St. Joe Co. Switches Gears, Recognizes Impairment Charge

The St. Joe Co.’s’s board of directors has adopted a new real estate investment strategy, which is focused on reducing future capital outlays and employing new risk-adjusted investment return criteria for evaluating the company’s properties and future investments in such properties.

Pursuant to this new strategy, the St. Joe Co. intends to significantly reduce planned future capital expenditures for infrastructure, amenities and master-planned community development and reposition certain assets to encourage increased absorption of such properties in their respective markets.

Based on the work performed to date, the company currently anticipates it will record an aggregate non-cash charge for impairment associated with these projects that may range from $325 million to $375 million in the fourth quarter of its year ended Dec. 31, 2011. The company expects to finalize its estimates by the end of February.

As part of this repositioning, the company expects properties may be sold in bulk, in undeveloped parcels, or at lower price points. The firm anticipates that the amount of future capital expenditures associated with existing projects will be reduced by approximately $190 million, the majority of which was expected to be spent in the next 10 years.

The firm put in place a new management team late last year. The team is led by Park Brady, who assumed the role of CEO on Oct. 12, 2011 and Patrick Bienvenue, who joined the company as its executive vice president in September 2011. They commenced a review of all of the company’s assets and projects and the development of a new strategic plan to maximize the risk-adjusted return on the company’s real estate portfolio. The new strategy adopted by the board of directors is a product of that review. As a result, the company has decided to modify the development plans for certain of its projects to bring them in line with the company’s new investment return criteria.

“In 2011, the new board directed management to reduce expenses. We have met that goal and, as a result, we currently expect to have positive operating cash flow in 2012, excluding discretionary capital expenditures,” Brady said in a statement. “The next request of our board was the evaluation of our assets and development of a strategy to reduce future capital outlays and enhance the risk-adjusted return on investment while continuing to minimize potential risk to the Company in light of uncertain economic conditions.”

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