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Tickers in this Article: JOE, TRC, CTO, FCE.A
Over the past two years, the term real estate has come to signify houses. While houses are indeed real estate, they are not its only form. Real estate also includes land, which clearly has more long-term appeal than houses: You can't build more land.

Mr. Market Sees No Difference
Thankfully for investors, the market hasn't differentiated between both classes of real estate. Land, like houses, has been marked down across the board. Patient investors should see the opportunity here - buy the land today when nobody wants it because they think no one will ever need to build again. The result is a dirt cheap price per acre. Then you wait for the land to appreciate and sell back what you bought at a much higher price. It's that simple. The question is not when land goes up, but when.

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Only Two
To me, only two land companies offer the upside potential worthy of the patience required to realize share price appreciation. These two names also offer the downside protection essential to any value-oriented investment. Ironically, they reside in two states that experienced the greatest boom and bust of the real estate bubble: Florida and California. The two respective businesses happen to be St. Joe (NYSE: JOE) and Tejon Ranch (NYSE: TRC).

The ultimate attraction in these two names can be found in the balance sheet: both are debt-free, a characteristic not found in any other comparable company. The closest name is Consolidated Tomaka Land (NYSE: CTO), which has a negligible debt position. Looking at Forest City (NYSE: FCE.A), one finds a $1.7 billion market cap against $8.6 billion in net debt. Debt is especially deadly for land companies, because they have no way to service it.

In addition, both Joe and Tejon have some excellent catalysts that will likely unlock land value over time. Next year will see the opening of the Panama Airport in Florida, built on land donated by Joe. Joe owns the surrounding land, which means any hotels, gas stations and restaurants will be buying Joe land. In California, Tejon has just reached a milestone agreement in which it will donate a chunk of land for permanent environmental conservation. In return, Tejon gets to develop other land without the common roadblocks put up by environmental organizations. (For more, check out Uncover The Next Real Estate Hot Spot.)

Patience Is Bliss
In both cases, investors should expect these catalysts to develop over time and not without a few bumps along the way. But the biggest hurdles are clearly out of the way, and both companies' current share prices ascribe no value to these catalysts. The wait is certainly worth the reward. (For more, see Value By The Book.)

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