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.
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