Kuppy on Inflation

[Gregmal]

16 minutes ago, thepupil said:

so when you do this by community, what the most valuable community and what's it worth in your view to sh today?

Ex LMWS cuz that’s kinda a different animal; short term putting the 3 sub communities together it’s Ward Creek. Ward Creek is probably something a builder would pay $90m or so for today given its very clearly

defined and has about 1200 remaining homes to be sold. 
 

There’s two types of communities JOE runs and it’s finite stuff like Ward or Park Place and then in perpetuity stuff like LMWS, Origins, Windmark, etc where they basically can build forever around them. Those you have to use the same approach as you would to valuing Ward Creek as a starting point, and then extrapolate quite a bit. 
 

My opinion is that the most valuable MPC has yet to even be built and that’s Lake Powell. 

[jfan]

On 1/13/2025 at 1:09 PM, Gregmal said:

With home prices where they are now the floor on per lot profit and margins is in and only inflecting higher. On the $2.2-2.5b pipeline estimate, as was described in the thread, column one is basically inventory; cash pricing is for much of it locked, just need to slap a tax rate on it. Column two is profit per lot, pricing marked to market, and column 3 is eventually the same as 2. Excluded in this was LMWS which is also another fairly easy valuation exercise.

I went back to listen to the 2024 annual meeting and Marek was describing the 3 columns and the capital intensity (ie soft and hard dollars) at 44 minutes. He said that the majority of the capex spend occurred when the homesites move into platted/underdevelopment column. 

 

I assume the capex for homesites sold in 2024, probably occurred in 2021 to 2023 (? over a 3 year period) and that a larger portion is spent in the early years vs later on. They report total net residential capex each year since 2015 but not by individual community. Is the company willing to share with investors this granularity?

 

@thepupil I'm not sure if this is the correct approach but in the footnotes, they describe capitalization of their real estate development expenditures (see below). This would smooth the numbers but may not reflect the actual cash expenditures.

 

Since I don't have the community by community data, nor the exact timing or magnitude of the expenditures, I thought perhaps another way to look at this from an aggregate bird's eye view of the issue, is by looking at the cumulative totals over time and calculating the per unit revenues and capex with each passing year. My rough guess is that they moved ~ 6000 homesites through column 1 (platted/under development) since 2018. This is all backwards looking of course.  

[thepupil]

Good stuff! Thanks. Seems fairly consistent with the even higher level reported accounting of the segment.

 

so given what you’ve done above and that we know the following 

 

As of 9/30

 

1) there’s $150mm of resi RE inventory

 

2) there’s 1300 or so homesites under contract for expected revenue of $122mm ($94k/lot)

 

3)there’s 2400 platted lots, 1300 ex LWMS, 4K engineered, and the rest for 22k total

 

how does this roll up into your valuation if JOE?

Does the exercise make you more bullish or bearish of JOE at current prices?

[Spekulatius]

6 hours ago, jfan said:

I went back to listen to the 2024 annual meeting and Marek was describing the 3 columns and the capital intensity (ie soft and hard dollars) at 44 minutes. He said that the majority of the capex spend occurred when the homesites move into platted/underdevelopment column. 

 

I assume the capex for homesites sold in 2024, probably occurred in 2021 to 2023 (? over a 3 year period) and that a larger portion is spent in the early years vs later on. They report total net residential capex each year since 2015 but not by individual community. Is the company willing to share with investors this granularity?

 

@thepupil I'm not sure if this is the correct approach but in the footnotes, they describe capitalization of their real estate development expenditures (see below). This would smooth the numbers but may not reflect the actual cash expenditures.

 

Since I don't have the community by community data, nor the exact timing or magnitude of the expenditures, I thought perhaps another way to look at this from an aggregate bird's eye view of the issue, is by looking at the cumulative totals over time and calculating the per unit revenues and capex with each passing year. My rough guess is that they moved ~ 6000 homesites through column 1 (platted/under development) since 2018. This is all backwards looking of course.  

The spreadsheet is actually pretty good for a big picture view. No dog in this fight and just looking at this like any other Capex driven business with leading and trailing indicators , this looks to me like they had a huge bump in 2021/22 and momentum is now stalling or even  reversing a bit.

 

Revenue per homesite is flatish

Contracted homes (future revenue  - Leading indicator is dropping)

Sold homes still rising but because of above, I would expect it to drop.

Gross margins dropping

 

Maybe I am missing something but this looks bearish to me.

 

[John Hjorth]

You guys constructively discussing JOE here should really leave this topic [in the General Discussion forum], meant in a positive way, to continue the discussions in the separate JOE topic [in the Investment Ideas forum]. 

 

It's a real pitty this ongoing discussion by now is going on here, and not in the separate JOE topic, meaning it 'drowns' here, over time, not tied to JOE. 

 

Peace, and enjoy your Sunday! 

[Gregmal]

Im happy to answer questions in the JOE thread per @John Hjorth's suggestion, to the extent things dont get too redundant; in which case Ive probably already answered what I can. But to reiterate, all youre gonna extract from 2021/22s numbers is the builder sentiment form 2018-2020; and that they sold a lot of Camp Creek(a finite community) lots at $400-500k per.