The St. Joe Companies on Monday (Oct. 8) announced a broad restructuring program that will complete the transformation of the company from a developer to an "asset-light" land bank.

The company, based in Jacksonville, Florida, said it plans to divest itself of several "non-core" assets, including its Sunshine State Cypress Mill, an unspecified number of non-contiguous parcels of land with commercial entitlements, approximately 100,000 acres of long-term rural lands, approximately 1,200 developed home sites and approximately 190 homes. It also plans to transfer the day-to-day operations of its hospitality, recreational and golf assets to "recognized leisure, hospitality and lifestyle companies" before the end of the year. With that move, St. Joe will move some 500 employees off its balance sheet, though it will continue to own the assets. Approximately 260 additional positions companywide, particularly in project development and related support staff, will be either eliminated or transferred to strategic partners and customers between now and the end of 2008.

The company also said it would eliminate its stock dividend.

"We are repositioning [St. Joe] from an 'end-to-end' developer to Northwest Florida¹s primary supplier of entitled land and development partner," said Peter S. Rummell, chairman and CEO. "By better managing our fixed overhead costs, we will be able to preserve the low basis in our land, which is fundamental to our ability to use price as a competitive advantage, to put time back on our side and to create significant value over the long term."

St. Joe, which announced it was exiting the home building business last year, owns some 750,000 acres, mostly in and around the Florida Panhandle. Much of the land was acquired during the first half of the 20th Century, to be used for timber for the company's paper mill, at exceedingly low prices.It is the largest private landholder in Florida.

"We will limit our capital investments by shifting more development to a range of best-of-class strategic business partners that include branded builders, project developers, venture partners, alliances and key long-term customers," said Rummell. "Capital investment for horizontal developments will be limited to our most strategic and valuable places. We believe this approach will accelerate our land sales and development."

St. Joe said it expects to take a charge of $7 million related to severance benefits over the next several quarters. It also said it will take charges of approximately $25 to $30 million in the third quarter of 2007 related to contract termination costs, the write-off of capitalized costs at certain projects, the impairment of completed spec homes in several communities and the write-off of goodwill related to the paper mill.

St. Joe also said it did not expect to trigger violation of any debt covenants in 2007 but that it is negotiating with it lenders to modify its credit facilities so it does not breach covenants in 2008.

In a research note to investors, the housing group at Raymond James & Associates, which has an "underperform" rating on St. Joe stock, said, "Ultimately, we believe this announcement is a prudent decision needed to preserve the company's long-term value, though it also underscores, in our view, the depressed market conditions St. Joe is likely to face for an extended period of time."

JMP Securities took down its earnings estimates for 2007 from $0.85 per share to $0.65 per share in 2007 but raised 2008 from $0.75 to $0.85 and reiterated its "market perform" rating.