The St. Joe Company Adopts New Real Estate Investment Strategy

Discussion in 'Real Estate' started by buster, Jan 27, 2012.

  1. buster

    buster Beach Fanatic

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    The St. Joe Company (NYSE: JOE) (the "Company") today announced that the Company's Board of Directors has adopted a new real estate investment strategy, which is focused on reducing future capital outlays and employing new risk-adjusted investment return criteria for evaluating the Company's properties and future investments in such properties. Pursuant to this new strategy, the Company intends to significantly reduce planned future capital expenditures for infrastructure, amenities and master planned community development and reposition certain assets to encourage increased absorption of such properties in their respective markets. As part of this repositioning, the Company expects properties may be sold in bulk, in undeveloped parcels, or at lower price points. The Company anticipates that the amount of future capital expenditures associated with existing projects will be reduced by approximately $190 million, the majority of which was expected to be spent in the next 10 years. The Company believes that this new investment strategy continues to build upon the successful cost reduction initiatives previously implemented by the Company and positions the Company to (i) increase its short and medium-term cash flow, (ii) reduce its long-term risk and (iii) maintain the strong cash position necessary to weather a tepid and uncertain real estate environment and to best exploit the Company's substantial land resources.

    As the Company stated in its November 3, 2011 press release, the new management team, led by Park Brady, who assumed the role of Chief Executive Officer on October 12, 2011 and Patrick Bienvenue, who joined the Company as its Executive Vice President in September 2011, commenced a review of all of the Company's assets and projects and the development of a new strategic plan to maximize the risk-adjusted return on the Company's real estate portfolio. The new strategy adopted by the Board of Directors is a product of that review. As a result, the Company has decided to modify the development plans for certain of its projects to bring them in line with the Company's new investment return criteria.

    "In 2011, the new Board directed management to reduce expenses. We have met that goal and, as a result, we currently expect to have positive operating cash flow in 2012, excluding discretionary capital expenditures. The next request of our Board was the evaluation of our assets and development of a strategy to reduce future capital outlays and enhance the risk-adjusted return on investment while continuing to minimize potential risk to the Company in light of uncertain economic conditions. We believe that this new strategy will fulfill that request" said Park Brady.

    The Company has made considerable progress in assessing the recoverability of specific properties under the new strategy, but has not yet completed the analysis. Based on the work performed to date, the Company currently anticipates it will record an aggregate non-cash charge for impairment associated with these projects that may range from $325 million to $375 million in the fourth quarter of its year ended December 31, 2011. The Company expects to finalize its estimates by the end of February.
     
  2. buster

    buster Beach Fanatic

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    Can someone translate please?
     
  3. Zebraspots

    Zebraspots Beach Fanatic

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    They are bleeding red ink and are trying to sell off anything they can and cut expenses anyway they can.
     
  4. buster

    buster Beach Fanatic

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    Any more detail? Are they abandoning all projects they have developed? Fire saling what they own?
     
  5. Zebraspots

    Zebraspots Beach Fanatic

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    I just translated, no inside knowledge.
     
  6. buster

    buster Beach Fanatic

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    Then that would mean there's nothing new.

    However, this sounds like they are walking away from their developments (Watersound) and selling off any remaining lots however they can. So can we expect WaterSound's Origins golf course to become fields of weeds?
    What the heck does the bold part mean?

    Is this strategy a result of not being able to find anyone to buy the company?
     
  7. Beach Runner

    Beach Runner beats on hood

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    Bump. I want to understand it too. In particular, how will it affect the owners in Watersound? Watersound West? I assume the Watersound north of US 98 will be history because I think there are only about a dozen or so houses there.
     
  8. Dawn

    Dawn Beach Fanatic

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    Wall Stret Journal - Notice the last line about a deep southern feel and muggy climate. Really?!

    St. Joe Co., one of largest landowners in Florida, signaled that it is scaling back development plans again, an indication that its efforts to turn the state's Northern Gulf Coast into a cluster of luxury second-home communities have been a flop.


    On Friday, the company indicated in a Securities and Exchange Commission filing that it has adopted a "new real-estate investment strategy" that will see it reduce capital expenditures at its master planned communities. The firm said it also expects to sell undeveloped parcels in bulk at discounted prices.



    The company expects to report a charge of between $325 million and $375 million for the fourth quarter of 2011, when earnings are released next month. That would amount to about one-fifth of the company's market capitalization and about half of the total real-estate assets on the company's balance sheet, which totaled $759.6 million at the end of September.


    Friday's news was the latest in litany of convulsive changes at St. Joe, which has struggled since the housing bust and has had just one profitable quarter since 2008. Last spring, the company's largestshareholder, Miami-based mutual-fund manager Bruce Berkowitz, successfully ousted St. Joe's board in a proxy battle and installed himself as chairman. In March, he named Park Brady, the former chief executive of vacation-rental company ResortQuest, with a mandate to cut costs and return St. Joe to profitability.


    In July, the WaterSound, Fla., company disclosed that the SEC was investigating the company's accounting practices for possible fraud and looking into whether Mr. Berkowitz filed the proper regulatory forms in acquiring a large portion of St. Joe's stock starting in 2008. That investigation remains unresolved. Mr. Berkowitz declined to comment through a representative.


    The strategy shift also seems to validate some of the assertions made by St. Joe's critics, who have argued that the company is overvalued. In October 2010, David Einhorn, president of the hedge-fund firm Greenlight Capital Inc., publicly questioned the company's accounting practices at a popular investment conference, saying St. Joe had valued some of its land too high on its balance sheet.


    Mr. Einhorn, who at the time had placed bets that St. Joe's stock would fall, suggested that the company should have written down the value of its assets by about two-thirds.


    On Friday, Mr. Einhorn said in an emailed statement, "Today's news confirms our view that St. Joe's land is worth less than they thought and that it can't be developed profitably."


    Mr. Einhorn retains a short, or bearish, position in St. Joe.

    Although the housing market has been reeling for several years, St. Joe was slow to react, said Eric Landry, a Morningstar analyst who follows the firm.


    "This new strategy confirms that the current management team feels more urgency toward attaining financial health than perhaps the old one did," he said. "They are saying, let's not build residential right now, until we spur some more economic development, because there's little demand for houses until they bring more jobs and commercial activity to the area."


    St. Joe executives declined to elaborate on the SEC filing, saying the company is in a quiet period ahead of its earnings report.

    People familiar with the company's plans, however, said that it will likely put on hold development at several of its most valuable resorts, possibly including WaterSound, a 1,400-acre group of coastal cottages sandwiched between a lake and the ocean, and WaterColor, a beach resort. Sales at both communities have been slow.
    In the filing, the company said the strategy change would save $190 million in capital expenditures that would have been made over the next 10 years.


    The company said it intends to continue to focus on commercial-real-estate development on the roughly 65 square miles of land the company owns around the Northwest Florida Beaches International Airport, which was built near West Bay on St. Joe land and opened in May 2011.


    St. Joe had been a timber and railroad company for decades until the 1990s, when it spun off its industrial businesses to focus on real-estate development. It was convinced that its vast land holdings—it owns 577,000 acres, most of which is located in the Panhandle near Florida's white-sand beaches—were a gold mine for residential and commercial development. The company began developing luxury master-planned communities in the area, which is often derided for its deep southern feel and muggy climate.


    From: Wall Street Journal, B-1, January 27th St. Joe Co., one of largest landowners in Florida, signaled that it is scaling back development plans again, an indication that its efforts to turn the state's Northern Gulf Coast into a cluster of luxury second-home communities have been a flop.


    On Friday, the company indicated in a Securities and Exchange Commission filing that it has adopted a "new real-estate investment strategy" that will see it reduce capital expenditures at its master planned communities. The firm said it also expects to sell undeveloped parcels in bulk at discounted prices.



    The company expects to report a charge of between $325 million and $375 million for the fourth quarter of 2011, when earnings are released next month. That would amount to about one-fifth of the company's market capitalization and about half of the total real-estate assets on the company's balance sheet, which totaled $759.6 million at the end of September.


    Friday's news was the latest in litany of convulsive changes at St. Joe, which has struggled since the housing bust and has had just one profitable quarter since 2008. Last spring, the company's largestshareholder, Miami-based mutual-fund manager Bruce Berkowitz, successfully ousted St. Joe's board in a proxy battle and installed himself as chairman. In March, he named Park Brady, the former chief executive of vacation-rental company ResortQuest, with a mandate to cut costs and return St. Joe to profitability.


    In July, the WaterSound, Fla., company disclosed that the SEC was investigating the company's accounting practices for possible fraud and looking into whether Mr. Berkowitz filed the proper regulatory forms in acquiring a large portion of St. Joe's stock starting in 2008. That investigation remains unresolved. Mr. Berkowitz declined to comment through a representative.


    The strategy shift also seems to validate some of the assertions made by St. Joe's critics, who have argued that the company is overvalued. In October 2010, David Einhorn, president of the hedge-fund firm Greenlight Capital Inc., publicly questioned the company's accounting practices at a popular investment conference, saying St. Joe had valued some of its land too high on its balance sheet.


    Mr. Einhorn, who at the time had placed bets that St. Joe's stock would fall, suggested that the company should have written down the value of its assets by about two-thirds.


    On Friday, Mr. Einhorn said in an emailed statement, "Today's news confirms our view that St. Joe's land is worth less than they thought and that it can't be developed profitably."


    Mr. Einhorn retains a short, or bearish, position in St. Joe.

    Although the housing market has been reeling for several years, St. Joe was slow to react, said Eric Landry, a Morningstar analyst who follows the firm.


    "This new strategy confirms that the current management team feels more urgency toward attaining financial health than perhaps the old one did," he said. "They are saying, let's not build residential right now, until we spur some more economic development, because there's little demand for houses until they bring more jobs and commercial activity to the area."


    St. Joe executives declined to elaborate on the SEC filing, saying the company is in a quiet period ahead of its earnings report.

    People familiar with the company's plans, however, said that it will likely put on hold development at several of its most valuable resorts, possibly including WaterSound, a 1,400-acre group of coastal cottages sandwiched between a lake and the ocean, and WaterColor, a beach resort. Sales at both communities have been slow.
    In the filing, the company said the strategy change would save $190 million in capital expenditures that would have been made over the next 10 years.


    The company said it intends to continue to focus on commercial-real-estate development on the roughly 65 square miles of land the company owns around the Northwest Florida Beaches International Airport, which was built near West Bay on St. Joe land and opened in May 2011.


    St. Joe had been a timber and railroad company for decades until the 1990s, when it spun off its industrial businesses to focus on real-estate development. It was convinced that its vast land holdings—it owns 577,000 acres, most of which is located in the Panhandle near Florida's white-sand beaches—were a gold mine for residential and commercial development. The company began developing luxury master-planned communities in the area, which is often derided for its deep southern feel and muggy climate.


    From: Wall Street Journal, B-1, January 27th
     
  9. gmarc

    gmarc Beach Fanatic

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    watercolor proabably won't be affected but watersound?

    does st joe still own most of the vacant lots in watersound?if they dump those in bulk it could kill prices just as sowal comes off the bottom
     
  10. Dawn

    Dawn Beach Fanatic

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    Not sure but if they are bought by a bulk builder like happened in some other developments inSoWal there will be some nice homes at a nice price point in a nice development. Can't see how that is bad.
     
  11. gmarc

    gmarc Beach Fanatic

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    its bad for existing ownerrs as it kills price even more.price down 40-60% are low

    yes for people who want to buy its good.but buyers have had great prices for yrs
     
  12. coondog

    coondog Beach Lover

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    St. Joe is finally marking their real estate to market as it has been over valued for years by prior management, whom paid themselves quite well over the past several years until they were forced out while insisting that all of the real estate was held at fair value, which it obviously was not. Hence, the SEC investigation and the Shareholder suits. The mark downs clearly are attributed to the River Camp and Windmark assets where there is virtually no activity, and likely a lot of their commerical land around the airport where they have only signed one deal in close to two years. Watersound West is selling well as the pricing here has come down to much more reasonable levels, and considering that it is located on the south side of 30-A, pricing here is attractive. One has to believe that they have significantly marked down the Watersound North development as there is little to no activity here as well, and the only way to jump start things here is to start a builder program like they have done at West, or bulk sale lots cheap to merchant builders. They are already giving away highly discounted memberships to the Watersound Beach Club, which will infuriate current members who paid $20,000 for their memberships (at a Club that Joe actually had promised to turn over to the homeowners in Watersound in thier preliminary applications to Walton County, but then reneged, which should come as no surprise to anyone used to dealing with Joe).
     
  13. watersounder

    watersounder Beach Comber

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    We bought our home in WaterSound North in 2008. We were "given" a beach club membership when we bought the house back then. At last count I think we have approx 16 homes occupied. Two homes and one lot sale last month. The pricey model went under contract a couple weeks ago. We love it there (no crowds but access to the beach club) and wish we didn't have to sell ours but we do.

    We especially love when so many Sowal visitors come by to enjoy our park for soccer and community center for parties/weddings or to enjoy a wonderful day playing golf or bike riding. Most visitors first remark is how nice the development is and how lucky we are to have all the amenties to ourselves. All of use "North-ers" just nod our head and agree :)

    St Joe will do what they have to do at this point in time. As soon as things change to benefit them they will be right back in the game again - charging a premium. I'm just happy we are currently the lowest priced house in the development!
     
  14. mbo222

    mbo222 Beach Comber

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    We are finishing building in West now. I have tried to get a "deal" like above on the beach club for quite some time and had absolutely no luck. We talked to alot of JOE people and were told that they sold the memberships to the developer "at full price" and they can "resell" it as they see fit. Really ticked us off since we are supporting the area with a true custom home, but because we bought our lot from someone else we have to pay full price. How is that different than buying the lot from Huff? Unless of course it really did cost the developer 20k....hard to believe since they dumped lot prices to these developers by a ton (and devalued my land on appraisal).
     
  15. SHELLY

    SHELLY SoWal Insider

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    Who the hell saw THIS coming??:wave:

    I posted the following on the "Time to Buy Joe" thread in January 2011:

    Berkowitz--who was named Morningstar's "Domestic Fund Manager of the Decade" in January 2010, hosed the hound when he went all in on financial stocks and set about estranging :cool: the JOE management and crowning himself King JOE. He took his eye off the ball and his fund lost 32% over the last year. His fund is bleeding red ink and with clients baling out of his fund he's gotta raise cash any way he can...his dumping of JOE land is certainly not surprising to me--he'll take cash from anyone...a McDonalds in 30A's future?--quite possible.
     
    Last edited: Jan 31, 2012
  16. Abby Prentiss

    Abby Prentiss Beach Fanatic

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    The St. Joe Co. is changing its strategy.


    The WaterSound-based company plans to cut $190 million from its upscale planned community projects in Northwest Florida, putting an end to the “build it and they will come” strategy they have had in place the past few years.


    The company’s board of directors adopted a revamped real estate investment strategy focusing on reducing future capital outlays and employing “new risk-adjusted investment return criteria.” Plans to cut their losses and restructure their infrastructure and sell undeveloped properties in “bulk” at lower discounted prices are also in the works, the company announced in a government filing.


    St. Joe, with numerous upscale developments in Bay, Walton and Gulf counties, among other places in Florida, has freely admitted it overestimated the housing downturn.


    But, it’s unclear what the immediate effects will be on developments already under way, such as Breakfast Point in Panama City Beach. Citing unnamed sources, the Wall Street Journal reported the company likely would “put on hold” development at WaterSound and WaterColor. Commercial real estate developments, such as at VentureCrossings adjacent to the Northwest Florida Beaches International Airport, are not expected to be as heavily affected by the strategy change.


    Company officials said Monday they were in a “quiet period” and would not comment further on the company’s status before February’s earnings report is released.


    As the company stated in a Nov. 3 news release, the new management team led by Park Brady, who assumed the role of CEO in October, and Patrick Bienvenue, who joined the company as its executive vice in president in September, commenced a review of all of the company’s assets and projects.


    “In 2011, the new board directed management to reduce expenses. We have met that goal and, as a result, we currently expect to have positive operating cash flow in 2012, excluding discretionary capital expenditures. The next request of our board was the evaluation of our assets and development of a strategy to reduce future capital outlays. ... We believe this new strategy will fulfill that request,” Brady said in a news release Friday.


    The company said it would record a fourth-quarter impairment charge of $325 million to $375 million to reposition certain assets for sale. The company expected to finalize its estimates in February.


    St. Joe owns about 573,000 acres of land concentrated primarily in Northwest Florida and has significant residential and commercial land-use entitlements in hand or in process. The company has been attempting to transform itself into a developer of high-end homes and resorts. The company’s roots are in the timber and paper industries.


    Early last year, St. Joe Co. stock had been trading at more than $30 a share and had drifted to a love of $12.72 a share, according to the company. Monday afternoon the stock was trading at just over $16 a share.


    The Florida developer reported in November its third-quarter loss narrowed on lower expenses, though revenue declined 1.5 percent.






    Read more: http://www.newsherald.com/articles/joe-100034-refocuses-strategy.html#ixzz1l7x00gxm
     
  17. STL Don

    STL Don Beach Fanatic

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    What did you think of this shot at the end of the Wall Street Journal article: " The company began developing luxury master-planned communities in the area, which is often derided for its deep southern feel and muggy climate."
     
  18. Beach Runner

    Beach Runner beats on hood

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    It's the NYC attitude. When we and our daughter visited Columbia University in NYC when she was deciding on colleges, the Columbia tour guide (a student) referred to Atlanta as being "in the country" and literally asked us if we had indoor plumbing. I told him to f himself. It made me very angry. Our daughter had already been accepted, so they couldn't renege on her acceptance.
     
  19. beachmouse

    beachmouse Beach Fanatic

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    http://www.tampabay.com/news/busine...e-declares-huge-loss-shrinks-strategy/1217378

     

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