had poured billions into his Fairholme Funds.
To read the full article click here-_ http://www.theatlantic.com/magazine/archive/1969/12/showdown-in-the-sunshine-state/8417/
http://www.valuewalk.com/
Einhorn’s argument seems compelling when you’re sitting in SummerCamp Beach’s empty restaurant, or walking, as I did the following day, through the vacant streets of WindMark Beach, his “favorite” of the St. Joe properties. Here, about an hour southeast of Panama City, everything has been laid out for a bustling community that has yet to arrive: stunning beaches, roads and boardwalks, even street lamps, and benches where neighbors can sit after a stroll. Only instead of houses, the streets are lined with neat rows of signs that name the owners of the empty lots, inviting writerly comparisons with grave markers.
The development’s commercial street looked to me more promising, at first; every building seemed to have a twee sign out front—and also a for lease sign in an empty window. Next to the main strip, a few houses had actually been built here and there—large, airy, comfortable-looking. But surrounded as they are by forlorn lots, they are somehow even more disturbing than the empty, waiting cul-de-sacs; the effect is that of one gleaming, pearly-white tooth jutting out of otherwise empty gums.
As Einhorn points out, speculators—or their bankers—own many of those empty lots and buildings, and they are eager to unload. This will undercut St. Joe’s ability to sell its remaining lots at the prices it needs to get. Meanwhile, taxes must be paid, a sales office must be maintained, headquarters must be subsidized. Unless people start coming, and building, one can argue that St. Joe’s real estate at WindMark isn’t so much an asset as a liability: to cover the carrying costs of residential land that can’t be sold, the company will have to continue selling off actually valuable rural land, until there’s nothing left. Walking through that commercial ghost town, I find it hard to disagree.
Below is a brief excerpt followed by a link to the full article:
Two of Wall Street's savviest value investors, Bruce Berkowitz and David Einhorn, pride themselves on their rigorous analysis. Now they're locked in a scorched-earth dispute over the value of some Florida real estate. How could they look at the same facts and reach such wildly different conclusions, and what does that say about the “value” of value investing?
You know a real-estate development is in trouble when the Hertz GPS denies that one of its major streets even exists. You really know it’s in trouble when Google Maps also shrugs, and asks if you wouldn’t like to know more about a similarly named town in Costa Rica.
I had gone to the Florida Panhandle to find out more about an outfit named the St. Joe Company. It sounds like the sort of place that makes designer coffee cake or handcrafted pine furniture, but until recently it was the largest landowner in Florida, a former timber barony that has spent the past decade or so transforming itself into a real-estate developer. Its current roster of developments covers acres of some of the world’s most beautiful beachfront property: sugar-white sand and emerald-green waters unfolding along a pristine, undeveloped coastline. If heaven has beaches, this is what they look like.
I was visiting the beaches because they seemed to hold the key to a very public dispute over the value of St. Joe Company’s assets, and its stock price, that was taking place between two money managers named David Einhorn and Bruce Berkowitz. Both are fairly famous “value investors” of the Warren Buffett school—that is, they rely on analyses of stocks’ fundamentals to reveal stocks that are exceptionally cheap, or outrageously expensive. Both had put rather a lot of money where their mouths were, and that money was talking, loudly. Einhorn’s money was shorting the stock, practically screaming that the company was way overvalued. Meanwhile, Berkowitz’s nearly 30 percent stake in St. Joe Company was proclaiming that the company’s best days were yet to come—and it was speaking not only for Berkowitz, but for all the individual investors who had poured billions into his Fairholme Funds.
To read the full article click here-_ http://www.theatlantic.com/magazine/archive/1969/12/showdown-in-the-sunshine-state/8417/
http://www.valuewalk.com/
