Consolidate credit debt fl management

A.I. duPont, scion of the family that founded the DuPont Co., set the foundation for The St. Joe Co. when he left Delaware in the 1920s with ambitions to start a Jacksonville-based paper company. The family rebel, duPont was considered a nonconformist who didn't mind shaking things up.

More than 70 years later, The St. Joe Co. continues to shake things up with its transformation into one of the largest real estate service providers and developers in Florida and the Southeast. With the advent of Chairman and CEO Peter Rummell two-years-ago, the company sold its sugar lands to the Nature Conservancy and ultimately the federal government for Everglades preservation. It began a flurry of mergers and acquisitions that has put the company in position to become a commercial real estate giant in the Southeast and eventually Texas and the Southwest.

It doesn't hurt that St. Joe owns 1.1 million acres of land in Florida, the starting point for the company's metamorphosis.

"The greatest advantage for us is that we can use that land to trade into other land positions that might be more 'market ready,' accelerate the production of the land and fundamentally not change the balance sheet of the company," St. Joe Commercial Group President David Fitch says. "From that foundation came the concept of focusing the majority of the company's efforts into creating a real estate production company. Having a great deal of raw material in the land made for a good start."

St. Joe also has more than $425 million in cash and securities, no debt and a market capitalization of $2 billion through the third quarter of 1998. The company owns a majority interest in Florida East Coast Industries Gran Central railroad, and in 1998 signed an agreement to manage Gran Central's existing commercial and industrial portfolio of more than 6 million sq. ft. and all new Gran Central development.

The company's financial strength and ability to move from timber holdings to urban and suburban commercial developments through Section 1031 Exchanges are two keys to St. Joe's triangle development strategy extending from Dallas to Washington, D.C., to south Florida. That financial strength and equity also give the company an upper hand when others find tight credit markets.

"We have acquired or are in the process of acquiring what we believe to be very exciting land positions in some of the strongest commercial engines in the Southeast and Texas," says Fitch, who joined St. Joe in 1997. "'99 is about putting them into production and development. We understand that there are certain markets which require one to have product immediately available on a short-term basis because of the nature of the decision cycle of some of the users.

"However, there are others that want to solve long-term real estate problems and are willing to take the time to do the planning and staging so they can do more build-to-suit. Again, in those instances we don't have to go outside our own balance sheet to perform. I think there are a fairly small number of groups that can do that right now."

St. Joe kicked off 1999 in a deep hole, literally, as 200 diggers broke ground in January on HomeSide Lending Inc.'s south Jacksonville headquarters -- a 141,500 sq. ft. build-to-suit that will allow HomeSide to consolidate more than 900 employees.

And while St. Joe started 1999 in a pit, the company finished 1998 announcing plans for more than 4 million sq. ft. of development in Florida alone. Key components include Gran Park at Jacksonville, a 1 million sq. ft. office park launched in the third quarter with its first building scheduled for July 1999 completion; Broward County's Beacon Pointe at Weston, which includes four office buildings totaling 375,000 sq. ft. and a full-service hotel; and Miami's Beacon Station, a joint-venture with Weeks Corp. that includes development plans for two Gran Central industrial buildings totaling 360,000 sq. ft. Near the Miami airport, Beacon Station is entitled for 6.5 million sq. ft. of office and industrial space.

Overall, the company manages 40 million sq. ft. of commercial space with annual transaction volume of more than $1 billion, has 2 million sq. ft. under development and has entitled development rights for an additional 20 million sq. fi. in Florida and the Southeast. With its massive land holdings, St. Joe also is developing resorts and hotels on the Florida Panhandle's Gulf Coast -- a move that will dramatically increase the value and return on the property -- as well as that of master-planned residential communities developed by Arvida, a 1997 St. Joe acquisition and one of the nation's largest community developers. An entertainment complex in Panama City Beach, Fla., is part of those Panhandle plans as well.

This month, St. Joe announced it entered a contract to acquire Glenlake 400 in Atlanta near United Parcel Service's headquarters in the Georgia 400 corridor. Glenlake 400 has full site plan approval and entitlements -- an important consideration with metro Atlanta's current zoning climate and environmental woes -- potential for 1 million sq. ft. of development, including a 450-room luxury motel. Even in the project's early stages, the luxury hotel has generated a great deal of interest, and St. Joe expects tenants needing large blocks of space to be equally interested. "It's as good a site as exists in that area of the world," Fitch says.

Covering all the bases with M&A

In one year-long fell swoop, St. Joe established its real estate services business with the acquisitions of Chesapeake, Va.'s, Goodman Segar Hogan Hoffler GVA; Florida Real Estate Advisors (FREA); and, with Weeks, a one third interest in Codina, one of south Florida's dominant real estate development and management firms. With the acquisitions, St. Joe now operates 11 offices in the Dallas - D.C.- Miami triangle, with plans to move into Charlotte, N.C., and Nashville, Tenn., in 1999. Goodman Segar GVA and FREA will be merged into an independent operating subsidiary of St. Joe Commercial Group with T. Richard ".Dick" Bryant Jr. serving as president. A new name for the subsidiary will be unveiled in the next few months.

"By way of the acquisitions, we instantly have market position," Fitch says. "We're going to strengthen that by providing resources to the service companies to make them better at what they do in the services they provide. We like the services business, and we think that there's a lot of room for a focused, Southeastern company."

While St. Joe was well on its way to establishing a dominant real estate company in Florida, the $15.7 million Goodman Segar deal pushed the company beyond the borders of the Sunshine State. With the deal, Goodman Segar's headquarters will move from Norfolk, Va., to Atlanta. Goodman Segar has offices in Washington, D.C.; Atlanta; North Carolina's Research Triangle Park; and Tyson's Corner, Richmond, Norfolk and Newport News, Va.

"Goodman Segar was a company that covered exactly the markets we wanted to be in," Fitch says. "And although there were other companies, they were not connected and put together the way Goodman Segar was."

The acquisitions give Goodman Segar and FREA instant advantages as well.

"It's primarily a focus and attitudinal change," Bryant says of the transition. "St. Joe is without question more long-term thinking. It is their vision and commitment to create a real estate services company throughout the triangle that has points in Dallas; Washington, D.C.; and Miami. They are willing to make the investment in infrastructure and foundation today to make sure that we accomplish that objective over the next few years.

"We are now thinking on a much broader, much more long-term basis in terms of building a first-class real estate service organization that is coupled with a real estate developer who also has a very aggressive development plan for the region we're going to operate in."

St. Joe's strength also gives the service companies access to the latest technology and enhances the company's ability to attract and retain top-shelf talent for their brokerage, financial, construction and management services. The company plans to introduce proprietary, high-tech marketing software within the next two months.

"Due to St. Joe's strength and long-term commitment to our success and dominance, we're able to look at the latest technology in terms of accounting systems, in terms of information systems, in terms of how we present ourselves, in terms of advertising and in terms of some of the employee retention programs that we can install as a strong financial entity that we think will retain people and attract people and make us better servers of our clients in' the process," says Bryant, who managed Goodman Segar GVA's Atlanta operations before the St. Joe acquisition.