You know a real-estate development is in trouble when the Hertz GPS denies that one of its major streets even exists. You really know it’s in trouble when Google Maps also shrugs, and asks if you wouldn’t like to know more about a similarly named town in Costa Rica.
I had gone to the Florida Panhandle to find out more about an outfit named the St. Joe Company. It sounds like the sort of place that makes designer coffee cake or handcrafted pine furniture, but until recently it was the largest landowner in Florida, a former timber barony that has spent the past decade or so transforming itself into a real-estate developer. Its current roster of developments covers acres of some of the world’s most beautiful beachfront property: sugar-white sand and emerald-green waters unfolding along a pristine, undeveloped coastline. If heaven has beaches, this is what they look like.
I was visiting the beaches because they seemed to hold the key to a very public dispute over the value of St. Joe Company’s assets, and its stock price, that was taking place between two money managers named David Einhorn and Bruce Berkowitz. Both are fairly famous “value investors” of the Warren Buffett school—that is, they rely on analyses of stocks’ fundamentals to reveal stocks that are exceptionally cheap, or outrageously expensive. Both had put rather a lot of money where their mouths were, and that money was talking, loudly. Einhorn’s money was shorting the stock, practically screaming that the company was way overvalued. Meanwhile, Berkowitz’s nearly 30 percent stake in St. Joe Company was proclaiming that the company’s best days were yet to come—and it was speaking not only for Berkowitz, but for all the individual investors who had poured billions into his Fairholme Funds. Like a lot of other people, including many money managers, I couldn’t understand how two very smart guys with strong track records could have such different—and vehement—opinions on what’s basically a simple real-estate operation. Even if both men are known for ignoring the herd and going their own way, shouldn’t we know by now which companies were going to recover from the bubble? So I headed to Florida, to survey the landscape over which this epic battle was taking place. That is, if I could get a GPS to take me there.