"Land Development for a High - Growth Region" St Joe Company's Jorge Gonzalez | September 16, 2021

I really appreciate the invitation to come and join you today. So I'm just doing everything. What I wanted to do today was give you a little bit of a background on our company. I know many of you are familiar with the Saint Joe Company, just engaged for those of you who are not. A five-minute video of projects that we have going on, and then I'll open for questions. And I love answering questions, so any questions any member of the audience ask, I would love to answer it. So the Saint Joe Company, we're a little bit unique. The real estate industry is very specialized, very customized. There's folks that do very specific things and they do them well. We are a diversified real estate operating company. We do a lot of different things, and hopefully every day we're doing them better and better. We have three primary segments: residential, commercial, and hospitality. In our residential segment, we have 12 residential communities at different levels of development. In our commercial segment, we have over a million square feet of commercial property that we lease in our leasing portfolio. In our hospitality segment, we own and operate hotels, golf courses, marinas, beach clubs. We have a private club membership program. In our commercial segment, we own and operate apartments, convenience stores, beverage facilities, self-storage facilities. Just a pretty wide range of assets. As I mentioned, we have been in a diversification mode for the last couple of years. People like diversity, I love diversity income streams, so that's something that we've been executing over the last few years. Our focus is in three counties: Bay County, Walton County, and Gulf County. 86% of our ownership, which is roughly 170,000 acres, are located in those three counties, and goes to the three counties that we're focused on. We're not a third-party developer. We don't develop for others. When we develop property, whether it's for an apartment complex or a hotel, we're developing that for ourselves for us to only operate. One of the big framework agreements that we have that we're operating under is what we call the A-Wall Sector Plan, which many of you may have heard about. That's an approval that we obtained from the state and local government a number of years ago on 110,000 acres of our property in Bay and Walton County. That sector plan took several years to navigate and obtain all the approvals, but it gave us a level of certainty for us to plan and spend dollars on planning and executing specific projects by having the correct entitlements to build and develop on those acres. The Bay-Walton Plan gave us approvals for 170,000 homes and over 20 million square feet of non-residential. That's obviously a long-range, 50-year planning. So what is happening in our local market? I've been in this market for a long time, and quite frankly I haven't seen anything like it ever before. We have been growing. A lot of growth has been occurring in our market. Last year was a record year in all of our segments. This year momentum continues. It's not exceeding last year's momentum. Let me give you a couple of data points on that. An example of that growth that we're experiencing: Walton County from 2010 to 2020, a 10-year period, grew 36%. So it ranked fourth in the state of Florida of all 67 counties. It was the fourth fastest growing county in the state of Florida out of 67. It was the 21st fastest growing county in the entire country in that time period. So tremendous growth in Walton County. Panama City metro area in terms of net in-migration since the pandemic started ranks 8 out of 926 metro areas in the country, which is incredible. Number eight out of 926 metro areas since the pandemic started in that migration. Tourism continues to grow in our region. As an example, Panama City Beach in 2020 had 19 million visitors to the beach. 19 million visitors. It ranked number one in the country for beach destinations in terms of the total number of visitors, which is incredible. The airport, which Ted mentioned briefly, has been experiencing tremendous growth. This year we're on track to have 1.4 million or more passengers for the year. Three straight months this year, May, June, July, each broke the all-time record for that month. Three straight months. So 1.4 million. Just to give you a comparison, the old airport in the old location in Panama City, who was there? Last full year about 10 years ago had a total passenger traffic of about 300,000 with one airline and one direct flight. So fast forward a little over 10 years to the new airport, and we're on track for 1.4 million compared to 300,000. We have four airlines and we have 15 direct flights out of the airport. So tremendous growth in the airport. This growth trend started before the pandemic. We were seeing this trajectory before the pandemic. The pandemic has been challenging for all of us both personally and professionally, but it's been interesting from a growth perspective. It has accelerated the growth trends that we had seen before the pandemic started to a pretty significant level. Two specific sub-trends to that growth are more permanent residents living here, more folks moving here to live permanently. As everyone in the audience probably knows, our region has historically had a pretty robust second home vacation rental market. We are a family resort destination. What we've been seeing over the last couple of years is a pretty significant increase in permanent residents, people living here, moving here full-time. The other sub-trend that we've seen that has been unique: we've seen people from a broader geography of the country moving in. Our traditional market area both for residential and tourism has been Atlanta, Nashville, Dallas. Those three cities: Atlanta, Nashville, Dallas, and everything inward of that has been our traditional market. Over the last year and a half, we are seeing folks, tourists, people joining our club from way outside of those areas, literally from all over the country, particularly from larger metro areas: California, Denver, Chicago, even the Northeast. So that's been a unique aspect that we've been experiencing in the last couple of years. I want to talk a little bit about Hurricane Michael. That was obviously a devastating hurricane that hit Bay County in October of 2018. A lot of challenges immediately after the storm. The community has recovered fairly well from this. Very resilient community, a community that picks up and works very hard and moves forward. As with many storms that occur, unfortunately the parts of town that had the older housing stock built to different codes are the parts of town that were most affected. Parts of town that had newer housing built to modern building codes tended to fare a little bit better. So the community has recovered really well. The housing stock that was affected has created opportunities for new residential communities, which we and others have been executing since the storm occurred, particularly in the Panama City area east of the Hathaway Bridge and in Panama City Beach. One of the first projects that we announced not too long after the storm hit was a master-planned community in the part of the county that was ground zero for the storm, that's Mexico Beach. They took a pretty direct hit as everybody knows. A lot of the housing stock that was there was fairly old. So we announced pretty early that we were committed to help rebuild the Mexico Beach community and committed to a pretty sizable master-planned community. We broke ground on that community earlier this year. The focus of the master-planned community, we're going to have a pretty broad range of residential housing types, from rental apartments to single-family homes, townhouses, commercial. The focus is on the rebuild of Tyndall Air Force Base. Mexico Beach in particular, where our property is, Mexico Beach is less than 10 miles from the main gate of Tyndall Air Force Base. Fortunately, it's a very strategic Air Force base to the Department of Defense because of the training grounds the Gulf of Mexico offers. It's the largest training ground of any Air Force base in the country. So it's very strategic to the Department of Defense. So the Air Force and Department of Defense committed almost immediately after the hurricane hit, and they did it in the context of making Tyndall the Air Force base of the future. Essentially a blank sheet of paper where they can plan and develop an Air Force base with the latest technology and doing it in the most efficient way possible. Congress appropriated $3.95 billion, almost $4 billion, to start the redevelopment of Tyndall, and that's one of several similar appropriations that are expected. That process has started. The Department of Defense went through the different process and they obtained a record of decision earlier this year. So the contracts have been let and the redevelopment of Tyndall has started. So we are targeting our master-planned community in Mexico Beach to coincide with the needs of Tyndall. There's not going to be a lot of housing that's going to be provided inside of the base, so the Department of Defense and the Air Force are relying on housing outside of the base. In the project that we have planned in Mexico Beach, we hope to accomplish that. In the rebuilding of Tyndall, every decision we make for that project of pricing, product types, we're really thinking of the Kindle ecosystem as an example. We're not going to allow short-term vacation rentals in our community. Once you do that, it changes the DNA of your community. So what are we up to? I think it's probably not a surprise to you in the audience with the growth that this region is experiencing and the positioning that our company has in these three counties that ourselves at the moment we are developing and constructing almost 40 projects, which is incredible. It's the biggest growth mode that this company has had in its history, I believe. I don't remember, I've been in the company for a long time, and I don't remember us having as many projects. It's a lot of fun. Covering a broad range of asset types and classes, from apartments, hotels, commercial, residential. A lot of different things. And it covers all of our nearly 40 projects in government construction. We have several in all of our segments. We're also planning many more that are on the drawing board, and if the trends continue and the growth of this region continues, those projects from the drawing board will start building. But we don't build anything and hope for the best. Everything we do is market-based. If it's a hotel, we've done a lot of market studies to make sure we understand the demand, we understand the clientele will be there, and the RevPAR that we will obtain at those hotels. So all the growth that we have is really market-based on the demand that we're seeing here at the ground level. On the residential end, a couple things I wanted to mention. We've always had residential communities that are for what I call the high-end resort demographic, whether it's WaterColor, WaterSound Beach, and other similar communities. One of the things that we've changed in the last couple years is we're focusing more on residential communities to cover all price points: workforce housing, permanent residential communities for nurses and teachers and different folks in the community. That's a shift that we made in our company. Of the 12 communities, the majority of them are for that demographic. One type of community that we hadn't done yet is an age-restricted retirement community. We spent many years studying that type of community, the demographic. Like anything else, it sounds simple but we can get into the details of understanding those type of communities, what the demographic wants to see, how to plan and program it. It's a little bit more complicated. So we made a decision to start a new community in West Bay on the Intracoastal Waterway, given about 20 miles of frontage on the Intracoastal Waterway, not too far from the new airport. Sales in that community, Latitude Margaritaville, we have a partner in that project. That community, we opened sales in May this year. The sales office opened in May this year. We had our first release of 200 home sites. When we opened the sales process, we had a lottery of 1,300 individuals vying for those 200 home sites. Ever since we started that process, momentum has increased. We've been very pleased. The fact that we had pretty high expectations for it, but our expectations have been exceeded in terms of the demand that we're seeing for that community. And similar to the other trends that we've been seeing in our other communities in this region, the consumer is coming from literally all parts of the country that have an interest in Latitude. We have several from Alaska of all places who are part of that first 200 home sites. We're actively developing nearly 700 home sites at the moment. We've started construction of over 100 homes. We expect the first residents to move in late this year. The first overall phase of the project is 3,500 homes. We're planning a marina right on the Intracoastal, which we're thinking about ourselves. If the demand continues beyond the 3,500 homes, because we own the property, we have an ability to build many more homes in Latitude. I get a lot of questions about Latitude, so that's one of the reasons why I wanted to give you a brief update on it. So what I'd like to do next: every quarter we post a video on YouTube showing the projects that we have under construction. We don't do that for the consumer as much as we do for our shareholders. When we issue our press releases and our quarterly reports, there's a lot of financial information there for our shareholders and others. But since we're building so many different things, we felt that showing them a video clip and inventory of the projects that we have going on, many of our shareholders are not local, was important. So we started that last year. It's been really well received. After we post, we actually have some shareholders that wait actually for the video to be posted, and if we're there too late they call me asking. We're proud. We don't see any area where we're doing well in our communities or not. First of all, we're trying to be very community-based. I often use the term rising tides. We believe in that. Good things happen in our region, good things happen in our company, and vice versa. One thing I would be remiss not to mention: we're really excited about an announcement we made a few months ago about a collaboration with TMH and Florida State University College of Medicine to create a new healthcare medical campus in Bay County. We feel pretty strongly about the potential synergies between research, teaching, and clinical delivery. And we're working very hard, obviously along with TMH, Mark and Andrew, and FSU, to really plan that campus in a way that's going to be world-class. And we're cautiously optimistic that we'll be able to break ground on the first phase of that campus sometime next year. So with that, I'll open the floor for any questions that anybody has.

We're not really planning on creating a new municipality. We have worked very closely. One of the advantages of having such a large-scale plan is we're able to work very efficiently with the utility providers and those that provide infrastructure. So we have a pretty good framework for that with Bay County and other utility providers. So at this moment, we do not have any plans to incorporate any municipality. All of the sector is really in unincorporated Bay and Walton County.

Great to see you, by the way. It's been a long time since I've seen you. Southwood is a project we're very proud of. The planning principles that were incorporated into that project with the trails, the open space, the mixed uses, I think from a planning perspective it's one of the projects we're most proud of. We changed our business strategy about Southwood a number of years ago. The project still has several phases to go from a development perspective. We changed our business strategy and we're not developing any more in Southwood. We do sell tracts of land to other developers and other builders. So our relationship is still there. We're a property owner within the community development district. They're using our fees. We're constantly talking to prospects who have an interest in purchasing land from us. We turned over the HOA recently, so the residents are in charge of the HOA. As far as we're concerned, a good relationship, but it's not a project that we're planning on developing many more phases ourselves.

Absolutely. First of all, it's going to be a pretty significant amenity on the Intracoastal Waterway, so we're very excited looking forward to it. And I believe if you look maybe in the next day or two, there's going to be a press release about the timing of the amenity, when we expect to start. And we expect the amenity to be open. We've been working on engineering, planning, permitting it, and finding the right contractor, and all that has occurred. So we're ready to move forward with starting the amenity. We hope we're going to start within the next month or so.