Sahm Adrangi is the founder and Chief Investment Officer of Kerrisdale Capital, a private investment manager, and he has issued a negative report related to The St. Joe Company. Kerrisdale is taking a short position with the billion dollar real estate development company that is located in Florida, because the company, along with Sahm Adrangi, believes that it is not likely to be able to develop a tract of land in Florida in a way that will make it as successful as they are touting. The company’s valuation is at $1 billion, but the land that the company is banking on turning into a retirement community is nothing less than a swampy, desolate, remote wasteland.
Sahm Adrangi has explained that the problem with this is that The St. Joe Company has been claiming that this development is what is going to push them forward. In reality, the rest of the land owned by St. Joe’s is beachfront land that has already been capitalized on. The valuation of the company is being justified by what they are claiming is going to be a retirement district. The issue is that this means that they would have to sale 2,700 home-sites every year along with 400,000 square feet of commercial space being sold on a yearly basis. Sahm Adrangi has pointed out that this means that this new retirement district would suddenly become the best-selling master-planned community in the United States.
Sahm Adrangi is keying in investors to the fact that barely any progress has been made on the development, and there has been barely any signs of building department inquiries, permits being filed, or anything else that would indicate positive movement with the development. He commented that the original plans that the company had are no more realistic now than they were ten years ago, and that investors who have held out for the long-haul are going to be the ones who suffer the most. To top it off, there is the fact that St. Joe’s largest investor, the Fairholme Funds, are going to have to cut their shares in half, which is an issue because Fairholme owns more than a third of the company’s shares.