St. Joe Co. moves away from ‘build it and they will come' strategy

WATERSOUND — The business focus is changing for the largest private landholding company in Northwest Florida, as the St. Joe Co. shifts its concentration from residential to commercial development.

St. Joe Co. leaders have an optimistic outlook for their shareholders and have pledged to keep their returns in mind when making business decisions and developing strategies.

While one of the most successful local St. Joe Co. developments, WaterColor, is seeing an increase in sales and prices in the first quarter of 2011, according to company executives, other developments have failed to provide similar results.

The financial future of the St. Joe Co. likely will have a strong tie to the development and sale of the land around the Northwest Florida Beaches International Airport near West Bay. The opening of the airport’s new covered parking structure for this Memorial Day weekend and plans in development to build warehouses and offices for potential customers are the start.

But, the previous mantra of the St. Joe Co., to invest in developing high-end home sites along Gulf Coast beaches in hope of attracting builders, is becoming less of a priority in light of the recession and state of the Florida housing market.

“St. Joe had made changes, but it had not addressed that this recession was going to be a little longer than we thought,” new Chief Operating Officer Park Brady told shareholders at a May 17 annual meeting in WaterColor.

The direction of the company is shifting to leverage development around the airport, one of the key economic engines for Bay County and Northwest Florida. An example of this philosophical change from “build it and they will come” to a strategic approach of building sites for aerospace and aviation companies is illustrated by the indefinite postponement of St. Joe. Co.’s new headquarters in VentureCrossings.

At the shareholders meeting, John Walt, a shareholder of St Joe Co. (NYSE:JOE) stock and a resident of Walton County, asked Brady and new Chairman of the Board Bruce Berkowitz about suspending construction of the new headquarters.

“We made the decision that we didn’t need to build a single-purpose building for our employees,” Brady said. “We decided we would be better off reallocating that money, and it allowed us to get started with some projects we had put on hold.”

St. Joe. Co. officials have declined to comment on the amount of capital allocated to the planned headquarters or how much will be reallocated now that the building has been suspended indefinitely.

“We have decided that instead of using the money to build a new space for us, we are going to build a space for some customers, and I hope that was clear,” Berkowitz told shareholders.

Berkowitz said the company is in negotiations with three or four clients and he hopes to have some good news in the not-so-distant future. “We are building at VentureCrossings. We are just not building for our staff,” he said.

The plans for VentureCrossings have not changed; the target industries to recruit to the new development include aerospace and industrial users.

Mark Lanky, a shareholder, asked the new chief executive what the core competencies are for the St. Joe Co., other than just the ownership of low cost land. The question could not be answered by Brady. He pointed out that with him being with the company for less than 60 days, he’s still examining every aspect of the business.

“What we really need is a strategy for this company,” Brady said. “We are looking and investigating everything that we are doing now.”

Some issues identified by other investors and fund managers on Wall Street, including how St. Joe values land on its financial statements and a Securities and Exchange Commission (SEC) informal inquiry based on those criticisms, were briefly addressed to shareholders.

“We are giving the SEC everything we have and we want to give them everything we have and do it as quickly as possible,” Berkowitz said.

The inquiry goes back to the valuation of land, something the land company has held is hard to accurately report on financial reports because there are thousands of areas on the books for mere pennies and other areas on the books at high values. The carry cost of land on the books is not reconciled until the acres are sold on the open market.

The WindMark development was discussed at the May 17 meeting, as well. The property in Port St. Joe has been criticized on Wall Street as a failure. Berkowitz used a map to illustrate that the criticisms levied by Wall Street investors failed to look at the entire WindMark development, only a small section. St. Joe. Co. officials do not generally respond to questions from the media or respond to criticism from other hedge fund managers.

“We are not in the business of educating nonshareholders about what we own,” Berkowitz said.

The shareholders of the company are still made up largely of hedge fund managers, as well as individual investors like Mark Lanky and John Walt.

“Just remember this is our retirement,” one unidentified female shareholder said at the meeting.