America’s first new major airport in 15 years opens on May 23rd. Northwest Florida International Beaches Airport will be a perfect Florida Panhandle gateway for retirees, or so the
St Joe Company (NYSE: JOE) hopes, having spent a decade planning, lobbying for and executing the relocation of Panama City Airport. The ‘old’ airport (though it didn’t seem particularly decrepit when you walked through its bright, airy arrivals lounge) was environmentally constrained. What that really meant was that Southwest Airlines couldn’t land there because the runways were too short and impossible to lengthen.
JOE’s executives had studied the economic impact of the new Fort Myers airport (eventually called Southwest Florida International Airport) when it opened in 1983. The housing boom that transformed Lee and Collier counties had been driven by the new airport. In 1999, a similar ‘inducer’ was deemed essential if the St Joe Company (formerly the St Joe Paper Company) was going to raise the value of its low-priced forest land from a couple of thousand dollars an acre to the mouth-watering prices that Florida developers had become used to.
Flights into Panama City and Fort Walton Beach on Delta’s turbo-prop ‘commuter’ planes were expensive, unreliable and often time-consuming. Most people drove to the beach, from Birmingham, Atlanta and even as far away as Nashville. But for JOE’s plans to take flight, it had to open up the Panhandle to a much larger market than the Deep South.
New York, Chicago, the Midwest. These were the kind of markets that could drive the Company’s new, burgeoning real estate business. What better means of accessing them than to provide America’s most efficient low-coast air carrier, Southwest Airlines, with a runway long enough to land its Boeing 737 jets and to underwrite several years worth of its daily flights?
And that is exactly what the St Joe Company did. No matter that, in the process, it built and then dismantled a sophisticated and highly respected real estate development business. It acquired Arvida, a south Florida home builder that had delivered a very successful new community in Broward County called Weston (pop. 62,000). It recruited some of the brightest real estate executives in America to create and manage places like Watercolor (a more profitable and, some would say, better planned community than Seaside, next door), Southwood (an increasingly popular Tallahassee suburb) and WindMark Beach, nestling on the edge of St Joseph’s Bay in Gulf County.
The recession (and perhaps more than a little hubris) led to JOE’s retreat from the real estate development business. Throughout 2006, it became apparent that the market for second homes in Florida was receding like a Gulf tide. Just like many of its customers, the St Joe Company had become addicted to luxury beach homes built on lots that, when they were released, attracted so many purchasers that they were sold out in a few hours. Lucky owners saw their beautifully serviced home sites, situated in expertly-designed communities, rise rapidly in value long before a home plan was approved by JOE’s fastidious design board. Property speculation flourished as cheap money and ‘creative’ lending practices, underpinned by helpful capital gains rules, enabled everyone to ‘play the market’ by buying and flipping lots before any construction costs were incurred.
Then things changed. Lot owners, fearing a ‘market adjustment’ and keen to ‘cash out’, found they had to compete for purchasers for the first time in many years. Worse still, prices began to soften just as the supply of new lots reached its peak. At the St Joe Company, construction was slowed – but not fast enough to keep pace with plummeting sales receipts. The company began a lengthy correction that has lasted four years, closing down all development activity, outsourcing resort management, cutting staffing to the bone and transforming itself for the second time in a decade; this time into a wholesaler of land.
The northwest Florida market for luxury second homes has withered to a shadow of its former self. What the Panhandle needs now, and in large numbers, are jobs and retirees. Hundreds of lots remain vacant awaiting the construction of new homes. We know that the St Joe Company, relying exclusively on the orderly sale of its sub-divided land, will not be building anything, so a new breed of developers will be needed to help unlock value for JOE’s shareholders. And, if the Panhandle is going to be transformed from a seasonal tourist economy to one that is more sustainable, then a core of higher-paying year-round employment is essential.
The new airport is considered by many to be critical to the future of the Panhandle. The formula is simple; cheap flights fill beds at the beach and happy visitors are tomorrow’s residents. Florida’s sun and sugar-sand will always attract individuals and businesses that have grown tired of long grey winters, state income tax and labor laws, so all that’s needed is decent transportation, infrastructure – and relatively cheap, affordable homes.
This last – and vital – component has been missing in recent years and must now be delivered in these straightened times if the financially bruised boomer generation is going to make any kind of economic impact on northwest Florida. JOE is betting that, as the economy improves, retirees will once more head for the sunshine, preferring the natural, more rural, charms of northwest Florida to the crowded beaches further south .
The Airport has been carefully located to provide, among other things, plenty of industrial and commercial land for businesses able to exploit this new transportation hub. There should also be plenty of land for workforce housing, as long as it is priced realistically. Some smart people with equally smart money have made a significant bet that the St Joe Company is perfectly placed to benefit from the economic growth that the new airport is expected to generate. It’s going to be intriguing to see, therefore, whether Northwest Florida International Beaches Airport proves to be the ‘inducer’ that changes the face of Florida’s last quiet coastline or an expensive flop with a tongue-twisting name.