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Fla. developer calls retreat

St. Joe's struggle signals that the housing market may yet worsen.

By KRIS HUNDLEY, Times Staff Writer
Published October 9, 2007

WaterColor, the St. Joe Co. 499-acre waterfront development in the Panhandle town of Santa Rosa Beach, is St. Joe's flagship property.
	[The St. Joe Co.]

ADVERTISEMENT Sidebar "Big area landowners hold on - for now" [Douglas R. Clifford | Times] Boats in St. Joe's expensive marina reflect the company's new direction as the paper mill, in background, reflects its past.

Faced with a real estate market that won't budge and a stock price that won't stop slipping, Florida's largest private landowner is taking a chain saw to its operations.

St. Joe Co., a papermaker turned real estate developer, said Monday it would eliminate about 80 percent of its work force of about 900, sell 100,000 acres of land and scrap its dividend to shareholders. The draconian moves by one of the state's most prominent and politically connected real estate firms are the strongest signal yet that Florida's struggling housing market has yet to hit bottom.

Despite the dramatic restructuring plans, chief executive Peter Rummell insisted, "This is not a fire sale."

"We are not dumping stuff on the market and we are not going to make stupid decisions, but there are things that we believe have reached their height in pricing," he told analysts Monday. "I firmly believe that we would be doing this whether the market was good or bad."

The historic Jacksonville company, once known as St. Joe Paper, was established during the Depression by a member of the DuPont family. It owns more than 800,000 acres, an area equal to the size of Rhode Island, with most of the land in Florida's Panhandle. Under the leadership of Rummell, a former Disney executive, St. Joe has spent the past decade transforming itself into a "placemaker," creating numerous high-end, second-home communities. Among them are WaterColor in the Panhandle's Walton County and the planned Seven Shores' mid-rise condo community in Bradenton.

During the real estate boom, St. Joe flourished, even launching a PR campaign to rebrand the Florida Panhandle as Florida's "Great Northwest." The company's stock topped $80 a share in mid July 2005. But when home sales slowed, St. Joe's stock started on a downward skid. From about $60 in May, the company's shares closed Monday at $34.04, down 11 cents.

The result? In those five months, more than $1-billion of the company's market value vanished. The company's profit dropped in four of the last six quarters, and sales have not risen since the third quarter of 2005.

For the first six months of this year, the company said it sold 247 homes or homesites. That's down from 518 a year ago. Statewide, home sales were down 41 percent in the second quarter, according to the National Association of Realtors.

As part of its restructuring, St. Joe intends to sell "nonstrategic" assets including the Sunshine State Cypress Mill in rural Liberty County west of Tallahassee and unspecified parcels with commercial entitlements.

Also "priced to sell," according to the company, are 1,200 developed homesites and about 190 homes. Most of these residential properties are in a 200-mile swath across northwest Florida.

Rummell said St. Joe would focus on its "high-growth assets," particularly 75,000 acres in Bay County surrounding the site of a recently approved new international airport. In August, the U.S. Army Corps of Engineers gave final approval to the controversial project, which will be built on land donated by St. Joe about 20 miles northwest of Panama City.

In August, Sheila McGrath, an analyst with Keefe, Bruyette & Woods in New York City, said the airport approval was "a significant positive for northwest Florida that will ultimately benefit St. Joe." McGrath did not return a call seeking comment on St. Joe's latest restructuring.

Over the past year, St. Joe has been paring back its home-building operations. On Monday the company said it would focus on getting land entitled and ready for development, then selling to builders. Jerry Ray, St. Joe's spokesman, described the move as a "logical progression."

"We got in the home-building business because there were no national home builders in northwest Florida," Ray said of the company, which bought much of its land for a dollar an acre in the 1930s. "Now we're reaching out to those specialty companies, and we're going back to what we do best, entitlement and strategic planning."

St. Joe, which also owns six golf courses, three marinas, and several small inns and restaurants, said it has arranged to transfer operations by year end to unidentified leisure and hospitality companies. St. Joe will retain ownership of the properties.

About 500 St. Joe employees will be affected by this transition. Another 260 St. Joe employees will see their jobs eliminated by the end of 2008 as the company ends its project development activities.

In connection with its restructuring, St. Joe will take a charge to earnings in 2007 and 2008 of about $7-million, mostly for severance to employees. The plans are expected to generate annual savings of about $10-million in 2008 and $18-million in 2009.

In addition, the company will take charges of $25-million to $30-million in the third quarter related to the restructuring.

St. Joe will replace its dividend with a share buyback program. It has paid a quarterly dividend of 16 cents a share since the third quarter of 2005.

Rather than dwell on its job cuts or land sales, St. Joe characterized its broad slate of changes as a way to "accelerate value creation."

"We are dramatically changing the company to become more efficient," Rummell said.

Times researcher Shirl Kennedy contributed to this report, which used information from Times wires. Kris Hundley can be reached at hundley@sptimes.com or 727 892-2996.

St. Joe Co.

Headquarters: Jacksonville

What it is: Florida's largest private landowner

What it owns: More than 800,000 acres

Business segments: Residential and commercial real estate projects, rural land sales, and forestry

[Last modified October 8, 2007, 23:07:55]