The St. Joe Co. (NYSE: JOE), or just St. Joe, is one of the more interesting real estate companies on the public markets. It isn't a real estate investment trust (REIT), it isn't just a commercial developer, and its business is far too complex to explain in a sentence or two.
With that in mind, here's an overview of what St. Joe does, the company's recent growth and developments, its performance history, and more.
The St. Joe Co. profile
The St. Joe Co. has had quite an interesting history. It has existed since 1936, but it was known as St. Joe Paper Co. for the first three decades and primarily operated a paper mill. It has since pivoted largely to land development, with massive land holdings mostly in Florida.
Most of St. Joe's land holdings are concentrated in Northwest Florida (the company is based in Panama City Beach). In addition to its land portfolio, The St. Joe Co. also owns commercial properties and resorts and develops residential and resort communities, mostly located near Northwest Florida beaches. The company also still operates a wood products division, in line with its roots, but this is a relatively small focus area.
One important point to get out of the way early in our discussion is that The St. Joe Co. is not a REIT. Therefore, it doesn't have minimum dividend requirements (it pays a paltry 0.7% yield) and is free to reinvest its profits into its business or distribute them as management sees fit.
This isn't necessarily good for income-seeking investors, but it can be a big advantage over the REIT structure for a company that sees significant future growth opportunities.
Apparently, St. Joe sees quite a bit of opportunity. In 2020, the company chose to pay out less than 6% of its profits as dividends, reinvesting most of the rest into growth opportunities. As of the 2020 annual report, St. Joe had 28 projects actively under construction, and this figure has increased in 2021.
Here's a quick rundown of the assets St. Joe owns and where the business stands as of 2021:
St. Joe owns 906,000 square feet of leasable commercial space, which includes retail, office, industrial, and freestanding properties. Top tenants in the portfolio include Starbucks, Publix, Ulta Beauty, and Dick's Sporting Goods, just to name a few. The company also owns multifamily residential properties, with 1,117 apartment units and more planned for the future.
The company uses the master-planned community model. If you're not familiar, this essentially involves selling land to residential developers, who build homes and create demand for commercial properties. St. Joe then builds commercial amenities that generate income.
This value-creation cycle continues until each community is built out. Right now, one that's particularly interesting is the Latitude Margaritaville Watersound community in Bay County, Florida, which is currently under development in partnership with homebuilder Minto Communities and will have 3,500 homes at full build-out.
St. Joe strategically sells homesites to builders in its communities. To give an idea of the scale, the company sold just over 500 homesites in 2020. As of mid-2021, more than 19,000 residential homesites in 17 communities were in various stages of development for future sales.
St. Joe also owns resort properties and operates clubs at its resorts. The company's Watersound Club has nearly 2,000 members and generates about $35 million in annualized revenue for St. Joe (as of mid-2021). Including joint ventures and properties under construction, St. Joe has interests in 11 hotels with 1,170 rooms.
The St. Joe Co. news
Recently, the company's growth has been quite strong. Since net income doesn't typically do a great job of conveying real estate profitability, and the popular REIT metric of funds from operations (FFO) doesn't really fit here either, St. Joe uses a metric it calls "cash generated for distribution or investment in additional growth," or CGFDI.
In short, since St. Joe is not a REIT, this is the amount of profit that can either be reinvested into the business or paid out as dividends to shareholders. On a per-share basis, St. Joe's CGFDI has grown from $0.79 per share in 2017 to $1.21 per share in 2020, an annualized growth rate of about 15%.
In the second quarter of 2021, the company's revenue increased by 100% year over year, led by a 133% increase in real estate revenue (land and property sales), which isn't too surprising given the hot real estate market. Hospitality revenue (e.g., resorts, club memberships, etc.) increased by an impressive 95%, while leasing revenue, which is normally the most consistent and predictable part, grew by 31%.
Another significant news item is that St. Joe has been very aggressive when it comes to buying back its own stock when it sees a bargain. Since 2015, St. Joe has bought back more than one-third of its outstanding shares at an average price of $17.64 per share. And it seems like it was an effective use of capital -- as of late October 2021, St. Joe stock trades for about $48.
It's also worth noting that while the COVID-19 pandemic wreaked havoc on much of the real estate sector, that wasn't really the case for St. Joe. As CEO Jorge Gonzalez said in the company's annual report, 2020 was a record-breaking year for the company's residential and commercial property segments.
St. Joe's land sales were as high as they've ever been, and the company's private clubs sold more memberships than ever before. As you'll see in the stock performance section, St. Joe's stock has more than doubled since before the pandemic started, something few other real estate companies can claim.
In other recent news items, St. Joe recently:
- Started development on a 554-acre master-planned community in Mexico Beach, Florida.
- Reached one million square feet of leasable commercial space, including properties under construction.
The St. Joe Co. stock price
St. Joe has been a public company since 1990, so there is quite a bit of performance history to unpack. And at first glance, the performance hasn't been great, with a 303% total return in approximately 31 years as a public company versus an excellent 2,480% total return for the S&P 500 as of October 2021.
However, St. Joe is a significantly different company from what it was back then. For example, the company's paper mill was operational (and unprofitable) until 1998. And keep in mind that this performance includes the Great Recession and the resulting real estate crash, which hit Florida particularly hard. In fact, in 2005, St. Joe was actually outperforming the S&P during its time on the public market before plunging as the real estate market turned.
With all of that in mind, here's a look at how St. Joe has performed over various periods: