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Fairholme Lowers Its Stake in St. Joe

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About St. Joe

St. Joe Company (JOE) is a Florida-based real estate development and operating company. It owns real estate assets in Tallahassee and Destin, Florida. Through its assets, the company engages in resorts, leisure- and leasing-related operations (~8% of fiscal 2014 revenues), residential and commercial real estate development (~91% of revenues), and a forestry business (~1% of revenues) through its timber holdings.

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Fairholme Capital and St. Joe

Fairholme Capital Management reduced its position in St. Joe Company (JOE) by 30,100 shares in 4Q14. St. Joe now represents 6.25% of the fund’s portfolio. Fairholme Capital founder Bruce Berkowitz is the largest shareholder, with a 27.1% stake in St. Joe. Berkowitz currently serves as St. Joe’s chairman of the board after winning a proxy fight in 2011.

St. Joe is a component of the iShares Dow Jones US Real Estate ETF (IYR), constituting 0.13% of the ETF. The ETF also consists of commercial real estate companies Simon Property Group (SPG) and CBRE Group (CBG), with portfolio weightings of 7.22% and 1.07%, respectively. It also holds timberland owner Plum Creek Timber Company (PCL) , with a weighting of 0.92%.

Revenues and earnings continue to decline

St. Joe’s real estate development and timber revenues have taken some recent hits. The company has fewer homesites and less timber available for sale after its liquidation of its RiverTown property and ~380,000 acres of timberland earlier this year.

In 4Q14, revenues fell by more than half from 4Q13 to $15.7 million, as real estate sales dropped by 76% and timber sales fell by 85%. Partly offsetting these declines were the higher revenues from the resorts, leisure, and leasing operations, which posted a 20% growth over the same period.

St. Joe’s posted a net loss of $11.1 million versus a net profit of $0.5 million in 4Q13. This loss is largely due to the company incurring 11.3 million in pension charges associated with the company’s pension plan termination.

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