St. Joe Co. Reports Rare Revenue Decline
Stagnant Florida real estate is catching up with the St. Joe Co., the Sunshine State’s biggest private landowner, the Orlando Sentinel reports. The company said Tuesday that its first-quarter profit tumbled to $3.7 million, or 5 cents percent share, from $15.4 million, or 20 cents per share, in the same period a year ago.
The culprit? Weak resort sales. The company, which has projects throughout the state of Florida, said its primary residential, commercial and rural land business did better than the resort division. Still, the Jacksonville-based developer saw its revenue slip to $167.4 million from $184.7 million a year ago as the Florida housing market continues to fall off its record pace.
One of Florida’s prominent real estate analysts, Paul Puryear of Raymond James & Associates, called the earnings statement disappointing. As part of a research report Tuesday, he said that that St. Joe’s operating profit of $11.8 million was well below the Raymond James’ forecast of $15.8 million, and the per-share profit of 5 cents was “dramatically” lower than the 28 cent consensus among analysts.
“We suspect the company will struggle to sell resort properties for some time, as Florida’s Panhandle appears over-developed following an immense amount of speculation over the last few years,” Puryear said.
St. Joe said the drop in demand from speculators — people who are seeking quick profits from flipping properties in a fast-rising market — is part of the explanation. Rising rates of Florida home loans also plays a part, as does record homes-for-sale inventory and lofty median prices that are discouraging to prospective buyers and make fast turnover unlikely.
This is St. Joe’s first earnings decline in five quarters. Sales of resort homes at the company’s waterfront Florida real estate communities such as WaterSound Beach and WaterColor, in the Florida Panhandle, slowed significantly in the first fiscal quarter, compared to the more active pace of the prior year.
“It appears that speculators are no longer a major demand element in this market. The size of the resale inventory suggests it will be some time before we return to a favorable balance between supply and demand,” said Chairman and CEO Peter Rummell.
St. Joe is clearly not alone. We’ve seen many Florida condo conversions revert to apartments in recent months, and a general decline in sales across the Sunshine State. As Florida home loans continue to rise, it will be interesting to see how major companies respond to decreased demand.
