JACKSONVILLE, Fla. ? The St. Joe Company announced today that it intends to significantly accelerate its value creation process in Northwest Florida and is restructuring the company to accomplish that objective.
The restructured JOE is designed to increase its financial flexibility and strengthen its balance sheet. To improve its financial performance the company intends to:
? Significantly reduce capital expenditures;
? Meaningfully decrease selling, general and administrative expenses;
? Divest non-core assets;
? Aggressively lower company debt; and
? Eliminate the current dividend and over time return value to shareholders through JOE?s share repurchase program.
?Going forward, a restructured JOE will enable us to accelerate the transition of our land to higher and better uses,? JOE?s Chairman and CEO Peter S. Rummell said. ?At the same time, we will limit our capital investments by shifting more development to a range of best-of-class strategic business partners that include branded builders, project developers, venture partners, alliances and key long-term customers. Capital investment for horizontal developments will be limited to our most strategic and valuable places. We believe this approach will accelerate our land sales and development.?
?We are repositioning JOE from an ?end-to-end? developer to Northwest Florida?s primary supplier of entitled land and development partner,? Rummell said. ?By better managing our fixed overhead costs, we will be able to preserve the low basis in our land, which is fundamental to our ability to use price as a competitive advantage, to put time back on our side and to create significant value over the long term.?
?We are dramatically changing the company to become more efficient,? said Rummell. ?Through our restructuring process, we will significantly reduce capital expenditure requirements and operate with a leaner infrastructure. We believe JOE will benefit from a stronger balance sheet and, over time, a meaningful increase in our financial flexibility.?
JOE TO DIVEST NON-CORE ASSETS
JOE intends to harvest value from its land assets that are no longer strategic, that have already been moved to their highest and best uses, or whose full potential value is beyond the time-value curve. JOE intends to divest, over a reasonable time period given current market conditions, assets that include:
? Sunshine State Cypress Mill
? Selected non-contiguous parcels with commercial entitlements
? Approximately 100,000 acres of long-term rural lands
Also priced to sell are approximately 1,200 developed home sites and approximately 190 homes.
REDUCE AND TIGHTLY FOCUS CAPITAL EXPENDITURES
The restructuring plan calls for a major reduction in capital expenditures and tighter focus on our high-growth assets. Currently located primarily in Walton, Bay and Gulf Counties, these high-growth assets are the primary targets for future new business, partners and ventures. Examples of these growth assets include:
? The 75,000-acre WestBay Sector to be anchored by the relocated Panama City ? Bay County International Airport. After nearly 10 years of study, analysis and permitting, the local airport authority is nearing the start of construction of the airport.
? JOE?s resorts at WaterSound and WindMark Beach which define the Northwest Florida experience.
? In Walton and Gulf counties, JOE resorts are existing keys to future value creation. The Town of WaterSound is designed to drive value inland, across U.S. Highway 98 all the way to the Intracoastal Waterway. The thousands of acres within this development zone are capable of supporting dozens of land uses.
? A hundred miles to the east of WaterSound, JOE is seeking additional strategic partners who share our vision to accelerate growth at WindMark Beach and for Port St. Joe?s planned waterfront town center.
? Multiple entitled commercial parcels for mixed-use, retail, office and industrial uses.
A NEW JOE ORGANIZATIONAL STRUCTURE
To accomplish these objectives will require a realigned JOE. To that end, the company is:
? Creating a streamlined corporate and regional staff to support our new structure, instead of an organization designed to support full-scale development.
? Partnering with nationally recognized leisure, hospitality and lifestyle brands to operate our hospitality, recreational and golf assets.
? Seeking relationships with strategic partners to leverage existing investment and expertise.
The new JOE will consist of a lean corporate center focused on regional planning, land-use entitlements, and business-to-business relationships with strategic partners and customers. JOE will increase its efforts to stimulate regional economic development and to identify and manage key regional inducers.
Before the end of the year, JOE intends to transfer the day-to-day operations of its hospitality, recreational and golf assets to recognized leisure, hospitality and lifestyle companies. For many of the approximately 500 employees in these units, this change will provide significant new professional opportunities. JOE will continue to own the assets to keep the revenue stream and ensure they continue to be managed in a way that increases the value of the surrounding JOE land.
Approximately 260 additional positions company-wide, particularly in project development and related support staff, will be either eliminated or transferred to strategic partners and customers between now and the end of 2008.
In connection with this restructuring, JOE expects to take a charge to earnings of approximately $7 million consisting of severance benefits to employees. This charge will be expensed substantially in 2007 and 2008. JOE?s restructuring is expected to generate annual savings of approximately $10 million in 2008, approximately $18 million in 2009 and approximately $20 million in later years.
In addition, JOE expects to take charges aggregating approximately $25 to $30 million in the third quarter of 2007 related to contract termination costs, the write-off of capitalized costs at certain projects, the impairment of completed spec homes in several communities and the write-off of goodwill related to Sunshine State Cypress Mill.
The charges outlined in this release are not expected to cause a violation of any debt covenants in 2007. The company is currently negotiating modifications to the bank credit facility with our bank group in order to mitigate the potential for any covenant breach in 2008. JOE also intends to seek similar covenant modifications from its Senior Note holders.
Replies
47Beach Comber
Everyone keeps saying that Joe turning over management of WaterColor is a huge event. The reality is that a new management company was brought in almost a year ago to handle property management, and the HOA is about to be turned over to the property owners pursuant to the HOA documents that were put in place over seven years ago (this happens in all planned communities once a certain percentage of ownership is held by persons other than the developer). Joe will continue to own the hotel, which will be managed by a third party hotel company. Am I missing something, or this not much of an impact on the day to day operations of WaterColor? As for the impact on the real estate in WaterColor, Joe's assets (with the exception of about four houses in Phases I, II and III and some more houses and lots in Phase IV) that will be dumped primarily are in other developments.
SoWal Insider
Word on the street is that Peter Rummell is also stepping down (retiring). I haven't read through the other threads on JOE, and this may have been mentioned earlier. Does anyone know who JOE will be using to replace Peter?
Jeb Bush
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Beach Fanatic
OMG! Pls tell me you're kidding!😱
Beach Fanatic
Just got back from sushi....used to be at Fish Out of Water, sushi now relocated to the lobby bar of the inn...had a visit with an employee and she was reeling from changes in management, real estate sales, and department heads.
SoWal Insider
...had a visit with an employee and she was reeling from changes in management, real estate sales, and department heads.
How so?
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Meow
😱...Molly and I are jumping off the f balcony!!!! ;-) 😀 :wave:
Beach Fanatic
Brit Greene will succeed Rummell. He is President and Chief Operating Officer of St. Joe.
Beach Fanatic
Everyone keeps saying that Joe turning over management of WaterColor is a huge event. The reality is that a new management company was brought in almost a year ago to handle property management, and the HOA is about to be turned over to the property owners pursuant to the HOA documents that were put in place over seven years ago (this happens in all planned communities once a certain percentage of ownership is held by persons other than the developer). Joe will continue to own the hotel, which will be managed by a third party hotel company. Am I missing something, or this not much of an impact on the day to day operations of WaterColor? As for the impact on the real estate in WaterColor, Joe's assets (with the exception of about four houses in Phases I, II and III and some more houses and lots in Phase IV) that will be dumped primarily are in other developments.
I think that you are dead on. Joe's decision to partner with companies who are frankly better at management than Joe is a good thing. As evidenced by their constant changing of policies, they are really average at managing resort properties. It is sad to see so many employees who we've become friends with be caught up in it.
Beach Comber
When these types of things happen, many good people lose jobs, and that is the sad part about what is happening. From the business perspective, however, I do not view any of these changes as surprising or negative in any way. WaterColor and WaterSound already have completed amenities and infrastructure, so the real issue relates to who will manage and maintain those going forward. I can almost guarantee you that the company that takes over managing the beach club and inn at WaterColor will be a company with a very prominent reputation as a first-class operator of resort properties. St. Joe never had experience running hotels or resorts prior to WaterColor. Thus, the new partners that are brought in likely will do a better job of managing the properties and maintaining the amenities and service levels. The real estate market is down now, we all know that and many prior message threads have been devoted to that subject. But these recent changes by Joe relate more to the management and operation of communities (particularly at WaterColor, where Joe had already sold off its spec homes and lots -- with the exception of Phase IV). Joe's strong suit never has been to manage and operate resort communities and there are companies that do nothing but those tasks that are better suited to perform those tasks.
I also would guess that many of the Joe employees at WaterColor who are in sales will land on their feet with other realty companies in the area. The employees at the inn, beach club, golf, etc. probably will land on their feet with the new companies that take over these operations.
In short, I think all of the negativity surrounding the real estate market is translating over into how Joe's recent announcment is being viewed.
I also would guess that many of the Joe employees at WaterColor who are in sales will land on their feet with other realty companies in the area. The employees at the inn, beach club, golf, etc. probably will land on their feet with the new companies that take over these operations.
In short, I think all of the negativity surrounding the real estate market is translating over into how Joe's recent announcment is being viewed.
Beach Comber
I don't read this as a firesale "dump". I see that there is recognition that they, Joe, don't like the risk associated with the cradle to grave r/e development. It sounds like they want to go from developer to landlord if you will. By partnering with those historically successful in the business it should allow them to predict better and avoid so much risk.
Somebody on a prior post suggested bulk sales to a wholesaler. I don't know about that. Who would want to be in that spot. Those sales would be recorded and then set the market. My guess is that Joe just get's alot more aggressive in the developments where the big capital expense is behind them and in those where much more is needed look to partner. I see it as a very good time to try and get in to Watercolor.
Somebody on a prior post suggested bulk sales to a wholesaler. I don't know about that. Who would want to be in that spot. Those sales would be recorded and then set the market. My guess is that Joe just get's alot more aggressive in the developments where the big capital expense is behind them and in those where much more is needed look to partner. I see it as a very good time to try and get in to Watercolor.
Beach Fanatic
When these types of things happen, many good people lose jobs, and that is the sad part about what is happening. From the business perspective, however, I do not view any of these changes as surprising or negative in any way. WaterColor and WaterSound already have completed amenities and infrastructure, so the real issue relates to who will manage and maintain those going forward. I can almost guarantee you that the company that takes over managing the beach club and inn at WaterColor will be a company with a very prominent reputation as a first-class operator of resort properties. St. Joe never had experience running hotels or resorts prior to WaterColor. Thus, the new partners that are brought in likely will do a better job of managing the properties and maintaining the amenities and service levels. The real estate market is down now, we all know that and many prior message threads have been devoted to that subject. But these recent changes by Joe relate more to the management and operation of communities (particularly at WaterColor, where Joe had already sold off its spec homes and lots -- with the exception of Phase IV). Joe's strong suit never has been to manage and operate resort communities and there are companies that do nothing but those tasks that are better suited to perform those tasks.
I also would guess that many of the Joe employees at WaterColor who are in sales will land on their feet with other realty companies in the area. The employees at the inn, beach club, golf, etc. probably will land on their feet with the new companies that take over these operations.
In short, I think all of the negativity surrounding the real estate market is translating over into how Joe's recent announcment is being viewed.
George, you are 100% correct! This will all taste like lemonaid by this time next year!:roll:
Beach Fanatic
anyone want to post some info from the watercolor homeowner's meetings from last weekend? anybody? buehler?
Beach Fanatic
I was at the meeting even though I am a Watersound owner. It was the first opportunity to get a slant on things after the JOE announcement. It was hardly mentioned in the context of lay offs etc. There was some discussion of Noble House and Troon but all in all the meeting was a non-event. Very benign and civil. The greatest concern and source of complaints had to do with renters at Water Color and lack of parking , bikes in the streets, crowded beach club , over crowding in the rental houses because some houses had 15-20 people when by law only 2 people per bedroom are allowed, and noise from renters.
Meow
What goofer said. Now that Joe is gone, the unhappies are bashing the owners that rent. :roll:
SoWal Insider
What goofer said. Now that Joe is gone, the unhappies are bashing the owners that rent. :roll:
yeah but what about that nasty comforter?! 😀:wave:
Beach Fanatic
There was some discussion of Noble House and Troon but all in all the meeting was a non-event.
Who are Noble House and Troon?
SoWal Insider
Who are Noble House and Troon?
Here is a link to Noble House resorts:
http://www.noblehousehotels.com/Noblehouse_home.aspx
One of the places they manage is one of my favorite resorts in Key West "Ocean Key House" that seem to run that one very well.
Troon's link:
http://www.troongolf.com/company/press_room/story/200.php
Edited
Beach Comber
St Joe gets the bad news out of the way before they give the good news (at least as far as the company is concered). They are keepng the West Bay Sector Area propety. They think it is prime for development. When the dirt is turned for the new airport , I think there will be big announcements for the area around the airport that Joe owns.
Beach Fanatic
This is not good news...
St. Joe was a timber company. Loggers, not real estate people, or hospitality people. They chose to team up with Arvida, whose practices led them into some serious trouble after Hurricane Andrew. The problem that I have been concerned with is that birds of a feather seem to flock together. How can a reputable company collaborate with one that is known to be not reputable? Unless they both have similar standards. I think that it has been inevitable. The problem now is what to do with the unemployed workers? Where do they go now?
http://www.ccfj.net/condoartshoddy.html
http://digital.library.miami.edu/andrew/html/signs_of_andrew.html
http://www.ansbacher.net/content/construction.htm
St. Joe was a timber company. Loggers, not real estate people, or hospitality people. They chose to team up with Arvida, whose practices led them into some serious trouble after Hurricane Andrew. The problem that I have been concerned with is that birds of a feather seem to flock together. How can a reputable company collaborate with one that is known to be not reputable? Unless they both have similar standards. I think that it has been inevitable. The problem now is what to do with the unemployed workers? Where do they go now?
http://www.ccfj.net/condoartshoddy.html
http://digital.library.miami.edu/andrew/html/signs_of_andrew.html
http://www.ansbacher.net/content/construction.htm
SoWal Insider
The problem now is what to do with the unemployed workers? Where do they go now?
Well, according to the Business Wire:
500 employees are being transferred to JOE's "best-in-class strategic alliance partners" which will "provide them with significant new professional opportunities."
.
Edited
Beach Fanatic
Well, according to the Business Wire:
500 employees are being transferred to JOE's "best-in-class strategic alliance partners" which will "provide them with significant new professional opportunities."
.
Thank goodness for the family's.
Beach Fanatic
George, you are 100% correct! This will all taste like lemonaid by this time next year!:roll:
I can taste it now! :clap:
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