The St. Joe Company (JOE) Earnings Call Transcript & Summary

Ladies and gentlemen. I'm Bruce Berkowitz, Chairman of the Board of The St. Joe Company. It's my pleasure to welcome all of you to our 2024 Annual Shareholders Meeting. In accordance with the notice of meeting, I officially call the meeting to order at 9:00 a.m. Central Time, 10 a.m. Eastern Time. Each of you should have registered as you entered the meeting. If anyone has not registered, please do so at this time. We will conduct this meeting in accordance with the agenda you were given when you registered this morning. On the reverse side of the agenda is a list of the rules of conduct for this meeting. To ensure an orderly meeting, we require that all participants abide by these rules. As is our custom, we will conduct the business portion of our meeting first. After the formal business portion of the meeting has been drawn, we will provide an opportunity for questions and answers. Only validated shareholders may ask questions in the Q&A session. Out of consideration for others, please limit yourself to no more than 2 questions. We will answer as many questions this morning as time allows. Now I'd like to introduce the other members of the Board to a President person; Howard Frank, of course, Jorge Gonzales and Tom Murphy. I'd also welcome Director, Cesar Alvarez, who will -- who is right over there. Say hi, Caesar, attending virtually. Also with us today are representatives of Grant Thornton, the company's independent registered public accounting firm, who will be available to answer any appropriate questions during the Q&A portion of the meeting. Company's Chief Legal Officer, Lisa Walters, will act as the Secretary of the meeting. We are being assisted today in the tabulation of proxies and ballots by James Hagan an agent for Broadridge Financial Solutions. At this time, I appoint James Hagan as inspector of elections. The notice of the meeting has been mailed to each shareholder of record as of April 4, 2024. The Inspector of Elections has informed me that 53,003,769 shares of the company's voting stock are present in person or by proxy, constituting a quorum for today's meeting. A list of shareholders on March 20, 2024, the record date is available and may be inspected during the meeting by any shareholder who has signed in. The final report of the Inspector of Elections will include the votes, if any, of shareholders present and voting during the meeting. The company's mailing agent, Broadridge Financial Solutions has provided an affidavit of mailing to show that notice of the meeting was given on or about April 4, 2024. A copy of both the notice and the affidavit will be incorporated into the minutes of this meeting. Next, I will describe each proposal to be acted upon today, and then we'll take the vote. Since no direct nominations or proposals for business were properly filed by a shareholder in advance of this meeting, the business of this meeting is limited to the following 4 proposals. The first proposal before the shareholders is the election of 5 Directors to serve for a 1-year term until the next annual meeting. I am standing for reelection as a director today, along with the following nominees: Cesar Alvarez, Howard Frank, Jorge Gonzales and Thomas Murphy. All of these nominees are in attendance today, present and virtually. We recommend the election of these nominees. The second proposal is the ratification of the appointment of Grant Thornton as our independent registered public accounting firm for the 2024 fiscal year. The Audit Committee retained the services of Grant Thornton to audit the company's financial statements for 2024, and the Board recommends that the shareholders ratify the appointment of Grant Thornton. The third proposal is a proposal to approve on a nonbinding advisory basis, the compensation paid to our named executive officers as described in the compensation discussion and analysis section. The compensation tables and related narrative disclosures set forth in the company's 2020 annual meeting proxy statement. We recommend the approval of the compensation of our named executive officers. So now we will now vote on the proposals. Those shareholders voting in person should now mark their ballots. If you have previously voted by proxy, you do not need to vote again today unless you want to change your vote. If you would like a ballot, please raise your hand and one will be provided to you. Would you like a -- no problem. Thank you. Just waiting at the moment, and the inspector of elections will collect the outstanding ballot. So it looks like everyone wanting to vote by the ballot has done so, so the polls are now closed. And will the Inspector of elections please report the results of the balloting when you are ready.

Mr. Chairman, this initial tally is subject to verification and the final tabulation of everyone like small changes in the vote I have announced. Regulation will be set forth in the formal report of the Inspector of election to the Secretary of the company, which will be made after the count has been verified. I certify that the majority of the votes cast has voted for the election of each of the nominees as Director of the company. In addition, the votes cast favoring ratification of the appointment of Grant Thornton has exceeded the votes cast opposing the action. Lastly, the proposal to approve the compensation of the named Executive officers has received more votes for than votes against. Thank you.

Thank you. I hereby declare that the Director nominees have been duly elected, that the appointment of Grant Thornton as the company's independent registered public accounting firm has been ratified and that shareholders approved the compensation of the named Executive officers. This concludes the official business of the 2024 Annual Meeting. The Annual Meeting is adjourned, and we'll now continue to the informational portion of our meeting today. Prior to opening up for your questions, I will ask Jorge Gonzalez, the company's President and Chief Executive Officer, to provide a brief overview of company operations.

Thank you, Bruce. I want to welcome everybody who is joining us online. And I particularly want to welcome those of you who are here. We really appreciate owners coming to visit us. That's something I encourage and recommend often, and you've heard me say that because really for the kind of company we are with the type of assets that we have, you have to come here. You have to come here and look at the region, look at what's happening and look at our assets. So thank you for taking the time being here. So we are rotating the annual meetings. For those of you who were here last year, we're rotating them really so our owners can see and experience at different hotels and resorts that we have. Last year, we had our annual meeting at Embassy this year at Camp Creek. Welcome to Camp Creek. We opened this gorgeous facility last summer. We're pretty excited about it. There's a lot of potential with this facility. It's not just lodging with the gain, but we have a pretty robust amenity package here. We haven't seen it yet, I encourage you to see it. And we're hopefully, the rain is going to hold up, so we'll be able to take a walking tour of the amenities right after, I think, at 12:30 is when we're going to gather at the lobby. So I'm going to go through a presentation, then we'll have questions and answers. But before we do that, like we do every year, I want to show you a brief video clip. It's about a 4- or 5-minute video clip that really captures the journey we've been on the last few years as a company, and it really shows you the seating and harvesting cycles that I often talk about as it relates to our company. So let me show you the video first, then I'll go through my presentation. So you noticed the news has gotten a little bit happier in the future part of the video, that's because I think we're all going to be happy about the future. That was on purpose. So I can't help but notice how many annual meetings have you been at where you can look out the window and you see a dad with his young son playing. It's a pretty unique setting. So thank you for being here again. So let me take you through the presentation, and we always like to start is move too fast. So I always like to start with what are we doing, right? That's a very basic question, and that speaks to business strategy. And these are the 3 core aspects of our business strategy: expand portfolio of income-producing commercial properties, developed residential communities with long-term scalable revenue, repeatable revenue and grow resorts and leisure segment. Now you notice, doesn't say hospitality segment, it says resorts and leisure. That's because this was taken this slide verbatim from a slide we had in the 2018 Annual Meeting. We've been consistently executing the business strategy for quite some time now. So the next question after what we're doing is how we're doing. So that's -- I want to just take you through briefly how we're doing. So we took each one of those core business strategies, expand portfolio income-producing commercial properties, and we tried to enumerate or quantify what the difference has been and our execution of that strategy since 2016. So building square feet in our leasing portfolio has grown from 600,000 to over 1 million. Multifamily and senior living portfolio have grown from 0 to over 1,200. We didn't have that asset in 2016, that asset type. And our leasing revenue has grown from $9.8 million to over $50 million. The next business strategy line item is develop residential communities with long-term scalable and repeatable revenue. So in 2016, we sold 106 home sites. That's not a typo. That's 106 home sites. And in 2023, we had our all-time record year for selling home sites and homes at over 1,700. So in that time period, we grew the residential segment from 106 sales to over 1,700 sales, which is pretty remarkable. Revenue grew from $19.4 million to $155.7 million, and that $155.7 million is only consolidated revenue. I know Marek is happy that I mentioned that. So that doesn't include unconsolidated revenue, for example, from the Latitude joint venture, which is a pretty significant number. But even without the unconsolidated revenue, that's a pretty remarkable increase from $19 million to $155 million. Then the last one, grow Resorts & Leisure segment. Back in 2016, we had a total of 126 hotel rooms, which is pretty incredible when you think about it, right? Panama City Beach has 20 million visitors a year. South Walton has 12 or 13, and we had 126 hotel rooms. That tremendous amount of tourism that comes into this area, and we had a very small hotel portfolio. So we've grown that from 126 rooms to 1,177 rooms. So this was as of the end of '23 since then the Residence Inn has opened in Pier Park. So that has grown a little bit. Club members, we've grown since 754 to over 3,300 private club members. Again, a pretty significant increase in that time period. And revenue in the segment, in the hospitality segment, as we call it today, we used to call it the Resort & Leisure segment. We've grown it from $57 million to $152 million. And one of the interesting data points, $152 million, the revenue for Hospitality segment last year exceeded the company's total revenue in 2015 and 2016. Which is pretty remarkable. Just one segment exceeded the revenue of the entire company, not that long ago when you really think about it. So just as a reminder, how is the company positioned? So we own approximately 168,000 acres. 87% of those acres are in 3 counties, Bay-Walton Golf. We have entitlement or approvals as our right to develop over 170,000 homes and over 22 million square feet of commercial and nonresidential. And that just within the sector plan. I'll talk a little bit about the sector plan in a minute. We have entitlements above that, too, outside of the sector plant. And this is -- we've talked about this before. You saw it in the video. I mentioned it in my annual letter to owners. Right now, the majority of our revenue is derived from 2%, a little bit less than 2% of our land holdings, just to give you some context about where we are. So one of the questions I get is, aren't you going to run out of land to execute the business strategy? And I think the technical answer the right technical answer to that question is yes, at some point, but it's going to be a long time. So let me give you 2 data points to enumerate that a little bit. So we own 168,000 acres since 2016, so there's 2 data points. One is how many acres have we sold on average every year from 2016 to 2023 and then how many acres we sold from 2000 to 2015. The reason why we have those 2 data points, those are the 2 time frames when the company changed the business strategy significantly. So starting in 2016, our focus was on recurring revenue. So we became really picky sellers of commercial land. If there's an opportunity to develop an asset, whether it's commercial, hospitality, we're going to look at that first and not just sell that land and let another landowner kind of get the appreciation of that land value because of other things we're doing in the region. So pretty remarkable, right? So since 2016, we have averaged a little bit over 1,000 acres per year. So you can do the math. You can draw your own conclusion on how much time we have and how much land we have to continue to grow the company the way we've been growing it. Prior to our business strategy, the average was $51,000 per year that we sold. So we were on 2 totally different tracks, right, in terms of when we would run out of land. So again, yes, at some point, we may run out of land, but it's going to be a very long time. So I'm going to take you through slides that we show every year. These are what I call trajectory slides. One thing is to have the business strategy, but nothing is to kind of show the trajectory that we're on in executing the business strategy. So this is our balance sheet from 2016 to 2023. We've grown it from $300 million to over $1 billion with consolidated/unconsolidated with investments that include unconsolidated also. That's a compound annual growth rate of about 19%. One thing that I always want to remind everybody that these numbers are based on cost basis. They're not based on market value of the assets. So the next slide is consolidated/unconsolidated revenue. We've grown it in that same time period from $96 million to over $740 million consolidated/unconsolidated. If you just want to look at the consolidated revenue in 2023, that was $389 million, which was a pretty big increase from the year before at $252 million. And the average growth rate has been 34% in that time period of time. So this is a slide that I really like because it's one that we get to control the most. So one thing is to grow. Another thing is to grow efficiently and to grow by leveraging scale. So this slide shows you the corporate SG&A or overhead as a percentage of revenue. So in this same time period of time from 2016, that percentage has dropped. So this is one of the few bar graphs that dropping is really good, having the downward trajectory. So back in 2016, our SG&A was 24% of our revenue. In 2023 is 6%. And -- so again, it's easy to grow. It's not that as easy to grow and be efficient and leverage scale. And this is just a consolidated revenue of the $389 million in '23. If we actually show you the percentage with unconsolidated is going to be much lower than the 6%. So again, we have a business strategy. We've been executing it, and we've been executing it fairly efficiently as we've grown. EBITDA. We've grown EBITDA from $26 million to $259 million at an average rate of 30%. We show this slide every year. We showed it last year, just to give you an update, we obviously update the numbers project debt. We only have project debt. We don't have corporate-wide debt. So every project stands on its own cash flows. And as of March 31, our debt total project that combined is 29% of the company's total assets. 66% of outstanding debt has a fixed or swapped interest rate. Average weighted effective interest rate is 5.3%, and the average remaining life in years of '17. This is a slide we're going to show every year and update it. So our owners get a sense of how we're doing on the debt side. Net income. Net income tends to be a little bit more nonlinear. A little bit -- there's other factors involved in it, a little bit more kind of wavy. In 2016, our net income was $15.9 million. Last year it was 77.7%, average growth rate of 25%. One of the things that I do want to mention because this has grown significantly as we've been developing new assets and bringing them into service, our depreciation has grown significantly. Depreciation is a noncash item, but it's separate from net income. So in 2023, our depreciation was $38.8 million, which is noncash. And when you compare that to what our depreciation was in 2016, we almost had no depreciation in 2016. It was really de minimis. So last year was $38 million, again, noncash item. Earnings per share from $0.21 to $1.33 average -- compound annual growth rate of 30%. Again, if we take that depreciation number do it on a per share basis, in '23 was $0.66 per share, which is pretty significant for a company of our size. That's what depreciation represented $0.66 per share. So let me talk a little bit about this because this is something I get asked questions about, too. Staying on the topic of depreciation. So depreciation is not cash, but it does take cash to keep and maintain our properties. So this is just a simple table that kind of gives you a better sense of how depreciation and then what we call sustaining capital, the actual cash we use to maintain our properties, how they look. So our net income was $77.7 million. Depreciation was $38.7 million, as I mentioned. Then last year, in '23, our sustaining capital, the actual cash that we use to upkeep and maintain our properties was about $8 million. That's actual cash that went out to maintain the property because again, depreciation is noncash. So the -- really the bottom line, the total of $108.5 million, that just gives you at a high level, a better sense of cash generation that we had in 2023. These are projects that we completed in 2023. So we had 12 projects in residential. We had 11 projects in commercial and then 5 projects in hospitality. Those 5 were a lot more involved than the others combined, finishing 5 hotels and opening 5 hotels is what's really quite an undertaking. I'm not sure anybody in the right mind would do that on purpose because hotels are operating properties. They're not really real estate properties. They're operating properties. It takes a lot of effort to open a hotel, and we opened 5 last year, if you can believe it. In fact, we opened 5 in the first 6 months of the year, which was a crazy ton. And Patrick came back, so we're happy about that. Patrick Murphy runs our Hospitality segment. So 2024, these are anticipated project completions and openings. We've already completed and opened several of these Watersound fountains in Watersound Origins, our senior living project that's completed and open. Residence Inn is the hotel I mentioned that opened in Pier Park about a month ago. And we have a couple of residential projects that are also completed. But most of these are going to be completed throughout the rest of the year. So let me talk about the future a little bit. And I want to just first some technicality because I think it's important for everybody to understand it. We've often talked about the Bay-Walton Sector Plan, which is 110,000 acres of our property that we went through a process many years ago with Bay-Walton County to create a land use framework for those 110,000 acres of entitlements of approvals, what we can build, how much we can build, and we did that even though it took a couple of years to have certainty, right? Because in order to grow the company, it's very difficult to do that rezoning by rezoning for every project, right? If you have to go to a county city commission and get a rezoning every single time to grow the company, that's a hard way to make a living. So we made a decision to create this framework for 110,000 acres. We got approvals as of right. The second step in activating the sector plan is to obtain what's called in Florida law Detailed Specific Area Plans. The sector planning process is enabled by Florida law, Florida State. So Detailed Specific Area Plans are the more specific master plan or site plan within the sector plan, they require 1,000 acres at a time at minimal 1,000 acres. So as we've been growing the company, we've also been quietly busy planning for the future by preparing, submitting and getting DSAP approved. So this map here of this slide, Slide 15 shows you all the Detailed Specific Area Plans we have gotten approved over the last few years as we've been simultaneously doing the company. So we had 9 DSAP approved in 4 of those, only 4 we have started. So 5 of those DSAP, we haven't even started yet. Before that we started, we barely have started. And then I know it's hard to read, but you do have a booklet with you, by the way. We made a booklet of our presentation, so you can look at the numbers in a little bit more detail. On each DSAP, we have the number of residential units, number of commercial square feet. So that gives you a sense of the scale of those DSAPs. One thing I want to mention, since the sector plan 50-year planning document, right, we worked hard to create as much optionality and flexibility as possible. So when you see the residential number of units or the commercial square feet, keep in mind, in the sector plan, we have language that we draft it, that was approved. That allows us to convert residential to commercial, commercial to residential because with a 50-year planning document, you need that optionality, that flexibility to react to market conditions. So if you see a DSAP that has 2 million square feet of commercial, that doesn't necessarily mean that we're planning the 2 million square feet. We'll see when we get there, what the market conditions are. And if there's more demand for residential, we can very easily as a right convert the commercial square feet to residential. So this is -- this next slide is something I mentioned in my annual shareholder letter. So these are commercial and hospitality areas of focus. They're more immediate than those DSAPs. And in fact, these -- I think we have 7 areas of focus and 5 of them are outside of the sector plan. So as I mentioned earlier, the 170,000 homes, 22 million square feet. That's what we have approval within the sector plant. We have other approvals outside of the sector plant. These areas of focus represent most -- a lot of those. So let me take you through these and we have some master planning document site plans, just to give you a sense. These are things that we've -- some of them we've already started, but just barely started. Others were about to start. So the first one is the WaterSound Town Center, which is a commercial town center across the street in front of WaterSound Origins. We obviously have started that, but we have a long way to go in terms of opportunities. So the site plan or master plan for the middle part of this master plan and what's on the right-hand side of the slide, that's about 400,000 square feet. The west side of it or on the left side, that's probably another 300,000 or 400,000 square feet. Again, it's going to be all market-based, but this is a pretty significant opportunity for us to have a portfolio to add to our leasing portfolio of some pretty high-end tenants and pretty high-end rates. And so we'll be focused on the WaterSound town center for quite some time. So East Lake Powell, this is an opportunity for us to create a really neat experience. It's a beautiful property right on Lake Powell, which is the lake, just east of us. It's a cultural doom lake that connects to the Gulf. It's beautiful. For those of you who are familiar with it. So we've been planning this property for some time. And the way we're envisioning this property is to create a mini Camp Creek opportunity where we're going to have opportunity for high-end custom home sites, just like we do at Camp Creek. We're going to have an opportunity to have amenities for our club members and then also potentially lodging, potentially having a boutique-ish in ride-on Lake Powell, which I think will be a really, really nice experience. Again, as it relates to our hospitality segment in general and specifically our club membership program, one of the things that we think about all the time is how can we add to the member experience. We constantly want to be adding to the member experience. So as we're growing our club membership program, and you saw the numbers from 600, 700 to 3,300, 3,400. We're not static. In the facility and the experiences. We're constantly are thinking about and planning and executing additional facilities and experiences for our club members. West Bay Center. So this is the commercial area in front of Latitude. It's actually not part of the joint venture. As you know, Latitude itself is a joint venture with Minto between Minto and us. The commercial part is just us, not part of the joint venture. We have barely started that center. We have our Golf Cart agency, which is a joint venture in and of itself. That's open. We're currently developing a bank. And then hopefully, pretty soon, we're going to start a grocery store with some in-line retail space. I can't say who the grocer is yet, but it's probably pretty easy to figure out. This is a pretty significant opportunity for the company. Latitude, and I'll go through the numbers later in the presentation, has been growing exponentially, something that has ever been seen in this region. And it's a captive audience of residents and consumers, right? And then we own all the land around it. So we have an opportunity to create a commercial town center that's going to be very scalable and very profitable for us over a period of time. So this site plan that you see right now, this, I think, represents 500,000 square feet, and that's not the entire property. The southern part of the property, we haven't gotten to master plan yet. We think we can easily add another 300,000 square feet to it. So again, just between this and the WaterSound Town Center that I mentioned, you can do math in your head pretty quickly that in -- just with 2 more projects, we can easily double, more than double our existing commercial leasing portfolio. So FSU/TMH Medical Campus. Health care is -- as this region grows, growing both the quantity and quality of health care is really important. When it comes to quality of life, there's nothing more important than health care, in our opinion. So we, a number of years ago, embarked on a vision to create a world-class campus. It's not just a medical clinic to check a box to sell more homes to latitude. We would have done that already 10x. That would have been really easy. This is about kind of rising and raising the quality of health care in the region for everybody. We're all consumers of health care who we live here, and we know we need more of everything and we need higher quality. So we did a lot of research. We talked to a lot of different partners. A lot of partners were interested, health care partners, clinical research for interest in being a part of this, and we made a decision on the partners that were going to be a part of this. And really, the core strategy of this campus is to leverage the natural synergy between teaching, research and clinical delivery. When you look at academic health centers, that's really the most successful health care model that exists in the country, academic centers that have all 3 components: research, teaching and clinical delivery. And that's the vision that we have for this campus. This is going to be one of the stops we're going to make today in the tour. And the first phase, let me first talk about the partners. So the partners are FSU and FSU College of Medicine. And then TMH, Tallahassee Memorial Hospital in Tallahassee, who's a very significant -- they have a very significant footprint in Northwest Florida. So the entire campus is going to be branded FSU Health. So to the consumer, to the patient, it's going to be a seamless experience, FSU Health. And over time, as the campus develops and all the phases are finished, the idea is not just to have those 3 components, teaching research in clinical delivery with residencies in the hospital and research activity, but also to have the entire spectrum of clinical delivery services. So as consumers of health care in this region, we all know that we have to drive 20 different places to do different lab work, different -- see different specialists, do different imaging. The goal here is really to have everything in one location. So everybody can go to that one location. And unless you're really, really ill, really extreme exceptions, you can have everything taken care of on that one campus. This is something we have spent a lot of time on. It was our vision originally. And so far, so good. The first phase of the campus is an 80,000 square foot medical office building. Again, we're going to stop out there this afternoon. That's going to start being operational and open late this summer. So as early as late this summer. That's the first phase of it. The second phase is going to be a hospital, which we'll talk a little bit more about when we do the tour this afternoon. Pier Park East, we're pretty simple. This is a property that's a superior park. That's the way we can keep up. So this is about, I think, 70, 80 acres that we own in Pier Park as everybody knows who's familiar with our market, Pier Park has become really the downtown. The commercial center of our region, particularly Bay County and Walton County. So this is a property that we've been -- we've master planned. We've received approvals and entitlements for again, outside of the sector plan. But we've been really picky about the tenants that would go there. Over the years, we've gotten interest from fast food restaurants and different folks, but we weren't interested in doing that. We really want to create the town center within the town center. We want to create an entertainment district within Pier Park, not just retail. So this master plan gives us an opportunity to do a pretty wide range of uses, entertainment, businesses, hotels, even apartments, high density apartments. And this is where we announced we issued a press release not long ago, this is where Topgolf is going to go. So we think Topgolf is going to be an ideal anchor for the tenant. It fits our region really well. It's family entertainment, wholesome family entertainment, and they're going to be doing their full-size Topgolf here. It's not going to be a smaller Topgolf for smaller markets, which tells you something about how our region has grown that we're actually becoming a Topgolf market now. FrexPoint East, this is going to be another stop. I think we're going to do this stop tomorrow. This is the public private partnership that we executed a number of years ago with the TDC Bay County and the school board. The TDC invested, I think, $40 million to build state-of-the-art sports fields, outdoor sports fields for amateur travel sports, soccer, baseball, Lacrosse. Then we own all the land around it. And as part of that public private partnership, we got approval for our master plan, which allows 750 hotel rooms, a couple of hundred thousand square feet of commercial, multifamily. And again, we own all the land around it. So the first development we've done in this project is the Homewood Sheets, which again, we'll see it tomorrow. We have an opportunity to do 3 or 4 more hotels there. The TDC, and we're going to have the CEO of the TDC there tomorrow to tell a little bit about what they're planning, but they've been working on building potentially an indoor facility to complement the outdoor facility. And that indoor facility is going to be another significant investment and then that's going to attract gymnastics, basketball, volleyball, and it's going to be year-round and it's not going to be subject to weather. So if that comes to fruition, we're going to need to step up our game on the next couple of hotels because the Homewood Suites has been doing really well just with the outdoor fields, if an indoor facility is added. It's going to be a pretty significant addition. So Point South of Marina in Port St. Joe. We opened the redevelopment of that Marina last year. We increased the size significantly of the -- it's mostly dry storage. We do have some -- that's where the Marina market is drive storage. We do have some wet slips that it's mostly dry storage -- we have master plan an area around the Marina barn and the barn in this master plan is the area in yellow. We think we can create a really cool and special town center that's really close to Reed Avenue, which is the Port St. Joe downtown, which has been thriving has been doing really well. And we think we have an opportunity to do a Waterfront hotel, which is going to be really, really cool in addition to commercial, entertainment, shopping activities all next to the Marina. So we'll complement the arena. As you guys know, we love to make investments that we call it the virtuous circle, right? We make an investment in one segment, and that segment helps the other segment. We make an investment in that other segment, and it helps our third segment, as we call it the virtual circle. So when we run pro formas in -- for projects, obviously, we look at the pro forma of that one project, but we also look at what that project may potentially do to our other segments. And this is one that we think will be very helpful to the Marina. We do have a lot of customers in that Marina that are not local. They come from different places, Columbus, Georgia, other locations. And we think if we do a nice boutiques waterfront hotel there, a lot of our customers in that arena, we'll be able to take advantage of that. So this is a slide we show often just to give you a snapshot of our residential home site pipeline. So as I mentioned before, we really -- if you look at the box on the right hand of the slide, the one that says 16,177, that's kind of where our pipeline starts. That's the most conceptual. We have entitlements, and we have a concept plan where we have a sense of yield. Many units can be accommodated in a particular master plan or side plan. Then we move down the line of the assembly line as we call it. We get into engineering and permitting. We have 3,193 in that segment of the pipeline. And then those 2 boxes are what we call soft dollars, right? We haven't put dollars in the ground yet. The third box, which is plated or under development, that's where the hard dollars have are being spent, and that's where we're building the infrastructure to create the home sites. So in total, what we have in our pipeline now is over 21,000, 21,503 residential units. Again, this is not all the entitlements we have. We have way more than this. These are the ones that we've taken off the entitlement shelf and have actually started doing planning, engineering or development. So right now, our builder program, we do sell some custom home sites, for example, at Camp Creek. And at Origins, we've done that. But most of our residential home site transactions are with builders. We have 20 builders right now in our builder program, which is pretty significant. Remember, in 2016, we sold a little bit of our 100 home sites. Back then, we had 1 builder. Now we have 20 builders. So we have 2 nationals kind of on both ends of the demographic spectrum, DR Horton and Toll Brothers. We recently announced Toll Brothers, the most luxury national homebuilder. Then we have many regional and local builders in between. And to be honest with you, we kind of like having that diversity. We like having nationals, regionals and locals. They all kind of behave differently. So we like having that diversity. Right now, with those 20 builders, we have a total of 1,335 home sites under contract with them. So one of the questions I get asked often and I call it a canary in the coal mine, when folks are getting nervous about the market about interest rates rising, the canary in the coal mine for us are our homebuilders. So the conversation usually start, they'll call me and they say, hey, we have a takedown coming up in 30 days, can we delay that by 2 weeks or 30 days? And I haven't had those phone calls in 4 or 5 years. So -- and we haven't done any phone calls or near that. So that's a canary in the coal mine for us. And our homebuilders still feel pretty good about the market even with the higher interest rates. And I think part of the -- because that's a question I get asked. So how would the higher interest rates, how are you still -- you had a record year last year, right? We did 1,700 home site. I think a lot of it -- probably a couple of different answers to that question, but the main one is the migration that's happening in this region is so significant from folks who are coming from places we hadn't seen before, right? Because traditionally, we've seen folks from the Southeast. We've been seeing folks from all over California, Oregon, Colorado, Illinois. The migration is so significant of folks moving here to life time, that creates a margin of error, right? So yes, higher mortgage interest rates, obviously, that has an impact on purchasing power and timing of decisions. But we certainly haven't seen a material slowdown in any way. And I do think that migration is a major part of that. And again, the canaries in the coal mine haven't gone those phone calls from any of our builders. So the last number here is homes under contract at Latitude and I have a slide that's going to focus on Latitude. It's 562. That's above and beyond the home sites we have with our 20 builders. So this is a slide we didn't show last year. You've seen it before. So what we try to do is we create milestones by asset type and then we put a year to it on when we want to reach a milestone. These are not card goals necessarily because we do everything market-based. The last thing we want to do is build buildings to check a box and then the buildings are empty. So -- and we have to calibrate everything to the market, not just the market in general, but locations. We have an apartment complex that we're planning on building, and there's another apartment complex that was built down the road. We kind of -- we want to we kind of see how that apartment complex is doing, how the rents are and how absorption is going. So these 2024 unit milestones, we set these at the annual meeting in 2022. So in 2022, we said by 2024, these are the milestones that we want to reach by asset type. So home sites is a little bit different because that's a per year, obviously. That's on a portfolio. So we had 2,000 last year, we're at 1,704, so we were 85% of that milestone. Multifamily and senior living, 2,500. We're at 1,383. So that's at 55%. A footnote to that is, as many of you know, we decided to sell Sea Sound apartments in '22. It was just an opportunity that we couldn't pass. That was 300 units that were subtracted from that number. So the number would be a little bit higher if we kept Sea Sound. But again, we don't make decisions based on reaching these percentages. This is just for our owners to calibrate the growth that we're planning. We're always going to make sound financial decisions project by project. Hotel rooms 1,500. We're at $12.98, that doesn't include the Residence Inn that we just opened about a month ago. So we're at 87% of the milestone. Commercial square feet and operational properties, 1.8. We're a little bit under 1.4 or 77%. Club memberships. We set a goal or milestone of 3,250 and the time that we did it. I know our hospitality folks were really nervous about that because it was really ambitious goal. We've exceeded it. So 33.17. We're at 102% of that milestone. And then we added boat slips in '22, 750. We're at 4.24%. So that's 57% of the milestone. Again, it's just a tool for our owners to look at in terms of potential growth of the different assets that we have. But every decision we make is going to be market-based, it's going to be sound financial decision. So Latitude. Latitude is our joint venture with Minto for a 55 and better community. And we located that property. We identify where we wanted to develop Latitude. And when you look at a map of the sector plan is literally in the middle of the sector line, literally in the middle, we did that on purpose because we hope that this would have really good velocity and it would help everything around that part of our sector plan. We didn't need help on edges of the sector plant in Panama City Beach in Walton County. We needed some help in the middle of the sector plan. So for this initial phase of the joint venture, we're planning 3,500 homes. The cell center opened in May of '21. As of the end of March, I believe these numbers are -- we've had over 1,700 sales, 1,181 closings are backlog. Backlog is homes under contract, not finished yet, $562 million, about $300 million in sales value. So this is really the significant data point. And when I say that this region has never seen this before, this pace, I think many parts of Florida haven't seen it, right, from one community. Of course, the villages, we're very familiar with that. But right now, we're at a pace of 67 home completions per month. So that was the number in March of '24. So it varies from month to month from, it's in the 50s and 60s. But in the month of March, we finished 67 homes in 1 month which is incredible. That volume, it's taken time, as you would imagine, to create the assembly line of production because this is -- we've never seen this kind of production before. So in terms of the trade base, the suppliers, the vendors. It has taken some time to get to this pace, but it's incredible that we are at this pace right now. We -- I mentioned this in my shareholder letter. One of the DSAP I mentioned that we got approval, one of the 9 over the last couple of years quietly is for a property to the west of the 3,500 homes. And that DSAP, I believe, is approved for over 5,000 units. So we have started planning that one already as an extension of the joint venture. No permitting yet, no money in the ground because we still have a good bit deal here. But in our business, you have to kind of plan a couple of years ahead. We've had a total of 1,561 home starts. And the amenity, which those of you that were here last year, you saw it last year, it's an incredible amenity. We own 20 miles of water frontage on the Intracoastal Waterway. And this amenity was really the first time that we've activated the Intracoastal Waterway. And then we're going to go -- we have a boat tour plan. For those of you that signed up tomorrow and one of the stops in the boat tour, we're going to go and show you the Latitude amenity from the water side. And then we're also planning a pretty significant Marina to the west of a Latitude amenity, and we'll start you that too tomorrow. I'm not going to read the reconciliation, and I'm certainly not going to read the forward-looking statements. So that concludes my presentation. So we'd love to open the floor up for questions.

So if anyone wishing to address the meeting should it speak in the microphone being webcast after rent you please state your name and whether you are a shareholder or a proxy holder and proceed with your question or comment. Please remember to conduct yourself in accordance with the rules of this meeting, including limiting your time to 2 questions. It will help us if your question is brief and covers only one topic per question.

Congratulations. My name is Dan, hi, and I'm a shareholder. This is my first annual meeting. So I apologize if this question gets asked every year. But as you mentioned, the migration continues to this part of the country. I'm sure it's really part of your DSAP planning, but the traffic congestion, the roadway systems, all those sorts of things, can you walk us through how you guys are planning for that and if that makes you nervous?

Well, yes, everything makes me nervous. So that's just the way I am. Dan, thank you for coming. Really appreciate you taking the time and being here. So obviously, infrastructure, community infrastructure, whether it's transportation, the roadway network schools, health care. Those are all things that we spend a lot of time planning years ahead. One of the challenges with transportation is we need the public sector to be part of that planning with us, whether it's a state Department of Transportation, local government. And they're just not built to plan years. And I'm not saying anything negative about them. They're all great people, and we work with them great. But election cycles are 2 and 4 years. So when you fix a pothole, that's when you get reelected when you solve a problem 10 years from now, that's irrelevant to reelection. So that's just the reality of our world. So we're constantly, constantly pushing our partners to think into the future and to think about infrastructure, to think about the roadway network. And we -- what we like to do is create public-private partnerships where they don't have to acquire the land necessarily. If we come up with a plan of action to create a new roadway where they're going to invest in that roadway and it makes sense and it fits in the sector plan because we already playing the roadways in the sector plant and the state and local governments approve them. So it's a matter of execution. So does it keep me up at night? Yes. It's something that we spend a lot of time on. And it's constantly reminding our public sector partners that we need to plan ahead. It's not just about fixing the potholes that exists today.

Why don't you show the example of WaterSound Parkway? And the work that's being done there on a 16.

So this is just one. If you look at the sector plan documents -- and by the way, we kept the Bay-Walton Sector Plan web page alive. So you can just Google Bay-Walton Sector Plan, and you can pull all kinds of maps and engineering studies about transportation, about schools about different things. So this is just one of those roads. There's many other roads. But the West Bay Parkway goes from 79% just that line, north of where you see WaterSound, West Bay Center. And it goes all the way through crosses unit coastal waterway and ends up in South Walton near our South Walton Commerce Park. So we've been working with the Floyd Department Transportation for quite some time on that concept. It's -- these kind of regional roads take a long time with our public partners and they have a lot of steps very structured. So they've approved essentially what's called the PD&E which is the alignment of the road that's been approved. After several years of public hearings and meetings and a lot of consultants that they hire to identify environmental challenges and so forth. Right now, we're working on the next step, which is to secure funding for engineering of that road. We hope to be able to finalize that process relatively soon. And then the next step after that is to work with them to identify funding. So that's a pretty significant road because it's going to help the congestion of '98, particularly for traffic in South Walton. We all know how much South Walton has been growing. And once that road is built, South Walton residents, we'll be able to get on that road and go right to the airport, go to stay Road 79 without having to get on 98. And a portion of it has been built already. So the easternmost portion is essentially through Latitude, and that's been built already as part of Latitude. You can tell the difference, the solid blue line and then the dotted line.

I'm Greg Malachowski, shareholder. I guess, 2 questions. The first one, when I look at Latitude, it's awesome and how fast that's come about, too, just looking at over 3 years is indeed spectacular. So I guess what I was wondering is, where do you see, especially given just the kind of very robust financial profile of the buyers there, an opportunity to perhaps associate some sort of club amenity or club option because, again, you look like right now you go through the area there and they're almost grumbling about we want shopping. We want restaurants. We want things like that. You look at what they don't have, which is necessarily beaches and golf, and that's something that clubs is providing. So I was just wondering where you see or if you see an opportunity to maybe do something with clubs over around Margaritaville.

So maybe you have our office bug. That's something that we actually see an opportunity for that, pretty robust opportunity. And we've been spending time planning that concept. So yes, absolutely. It kind of the details of it. Is it part of the same club? Is it a different club? Is it a hybrid? What would be the amenities, the facilities, that would be a little bit different because obviously, our club here, it's very family-centric, where with Latitude, the club amenities and the experiences would probably be less family-centric -- so yes, short answer to your question, absolutely, we see a tremendous opportunity, and we have already started that process.

My second question, what in the world are you guys doing in 38 West? Because I've looked into that. And even watching, I think, the Board of Commissioners meeting like the people reviewing this raving about I think the words were one of the most beautiful projects they've ever seen well thought out, well done. It's magnitude bigger than some of the projects you've mentioned in your reports. But I've spent over a year looking at it, and it's very hard. I don't even think I've seen the name St. Joe associated with it. So I just kind of -- I was wondering if it's not something you want to keep too close to the chest -- what's going on there? Because every time I drive down that way, there's more dirt moving around, and it looks like there's clearly things happening. And everything I've been able to find, it's a spectacular project. And you guys have been relatively quiet about that. So I was just wondering if you could maybe.

Absolutely. So he's referring to a property that is on 98, the north side of 98, just where 38 terminates on the West End. So it's in Miramar Beach closer to Destin. So we've been planning that project together with an adjoining property owner. Keith Howard, the Howard Group. He is the owner of several entertainment shopping centers in our area. We think the world of Keith and his team. He owns property to the East of us. We own property to the West. So we've been planning that property together. The dirt moving that you see there has none now with the project. We haven't broken ground on the project yet. We're still in the planning process of the project. What you're seeing there is we stockpile filter, and that's used for other projects. So we haven't finalized that the planning process. We haven't finalized the potential partnership on that project. The process that you saw was a public process that we had to go through to obtain the entitlement to obtain the approval, and that's been obtained. So by having that master plan approved by Walton County and obtaining the entitlements essentially has created value for both of our properties. And we still need to kind of finalize the structure of that and what we're going to do with that. So we haven't been quiet on purpose. It's just we've been busy with a lot of other things. And Keith has -- and his team have taken the point on that, obviously, with core naming with us.

Glenn Rollins, I'm a shareholder. I plan on being a shareholder for a very long time, and so I have a question for each of you. The first one is for you, Jorge. With all the success with a strong hand with the hand getting stronger and all these tailwinds, how do you make sure that the culture doesn't get complacent with all the success?

Now, that's a great question. So far the best question not to tell anybody else, anything different. We talk about culture all the time. It is, in our opinion, in my opinion, culture trumps strategy every day of the week especially with an organization like us, we do so many different things. We're a very diverse company. We just don't do one thing. So that process of how we create our culture where it's an owner-centric culture. You've heard me say that before. We want all of our employees to think and act like owners. And owners don't get complacent. Owners don't get complacent. So it's something we work at literally every day. We're very careful in who we hire, how -- and making sure that when we bring them on board, we instill that I call it software, that software of culture. There's not one answer to that. It's literally recognizing that, that's important and 2, working at it every day. But that's near the top of our list.

And then a question for you, Bruce. I'd love to hear at a high level how you think about having really high return on invested capital and activities that take so much capital.

Years ago, I looked at the history of wealth creation in the United States and how families did it. And at the time, it seemed to me that families do quite well over generations investing in real estate and developing real estate from farm land and farm industry, which eventually led me to St. Joe. It's led to a recreating and the reshaping of St. Joe to the point we're very happy with the progress of saying, Jon, frankly, don't need to be on the board of St. Joe anymore. They're all doing a great job, and I see many years of growth. But St. Joe is complex to the extent that it's a story that's going to last for many decades, and it's going to have a very high terminal value. It's not a question of if. It's just a question of when. And it's complex when you start to think about return on invested capital, so a lot to measure route the cash flows. Well, it's becoming easier to measure out the cash flows as you continue to see the growth of the company and to see the free cash generation and to see the projector that the company is on and to see the pipeline because in many cases, St. Joe, is now a question of, okay, how do you get to -- let me rephrase that. The last question is, how do you get to 2,000 homes and home sites a year. The next question is going to be, well, how do you get to 4,000 per annum? And what does it take to get to 4,000 homes and home sites. And we kind of commercial facility team at kind of hospitality and how is that hospitality going to drive the home site, how the home site is going to drive the commercial. So you start to see it. And -- but the tough part is to determine what the value of all that land is besides it's easy to look at the cash flows and say it's worth this multiple. So what is all that land worth that's on the books for practically nothing that's bought decades and decades ago. And that I leave up to investors.

[indiscernible] were shareholders. We live in Atlanta to by Greyville, my question is with regards to EMS service and the EMS fire service in that area. Here, there's a plan for a fire station in the new 38. I've been working with Bay County through Margaritaville -- just wondering the status of that as far as providing health care, I mean, we're 55 and better. If we're a little bit older than people in that area. So our concern was response times. And again, with the hospital time frame for the hospital to start and things like that.

So that's a great example of part of the answer provided previously. So we've been working with Bay County in that for quite some time, and they're great partners, great folks. It's taking a lot longer than we anticipated. But that agreement has been executed. And then we're going to be moving forward with that facility and start pretty soon, I forget what the time frame is lease up, Bridget, do you remember when we start?

[indiscernible] and engineering of it. So our intended to get started on that have only design [indiscernible] facility and start construction in [indiscernible].

Yes. So the way we're -- so the agreement has been executed. The county commission approved it. So you can look that up at county commission meeting fully executed. We're moving forward and taking the lead to kind of do this and then the county is going to pay us for the century. And then the hospital -- the hospital is going to be big. Obviously, we don't have an exact date when it's going to break ground, but don't discount the medical office building. So the 80,000 square feet that is going to start becoming operational this summer, hopefully by the end of the year, it will be mostly full. That's going to have an entire floor of Orthopedics, entire floor of cardiology. I believe 7 outpatient surgery rooms in urgent care, full diagnostics and family practice. So that's before -- obviously, when the hospital is done, it's going to be terrific, but you don't have to win to a hospital to start seeing an increase in an improvement in the level of service and the quality of health care. You're going to start seeing that as early as this later this summer. Forget what time. And in fact, by then, you're going to be tired of hearing me talk, especially in the bus. So we're having Andrew Star. Andrew is going to be the President on the clinical side of the campus. He's going to be there. And he's going to talk about the plans and kind of the timing and the physician groups that are coming on board.

Joe, what is the ultimate goal for this? When we're talking about 80 acres medical camps.

Yes. So the master plan, again, having all 3 components, teaching, research and clinical delivery. So the hospital has been designed for, I believe, 486 rooms, which is a pretty big hospital, and that's going to be phased over time. And it's been fully designed. The core or the gut to the hospital will be built in day 1. What will be phased over time are the rooms. So the Phase 1 rooms haven't been finalized yet, but the hospital has been signed for 486 rooms is going to be a full teaching hospital with residents there. And that's what really makes us excited, right? Because the research is pretty clear where docs do their residencies, they tend to stay because their families develop relationships in the community. So that's really the end goal. So a squishy goal that we have, we all know that a lot of folks in our region, they go outside of our market for health care, right, UAB in Birmingham, maybe Shands in Gainesville or in Jacksonville. We really want to kind of reverse that, right? The goal we really want it to be world class. It's going to take time, right? It's not going to happen overnight. But our ultimate goal is really to reverse that, where folks in this region don't have to travel if they don't want to. And in fact, we hope to attract some people from other parts of the Southeast to come here. That's really the ultimate goal.

The investment dollars gigantic. I don't think there's going to be no change when this is all done from $0.5 billion. This is going to be a world-class, top not medical facility for the residents. It's just going to take some more time to get there, and we can just keep taking one step forward, right, to look that's forward every year. To me, the progress, if you thought about this 5 years ago, this would be incomprehensible where we are today. And I think 5 years from now, I think you'll have a big smile line you face.

And the key is, I can't say it's enough having that academic health center model because that is the way to attract docs and retain them. The days of physicians getting together, creating an LLC and running a business, those days are in the rear mirror, having an academic health center model where physicians are attracted to quality research. They're attracted to teaching and to our patients.

It's a cool element to this campus also, especially the focus on aging like the home elements, I've heard in the home of the future, you could monitoring keeping healthy, quite amazing.

It's one of the things we're working on because medicine is changing, right? AI is going to be a big part of medicine in the future. There's a lot of things, a lot of technology available already at the home level digital technology that will help. And we're in discussions with FSU, nursing school, the medical school to kind of -- we're planning to do some test cases at Latitude.

Yes. I think the first place you'll see the home of the future, we'll be Latitude.

I'm [indiscernible]. I'm a shareholder. One -- first, I wanted to say, I appreciate you guys being thoughtful about one holding an annual meeting and then also sort of designing it toward the structure around it for us as shareholders to kind of get a better sense of what's going on. And I also appreciate your thoughtfulness and detail in the presentation today because I think it's helpful kind of seeing where things are going and the amount of work you guys do in advance to kind of get things to where they are now. My question specifically is more around the Marinas, the 2 Marinas you guys have built. In the quarterly release, I think, you sort of mentioned your -- you see positive developments there and are starting to think more about kind of building that whole ecosystem around the Marinas. And I just wanted to kind of understand better what exactly do you see that sort of encourages you? Is it absorption of the slips -- or is it like the clientele that you're attracting there? What kind of gives you that enthusiasm?