St. Joe, a big player in Florida real estate, said it would reduce staff and sell off substantial acreage.
The housing-market decline has taken its toll on another giant Florida real estate company. St. Joe, Florida’s largest private landowner, plans to eliminate more than 75 percent of its workforce and sell about 100,000 acres of land.
St. Joe, whose 800,000 acres in Northwest Florida include some of the last pristine beachfront land, had ambitious plans to remake the region. It owns 10 master-planned communities, seven commerce parks, six golf courses and three marinas and had donated land for a new airport in the Florida Panhandle.
Now the company that referred to itself as a ”place maker” is handing off the management of its planned communities to what it calls strategic partners. CEO Peter Rummell said the move makes good business sense regardless of market conditions.
”This is not a fire sale,” Rummell told analysts Monday on a conference call. “We are not going to make stupid decisions, but there are things that we believe have reached their height in pricing. I firmly believe that we would be doing this whether the market was good or bad.”
Still, there’s no question that St. Joe is feeling the heat of Florida’s worst housing slump in 16 years. Statewide, sales plummeted 41 percent in the second quarter, according to the National Association of Realtors.
Homebuilders are struggling as prices fall and stricter lending standards resulting from the collapse of the subprime home-loan industry have cut demand. Florida has been hard hit as speculators abandoned the market and foreclosures have soared. In August, Florida had 26,203 foreclosure notices, ranking it the second highest in the nation after California.
Like other real estate companies, including Miami-based Lennar, St. Joe has suffered as well. The company’s profit has dropped four of the past six quarters, and sales haven’t risen since the third quarter of 2005.
This quarter, earnings will be reduced by a $30 million charge, and the company will also have $7 million in severance costs this year and next. In a dramatic move, the company is scrapping its dividend and replacing it with a share buyback program.
St. Joe’s stock has fallen 36 percent this year through Oct. 5. It closed Monday at $34.04.
St. Joe’s history in Florida dates back to 1936, when Ed Ball — black sheep brother-in-law of Delaware chemical scion Alfred I. duPont — founded the firm as St. Joe Paper. Its primary business was timber-growing, and it also at one time owned the Florida East Coast Railway.
Over the years, the company got out of the paper business and moved to leverage the value of its vast holdings. Within the last decade, it had begun developing massive resort communities such as WaterColor, targeted at baby boomers looking for new retirement destinations.
As of Feb. 1, St. Joe had about 938 employees and said its land holdings could allow it to build 46,000 residential units and more than 14 million square feet of commercial space.
The restructuring will save about $10 million in 2008, $18 million in 2009 and $20 million in later years, the company said.
”We’re not selling land now,” Rummell said on the conference call. “We’re carving it out and identifying it and we’ll sell at an appropriate price at an appropriate time. We have been able to articulate 100,000 acres that we think over a reasonable time frame is close to its reasonable value and based on pure economics it doesn’t make sense to hold on to.”
The company plans to transfer by the end of the year the operations of its hospitality, recreational and golf assets to companies that focus on those types of business. St. Joe said it will transfer 500 workers to those companies. It will also transfer or eliminate another 260 jobs by the end of next year.
BY BOB IVRY AND PETER WOODIFIELD, Bloomberg News
