Alfred DuPont, considered the "bad-boy" of the famous DuPont family, was exiled to Florida during the late 1800's, where he soon started to accumulate large amounts of raw-land.
Mr. DuPont of course, is now long gone, but his real-estate legacy continues. What is left now is known as the St. Joe Company (NYSE: JOE). This currently amounts to somewhere over 1 million acres of land in Florida, or about 3 percent of the land surface in the state. It is spread all over the state and includes oceanfront property, timberland, residential, pasture, commercial … all sorts of goodies.
St. Joe currently has six operating divisions.
One encouraging sign is that St. Joe has hired Pete Rummell as the CEO. Mr. Rummell has many years' experience in real estate development and is a top-notch fellow. In fact, he was a big player in the '90s for Disney, handling their real estate projects. He now has a huge canvass on which to work at St. Joe.
St. Joe has a very strong balance sheet with only about $250 million in debt (most against existing commercial property), and somewhere very close to $100 million in cash. With a market cap of about $1.8 billion, St. Joe should find it easy to raise funds for future development. The company makes a very attractive partner for developers, as the land ready to develop is unencumbered with debt. St. Joe can put the land into the deal, while the partner puts up the capital. This will help St. Joe draw quality partners.
Obviously, Florida is going to be a very fast growing state, and the land that St. Joe owns should see exploding demand in the next 10 years.
In recent years, St. Joe has been an active buyer of their own stock to the tune of about $350 million, and they are still buying back stock. The DuPont Trust still owns about 40 percent of the stock but in recent years, St. Joe has also been buying back some of this stock.
St. Joe currently has about 80 million shares outstanding. Now, we know that St. Joe owns over 1 million acres of land … so if you buy 80 shares of St. Joe, then that would be the equivalent of owning 1 acre of St. Joe Land. At the current price of $22, then $22 times 80 shares would equal $1,760 -- for one acre of land. I think that is pretty cheap. Even the worthless swamp land (and those numbers are a small amount of the total) is not so worthless. Why?
Good Old Uncle Sam is willing to buy your worthless land, or St. Joe's. They will swap or buy your land. You can swap your land that Uncle Sam wants, for something in Uncle Sam's land holdings you might want, or they will buy it straight out from you.
This already happened several years ago at St. Joe, as Uncle Sam bought St. Joe's sugar plantations for probably twice (!) what they could have received for them on the open market (hey, I don't make the rules here; I think it's a goofy idea, but I can't do anything about that).
If you want to "play" the real estate market, I think St. Joe is a good way to do it. Consider the advantages of doing it this way:
Conclusion: St. Joe recently made a new high in the $24 area and even with the recent market-weakness, the stock is holding up very well, trading in the $21-23 area. If St. Joe can break $24.50 on a close, it will have achieved an important technical breakout, and could still be bought at that level in my opinion, in hopes this quality stock will start to get more attention from the institutional players.