Real estate companies have one of the great performers of the current bull market. However, one investment expert believes that a particular billion dollar real estate company is vastly overvalued. That investment expert, Sahm Adrangi of Kerrisdale Capital Management, recently issued a negative report on the real estate firm The St. Joe Company.
According to a negative report issued by Kerrisdale Capital, St. Joe are only worth a fraction of the current market valuation. Sahm Adrangi lays out a couple of factors leading to the negative report on the real estate firm. According to the report, the largest shareholder of St. Joe, Fairholme Fund, will be forced to sell some of their shares due to SEC liquidity rules. Second, one of the real estate firm’s biggest projects, Bay-Walton Sector Plan, remains stalled. Finally, recurring revenue from St. Joe’s commercial development is not materially contributing to the company’s bottom line.
The report from Kerrisdale Capital goes on to state that St. Joe does not appear able to develop its current land holdings in a way to justify the company’s $1 billion market valuation. Current shareholders, according to Sahm Adrangi’s negative report, have been waiting years for St. Joe to develop their land projects.
Given that St Joe is facing roadblocks to further development and the eventual force selling from the Fairholme Fund, Kerrisdale Capital believes that the real estate firm is worth 40% less than its current market valuation. In the report, Kerrisdale Capital revealed that they have a short position in St Joe and stand to gain financially if the company’s stock falls in value.
Sahm Adrangi is the founder and the Chief investment Officer of Kerrisdale Capital Management LLC. Since 2009, Kerrisdale Capital has grown from $1 million in assets under management (AUM) to over $150 million AUM. Prior to the founding of his own investment firm, Mr. Adrangi has been employed at Longacre Management, Chanin Capital Partners and Deutsche Bank. Mr Adrangi holds a Bachelor of Arts in Economics from Yale University.