"The Family Behind Pinelawn Memorial Park Cashed in During COVID"

Earlier this month we posted an excerpt on the blog from the Oddball Stocks Newsletter about Pinelawn Cemetery. A journalist from ProPublica has just published a long exposé on Pinelawn Memorial Park, which has "land share certificates" that trade on the OTC:

All those new graves and higher prices at Pinelawn translated into cash for the Locke family, the descendents of the cemetery’s founder. The explanation lies in an obscure but lucrative financial instrument called a “land share,” which in Pinelawn’s case dates back to 1904 and pays dividends twice a year. Those payouts more than doubled during the early months of the pandemic, from $13.65 per share in August 2019 to $28 in August 2020, before subsiding to $20.70 in August 2021.

The Locke family owns 51,964 of the 127,850 land shares that were issued by Pinelawn during the presidential administration of Theodore Roosevelt, and which still circulate today. The shares are unusual in another regard: Some of the rest are traded on an over-the-counter Nasdaq market — their price has more than doubled over the past five years — and a small coterie of investors have bought shares, coveting their reliable revenue stream. No other cemetery land shares are listed on Nasdaq’s OTC Markets Group.

Calling them “land shares” is a bit of a misnomer, since they don’t actually entail owning land. Instead, they’re an investment, originally used to fund the creation of the cemetery, that entitles the holder to dividends derived from the sales of cemetery plots. Half of the proceeds from each sale of a plot go to pay the dividends, with the other half used to take care of the property.

The shares remain valid until the last plot is sold and the empty land at Pinelawn has been used up. That day is far off. Of Pinelawn’s 839 acres, more than 600 remain unsold and undeveloped today. In 2018, Pinelawn president Justin Locke said that at the current pace the cemetery wouldn’t run out of land for at least 206 years.

That is much more unsold land than we had previously estimated. However, it seems plausible because Pinelawn has enough undeveloped land that they have proposed to develop warehouses and office buildings on some of it:

Justin Locke was appearing before the Cemetery Board to sound them out on a new idea: leasing 100 acres of Pinelawn’s property to develop into warehouses and office buildings.

Justin Locke made his case to the Cemetery Board, starting with the surprising claim that the area of the cemetery he wanted to develop was blighted. He described the 100-acre parcel as filled with “crime, trespassing, quality-of-life issues that are affecting the neighbors, complaints. It’s hurting our reputation.” (The “crime” he was describing seemed to consist largely of trespassers riding ATVs on the property.)

Noting Pinelawn’s extensive unused land, Locke touted the potential revenues the cemetery could earn by leasing the parcel. He called it a “cake-and-eat-it scenario where we can leave the property over there, maintain control over it, but generate a substantial income off of it in the meantime.”

The Pinelawn certificates are now "expert market" on the OTC. Recently they have been trading in the low $500s, which is about an 8% distribution yield on the most recent two distributions.