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Vision: Planning for Northwest Florida's Recovery
Alignment Provides Focus
Deployment toward Sustainable Value Creation
Protecting the Balance Sheet for the Opportunities Ahead
March 31, 2009
Dear Shareholders,
The year 2008 will long be remembered for the financial turmoil that has affected most aspects of the global, national and Florida economies. The result has already been a recession much more severe than most anticipated, and we have experienced significant challenges in our markets and our business.
At JOE, we acted quickly and decisively to protect and preserve the long-term value of your company and its unique assets. We have a dedicated and highly-skilled management team that is committed to ensuring JOE maintains the necessary financial strength to overcome the current economic conditions while positioning the company for success in the future.
We are managing JOE's assets prudently during this period of uncertainty, and have restructured our business model with meaningful reductions in capital expenditures, operating costs and overhead expenses. JOE's balance sheet, bolstered by a strong cash position and virtually no debt, positions us well.
As much change as we have seen, we are sure there is more change ahead. So, I want to use this opportunity to share with you our preliminary strategy for moving forward.
Vision: Planning for Northwest Florida's Recovery
The foundation for success is often set during the downside of the business cycle. During 2008, we conducted a complete review of our business and eliminated significant spending while identifying opportunities for value creation when the economy improves. Over the past year we have further focused our efforts on the Northwest Florida economy, which is the platform for JOE's future growth.
We have set three priorities for strengthening that platform: economic development, infrastructure investment and regional branding. Long-term investment in each of these areas can provide an excellent return for a healthier, more diversified regional economy and JOE's long-term success.
Economic Development
We believe a strong and growing regional economy will provide the necessary foundation for a healthy real estate market for decades to come.
Over the past eighty years of JOE's history, Florida has gone through numerous cycles of growth and contraction, each time emerging stronger than before. That does not mean we can simply wait for the state's economy to recover and expect everything to "return to normal." Going forward, Florida will need to aggressively compete for economic development and new jobs to maintain the standard-of-living and high-quality experiences that we enjoy.
The centerpiece for economic development in Northwest Florida is the nation's largest green-field airport and JOE's surrounding 71,000-acre WestBay Sector. We are promoting WestBay and the airport as a "landing zone" for jobs. We are focused on attracting new businesses to WestBay that will expand the economic clusters that already have a strong presence in the region, including:
- Aerospace & Defense -- expected to be a top global growth business, and already accounting for more than 30,000 workers at 1,900 businesses in Northwest Florida.
- Alternative Energy & Environment -- driven by renewable energy and environmental sustainability mandates.
- International Trade, Transportation & Logistics -- with world trade expected to grow over the long term.
- Health Care -- an issue gaining focus on the national agenda.
Infrastructure Development
To become more competitive, Northwest Florida must become more connected to the global marketplace.
Over the past eleven years federal, state and local governments have invested nearly $1 billion in new infrastructure spending in Northwest Florida. We have seen significant investment in roads and highways, port and rail improvements, healthcare, education and the arts, as well as on the much-anticipated new Panama City - Bay County International Airport. I am proud to say that JOE has been a leading advocate for these crucial investments.
JOE has a history of complementing public investment in Northwest Florida by committing its resources to further support regional infrastructure. We have worked with governments and organizations throughout the region, investing time, resources and land to aid projects that are crucial to future growth in the region, and we will continue to make such investments when they clearly benefit JOE's shareholders.
The new international airport in WestBay, currently under construction, stands as the prime example of JOE's willingness to make regional investments to meet a crucial infrastructure need. JOE donated the 4,000-acre airport site and provided almost 10,000 acres for the mitigation of the environmental impacts of the airport construction.
The local Airport Authority reports that more than half the site infrastructure work is complete. Construction of the terminal building and control tower is underway, and the Airport Authority expects a May 2010 opening. When it opens, the new airport will be a critical link to both the national and global economy.
By combining the new airport with an under-utilized deepwater seaport and rail system already in place, Northwest Florida has a unique competitive advantage for businesses locating there. WestBay is well positioned to take advantage of these connections to the global network.
Regional Branding
Florida remains a strong brand, an exciting destination and a place where people want to live and own real estate.
Building on the economic development initiatives and leveraging new transportation infrastructure, JOE, along with local business leaders and government officials, is committed to making Northwest Florida an even more desirable national and international destination for visitors and real estate owners.
A broad-based public/private partnership is leveraging the Florida brand by implementing a strong regional branding campaign to promote the region as an emerging national and international destination. The campaign, called THE Beach, is focused on the region's 125 miles of white-sand beaches, considered some of the best and most popular in America.
As the grand opening of the new airport approaches, the region is preparing to launch an aggressive outreach effort to attract airlines, hospitality companies and travel-based businesses. We are working directly with several airlines to bring new high-quality airline service to Northwest Florida that can expand our market and significantly increase the number of visitors.
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Alignment Provides Focus
As we look to the future, we believe JOE's greatest mid-term opportunities lie in WestBay, the 71,000 acres surrounding the new airport site. JOE currently holds entitlements for more than 4.4 million commercial square feet, 5,800 residential units, 490 hotel rooms and 2 marinas with 800 slips. In our view, WestBay is the epicenter of JOE's value creation potential. The opening of the airport will help Northwest Florida achieve a "tipping point," the moment when potential yields to action. We are working with our partners to make WestBay tipping-point ready.
For JOE and for Northwest Florida, an alignment of interests is required for success, particularly in difficult markets. Local, state and regional economic development officials, along with our team, have begun a number of coordinated initiatives to prepare WestBay to respond to the needs of a global customer base.
For example, local and regional economic development organizations, educational institutions and other major corporations have joined JOE in focusing on workforce training issues to improve the quality of Northwest Florida workers. We recently signed an agreement with Gulf Coast Community College, Gulf Power Company and the State of Florida's Workforce Florida, Inc. to address emerging workforce training needs spurred by the development of the new airport.
JOE will continue to promote and support efforts to stimulate economic development in Northwest Florida. We believe focusing on these efforts will accelerate demand for our real estate and lead to increased revenues and asset values for JOE shareholders.
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Deployment toward Sustainable Value Creation
Our objective is to deploy our resources to achieve increased asset value. We want to forge alliances and ventures with strong partners and create sources of recurring revenues. The leases we announced with the Port Authority of Port St. Joe, which supports the reopening of a deepwater seaport in Port St. Joe, and with Genesee & Wyoming, which links that port with the national rail system, are good models for future relationships.
Beyond WestBay, we also intend to maximize our presence in market segments across the region where there is momentum. We intend to use JOE land strategically, to supply land for more varied uses at various price points, to forge new strategic partnerships with other companies and to nurture new markets.
We will continue efforts to sell our inventory of constructed homes and developed homesites, despite the challenging environment. We will continue to work with local, regional and national builders on homesite-takedowns and more broad-based builder programs. We will also work towards creating value through developer relationships for some of our entitled lands.
We will continue to push ourselves to think outside the box to develop new sources of revenue from our assets.
For example, JOE owns wetland mitigation banks with excess credits that we will market for sale to third parties as a source of revenue. We also have in-house expertise on maintenance of environmental mitigation banks and have the potential to earn fee-income on this business. And we are actively investigating other uses for our timberland assets, including exploring the potential of our timber as a source of fuel in alternative energy production.
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Protecting the Balance Sheet for the Opportunities Ahead
The economic environment and real estate markets will remain extremely challenging in the near term, but we believe that our long-term focus will generate value for many years to come.
To that end, we are fully committed to protecting and preserving the long-term value of your company and its unique assets. We intend to position JOE for the vision we know is ahead by maintaining our strong balance sheet. Our cash position and low debt levels afford our management team the ability to focus on the future, while executing our near-term strategy.
But most importantly, we will continue to balance the value preservation challenges of today with the many value creation opportunities in the years ahead.
Thank you for your support.
Wm. Britton Greene
President and Chief Executive Officer
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