The St. Joe pany(JOE) - 2021 Q4 - Annual Report

PART I Business The St. Joe Company is a Florida-based real estate developer owning 170,000 acres in Northwest Florida, focused on developing residential, hospitality, and commercial assets to build recurring revenues and long-term value - The company is a major real estate developer in Northwest Florida, owning 170,000 acres with entitlements for over 170,000 residential units and 22 million sq. ft. of commercial space[11] - St. Joe's business is organized into three reportable segments: (1) residential, (2) hospitality, and (3) commercial[15] - The company's strategy is to develop its real estate assets to generate recurring revenues and enterprise value, funded by project proceeds, cash, partner capital, and financing, while maintaining low corporate debt[12][13] - As of February 21, 2022, the company employed 54 corporate professionals, 528 full-time employees, and 80 part-time/seasonal employees, with approximately 49% of the workforce and 50% of the executive management team being female[20][27] - The company returns cash to shareholders via dividends and stock repurchases, paying a quarterly dividend of $0.08 per share in 2021, with $77.4 million available under the Stock Repurchase Program as of December 31, 2021[14] Risk Factors The company faces strategic, operational, geographic, ownership, legal, regulatory, and financial risks that could materially affect its business and financial performance - Strategic risks include potential failure to implement its business strategy, accurately forecast financial results, and significant competition from local, regional, and national companies[39][41][42] - Operational risks stem from real estate development and construction, including supply chain disruptions, labor shortages, rising costs, and high dependency on homebuilders, alongside inherent risks in the hospitality and commercial leasing sectors[55][61][62][63] - The company's geographic concentration in Northwest Florida makes it particularly vulnerable to regional economic downturns, hurricanes, and the long-term effects of climate change[74][76] - A significant ownership risk exists as the largest shareholder, Fairholme Capital Management, L.L.C. and its clients, beneficially own approximately 42.6% of the company's common stock, allowing them to influence corporate matters[79] - Legal and regulatory risks include the potential of being deemed an investment company under the Investment Company Act of 1940, complex development and land use requirements, and evolving environmental regulations[81][85][88] - The company faces risks related to cybersecurity threats, its ability to attract and retain skilled employees in a competitive labor market, and the effectiveness of its internal controls over financial reporting[94][97][101] Unresolved Staff Comments The company reports no unresolved staff comments from the U.S. Securities and Exchange Commission - There are no unresolved staff comments[108] Properties The company owns 170,000 acres in Northwest Florida, with properties across residential, hospitality, and commercial segments, including communities, hotels, golf courses, and various leasing assets - St. Joe owns 170,000 acres in Northwest Florida, with entitlements for over 170,000 residential units, 22 million sq. ft. of commercial space, and 3,000 hotel rooms[110] - The residential segment is actively developing homesites in 17 communities, including Watersound Origins, Breakfast Point East, and WindMark Beach[111] - The hospitality portfolio includes the WaterColor Inn, three golf courses, a beach club, and two marinas, with several new hotels under construction, including an Embassy Suites, Homewood Suites, and Hotel Indigo[112] - The commercial segment owns and operates multi-family, senior living, self-storage, retail, and office properties, including assets in Pier Park North, VentureCrossings, and Watersound Town Center[113] Legal Proceedings Information regarding the company's legal proceedings is incorporated by reference from Note 20 of the financial statements - Details on legal proceedings are available in Note 20. Commitments and Contingencies[114] Mine Safety Disclosures This item is not applicable to the company - Not applicable[115] PART II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE, paid quarterly dividends in 2021, significantly outperformed indices, and has an active stock repurchase program - The company's common stock (Symbol: JOE) is listed on the NYSE, and it paid quarterly cash dividends of $0.08 per share in 2021[118] Stock Performance vs. Indices (2016-2021) | | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | |:---|:---:|:---:|:---:|:---:|:---:|:---:| | The St. Joe Company | $100 | $95.00 | $69.32 | $104.37 | $223.94 | $276.44 | | S&P SmallCap 600 Index | $100 | $113.23 | $103.63 | $127.24 | $141.60 | $179.58 | | Custom Real Estate Peer Group | $100 | $107.65 | $76.47 | $93.69 | $65.83 | $87.28 | - As of December 31, 2021, the company had $77.4 million available for share repurchases under its Stock Repurchase Program, with no shares repurchased in 2021[122] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strong 2021 financial performance, driven by robust demand across all segments, increased revenue and net income, and a solid liquidity position supporting future development 2021 Highlights and Market Conditions In 2021, the company achieved significant revenue and net income growth, driven by strong demand across all segments in Northwest Florida, despite potential future COVID-19 impacts 2021 Financial Highlights (vs. 2020) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $267.0 million | $160.5 million | +66.3% | | Net Income | $74.5 million | $45.2 million | +65.0% | | Net Cash from Operating Activities | $111.8 million | $37.3 million | +199.7% | - Strong demand across all segments is attributed to the continued growth of Northwest Florida, its high quality of life, and evolving workplace flexibility[128] Reportable Segments Overview The company operates through residential, hospitality, and commercial segments, with residential being the largest revenue contributor in 2021, and all segments showing substantial development pipelines Segment Operating Revenue Contribution | Segment | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Residential | 54.6% | 46.6% | 32.7% | | Hospitality | 27.9% | 29.5% | 36.0% | | Commercial | 16.7% | 22.8% | 30.6% | | Other | 0.8% | 1.1% | 0.7% | - As of December 31, 2021, the company had 2,000 residential homesites under contract with homebuilders, expected to generate revenue of approximately $158.9 million[142] - The hotel portfolio is planned to grow from 393 total operational and managed rooms to 1,177 rooms with the completion of projects under development[148] - The commercial segment is expanding its leasing portfolio, with 390 multi-family units and 148 senior living units under construction, in addition to 898 recently completed units[156][157] Consolidated Results of Operations Total revenue increased significantly in 2021, driven by strong residential and hospitality performance, leading to a near doubling of operating income and substantial net income growth Consolidated Results of Operations (in millions) | | 2021 | 2020 | | :--- | :--- | :--- | | Total revenue | $267.0 | $160.5 | | Real estate revenue | $158.6 | $87.6 | | Hospitality revenue | $75.3 | $47.8 | | Leasing revenue | $27.1 | $18.8 | | Operating income | $94.5 | $47.1 | | Net income | $73.7 | $45.5 | - Residential real estate revenue increased 95.3% to $144.7 million in 2021, driven by the sale of 804 homesites compared to 509 in 2020, and a higher average sales price per homesite ($157,000 vs. $124,000)[171] - Hospitality revenue increased 57.5% in 2021 due to higher demand for lodging and resort amenities, and a significant increase in Watersound Club memberships to 2,255 from 1,563 in 2020[176] - Leasing revenue grew 44.1% to $27.1 million, primarily due to new leases at recently completed apartment communities (Pier Park Crossings Phase II, Watersound Origins Crossings) and the Watercrest senior living community[178] - Gain on contribution to unconsolidated joint ventures was $3.6 million in 2021, compared to $20.0 million in 2020, which included a significant gain from the Latitude Margaritaville Watersound JV land contribution[189] Segment Results All segments demonstrated strong performance in 2021, with residential operating income more than doubling, and hospitality and commercial segments also showing increased operating income from higher revenues Residential Segment Results (in millions) | | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenue | $145.8 | $74.6 | | Operating Income | $82.8 | $38.6 | Hospitality Segment Results (in millions) | | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenue | $74.6 | $47.4 | | Operating Income | $9.2 | $6.9 | Commercial Segment Results (in millions) | | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenue | $44.6 | $36.7 | | Operating Income | $15.7 | $13.8 | Liquidity and Capital Resources The company maintained a strong liquidity position in 2021 with increased cash from operations, higher capital expenditures for development, and increased debt to fund new projects - As of December 31, 2021, the company had cash, cash equivalents, and U.S. Treasury Bills of $159.1 million[217] Summary of Cash Flows (in millions) | | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $111.8 | $37.3 | | Net cash used in investing activities | ($196.1) | ($175.3) | | Net cash provided by financing activities | $48.6 | $59.4 | - Capital expenditures in 2021 totaled $200.8 million, with $101.7 million for hospitality, $52.8 million for residential, and $45.8 million for commercial segments, and the 2022 budget is expected to exceed 2021 expenditures[219] - Total outstanding debt increased to $227.5 million as of December 31, 2021, from $161.4 million at year-end 2020, primarily to fund new projects[220] Critical Accounting Estimates The company's financial statements rely on critical estimates for real estate valuation, development cost allocation, long-lived asset impairment, and income tax assessment, requiring significant management judgment - Investment in Real Estate: Costs are capitalized and allocated to units based on relative sales value, with these estimates reviewed at least annually and adjusted prospectively[254][255] - Long-Lived Assets: The company reviews assets for impairment quarterly by analyzing expected future undiscounted cash flows against the asset's carrying value, using assumptions about sales pace, pricing, and holding periods[258][259][260] - Income Taxes: Management judgment is required to estimate income taxes, assess temporary differences creating deferred tax assets/liabilities, and determine the need for a valuation allowance against deferred tax assets[268] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate fluctuations, impacting investment values and debt expense, while actively managing the transition away from LIBOR in debt agreements - The company is primarily exposed to interest rate risk, where a hypothetical 100 basis point increase in rates would increase annual interest expense on variable-rate debt by $0.7 million[276][279] - The company is managing the transition away from LIBOR, as many of its debt agreements reference it, and these agreements contain provisions for an alternative base rate[280] Financial Statements and Supplementary Data This section incorporates the company's audited consolidated financial statements, related notes, and the independent auditor's report by reference from Item 15 - The company's audited financial statements and related notes are included in Item 15 of the Form 10-K[281] - The financial statements are accompanied by the report of the independent registered public accounting firm, Grant Thornton LLP[320] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None reported[282] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, a conclusion affirmed by the independent auditor - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[285] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[288] - The independent auditor, Grant Thornton LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2021[289] Other Information The company reports no other information for this item - None[295] PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement - Required information is incorporated by reference from the Registrant's Proxy Statement for the 2022 Annual Meeting of Shareholders[300] Executive Compensation Information concerning executive compensation is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement - Required information is incorporated by reference from the Registrant's Proxy Statement for the 2022 Annual Meeting of Shareholders[301] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of beneficial owners and management is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement - Required information is incorporated by reference from the Registrant's Proxy Statement for the 2022 Annual Meeting of Shareholders[302] Certain Relationships and Related Transactions and Director Independence Information concerning certain relationships, related party transactions, and director independence is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement - Required information is incorporated by reference from the Registrant's Proxy Statement for the 2022 Annual Meeting of Shareholders[303] Principal Accounting Fees and Services Information concerning principal accounting fees and services is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement - Required information is incorporated by reference from the Registrant's Proxy Statement for the 2022 Annual Meeting of Shareholders[304] PART IV Exhibits, Financial Statement Schedules This section includes the audited financial statements, schedules, and exhibits filed as part of the Form 10-K, along with the independent auditor's report - This section includes the audited financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K[307] - The financial statements are accompanied by the report of the independent registered public accounting firm, Grant Thornton LLP[320]