A recent stock offering, which netted the company $580 million, was dilutive to existing shareholders but let St. Joe wipe out its debt, erasing any concerns about its liquidity.
The debt-free company, which owns 700,000 acres -- much of it on or near the relatively undeveloped and, in many areas, beautiful Gulf Coast of Florida's panhandle -- is on very solid ground.
A big plus: A new airport, now under construction, has the potential to increase the area's allure to visitors from outside the South, help broaden its economy beyond tourism and make the area more attractive when property buyers emerge in strength again.
St. Joe got into the construction business after Peter Rummell became chief executive in 1997 and saw how difficult it was to entice builders to northwest Florida. But operating a building unit was very expensive and tied up a lot of the firm's capital, says Britt Greene, St. Joe's president, who will succeed Mr. Rummell as CEO later this month.
Profitable Sites
Now, St. Joe is getting out of the construction business with the transition eased by the fact that other builders have come into the region. Going forward, the company's focus will be on "entitled land" -- construction-ready sites sold with all of the necessary land-use and environmental approvals. St. Joe plans to either sell land to developers outright or partner with them.
As of Dec. 31, St. Joe had entitlements for 38,559 residential units that are being developed or are in predevelopment, along with 12.3 million square feet of commercial land ready to go.
Whenever these properties are sold, they'll be extremely profitable for St. Joe because the parcels were bought 70 or 80 years ago for a song and still are carried on the company's balance sheet at prices below market value.
Valuing St. Joe precisely is difficult because its growth is embedded in its land holdings, whose sale prices are hard to predict.
"The bottom line is that on a per-acre basis, it still looks like you are buying the land at a reasonable valuation today," says Michael Winer, who runs the Third Avenue Real Estate Value Fund.
Plus St. Joe can afford to wait, now that it's debt-free.
