One of the great things about owning prime real estate is, well, that you own it. You can do anything you like with it. You can sell it. You can hold onto it. You can build on it. You can generate income off of it. Or you can build a $5 billion public company around it. That's just what the St. Joe Company (NYSE:JOE) has done, and so far it has led to some pretty nifty returns.

St. Joe owns 820,000 acres of land, much of it Florida, and 40% of it is within 10 miles of the coastline. With all that land, what's a CEO to do? All of the above, and the best part is that in the current housing environment, St. Joe has joined the fray by building developments and selling houses. So for the time being, it can play along with homebuilders like NVR (NYSE:NVR), D.R. Horton (NYSE:DHI), Pulte Homes (NYSE:PHM), Toll Brothers (NYSE:TOL), and Lennar Corp (NYSE:LEN).

Even better, its land was purchased at such a low-cost basis that it's able to cash in on some of it now, while prices are high. And because it owns so darn much space, when the housing market cools, it can just sit back until the boom cycle begins again. In the meantime, the real estate it's sitting on will just continue to appreciate -- unless it's washed away by a tsunami or someone discovers toxic waste brewing underground. Of course, in short-term periods, the value of that land may slide -- a very real risk for those without a long time horizon.

How does this translate for investors? All that land and St. Joe carries only $420 million in long-term debt. It's got $95 million in cash on hand, generated $135 million in operating cash flow during fiscal 2004, and still managed $50 million in free cash flow (defined as operating cash flow minus capital expenditures) over the same period. The company is on really solid footing, but note that it is not a REIT, so it does not have to pay out earnings to investors.

Unfortunately, everyone else seems to know all this, too. The stock is now a seven-bagger since it went public in 1992, and even though analysts estimate 25% earnings growth in 2005, investors have bid the stock up to 60 times trailing earnings. For investors looking to jump into St. Joe, it might be prudent to pull up a chair next to its vast tracts of land -- and wait.

Care to learn about other real estate investments? Check out:

Fool contributor Lawrence Meyers does not own any stock mentioned in the article and advises you to thoroughly investigate any potential investment, including real estate.