NEW YORK, April 24, 2018 /PRNewswire/ -- Kerrisdale Capital, a private investment manager, has published a negative report explaining its short position in The St. Joe Company (NYSE :JOE ), a ~$1 billion Florida real estate development company that hopes to transform a vast area of desolate land near Panama City Beach into an attractive destination for retirees and businesses.
The full report can be found at http://kerr.co/joe.
St. Joe is unlikely to develop its land in a manner that justifies the company's current $1 billion valuation. Located in swampy, remote, desolate areas, the bulk of St. Joe's remaining land holdings stand in stark contrast to the beachfront land St. Joe has already monetized. To justify the current valuation, the sellside assumes that more than 2,700 homesites and 400k square feet of commercial space are sold every year, for fifty years. Yet that would mean that St. Joe's supposed new retirement district would immediately become the top-selling master-planned community in America and that more St. Joe commercial real estate would be sold than that absorbed in the entire Panhandle market in 2017.
In reality, there has been little progress on St. Joe's interior land, and our channel checks have found that there is minimal activity in terms of building department inquiries, permit filings or other signs of advancement.
"The company's plans for its interior lands are no more feasible now than when they were first proposed over a decade ago," said Sahm Adrangi. "Long-suffering investors who have waited years for progress should be prepared to wait longer – St. Joe continues to struggle in its attempt to monetize its land at a pace that can remotely justify its current valuation."
Compounding problems for shareholders is the looming required compliance by St. Joe's largest investor, the Fairholme Funds, with new SEC liquidity rules enacted two months ago. Due to years of poor stock selection, the Fairholme Fund's assets have declined more than 90% from its peak and as assets have plummeted, its position in St. Joe has become an ever larger percentage of the fund. Under the new rule, Fairholme, which holds more than a third of St. Joe's shares, should be forced to cut its position by nearly half. Fairholme's impending demise, and the need to comply with the new SEC regulations, subjects St. Joe shareholders to the risk and uncertainty of a forced seller.
Kerrisdale believes no reasonable set of development assumptions point to upside for the stock. Kerrisdale thinks St. Joe shares are worth 40% less than its current value, and forced selling by its largest shareholder due to new SEC limitations on illiquid equity holdings should serve as a catalyst.
Kerrisdale has a short position in St. Joe Company and stands to benefit if its share price falls.
Conference Call Schedule
Kerrisdale will host a conference call on Tuesday, April 24 at 10:30am ET to discuss the The St. Joe Company report.
To participate in the conference call, dial (866) 834-3313 (United States) or (409) 981-0700 (international) and reference the Kerrisdale Capital call or conference ID 5662359.
About Kerrisdale Capital
Kerrisdale Capital Management, LLC, is a fundamentally-oriented investment manager that focuses on long-term value investments and event-driven special situations.
Kerrisdale Capital Management, LLC is a member of the Financial Industry Regulatory Authority, CRD number 160804
SOURCE Kerrisdale Capital Management, LLC