ST JOE COMPANY THINKING BIG FOR THE PANHANDLE OF FLORIDA

St. Joe Co. weathers recession by thinking big
By MELISSA NELSON (AP) – 2 hours ago

SANTA ROSA BEACH, Fla. — Building along the Florida Panhandle's picturesque seaside slowed when financing dried up and the economy soured. Fences with architects' renderings of developments hide the unfinished eyesores dotting the beaches.
But the St. Joe Co.'s construction cranes and earth movers never stopped and its high-end vacation retreats and shopping centers are being built along with taxpayer-funded roads and an international airport, the nation's first since the 2001 terrorist attacks. Southwest Airlines recently agreed to service the airport, an announcement St. Joe CEO Britton Greene touted as a milestone in the company's 80-year history.

"This changes the dynamics of what we have as a land company," he said, standing in an unfinished terminal beneath a sign with the May 18 targeted opening.
Rooted in the Great Depression, St. Joe Co. was founded by a DuPont chemical heir who bought a wide swath of the Panhandle for pennies an acre.

Today, St. Joe is pushing a massive plan to transform into an international destination this region long known as the "Redneck Riviera" for its cheap motels, kitschy tourist attractions and appeal among Southern tourists. The strategy's lynchpin: The new Northwest Florida-Panama City International Airport on 4,000 acres west of Panama City donated by the company.
St. Joe's stock price jumped 6 percent to $28.63 a share the afternoon of Oct. 21 when Greene announced the agreement with Dallas-based Southwest to offer eight daily flights out of the airport. The destinations of the Southwest flights haven't been determined. On Monday, the company's stock was trading around $24 a share.

Under an agreement between the company and the airline, St. Joe will cover fuel costs if Southwest fails to break even on ticket purchases during the first three years. The company and the airport will pay up to $14 million the first year and $12 million the second year.
St. Joe Co. operated as a timber and paper manufacturer until 1996 when it got out of those businesses and turned to land development. It hired Peter Rummell, the former head of real estate for Walt Disney Co., and started selling off sections of it's then nearly 1 million acres, which had made it Florida's largest private landowner for decades.

Greene, the company's former chief operating officer, replaced Rummell as CEO in 2008.
The company today owns about 590,000 acres — including 72,000 acres surrounding the new airport — and is Florida's No. 2 private landowner behind Seattle-based Plum Creek Timber Co.
St. Joe is banking it's future on the airport and the estimated 2,000 passengers a day Southwest could bring to open that land to the rest of the country.

A chunk of St. Joe's holdings include undeveloped stretches of pristine Panhandle beaches where white sand is lapped by turquoise waters. The company has slowly developed some of those areas with high-end vacation homes, shopping centers, golf courses and hotels. It has also donated or sold thousands of acres to the state and federal government for roads that will eventually connect company properties in several counties to the airport and to the Panhandle's major interstate.

The company's detractors say St. Joe's massive landholdings and political clout have allowed it to quietly reshape the region with taxpayer money, pushing through public infrastructure projects and zoning changes with little fanfare.

Linda Young, director of the Clean Water Network of Florida, has spent years fighting the airport construction in sensitive wetland areas. But state and federal agencies have generally sided with St. Joe and she said her group is running short of money to continue its legal fight. The New York-based nonprofit Natural Resources Defense Council, which also tried to stop the airport, also surrendered.

"When people say that the St. Joe Company is all powerful and that is pointless to stand up against them, I'm hard pressed to argue that," Young said.
St. Joe is unique because of its age and its vast land holdings, said Jim Wilson, a financial analyst with California-based JMP Securities. This makes it difficult to compare St. Joe to other land companies, he said.

Analysts have likened St. Joe to California-based Tejon Ranch, a publicly traded company that started in 1843 as a Mexican land grant and includes 240,000 acres north of Los Angeles, and to Irvine Company, a private firm that began as a large ranch and became the planned community of Irvine, Calif.

"In the Panhandle, St. Joe will have most if not all of the influence over how Florida develops," Wilson said. "They are in good shape financially because they have no debt and very few employees. The question is at what price they sell land and at what pace they sell it. I see that part of Florida developing and expanding, it's just a question of when."

St. Joe hasn't made it through the last several years unscathed as the Florida real estate market tanked. The company slashed more than 700 of its 1,000 employees by outsourcing its golf and resort-management businesses and moving those employees to the contractors it hired. St. Joe also got out of the home-building business and instead began recruiting construction firms as partners to build on its land.

Jerry Ray, longtime St. Joe spokesman and vice president, said the company's size and its massive land holdings have allowed it to weather to downturn.
"We exist because we were forward looking during the Depression," he said. "Because of the land assets that we accumulated back then, we do not have a peer today."

Home sales and construction are ongoing at WaterColor and WaterSound, two luxury home resorts on secluded beaches. At WaterColor, winding brick bike paths circle pastel cottages surrounded by white picket fences. At WaterSound, boardwalks cover sand dunes and lead to Nantucket-style beach homes with wide porches and breathtaking views of the Gulf of Mexico.
In one section of WaterColor, 17 homes were listed for sale at around $850,000 each and two of the homes sold in 2008. In 2009, the company priced the remaining homes for $500,000 or less and sold them all.

St. Joe Vice President Tom Dodson traces lines with his finger from the northeastern United States and the Midwest to the remote swath of Florida Panhandle where his office in the WaterSound development is located.

The airport, he says, will bring the company's vision of a new Florida to the rest of the world.
And the new Florida St. Joe plans to build will be very different from the high-rise condominiums and congested expressways of South Florida, he said.
"What people like, what people embrace about this area, is that there aren't any giant condominiums. We are creating places and you don't do that by blocking views and access to the beach," he said.

CEO Greene says the company has a chance to reshape Florida by creating new towns, resorts, shopping centers, hotels and highways in places that haven't much more than a few timber mills for generations until now.

"Because this part of the state is so new and so green we have the opportunity to be one of the leaders in job growth," he said. "We don't have the massive vacant real estate overhang that they have in other parts of the state."

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