Business Overview

St. Joe is a real estate development, asset management and operating company with all of its real estate assets and operations in Northwest Florida. The company intends to use existing assets for residential, hospitality and commercial ventures. St. Joe has significant residential and commercial land-use entitlements and actively seeks higher and better uses for its real estate assets through a range of development activities.

The company has created a meaningful portion of its business through joint ventures (JVs) and limited partnerships over the past several years to complement its growth strategy, leverage industry expertise and diversify its business. St. Joe may also partner with or explore the sale of discrete assets when it or others can better deploy resources.

Approximately 87% of St. Joe’s real estate is located in Florida’s Bay, Gulf, and Walton counties, with around 90% within fifteen miles of the Gulf of Mexico. The company believes its capital structure, liquidity and land provide years of opportunities to increase recurring revenue and long-term value for shareholders. St. Joe intends to focus on real estate development, asset management and operations, developing a broad range of asset types that it believes will provide acceptable returns, grow recurring revenues and support future business.

Market Conditions

Despite macroeconomic headwinds like inflation, interest rates, insurance costs, supply chain issues, and geopolitical conflicts, St. Joe has continued to generate positive financial results. The company attributes this to the continued growth of Northwest Florida due to increased migration, driven by the region’s high quality of life, natural beauty and amenities.

While elevated interest rates have negatively impacted buyers’ ability to obtain financing, this has been offset by net migration, limited housing supply, and the number of cash buyers. Market conditions have not caused an increase in cancellation rates as homebuilders have continued to perform on their contractual obligations.

Reportable Segments

St. Joe conducts business in three reportable segments:

1. Residential
2. Hospitality
3. Commercial

The relative contribution of these segments to consolidated operating revenue is shown in the table below:

,Three Months Ended September 30,Nine Months Ended September 30, Segment,2024,2023,2024,2023, Residential,19.2%,35.0%,27.3%,42.0%, Hospitality,57.0%,47.3%,53.5%,39.2%, Commercial,22.7%,16.2%,18.1%,17.7%, Other,1.1%,1.5%,1.1%,1.1%, Consolidated operating revenue,100.0%,100.0%,100.0%,100.0%,

Residential Segment

St. Joe’s residential segment plans and develops residential communities of various sizes across a range of price points, selling homesites to homebuilders or retail consumers. The segment also evaluates opportunities to enter into JV agreements for specific communities like Latitude Margaritaville Watersound.

Residential segment revenue comes from homesite sales, home sales, residential land sales, homesite residuals, tap/impact fees, marketing fees and other fees. Costs include direct development/construction, selling and indirect expenses.

The residential pipeline includes over 22,000 homesites in various stages of planning or development across 20 different communities. As of September 30, 2024, there were 1,381 residential homesites under contract, expected to result in $122.3 million in revenue.

Hospitality Segment

St. Joe’s hospitality segment features a private membership club (Watersound Club), hotel operations, food/beverage, golf courses, beach clubs, retail, marinas, and other entertainment assets. Hospitality revenue comes from membership sales, golf, lodging, short-term rentals, food/beverage, merchandise, marina operations, charter flights, and beach clubs.

The hospitality portfolio includes 1,298 hotel rooms across 12 properties, as well as two marinas, retail stores, restaurants, and other entertainment assets. The company has additional hospitality projects in various planning stages.

Commercial Segment

St. Joe’s commercial segment includes leasing of commercial, multi-family, senior living, self-storage and other assets. It also oversees planning, development, entitlement, management and sale of commercial and forestry land holdings.

The commercial leasing portfolio consists of approximately 1,179,000 square feet of leasable space for mixed-use, retail, industrial, office, self-storage and medical uses, with 96% leased as of September 30, 2024. The company also has commercial projects under development and construction.

Critical Accounting Estimates

St. Joe’s critical accounting policies and estimates, which are subject to change, are set forth in its 2023 Annual Report on Form 10-K. There have been no significant changes during the first nine months of 2024.

Seasonality and Market Variability

St. Joe’s operations may be affected by seasonal fluctuations. Revenues and earnings can vary significantly from period to period due to factors like sporadic homebuilder transactions, varying homesite prices by community, higher hospitality revenues in Q2/Q3, and non-recurring commercial real estate sales.

Extraordinary events like hurricanes or public health emergencies may also dramatically change demand and pricing. The company may choose to operate, lease or sell assets in ways that may delay revenue and profits.

Results of Operations

Consolidated Results:

• Total revenue decreased 2.4% to $99.0 million in Q3 2024, while operating income increased 4.4% to $21.2 million.
• Net income attributable to the company decreased 13.4% to $16.8 million in Q3 2024, primarily due to timing of homesite closings, product mix, and lower equity income from JVs.
• For the first 9 months of 2024, total revenue decreased 1.4% to $298.4 million, while operating income decreased 4.8% to $69.9 million.

Real Estate Revenue and Gross Profit:

• Residential real estate revenue decreased 46.5% in Q3 2024 and 35.8% in 9M 2024, with gross margins of 39.1% and 48.0% respectively.
• Commercial/forestry real estate revenue increased in Q3 2024 but decreased in 9M 2024, with gross margins around 57-62%.
• Timber revenue decreased in both periods due to lower volumes and prices.

Hospitality Revenue and Gross Profit:

• Hospitality revenue increased 16.9% in Q3 2024 and 34.2% in 9M 2024, with gross margins of 34.1% and 33.3% respectively.
• The increases were driven by growth in membership, new amenities, and higher lodging revenue from new hotel openings.

Leasing Revenue and Gross Profit:

• Leasing revenue increased 19.1% in Q3 2024 and 20.2% in 9M 2024, with gross margins around 50%.
• The increases were due to new multi-family, commercial, and marina leases.

Segment Results

Residential Segment:

• Homesite sales revenue decreased due to mix and timing of closings, with gross margins of 39.1% in Q3 2024 and 48.4% in 9M 2024.
• Equity income from the Latitude Margaritaville Watersound JV decreased slightly in Q3 2024 but increased in 9M 2024 due to higher home sales.

Hospitality Segment:

• Revenue increased from membership growth, new amenities, and higher lodging from new hotel openings.
• Gross margins improved to 34.1% in Q3 2024 and 33.3% in 9M 2024 as new assets stabilized.

Commercial Segment:

• Leasing revenue increased from new multi-family, commercial, and marina leases, with stable gross margins around 53-54%.
• Commercial/forestry real estate revenue and margins varied by period based on the mix and characteristics of sales.
• Equity loss from the Watersound Fountains JV increased due to pre-opening, lease-up, and other expenses.

Liquidity and Capital Resources

As of September 30, 2024, St. Joe had $82.7 million in cash and cash equivalents. The company believes its current liquidity, financing arrangements, and cash flow from operations will be sufficient to meet anticipated needs for the next 12 months.

St. Joe invested $98.7 million in capital expenditures during the first 9 months of 2024, primarily in the residential, hospitality, and commercial segments. Future commitments of $28.7 million will be funded through operations, new financing, and cash on hand.

St. Joe had $448.5 million in total debt outstanding as of September 30, 2024, with a weighted average interest rate of 5.1% and average remaining life of 16.8 years. The company also has various loans and guarantees related to its JV projects.

Forward-Looking Statements

This report contains forward-looking statements subject to risks and uncertainties, including the company’s ability to successfully execute its strategic objectives, manage its real estate assets and JV projects, complete development projects, maintain demand for its hospitality offerings, and navigate macroeconomic conditions like inflation, interest rates, supply chain issues, and geopolitical conflicts. Other risks include regulatory, legal, tax, reputational, cybersecurity, and financing-related matters. St. Joe cautions readers not to place undue reliance on these forward-looking statements.