Tell everyone that land is an appreciating asset and all will nod in agreement. Tell everyone that the supply of land is fixed and all will nod in agreement. Unfortunately, very few folks will nod in agreement when you tell them that now might be an excellent time to acquire prime Florida land selling at a fraction of its true cost.
IN PICTURES: Eight Ways To Survive A Market Downturn
A Wonderful Story
St. Joe Co. (NYSE:JOE) is the largest real estate company in Florida. This former papermaker now owns 586,000 acres of prime Florida real estate, most of it minutes away from Florida Panhandle beachfront.
Shares in St. Joe today hover around $23, and folks are afraid to buy them. A few years ago, shares were trading at $80 and investors couldn't get enough of them. As the housing market began to deteriorate, St. Joe took prudent steps to ready the company for future growth. The first was to quickly pull back its homebuilding operations. Second, and most important, the company became debt-free. On March 31, St. Joe had cash and treasury securities of $138 million and $49 million in debt. (For more, see Can Real Estate Stabilize Your Portfolio?)
A debt-free land company has a significant competitive advantage today. Many businesses like Forest City Enterprises (NYSE:FCE-A), Cousins Properties (NYSE:CUZ) and ProLogis (NYSE:PLD) all own significant amounts of valuable land, but they are all loaded with debt. Buying them today is simply making a bet on surviving the balance. It's a different story with St. Joe.
The Business Vs. The Stock
St. Joe shares trade near $23, implying a market cap of $2.1 billion. Of the 586,000 acres the company owns, 406,000 are on the Gulf of Mexico. The market cap implies a value of $3,600 an acre, which in my book is a great deal.
To be sure, not all of Joe's land is equal. Some of the rural timberland obviously isn't worth as much, and with few developers looking to build pricey beachfront property, Mr. Market will likely keep shares undervalued. Investors should rejoice as the price won't likely sit still for long.
For one, Florida will always be a destination spot. The state's wonderful weather and tax-friendly status make a great place for retirees. Secondly, the coming Panama City, Fla., airport is being built in the middle of St. Joe's land. This is a very big deal - one that the market is severely discounting. Imagine all the hotels, restaurants and gas stations that will have to go up. St. Joe will be selling the land. (For further reading, see Investing In Real Estate.)
These Assets Are Real
There's nothing better to own in an uncertain world than land, provided it can be bought at a good price. With St. Joe today, you can buy the land at a dirt cheap price in one of the most desirable places to live.
For more, see Add Some Real Estate To Your Portfolio.
