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Has anyone looked at any land companies?  JOE which has been hit by the spill panic @ $4,000/acre looks cheap based upon the 130 miles of oceanfront property they own. Morningstar's back of the envelope valuation is about 2x the current price and there is a fair amount of shorting in the stock.

 

I was also looking at Griffen Nursery which has an FFO of about $10 m (capped at 8%) yield a value of $125 million.  They state they have 4,000 total acres (1,000 of the total available for residential housing).  For an average price of $300,000 (in Hartford, CT area) and a land value of about 20% home price and 4 lots per acre results in a high-end price for the land of $240 million.  The total market cap of the firm is about $135 million.

 

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In a strange way I've been interested in these kinds of companies, you think about the enormous difference in value between undeveloped and developed land and there is long term potential.

 

However with many of these companies I think there needs to be a clear catalyst for creating value.  Tejon Ranch for example holds a huge contiguous block of land north of Los Angeles, and you can imagine how that could become valuable one day.  However they are mired in disputes with environmentalists and a lot of the land if of questionable value.  As a result the stock has gone nowhere for 10+ years.  This seems like a "value trap" -- the value is there theoretically and can keep you hanging on, but it might not materialize during your lifetime.

 

I like JOE better because there seems to be a real catalyst.  The airport will bring in new development and is becoming active now.  Though you have to keep in mind that while some of the acres are pretty good real estate, there is a lot of what is literally swamp land in Florida and is probably worthless.  I would bet that the difference in value between the most and least valuable acreage is 1000-fold.

 

BHS (Brookfield Homes) is essentially a land bank company that operates as a luxury home builder, though they are more of a builder, which means their business has been in trouble for a few years.  But they carry a lot of land which was acquired very cheaply 15-25 years ago and there is an immediate catalyst for creating value.

 

T

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I know Francis Chou at one point held CTO. I briefly looked into it but never pursued it judging that I was very late to the party. I see it is covered to some extent in manualofideas report.

 

moi, thanks for posting that ... i enjoyed the read and will have to look a little closer at a few names.

 

<IV

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David Winters owns a huge chunk of CTO but he seems to really dislike management, I haven't followed the story too much.  As far as Tejon, Tiddman its obvious that you don't live in Los Angeles! Kern county is relatively poor and way too far from L.A for most commuters.  I believe they settled most of their environmental issues by reserving most of their land for non development, they're going to be developing about 30,000 acres over the next 20 years and if you do the math and figure out how much of that land can potentially be sold you aren't getting in cheap! 

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PCL is the largest private landowner in the US, including North Florida, not the beaches though :). There were a couple of short-case write-ups about them on VIC and Graham & Doddsville newsletter, so the general perception is that it's overvalued.  On the other hand, Grantham keeps saying timber will outperform most other asset classes.

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There is an interesting line of reasoning for JOE as it relates to the BP oil spill.  JOE owns around 600,000 acres of land in the Florida panhandle, including a bunch on the coast.  The oil is spreading and heading right towards them.

 

While some of their land may be damaged, now that the $20 billion escrow fund has been set up for BP, JOE will very likely benefit from the spending of that $20 billion.  Their land may be cleaned up at no cost to them, and the money will basically act as an economic stimulus to the area.  And the $20 billion might be the first of many tranches of money that are deployed in the area.

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