Joe Admits Failure

I'm always amazed at the brazenly upbeat language foundering companies will use when attempting to pretty up their rough realities. Mercifully, some of the homebuilding industry has lacked this urge. Certain executives have offered relatively frank assessments of housing's rancid prospects; D.R. Horton's (NYSE: DHI  ) CEO actually said that 2007 would "suck."

You'll find no such refreshing honesty this morning -- at least, not in the verbiage from (former) Florida real estate developer St. Joe (NYSE: JOE  ) . Here's what the firm hopes naive and lazy business reporters will write: "The St. Joe Company to Accelerate Value Creation."

Here's what those reporters should write: "Saint Joe cuts dividend, decides to get out of core businesses, and needs to sell furniture to heat its house."

I love the sleight of hand here. Suddenly, the stuff that provided all the earnings juice over the past few years -- like, say, the company's housing developments -- is newly classified as "non-core." The new new core is, it appears, no longer developing anything, but reverting to being a "supplier of entitled land."

So, Joe admits its failure as an "end-to-end" developer. What does that leave investors? A fancified land-flipper, it appears. But St. Joe's already giving a hint of just how great that's (not) going to go, announcing that it has 100,000 acres of "rural land" (i.e., stuff no one wants) on the block, along with 1,200 "developed" home sites and 190 homes that are "priced to sell."

"Priced to sell?" Doesn't get more desperate than that. And somehow, I don't think a public admission like this puts Joe in a strong bargaining position. Talk about playing a weak hand. Of course, it's not like the company has much choice. Saint Joe also admits that it's had to resort to meetings with creditors in order to avoid potential debt defaults in the years to come.

In other words, Joe's value to investors increasingly relies on guessing how much its pile of land is worth -- and when. Given that fewer people seem interested in buying it, it won't be easy to figure out that figure. My back-of-the-envelope guess? It's less than the current price.


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