Transformer

Florida Trend, May 2008 by Westlund, Richard

Eleven years ago, Peter Rummell left Welt Disney Co. to become CEO of Jacksonville-based St. Joe Co. Fresh off the creation of Celebration as a new town" near Orlando, Rummell had a clear mission: Transform an industrial conglomerate with interests in paper mills, timber, rail transportation and sugar cane into a real estate development company.

"We were all over the place," recalls Rummell, 62, who is stepping down as CEO in May but will remain chairman. "At that time, the board hired me rather than a railroad or sugar guy because they thought the future was in the land. My job was to develop a strategy for the land, while taking apart the conglomerate in a way that made sense to shareholders."

In the decade after Alfred duPont founded it in the 1920s, St. Joe purchased roughly a million acres in the Panhandle for next to nothing. That gave Rummell, who had started his real estate career in 1971, a fresh canvas to develop residential communities.

While selling off St. Joe's older businesses, a process that took about three years, Rummell focused on two key development projects. Applying lessons learned with Celebration and the nearby New Urbanist community of Seaside, Rummell launched Watercolor, a master-planned beachfront development in Fort Walton Beach. "We knew there was an existing market for these homes, and the land was relatively easy to entitle," he says. Watercolor set the pattern for future St. Joe residential projects and is virtually sold out.

Rummell's second major goal was creating a new Panama City airport to improve access to the central Panhandle and spur economic growth. St. Joe donated 4,000 acres and became the leading advocate for the Panama City-Bay County International Airport, which is now under construction, with completion expected in 2010.

Richard Clattenburg, an analyst at T. Rowe Price Group in Baltimore, calls Rummell a visionary who changed both his company and the region, creating a more upscale vacation image for the Panhandle. "Peter can see what something could become years down the line while managing the process along the way," says Clattenburg.

St. Joe's stock price has mirrored Florida's real estate cycles. As the Florida residential market took off, the company launched a series of developments from Tallahassee westward, and shares reached a high of around $90 in December 2005.

Then came the national market downturn, and St. Joe's sales dried up. In 2007, profit fell to $39.2 million, compared with $51 million in 2006. The company cut its staff from 980 in mid-2007 to a projected 200 in early 2008. In mid-April, its stock was trading for around $40 a share.

"What we're going through is one of the facts of life in the real estate business," Rummell says. "There's plenty of activity in our sales centers, but there's no incentive for buyers to make a decision." He expects 2008 to be another slow year, with some improvement in 2009.

St. Joe still owns about 700,000 acres - worth as much as $1 million an acre - with no urgent need to dispose of those assets. "When you deal with such large amounts of land, you have to take a long view, otherwise you'll never capture the real value. I believe the next decade will bring even greater success for our company."