The St. Joe Co. is currently accepting bids for three parcels of land it is selling in Western Florida's Panhandle region. What makes this unique for the giant developer is the bidding process that's being conducted online by The LFC Group of Cos., a Newport Beach, Calif.-based marketing firm that specializes in property auctions. Given that St. Joe, since last October, has been liquidating what it considers to be "non-core" assets, the success of these online auctions could presage future Web-enabled land sales. "We'll be looking to see how this works, and learning from it," says Jerry Ray, a spokesman for St. Joe, who notes that the land being auctioned is rural property that is probably better suited for recreational use than for residential construction. St. Joe has lately become more aggressive about using the Internet for selling assets: Last September, it entered into a strategic alliance to market its rural recreational retreats and resort and second homes through two portals-ResortScape.com and LandWatch.com-on the Web site SecondSpace, an electronic marketplace that is set up to connect brokers, developers, agents, and other service professionals to prospective buyers.
St. Joe's is taking this activity to the next level through its relationship with LFC, which is accepting bids on the developer's behalf for the properties, which can be viewed at www.LFC.com/706R5:
- A 3,059-acre parcel, called Concord, located 15 miles from Tallahassee, Fla., for which St. Joe is asking $25 million. The minimum bid for this property is set at $10 million;
- The 56-acre Sabal Island property, along the coast in Port St. Joe, that includes plans for an 18-lot residential subdivision. St. Joe is asking $5 million, and the minimum bid must be $1 million;
- A 29.5-acre lakefront development called Brewton Lane, which has residential zoning for between 50 and 60 lots. This property is near the 5,000-acre Deer Point Lake in Bay County, Fla. The asking price is $4.5 million, the minimum bid is $1 million.
"These kinds of auctions are attractive to sellers because there are no borders or boundaries to the types of buyers who can participate," explains Kelly Lovegrove, LFC Online's director of operations. To participate, bidders for Concord must put down a $100,000 deposit; for the other two properties, the deposit is $10,000. One of LFC's agents will contact any prospective bidder who registers and downloads documents from its Web site. Its contracts stipulate that interested parties must have the financial means and intent to bid for the properties for sale, although bidders can sometimes turn out to be less than they seem. Lovegrove notes, for example, that when LFC auctioned the 70,000-square-foot headquarters of bankrupt Adelphia Communications Corp., it had two buyer defaults, at $400,000 and $1 million.
To drum up interest for its auctions, LFC conducts extensive marketing that includes domestic and international print ads, Internet ads to brokers, and "lots of P.R.," says Lovegrove. Its campaigns generally last for between 45 and 60 days. And one of those promotions to sell land for Timber West in Vancouver, British Columbia, brought LFC to St. Joe's attention.
LFC presents sealed bids to its clients for approval or rejection. Depending on the level of interest, the client might then request an online auction, at which point "the bidding is completely transparent" to the bidders, who are e-mailed when they are outbid, says Lovegrove, and then asked if they want to increase their offers. Buyers pay LRC a 1 percent premium on the final sale price, which Lovegrove claims is considerably below what some competitors charge. The marketing firm also receives a commission from the seller, which she wouldn't quantify.
Lovegrove did not want to speculate about the developer's possible future use of online auctions. However, she did note that St. Joe had taken "a very brave step, because not too many companies their size go into online auctions."
St. Joe right now is a motivated seller. In its 10-k report for 2007 to the U.S. Securities and Exchange Commission, the company stated that it owns approximately 700,000 acres of land, most of it in Florida. In response to current market conditions, the developer last year significantly increased its sales of rural land by liquidating 105,963 acres (a 209 percent increase over 2006) for an aggregate price of $161.3 million. St. Joe also noted that its investment in real estate last year declined 22.3 percent to $943.5 million, but that its overall real estate sales were off 32.5 percent to $307.9 million. It attributed those decreases to lower sales volume and prices for residential land as a result of the current slowdown in the real estate market. The company reported a $13.6 million impairment charge for residential real estate in 2007.
Ray did not think LRC's model would work for Joe to sell residential-oriented land or homes through. However, Lovegrove says her company has been getting more inquiries about its services lately from home builders looking to sell excess inventories. Another of LFC's divisions, Freedom Realty Exchange (FRE) (www.fre.com), conducts land and house auctions for builders. It recently auctioned three subdivisions in Southern California for a company called Storm Western Development. And it just completed an auction, over four marketing campaigns, of 50 homes in Arizona for Nationwide Homes. (One of Nationwide's fully furnished models, for which the seller was asking $710,000, sold at auction for $449,000.) "Nationwide has worked with FRE for a year and totally gets it," says Lovegrove. Five thousand people visited its houses as a result of the auction marketing, and it received 10 to 15 bids per house. FRE is currently working on a 60-home auction in California's Central Valley for Pacific Mountain Partners.
Learn more about markets featured in this article: Orlando, FL.