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The St. Joe Company Form 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2004

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File No. 1-10466

The St. Joe Company

(Exact name of registrant as specified in its charter)


Florida (State or other jurisdiction of incorporation or organization)		59-0432511 (I.R.S. Employer Identification No.)

245 Riverside Avenue, Suite 500 Jacksonville, Florida (Address of principal executive offices)		32202 (Zip Code)

Registrant’s telephone number, including area code: (904) 301-4200

Securities Registered Pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on Which Registered

Common Stock, no par value		New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES þ NO o

The aggregate market value of the registrant’s Common Stock held by non-affiliates based on the closing price on June 30, 2004 was approximately $2.24 billion.

As of February 28, 2005, there were 103,464,901 shares of Common Stock, no par value, issued and 76,076,931 shares outstanding with 27,387,970 shares of treasury stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 17, 2005 (the “proxy statement”) are incorporated by reference in Part III of this Report. Other documents incorporated by reference in this Report are listed in the Exhibit Index.

Table of Contents


		Page
Item		No.

PART I
1.	Business		2
	Recent Developments		2
	Land-Use Entitlements		3
	Towns & Resorts Development		4
	Commercial Real Estate Development and Services		6
	Land Sales		9
	Forestry		10
	Risk Factors		11
	Forward-looking Statements		16
	Employees		18
	Website Access to Reports		18
2.	Properties		18
3.	Legal Proceedings		18
4.	Submission of Matters to a Vote of Security Holders		19
PART II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities		20
6.	Selected Consolidated Financial Data		21
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
7A.	Quantitative and Qualitative Disclosures about Market Risk		47
8.	Financial Statements and Supplementary Data		48
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		48
9A.	Controls and Procedures		48
9B.	Other Information		50
PART III*
10.	Directors and Executive Officers of the Registrant		50
11.	Executive Compensation		50
12.	Security Ownership of Certain Beneficial Owners and Management		50
13.	Certain Relationships and Related Transactions		51
14.	Principal Accountant Fees and Services		51
PART IV
15.	Exhibits and Financial Statement Schedule		51
SIGNATURES			55
Ex-10.26 Severance Agreement - Wm. Britton Greene
Ex-21.1 Subsidiaries of The St. Joe Company
Ex-23.1 Consent of KPMG LLP
Ex-31.1 Sect. 302 Certification of the C.E.O.
Ex-31.2 Sect. 302 Certification of the C.F.O.
Ex-32.1 Sect. 906 Certification of the C.E.O.
Ex-32.2 Sect. 906 Certification of the C.F.O.


*	Portions of the Proxy Statement for the Annual Meeting of our stockholders to be held on May 17, 2005 are incorporated by reference in Part III of this Form 10-K.


Item 1.	*Business*

As used throughout this Form 10-K Annual Report, the terms “we,” “JOE,” “Company” and “Registrant” mean The St. Joe Company and its consolidated subsidiaries unless the context indicates otherwise.

JOE is one of Florida’s largest real estate operating companies. We believe that we are the largest private landowner in the State of Florida. The majority of our land is located in Northwest Florida. We own approximately 820,000 acres, approximately 352,000 acres of which are within ten miles of the coast.

We are engaged in town and resort development, commercial and industrial development, land sales, and commercial real estate services. We also have significant interests in timber. We believe we are one of the few real estate operating companies to have assembled the range of real estate, financial, marketing and regulatory expertise necessary to take a large-scale approach to real estate development and services.

Our four operating segments are:


	•	Towns & Resorts Development

	•	Commercial Real Estate Development and Services

	•	Land Sales

	•	Forestry

We believe we have a number of key business strengths and competitive advantages, including one of the largest inventories of private land suitable for development in the state of Florida, a very low cost basis in our land and a strong financial condition, which allow us the financial flexibility to pursue development opportunities.

In order to optimize the value of our core real estate assets in Northwest Florida, our strategic plan calls for us to continue to reposition our timberland holdings for higher and better uses. This value creation results from market analysis, land use/zoning changes, and parceling of our land holdings. We are currently seeking additional entitlements and zoning improvements throughout our land holdings. These entitlements are intended to facilitate alternative uses of our property and to increase its per acre value.

Recent Developments

During 2004, our business experienced the following developments:


	•	We acquired 2,446,198 shares of our common stock for a total cost of $105.0 million.

	•	In August, we increased our quarterly dividend from $0.12 per share to $0.14 per share. We paid $0.52 per share in dividends for the year.

	•	Development of Regional Impact (“DRI”) land-use entitlements were approved for WindMark Beach in Gulf County for 1,662 units on 2,080 acres and for RiverTown in St. Johns County for 4,500 units on 4,170 acres.

	•	The legal challenges to the land-use changes in the West Bay Sector for 20,556 acres of our land and for the proposed relocation of the Panama City-Bay County International Airport were settled, and the Federal Aviation Administration released its draft Environmental Impact Statement, which took a favorable view of the relocation.

	•	In December, we sold approximately 93 acres at Pier Park in Panama City Beach to the Simon Property Group for $26.5 million, or approximately $286,000 per acre.

	•	Land-use entitlements were received for WaterSound West Beach in Walton County with 197 units on 62 acres and for Perico Island in Manatee County with 686 units on 352 acres.


	•	The Alfred I. duPont Testamentary Trust (the “Trust”) sold an aggregate of 18 million shares of our common stock to the public, decreasing the Trust’s ownership of our common stock to 7.5% on December 31, 2004.

Land-Use Entitlements

We have a broad range of land-use entitlements in hand or in various stages of the approval process for primary residential, resort, and RiverCamps communities in Northwest Florida and other high-growth regions of the state. The following table describes the primary residential, resort and RiverCamps communities with land-use entitlements that we are currently planning and developing in Florida. As shown in the table, the expected build out periods for these communities range from 2005 to 2017, the maximum project units for these communities exceed 26,000, and the total acreage encompassed by these communities is approximately 29,000 acres. Most of the communities are on lands we own. We expect some of the communities to be developed through ventures with unrelated third parties.

Summary of Land-Use Entitlements

Residential, Resort and RiverCamps Projects in Florida

December 31, 2004


									Units Sold/ Under
	Year			Planned					Contract as of				Company-
	Sales			Sales End			Maximum Project		December 31,		Total Project		Built House
Name of Community	Begin(1)			Date			Units(3)(4)		2004(4)		Acres(5)		Pricing			Lot Pricing(6)

													(In thousands)			(In thousands)
Walton County:
WaterColor		2000			2007			1,140		813		499	$	750-1000	+	$	450-1000	+
WaterSound Beach		2001			2007			499		362		256	$	750-3000	+	$	700-1000	+
WaterSound Phase I		2006			2013			487		0		506	$	500-750	+	$	200-400	+
WaterSound West Beach		2005			2008			197		0		62	$	750-1000	+	$	600	+
Camp Creek Golf Cottages		TBD	(2)		TBD	(2)		50		0		10		TBD(2	)		TBD(2	)
Bay County:
Hammocks		2000			2007			457		383		143	$	100-180	+	$	30-40	+
Palmetto Trace		2001			2008			480		298		138	$	120-200	+		—
East Lake Powell		2007			2010			360		0		181	$	500	+	$	200	+
Hawks Landing		2005			2007			167		0		88		—		$	40-50	+
Wavecrest		2007			2009			95		0		7		TBD(2	)		TBD(2	)
Pier Park (Residential)		TBD	(2)		TBD	(2)		125		0		10		TBD(2	)		TBD(2	)
RiverCamps on Crooked Creek		2003			2007			450		65		1,500	$	700-900		$	150-1,000	+
RiverCamps on Sandy Creek		2006			2012			600		0		6,000		TBD(2	)		TBD(2	)
West Bay DSAP Phase I		TBD	(2)		TBD	(2)		685		0		4,234		TBD(2	)		TBD(2	)
Gulf County:
WindMark Beach, phase 1		2001			2006			110		104		80	$	2,000	+	$	800-1,000	+
WindMark Beach, phase 2		2005			2015			1,552		0		2,000	$	400-1,000	+	$	200-1,000	+
WaterMill		2006			2008			120		0		94		TBD(2	)		TBD(2	)
Franklin County:
SummerCamp		2005			2012			499		0		782	$	700-1,000	+	$	150-800	+
Cutter Ridge		2005			2006			24		0		10		—		$	22	+
Timber Island		TBD	(2)		TBD	(2)		400		0		49		TBD(2	)		TBD(2	)
Calhoun County:
Riverside at Chipola		2005			2006			10		0		271		—		$	150-300
Leon County:
SouthWood		2000			2017			4,770		858		3,770	$	150-400	+	$	50-150	+
Walton Corners		2005			2005			33		0		60		—		$	40-75


								Units Sold/ Under
	Year		Planned					Contract as of				Company-
	Sales		Sales End		Maximum Project			December 31,		Total Project		Built House
Name of Community	Begin(1)		Date		Units(3)(4)			2004(4)		Acres(5)		Pricing			Lot Pricing(6)

												(In thousands)			(In thousands)
Northeast Florida:
James Island		1999		2005		365			363		194	$	400	+		—
St. Johns Golf and Country Club		2001		2006		799			664		820	$	300-400	+	$	50-125	+
RiverTown		2000		2015		4,500			23		4,170	$	165-800	+	$	150-500	+
Hampton Park		2001		2005		158			156		150	$	300-400	+		—
Central Florida:
Victoria Park		2001		2012+		4,000	+		683		1,859	$	175-300	+	$	50-100	+
Artisan Park, Celebration(7)		2003		2006		616			309		160	$	300-600	+	$	200	+
Perico Island(8)		2006		2010+		686			0		352		TBD(2	)		—
Hillsborough County:
Rivercrest(7)		2002		2006		1,300	+		1,085		413	$	120-200	+		—
Palm Beach County:
Paseos(7)		2002		2005		325			322		175	$	400-600	+		—


(1)	Includes estimated future dates.

(2)	To be determined.

(3)	Maximum project units represent the number of units land-use entitled. A project is deemed land-use entitled when all major discretionary governmental land-use approvals have been received. Some of these projects may require additional permits for development and/or build-out; they also may be subject to legal challenge. The actual number of units to be constructed at full build-out may be lower than the number of units entitled.

(4)	Units are comprised of home sites, single-family and multi-family units, and Private Residence Clubs (“PRC”) shares, with each PRC share interest treated as one-eighth of a unit.

(5)	Represents actual acreage utilized or the acres required to gain land-use entitlements for the maximum project units. Total acres utilized for a project may vary considerably from the acres necessary to gain land-use entitlements.

(6)	Pricing based on remaining product.

(7)	Paseos and Rivercrest are each 50 percent owned by the Company. Artisan Park is 74 percent owned by the Company.

(8)	We have an option to purchase the land for this project.

Towns & Resorts Development

Our Towns & Resorts Development segment develops large-scale, mixed-use communities primarily on land that we have owned for a long period of time. We own large tracts of land in Northwest Florida, including large tracts near Tallahassee, the state capital, and significant Gulf of Mexico beach frontage and waterfront properties, which we believe are suited for primary housing, resort and second-home communities. We believe this large, established land inventory, with a low cost basis, provides us an advantage over our competitors who must purchase real estate at current market prices before beginning projects. We manage the conceptual design, planning and permitting process for each of our new communities. We then construct or contract for the construction of the infrastructure for the community. Developed home sites and finished housing units are then marketed and sold.

In addition, we own all of the outstanding stock of Saussy Burbank, a homebuilder located in Charlotte, North Carolina. In 2004, Saussy Burbank closed sales of 748 homes it constructed in North and South Carolina.

The following is a description of some of the communities we are developing:

WaterColor is situated on approximately 499 acres on the beaches of the Gulf of Mexico in south Walton County. We are building homes and condominiums and selling developed home sites in WaterColor. The community is planned to include approximately 1,140 units, including a private residence club with fractional ownership. Amenities include a beach club, tennis center, boat house, restaurant on an

inland freshwater lake, a 60-room inn and restaurant and commercial space and parks. Sales began in phase four in the first quarter of 2005.

WaterSound Beach is located approximately five miles east of WaterColor. Situated on approximately 256 acres, WaterSound Beach includes over one mile of beachfront on the Gulf of Mexico. This community is currently planned to include approximately 499 units. Eighty-one beachfront, multi-family units were closed in 2004. The remaining 43 multi-family units are scheduled to be released for sale in 2006. Construction of 22 of the 43 units is scheduled to begin in late 2005, and the remaining 21 units are scheduled to start in early 2006.

WaterSound West Beach is located over one half mile west of WaterSound Beach on the beach side of County Road 30A. It is being designed as a gated, high-end community with 197 units which includes beach access through the adjacent Deer Lake State Park. Construction is scheduled to begin in the first half of 2005, with sales expected to begin in mid-2005.

WaterSound is located northeast of WaterSound Beach with frontage on Lake Powell. This project is situated on approximately 1,443 acres. The Walton County Board of Commissioners has approved the Application for Planned Unit Development enabling development of 478 residential units and 35,000 square feet of commercial space. Including the amount above, the plan for WaterSound calls for approximately 1,060 residential units, 470,000 square feet of commercial space and a golf course. The DRI process for that project commenced in early 2003 and is expected to continue through 2005. General infrastructure construction began in late 2004 and sales are currently expected to start in early 2006.

WindMark Beach is situated on approximately 2,080 acres in Gulf County and includes approximately 15,000 feet of beachfront that we own. Phase I of WindMark Beach, situated on approximately 80 acres, includes approximately 110 home sites, many of which are located on the beachfront. Future phases are planned to include approximately 1,552 units. The DRI process for WindMark Beach was completed in 2004. Plans also include the realignment of approximately four miles of US Highway 98. Field survey work and project engineering and design of the relocated road are ongoing.

SouthWood is situated on approximately 3,770 acres in southeast Tallahassee. Plans for SouthWood include approximately 4,770 residential units and a traditional town center with restaurants, entertainment facilities, retail shops and offices. Over 35% of the land in this community is designated for future greenspaces, including a 123-acre central park. Certain regulatory approvals are required prior to commencing development on phases of construction that are scheduled to begin in the 2006-2007 timeframe.

SummerCamp, in Franklin County, is situated on approximately 782 acres. Current plans include approximately 499 units, a beach club, a community dock and nature trails. Sales of 52 home sites are scheduled to close in 2005, pending the receipt of environmental permits, one of which is the subject of a legal challenge.

St. Johns Golf and Country Club is a primary residential community situated on approximately 820 acres we acquired in St. Johns County in 2001. The community is planned to include a total of approximately 799 housing units and an 18-hole golf course. Most homes will be adjacent to a golf course, conservation land, lakes, or natural wooded areas.

RiverTown is situated on approximately 4,200 acres located in St. Johns County south of Jacksonville along the St. Johns River. A Comprehensive Plan Amendment and DRI were approved for RiverTown by the St. Johns County Board of Commissioners in February 2004, and environmental permits are pending. Infrastructure development is expected to begin in late 2005 and sales in 2006.

Timber Island, located near Carrabelle, is a 49-acre parcel entitled for 400 units for resort and transient uses, including private residence clubs with fractional ownership. Timber Island land-use approvals also allow 480 wet/dry marina slips.

Victoria Park is situated on approximately 1,859 acres in Volusia County near Interstate 4 in the historic college town of Deland between Daytona Beach and Orlando. Plans for Victoria Park include

approximately 4,000 single and multi-family units built among parks, lakes and conservation areas with a traditional town center and an award-winning 18-hole golf course which is currently open for play.

Artisan Park, located in Celebration, Florida near Orlando, is being developed through a joint venture in which we own 74%. Artisan Park is situated on approximately 160 acres which we acquired in 2002. Current plans include approximately 267 single-family units, 47 townhomes, and 302 condominiums as well as parks, trails, and a community clubhouse with a pool and educational and recreational programming.

Perico Island is situated in the City of Bradenton in Manatee County on Tampa Bay. Planned as an upscale 686-unit condominium community on 352 acres, it is being designed as an environmentally sensitive community. Sales activity at Perico Island is expected to begin in late 2006.

Several of our planned developments are in the midst of the entitlement process or are in the planning stage. We cannot assure you that:


	•	the necessary entitlements for development will be secured;

	•	any of our projects can be successfully developed, if at all; or

	•	our projects can be developed in a timely manner.

It is not feasible to estimate project development costs until entitlements have been obtained. Large-scale development projects can require significant infrastructure development costs and may raise environmental issues that require mitigation.

Commercial Real Estate Development and Services

Our Commercial Real Estate Development and Services segment develops and sells real estate for commercial purposes. We also own and manage office, industrial and retail properties throughout the southeastern United States. Through the Advantis business unit, we provide commercial real estate services, including brokerage, property management and construction management.

Development and Sales. We focus on commercial development in Northwest Florida because of our large land holdings along roadways and near or within business districts in the region. We also develop parcels within or near existing Towns & Resorts development projects. For each new development, we direct the conceptual design, planning and permitting process and then contract for the construction of the horizontal infrastructure and any vertical building.

We develop and sell properties focused on the following products:


	•	Retail properties

	•	Multi-family parcels

	•	Office parks

	•	Commerce or small business parks

Many of our projects are mixed-use in nature due to the large size of the land parcels that we own. The following table shows our mixed-use projects in the Northwest Florida region.

Mixed-Use Projects

December 31, 2004


						Net		Acres
				Year Sales		Saleable		Sold/Under
Project	Product Type	Market		Commenced		Acres		Contract

WaterColor Crossing	Retail (grocery)		Walton County		2003		9		8
Beckrich Office Park	Office		Bay County		2002		24		8
East Lake Creek	Retail/Multi-family		Bay County		2003		140		48
Highland Commons	Retail/Multi-family		Bay County		2003		114		17
Pier Park	Retail (mixed-use)		Bay County		2003		130		93
SouthWood Business Park	Retail/Office		Leon County		2003		16		13
SouthWood Village	Retail (grocery)		Leon County		2002		22		14

Total							455		201

The table below summarizes the status of JOE commerce parks throughout Northwest Florida at December 31, 2004.

Commerce Parks

December 31, 2004


						Acres
				Net Saleable		Sold/Under		Current Asking Price
Commerce Parks		County		Acres		Contract		Per Acre

Existing and Under Construction
South Walton Commerce			Walton		39		8	$	200,000 - 435,000
Beach Commerce			Bay		161		108	$	70,000 - 435,000
Beach Commerce II			Bay		115		—	$	70,000 - 100,000
Nautilus Court			Bay		12		4	$	300,000 - 400,000
Port St. Joe Commerce			Gulf		58		58	$	50,000 - 60,000
Port St. Joe Commerce II			Gulf		40		—	$	60,000 - 100,000
Airport Commerce			Leon		40		—	$	75,000 - 260,000
Hammock Creek Commerce			Gadsden		114		27	$	40,000 - 150,000
Predevelopment
Cedar Grove Commerce			Bay		100		—
Mill Creek Commerce			Bay		40		—

	Total				719		205

Investment Property Portfolio. Our commercial development operations, combined with our tax deferral strategy of reinvesting qualifying asset sale proceeds into like-kind properties, have enabled us to create a portfolio of rental properties totaling 2.8 million square feet. As the table below shows, our portfolio of investment properties was 85% leased, based on net rentable square feet, as of December 31, 2004.

Investment Property Portfolio

December 31, 2004


		Number of		Net Rentable		Leased
Location		Properties		Square Feet		Percentage

Florida
	Tampa		5		489,000		80	%
	Orlando		2		317,000		69
	Jacksonville		1		136,000		57
	Northwest Florida		3		156,000		84
Atlanta			8		1,289,000		89
Washington, D.C.			1		119,000		97
Charlotte			1		158,000		100
Richmond			2		129,000		99

	Total/ Weighted Average		23		2,793,000		85	%

Other Real Estate Assets. We have investments in certain other assets including land positions that are held for investment and investments in real estate ventures. It is generally our intent to sell these land positions, which include approximately 76 acres and are located in Florida, Georgia, Northern Virginia and Texas. Our investments in real estate ventures include investments in land and buildings located in Georgia and an investment in a full-service real estate company located in South Florida.

St. Joe Commercial

Land Positions Held for Investment

December 31, 2004


								Acres Under
		Acres Held at		Acres Sold		Acres Held at		Contract		Sales Proceeds
Market		12/31/2003		During 2004		12/31/2004		12/31/2004		During 2004

										(In thousands)
Florida			49.6		28.1		21.5		—	$	16,650
Georgia			9.8		—		9.8		3.0		—
Texas			31.9		6.7		25.2		4.4		2,168
Virginia			19.1		—		19.1		19.1		—

	Total		110.4		34.8		75.6		26.5	$	18,818

Services. We provide commercial real estate services in the southeastern United States through Advantis Real Estate Services Company (“Advantis”). Advantis provides our clients with a complete array of services, including:


	•	brokerage;

	•	property management; and

	•	construction management.

We provide property management services for projects owned by us and others. We generally receive a property management fee based on the gross rental revenues of a managed project or building or on a fixed-fee basis. The table below summarizes, by state and by type of property, the approximately 24.4 million rentable square feet of property we manage.

Properties Managed

December 31, 2004


	Rentable
State	Square Feet

Georgia		1,768,485
Washington, D.C.		118,616
Virginia		8,904,300
Maryland		1,502,438
North Carolina		3,301,608
Florida		8,838,187


	Rentable
Type of Property	Square Feet

Office property		13,878,087
Industrial property		5,311,077
Retail property		3,880,149
Facilities management		1,200,225
Residential property		164,096

Land Sales

Our Land Sales segment markets parcels for a variety of rural residential and recreational uses on a portion of our long-held timberlands in Northwest Florida. We are developing a range of innovative products for rural settings including RiverCamps, St. Joe Ranches, St. Joe Farmsteads and St. Joe Woodlands.

In 2004, our Land Sales segment closed 169 transactions totaling 18,376 acres, excluding RiverCamps.

The vast majority of the holdings marketed by our Land Sales segment will continue to be managed as timberland until sold. The revenues and income from our timberland operations are reflected in the results of our forestry segment.


	*Woodlands*

Our Woodlands product consists of land, marketed in tracts from one to 1,000 acres for primary or secondary home building, recreation, timber or private retreats throughout Northwest Florida. Improvements to these tracts vary, but are typically minimal, and are generally restricted to burning, the thinning of timber, and simple fencing. Prices for Woodlands parcels vary depending on the physical attributes of each site, including timber stands, topography and proximity to rivers, creeks, and bays.


	*Farmsteads and Ranches*

Work continued in 2004 on our Farmsteads and Ranches, new real estate products which are designed to transform what were once timberlands to higher and better uses. Farmsteads are being designed as rural residential products to allow owners to live close to the land with modern conveniences. Initial designs call for parcels of five to 20 acres, featuring cleared acreage, fencing, trails and entry features. Each Farmstead would include a home site for a main farmhouse along with sites for other optional outbuildings, such as barns, guest houses, stables and sheds.

Ranches are for customers who want to own larger parcels from 50 to 150 acres in rural settings. Improvements may generally include clearing, fencing, road stabilization and entry features.

Prices for Farmstead and Ranch parcels are expected to vary depending on the physical attributes of each site, including timber stands, topography and proximity to rivers, creeks and bays.


	*RiverCamps*

RiverCamps are planned developments in rustic settings, supplemented with amenities that may include docks, pools, and community river houses. Most of the lots in these developments are expected to be located on or near waterfront property. The RiverCamps concept envisions home sites and high-quality finished cabins in low-density settings with access to various outdoor activities such as fishing, boating, and hiking.

The first of potentially several RiverCamp developments is RiverCamps on Crooked Creek, situated on approximately 1,491 acres of our timberland in western Bay County, Florida and bounded by West Bay, the Intracoastal Waterway and Crooked Creek. In the fourth quarter of 2004, RiverCamps on Crooked Creek offered 42 home sites for sale, of which 41 closed during the quarter. Prices ranged from $129,000 to $595,000, plus one bay-front site priced at $750,000. In February 2005, we released 37 home sites for sale with prices ranging from $148,500 to $849,500 and averaging $276,000. Additional home site releases are planned for later in the year.

A majority of the permits for construction of the project have been received, and the pace of infrastructure development is accelerating with 190 home sites currently under construction.

Planning and evaluation of a 6,000-acre parcel located on Sandy Creek in Bay County, Florida is also currently underway. Additional RiverCamps locations are actively being reviewed in other parts of Northwest Florida.


	*Other Land Projects*

Planned as a primary home community with 24 units on 10 acres, construction started at Cutter Ridge in Franklin County in the fourth quarter of 2004. In addition, during the fourth quarter of 2004, marketing began for RiverSide at Chipola, a 10-unit gated community on the Chipola River in Calhoun County.


	*Conservation Lands*

Our Land Sales segment also periodically considers the sale of land to conservation groups and governmental agencies. In 2004, we closed three conservation land transactions, totaling 1,798 acres.

Forestry

Our Forestry segment focuses on the management and harvesting of our extensive timberland holdings. We grow, harvest and sell timber and wood fiber. We believe we are the largest private landowner in Florida, owning:


	•	Approximately 509,504 acres of planted pine forests, primarily in Northwest Florida.

	•	Approximately 309,295 acres of mixed timberland, wetlands, lake and canal properties.

Our principal forestry product is softwood pulpwood. We also grow and sell softwood and hardwood sawtimber. In addition, we own and operate a cypress sawmill and mulch plant (“Sunshine State Cypress”) which converts cypress logs into wood products and mulch.

On December 31, 2004, our standing pine inventory totaled approximately 23.4 million tons and our hardwood inventory totaled approximately 6.7 million tons. Our timberlands are harvested by local independent contractors under agreements that are generally renewed annually. Our timberlands are located near key transportation links, including roads, waterways and railroads.

Our strategy is to actively manage, with the best available silviculture practices, portions of our timberlands that produce adequate amounts of timber to meet our pulpwood supply agreement obligation with Smurfit-Stone Container Corporation, which expires June 30, 2012. We also harvest and sell additional timber to regional sawmills that produce products other than pulpwood. In addition, our forestry

operation is focused on selective harvesting, thinning, and site preparation of timberlands that may later be sold or developed by other JOE divisions.

Supplemental Information

Information regarding the revenues, income and total assets of each of our operating segments can be found in note 14 to our Consolidated Financial Statements included in this Report.

Risk Factors

Our business faces numerous risks, including those set forth below. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected. The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations.


	*A downturn in economic conditions could adversely affect our business.*

Our ability to generate revenues is directly related to the real estate market, primarily in Florida, and to the national and local economy in general. Considerable economic and political uncertainties currently exist that could have adverse effects on consumer buying habits, construction costs, availability of labor and materials and other factors affecting us and the real estate industry in general.

Significant expenditures associated with investment in real estate, such as real estate taxes, maintenance costs and debt payments, cannot generally be reduced if changes in Florida’s or the nation’s economy cause a decrease in revenues from our properties. In particular, if the growth rate for the Florida economy declines or if a recession in the Florida economy occurs, our profitability could be materially adversely affected.

While real estate market conditions have generally remained healthy in our regions of development, particularly in Northwest Florida, continued demand for our services and products is dependent on long term prospects for job growth and strong in-migration population expansion in our regions of development.

Over the last several years, investors have increasingly utilized real estate as an investment. Florida resort real estate has particularly benefited from this trend, creating demand, in addition to that described above, for our products. If this trend were to lessen, the demand for our products could decline, potentially impacting selling prices and/or absorption rates.


	Our businesses are primarily concentrated in the State of Florida. As a result, our financial results are dependent on the economic growth and health of Florida, particularly Northwest Florida.

The economic growth and health of the State of Florida, particularly Northwest Florida where the majority of our land is located, are important factors in sustaining demand for our products and services. As a result, any adverse change to the economic growth and health of Florida, particularly Northwest Florida, could materially adversely affect our financial results. The future economic growth in certain portions of Northwest Florida may be adversely affected if its infrastructure, such as roads, airports, medical facilities and schools, are not improved to meet increased demand. There can be no assurance that these improvements will occur.

Currently, the Federal Aviation Administration is considering five alternatives to expand the capacity of the Panama City — Bay County International Airport. Two of these alternatives involve expansion of the current facility, and two alternatives require relocation of the airport to a new site proposed by the airport authority in the West Bay Sector on land owned by us. The final alternative is to take no action at all.

The relocation of the airport is a condition to certain of our land-use entitlements in Bay County. We also believe that the relocation of the airport is important to the overall economic development of Northwest Florida. The FAA has issued a draft Environmental Impact Study (“EIS”) with respect to the

proposed alternatives, and it expects to issue its Record of Decision with respect to the EIS in late 2005. In addition to the EIS process, other regulatory steps remain before a final decision is reached on the relocation of the airport. The relocation is also dependent on adequate funding. If the relocation of the airport does not occur, our business could be materially affected.


	*Changes in the demographics affecting projected population growth in Florida, including a decrease in the migration of Baby Boomers, could adversely affect our business.*

Florida has experienced strong recent population growth, including the migration of Baby Boomers to the state. This population growth is expected to continue into the foreseeable future. Baby Boomers seeking retirement or vacation homes in Florida represent a significant portion of purchasers in many of our developments, and we intend to continue to plan and market future developments to Baby Boomers. Any decrease in the demographic trend of Baby Boomers moving to Florida could adversely affect our business.


	*The occurrence of natural disasters in Florida could adversely affect our business.*

The occurrence of natural disasters in Florida, such as hurricanes, floods, fires, unusually heavy or prolonged rain and droughts, could have a material adverse effect on our ability to develop and sell properties or realize income from our projects. The occurrence of natural disasters could also cause increases in property insurance rates and deductibles which could reduce demand for our properties.


	*Increases in interest rates could reduce demand for our products.*

An increase in interest rates could reduce the demand for homes we build, particularly primary housing and home sites we develop, commercial properties we develop or sell, and land we sell. A reduction in demand could materially adversely affect our profitability.


	*Our real estate operations are cyclical.*

Our business is affected by demographic and economic trends and the supply and rate of absorption of lot sales and new construction. As a result, our real estate operations are cyclical which may cause our quarterly revenues and operating results to fluctuate significantly from quarter to quarter and to differ from the expectations of public market analysts and investors. If this occurs, our stock’s trading price could also fluctuate significantly.


	*We are exposed to risks associated with real estate sales and development.*

Our real estate development activities entail risks that include:


	•	construction delays or cost overruns, which may increase project development costs;

	•	compliance with building codes and other local regulations;

	•	evolving liability theories affecting the construction industry;

	•	an inability to obtain required governmental permits and authorizations;

	•	an inability to secure tenants or anchors necessary to support commercial projects;

	•	failure to achieve anticipated occupancy levels or rents; and

	•	an inability to sell our constructed inventory.

In addition, our real estate development activities require significant capital expenditures. We obtain funds for our capital expenditures through cash flow from operations, property sales or financings. We cannot be sure that the funds available from these sources will be sufficient to fund our required or desired capital expenditures for development. If we are unable to obtain sufficient funds, we may have to defer or otherwise limit our development activities. Our residential projects require significant capital expenditures

for infrastructure development before we can begin our selling efforts. If we are unsuccessful in our selling efforts, we may not be able to recover these capital expenditures. Also, our ability to continue to make conservation land sales to government agencies depends on the agencies having sufficient funds available to purchase the lands.


	*Our business is subject to extensive regulation which makes it difficult and expensive for us to conduct our operations.*


	Development of real estate entails a lengthy, uncertain and costly approval process.

Development of real property in Florida entails an extensive approval process involving overlapping regulatory jurisdictions. Real estate projects must generally comply with the provisions of the Local Government Comprehensive Planning and Land Development Regulation Act (the “Growth Management Act”) and local land development regulations. In addition, development projects that exceed certain specified regulatory thresholds require approval of a comprehensive Development of Regional Impact, or DRI, application. Compliance with the Growth Management Act, local land development regulations, and the DRI process is usually lengthy and costly and can be expected to materially affect our real estate development activities.

The Growth Management Act requires counties and cities to adopt comprehensive plans guiding and controlling future real property development in their respective jurisdictions. After a local government adopts its comprehensive plan, all development orders and development permits must be consistent with the plan. Each plan must address such topics as future land use, capital improvements, traffic circulation, sanitation, sewerage, potable water, drainage and solid waste disposal. The local governments’ comprehensive plans must also establish “levels of service” with respect to certain specified public facilities and services to residents. Local governments are prohibited from issuing development orders or permits if facilities and services are not operating at established levels of service, or if the projects for which permits are requested will reduce the level of service for public facilities below the level of service established in the local government’s comprehensive plan. If the proposed development would reduce the established level of services below the level set by the plan, the development order will require that, at the outset of the project, the developer either sufficiently improve the services to meet the required level or provide financial assurances that the additional services will be provided as the project progresses.

The Growth Management Act, in some instances, can significantly affect the ability of developers to obtain local government approval in Florida. In many areas, infrastructure funding has not kept pace with growth. As a result, substandard facilities and services can delay or prevent the issuance of permits. Consequently, the Growth Management Act could adversely affect our ability to develop our real estate projects.

The DRI review process includes an evaluation of a project’s impact on the environment, infrastructure and government services, and requires the involvement of numerous state and local environmental, zoning and community development agencies. Local government approval of any DRI is subject to appeal to the Governor and Cabinet by the Florida Department of Community Affairs, and adverse decisions by the Governor or Cabinet are subject to judicial appeal. The DRI approval process is usually lengthy and costly, and conditions, standards or requirements may be imposed on a developer with respect to a particular project, which may materially increase the cost of the project. The DRI approval process is expected to have a material impact on our real estate development activities in the future.

Changes in the Growth Management Act or the DRI review process or the interpretation thereof, new enforcement of these laws, the enactment of new laws regarding the development of real property, or the identification of new facts could all lead to new or greater liabilities that could materially adversely affect our business, profitability or financial condition.


	Environmental and other regulations may have an adverse effect on our business.

A substantial portion of our development properties in Florida is subject to federal, state and local regulations and restrictions that may impose significant limitations on our ability to develop them. Much of our property is undeveloped land located in areas where development may have to address the natural habitats of various endangered or protected wildlife species or in sensitive environmental areas such as wetlands and coastal areas.

In addition, our current or past ownership, operation and leasing of real property, and our current or past transportation and other operations are subject to extensive and evolving federal, state and local environmental laws and other regulations. The provisions and enforcement of these environmental laws and regulations may become more stringent in the future. Violations of these laws and regulations can result in:


	•	civil penalties;

	•	remediation expenses;

	•	natural resource damages;

	•	personal injury damages;

	•	potential injunctions;

	•	cease and desist orders; and

	•	criminal penalties.

In addition, some of these environmental laws impose strict liability, which means that we may be held liable for any environmental damages on our property regardless of fault.

Some of our past and present real property, particularly properties used in connection with our previous transportation and papermill operations, involve the storage, use or disposal of hazardous substances that have contaminated and may in the future contaminate the environment. We may bear liability for this contamination and for the costs of cleaning up a site at which we have disposed of or to which we have transported hazardous substances. The presence of hazardous substances on a property may also adversely affect our ability to sell or develop the property or to borrow using the property as collateral.

Changes in laws or the interpretation thereof, new enforcement of laws, the identification of new facts or the failure of other parties to perform remediation at our current or former facilities could all lead to new or greater liabilities that could materially adversely affect our business, profitability, or financial condition.


	*Our joint venture partners may have interests that differ from ours and may take actions that adversely affect us.*

We are involved in joint venture relationships and may initiate future joint venture projects as part of our overall development strategy. A joint venture involves special risks such as:


	•	we may not have voting control over the joint venture;

	•	the venture partner at any time may have economic or business interests or goals that are inconsistent with ours;

	•	the venture partner may take actions contrary to our instructions or requests, or contrary to our policies or objectives with respect to the real estate investments; and

	•	the venture partner could experience financial difficulties.

Actions by our venture partners may subject property owned by the joint venture to liabilities greater than those contemplated by the joint venture agreement or have other adverse consequences.


	*Changes in our income tax estimates could affect our profitability.*

In preparing our consolidated financial statements, significant management judgment is required to estimate our income taxes. Our estimates are based on our interpretation of federal and state tax laws. We estimate our actual current tax due and assess temporary differences resulting from differing treatment of items for tax and accounting purposes. The temporary differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. Adjustments may be required by a change in assessment of our deferred tax assets and liabilities, changes due to audit adjustments by federal and state tax authorities, and changes in tax laws. To the extent adjustments are required in any given period, we would include the adjustments in the tax provision in our statement of operations and/or balance sheet. These adjustments could materially impact our financial position and results of operation.


	*Significant competition could have an adverse effect on our business.*


	The real estate industry is generally characterized by significant competition.

A number of residential and commercial developers and real estate services companies, some with greater financial and other resources, compete with us in seeking properties for acquisition, resources for development and prospective purchasers and tenants. Competition from other real estate developers and real estate services companies may adversely affect our ability to:


	•	sell homes and home sites;

	•	attract purchasers;

	•	attract and retain tenants;

	•	sell undeveloped rural land; and

	•	sell our commercial services.


	The forest products industry is highly competitive.

Many of our competitors in the forest products industry are fully integrated companies with substantially greater financial and operating resources. Our products are also subject to increasing competition from a variety of non-wood and engineered wood products. In addition, we are subject to competition from lumber products and logs imported from foreign sources. Any significant increase in competitive pressures from substitute products or other domestic or foreign suppliers could have a material adverse effect on our forestry operations.


	*We are highly dependent on our senior management.*

Our senior management has been responsible for our transformation from an industrial conglomerate to a successful real estate operating company. Our future success is highly dependent upon the continued employment of our senior management. The loss of one or more of our senior managers could have a material adverse effect on our business. In August 2003, we entered into five-year employment agreements with Peter Rummell, our Chairman and Chief Executive Officer, and Kevin Twomey, our President and Chief Operating Officer. We do not have key-person life insurance on any of our senior managers.


	*If we are unable to attract or retain experienced real estate development personnel, our business may be adversely affected.*

Our future success largely depends on our ability to attract and retain experienced real estate development personnel. The market for these employees is highly competitive, and if we cannot continue to attract and retain quality personnel, our ability to effectively operate our business may be significantly limited.


	*Decline in rental income could adversely affect our financial results.*

We own a large portfolio of commercial real estate rental properties. Our profitability could be adversely affected if:


	•	a significant number of our tenants are unable to meet their obligations to us;

	•	we are unable to lease space at our properties when the space becomes available; and

	•	the rental rates upon a renewal or a new lease are significantly lower than expected.


	The Trust owns approximately 7.5% of our stock, and two of our directors are trustees of the Trust. The Trust’s interests may not always be identical to those of our public shareholders.

As of March 1, 2005, The Alfred I. duPont Testamentary Trust owned 5,689,355 shares, or approximately 7.5%, of our outstanding common stock. In addition, two of our current directors are trustees of the Trust. Under the terms of our registration rights agreement with the Trust, if the Trust beneficially owns less than 20% but at least 5% of our outstanding shares of common stock, the Trust will be entitled to nominate one member of our board. Accordingly, the Trust will continue to be able to have significant influence over our corporate and management policies, including decisions relating to mergers, acquisitions, the sale of all or substantially all of our assets and other significant transactions. The interests of the Trust may not be aligned with our interests or the interests of other shareholders.

Forward-looking Statements

This Form 10-K includes forward-looking statements, particularly in the Management’s Discussion and Analysis Section. The Private Securities Litigation Reform Act of 1995 provides a safe-harbor for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ, possibly materially, from those in the information. Any statements in this Form 10-K that are not historical facts are forward-looking statements. You can find many of these forward-looking statements by looking for words such as “intend”, “anticipate”, “believe”, “estimate”, “expect”, “plan”, “should”, “forecast” or similar expressions. In particular, forward-looking statements include, among others, statements about the following:


	•	the size and number of residential units and commercial buildings;

	•	expected development timetables, development approvals and the ability to obtain such approvals, including possible legal challenges;

	•	the anticipated price ranges of developments;

	•	the number of units that can be supported upon full build-out of a development;

	•	the number, price and timing of anticipated land sales or acquisitions;

	•	estimated land holdings for a particular use within a specific time frame;

	•	absorption rates and expected gains on land and home site sales;

	•	the pace at which we release new product for sale;

	•	future operating performance, cash flows, and short and long-term revenue and earnings growth rates;

	•	comparisons to historical projects;

	•	the amount of dividends we pay; and

	•	the number of shares of company stock which may be purchased under the company’s existing or future share-repurchase program.

Forward-looking statements are not guarantees of future performance. You are cautioned not to place undue reliance on any of these forward-looking statements. These statements are made as of the date hereof based on current expectations, and we undertake no obligation to update the information contained in this release.

Forward-looking statements are subject to numerous assumptions, risks and uncertainties. Factors that could cause actual results to differ materially from those contemplated by a forward-looking statement include the risk factors described above as well as, among others, the following:


	•	economic conditions, particularly in Northwest Florida, Florida as a whole and key areas of the southeast United States that serve as feeder markets to our Northwest Florida operations;

	•	changes in the demographics affecting projected population growth in Florida, including the demographic migration of Baby Boomers;

	•	whether our developments receive all land-use entitlements or other permits necessary for development and/or full build-out or are subject to legal challenge;

	•	local conditions such as the supply of homes and home sites and residential or resort properties or a change in the demand for real estate in an area;

	•	timing and costs associated with property developments and rentals;

	•	the pace of commercial development in Northwest Florida;

	•	competition from other real estate developers;

	•	whether potential residents or tenants consider our properties attractive;

	•	changes in operating costs, including real estate taxes and the cost of construction materials;

	•	changes in the amount or timing of federal and state income tax liabilities resulting from either a change in our application of tax laws, an adverse determination by a taxing authority or court, or legislative changes to existing laws;

	•	how well we manage our properties;

	•	changes in interest rates and the performance of the financial markets;

	•	changes in market rental rates for our commercial and resort properties;

	•	changes in the prices of wood products;

	•	the pace of development of public infrastructure, particularly in Northwest Florida, including a proposed new airport in Bay County, which is dependent on approvals of the local airport authority and the Federal Aviation Administration, various permits and the availability of adequate funding;

	•	potential liability under environmental laws or other laws or regulations;

	•	changes in laws, regulations or the regulatory environment affecting the development of real estate;

	•	fluctuations in the size and number of transactions from period to period;

	•	adverse weather conditions or natural disasters and the impact on future demand in Florida;

	•	changes in insurance rates and deductibles for property in Florida; and

	•	acts of war, terrorism or other geopolitical events.

The foregoing list is not exhaustive and should be read in conjunction with other cautionary statements contained herein and in our periodic and other filings with the Securities and Exchange Commission. We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or risks. New information, future events or risks may cause the forward-looking events we discuss in this Form 10-K not to occur.

Employees

We had approximately 1,603 full-time employees and 138 part-time employees at December 31, 2004. We consider our relations with our employees to be good. These employees work in the following segments:


Towns & Resorts development			1,024
Commercial real estate development and services			540
Land sales			47
Forestry			28
Other — including corporate			102

Website Access to Reports

We will make available, free of charge, access to our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC, through our home page at www.JOE.com.


Item 2.	*Properties*

We own our principal executive office located in Jacksonville, Florida.

We own approximately 820,000 acres, the majority of which are located in Northwest Florida, including substantial gulf, lake and riverfront acreage. Most of our raw land assets are managed as timberland until designated for development. For more information on our real estate assets, see Item 1. Business.


Item 3.	*Legal Proceedings*

We are involved in litigation on a number of matters and are subject to certain claims which arise in the normal course of business, none of which, in the opinion of management, is expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity. However, the aggregate amount being sought by the claimants in these matters is presently estimated to be several million dollars.

We have retained certain self-insurance risks with respect to losses for third-party liability, worker’s compensation, property damage, group health insurance provided to employees, and other types of insurance.

We are subject to costs arising out of environmental laws and regulations, which include obligations to remove or limit the effects on the environment of the disposal or release of certain wastes or substances at various sites, including sites which have been previously sold. It is our policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred and an amount can be reasonably estimated. As assessments and cleanups proceed, these accruals are reviewed and adjusted, if necessary, as additional information becomes available.

Pursuant to the terms of various agreements by which we disposed of our sugar assets in 1999, we are obligated to complete certain defined environmental remediation. Approximately $5.0 million of the sales proceeds are being held in escrow pending the completion of the remediation. We have separately funded the costs of remediation. Remediation was substantially completed in 2004 and is expected to be finalized in early 2005. We expect the amounts held in escrow to be released to us during the first half of 2005.

During the fourth quarter of 2000, management became aware of an investigation being conducted by the Florida Department of Environmental Protection (“DEP”) of our former paper mill site and some adjacent real property north of the paper mill site in Gulf County, Florida (the “Mill Site”). The real property on which our former paper mill is located was sold to the Smurfit-Stone Container Corporation

(“Smurfit”) and we retained ownership of the adjacent real property. In January 2004, we entered into a joint venture with Smurfit; this joint venture now owns the site of our former paper mill.

The DEP submitted a Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) Site Discovery/ Prescreening Evaluation to Region IV of the United States Environmental Protection Agency (“USEPA”) in Atlanta in September 2000. Based on this submission, the USEPA included the Mill Site on the CERCLIS List. The CERCLIS List is a list of sites which are to be evaluated to determine whether there is a potential presence of actionable contaminants.

Based on its assessment of data obtained from voluntary testing performed by us and Smurfit, the DEP submitted a proposed Consent Order that we and Smurfit have executed. It obligates us to conduct further assessment of that portion of the Mill Site owned by us at that time and, if necessary, to rehabilitate that portion of the Mill Site. Smurfit has a corresponding obligation with respect to its portion of the Mill Site.

Through incorporation of the data and findings which resulted from our voluntary testing, the DEP has completed and submitted a preliminary assessment/site investigation report to the USEPA, including a recommendation that the Mill Site be considered “low priority” under CERCLA. Based on this recommendation, the USEPA has deferred further action on the Mill Site and has agreed to allow the Mill Site to be assessed and rehabilitated, if necessary, under the guidance of the DEP.

On November 5, 2002, the Mill Site was designated as a Brownfields Redevelopment Area for site rehabilitation under the provisions of applicable Florida law. Florida’s Brownfields program provides economic and tax incentives which may be available to us. We entered into a Brownfield Site Rehabilitation Agreement for the Mill Site that obligates us to conduct further assessment of our portion of the Mill Site to delineate the extent of contamination, if any, and, if necessary, to rehabilitate that portion. The Consent Order will be held in abeyance pending the completion of the assessment and remediation, if any, of the Mill Site under the terms of the Brownfield Site Remediation Agreement.

Based on this current information, including the environmental test results, the recommendation for “low priority” USEPA consideration, the USEPA agreement to defer further action, and the Brownfields Area local designation, management does not believe our liability, if any, for the possible cleanup of any potential contaminants detected on the Mill Site will be material.

We are currently a party to, or involved in, legal proceedings directed at the cleanup of Superfund sites. We have accrued an allocated share of the total estimated cleanup costs for these sites. Based upon management’s evaluation of the other potentially responsible parties, we do not expect to incur material additional amounts even though we have joint and several liability. Other proceedings involving environmental matters such as alleged discharge of oil or waste material into water or soil are pending against us. It is not possible to quantify future environmental costs because many issues relate to actions by third parties or changes in environmental regulation. However, based on information presently available, management believes that the ultimate disposition of currently known matters will not have a material effect on our consolidated financial position, results of operations or liquidity. Environmental liabilities are paid over an extended period and the timing of such payments cannot be predicted with any confidence.


Item 4.	*Submission of Matters to a Vote of Security Holders*

None.

PART II


Item 5.	*Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities*

We had approximately 77,000 beneficial owners of our common stock as of March 9, 2005. Our common stock is quoted on the New York Stock Exchange (“NYSE”) Composite Transactions Tape under the symbol “JOE.”

The range of high and low prices for our common stock as reported on the NYSE Composite Transactions Tape and the dividends declared for the periods indicated is set forth below:


		Common
		Stock Price
						Dividends
		High		Low		Declared

2004
	First Quarter		41.99		36.39		0.12
	Second Quarter		42.27		35.06		0.12
	Third Quarter		49.08		39.38		0.14
	Fourth Quarter		64.75		46.97		0.14
2003
	First Quarter		30.74		26.19		0.08
	Second Quarter		31.58		27.04		—
	Third Quarter		35.01		31.01		0.12
	Fourth Quarter		38.60		32.05		0.12

On March 9, 2005, the closing price of our common stock on the NYSE was $73.90.

The following table describes the Company’s purchases of its common stock during the fourth quarter of 2004.

(c)

(d)

Total Number of

Maximum Dollar

(a)

(b)

Shares Purchased as

Amount that May

Total Number

Average

Part of Publicly

Yet Be Purchased

of Shares

Price Paid

Announced Plans or

Under the Plans or

Period

Purchased(1)

per Share

Programs(2)

Programs

(In thousands)

Month Ended

October 31, 2004

104,265

49.12

90,000

137,772

Month Ended

November 30, 2004

110,600

53.08

110,600

131,897

Month Ended

December 31, 2004

139,100

60.34

139,100

123,499


(1)	Includes shares surrendered to the Company by executives as payment for the strike prices and taxes due on exercised stock options and/or taxes due on vested restricted stock equal in the aggregate to 14,265 shares in October 2004. There were no shares surrendered by executives in November or December 2004.

(2)	For a description of our Stock Repurchase Program, see note 2, “Summary of Significant Accounting Policies — Earnings Per Share,” of the notes to our Consolidated Financial Statements.


Item 6.	*Selected Consolidated Financial Data*

The selected consolidated financial data set forth below are qualified in their entirety by and should be read in conjunction with the consolidated financial statements and the related notes included elsewhere herein. The statement of income data with respect to the years ended December 31, 2004, 2003, and 2002 and the balance sheet data as of December 31, 2004 and 2003 have been derived from the financial statements of the Company included herein, which have been audited by KPMG LLP. The statement of income data with respect to the years ended December 31, 2001 and 2000 and the balance sheet data as of December 31, 2002, 2001, and 2000 have been derived from the financial statements of the Company previously filed with the SEC, and have also been audited by KPMG LLP. Historical results are not necessarily indicative of the results to be expected in the future.


		Year Ended December 31,

		2004			2003			2002		2001			2000

		(In thousands, except per share amounts)
Statement of Income Data:
Total revenues(1)		$	951,503		$	750,826		$	626,440	$	564,054		$	604,558
Total expenses			806,950			623,845			518,891		487,152			474,778

Operating profit			144,553			126,981			107,549		76,902			129,780
Other income (expense)			(9,218	)		(6,942	)		122,018		(5,846	)		6,184

Income from continuing operations before equity in income (loss) of unconsolidated affiliates, income taxes, and minority interest			135,335			120,039			229,567		71,056			135,964
Equity in income (loss) of unconsolidated affiliates			5,600			(2,168	)		10,940		24,126			18,375
Income tax expense			53,258			42,167			88,960		35,443			51,789

Income from continuing operations before minority interest			87,677			75,704			151,547		59,739			102,550
Minority interest			2,594			553			1,366		524			9,954

Income from continuing operations			85,083			75,151			150,181		59,215			92,596
Income from discontinued operations(2)			178			764			3,295		10,990			7,727
Gain on sale of discontinued operations(2)			4,839			—			20,887		—			—

Net income		$	90,100		$	75,915		$	174,363	$	70,205		$	100,323

Per Share Data:
	Basic
Income from continuing operations		$	1.13		$	0.99		$	1.92	$	0.73		$	1.09
Income from discontinued operations(2)			—			0.01			0.04		0.14			0.09
Gain on the sale of discontinued operations(2)			0.06			—			0.26		—			—

Net income		$	1.19		$	1.00		$	2.22	$	0.87		$	1.18

	Diluted
Income from continuing operations		$	1.11		$	0.97		$	1.84	$	0.70		$	1.06
Income from discontinued operations			—			0.01			0.04		0.13			0.09
Gain on the sale of discontinued operations			0.06			—			0.26		—			—

Net income		$	1.17		$	0.98		$	2.14	$	0.83		$	1.15

Dividends declared and paid		$	0.52		$	0.32		$	0.08	$	0.08		$	0.02
FLA spin-off(3)			—			—			—		—			4.64


	Year Ended December 31,

	2004		2003		2002		2001		2000

Balance Sheet Data:
Investment in real estate	$	942,630	$	886,076	$	806,701	$	736,734	$	562,181
Cash and investments(4)		94,816		57,403		73,273		200,225		201,905
Property, plant & equipment, net		33,562		36,272		42,907		49,826		59,665
Total assets		1,403,629		1,275,730		1,169,887		1,340,559		1,115,021
Total stockholders’ equity		495,411		487,315		480,093		518,073		569,084


(1)	Total revenues includes real estate revenues from property sales; realty revenues consisting of property and asset management fees, construction revenues, and lease and sales commissions; timber sales; rental revenues; club operations revenues; management fees; and transportation revenues.

(2)	Discontinued operations include the operations and subsequent sale of two commercial office buildings sold in 2004, Arvida Realty Services (“ARS”), our residential real estate services subsidiary, and two commercial office buildings sold in 2002. (See note 4 of Notes to Consolidated Financial Statements.)

(3)	On October 9, 2000, the Company distributed to its shareholders all of its equity interest in Florida East Coast Industries, Inc. (“FLA”). To effect the distribution, the Company exchanged its 19,609,216 shares of FLA common stock for an equal number of shares of a new class of FLA common stock. On October 9, 2000, the new class of stock, FLA.B, was distributed prorata to the Company’s shareholders in a tax-free distribution. For each share of the Company common stock owned of record on September 18, 2000, the Company’s shareholders received 0.23103369 of a share of FLA.B common stock.

(4)	Includes cash, cash equivalents, and marketable securities.


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

Overview

The St. Joe Company is one of Florida’s largest real estate operating companies. We believe we have one of the largest inventories of private land suitable for development in the State of Florida, with a very low cost basis. The majority of our land is located in Northwest Florida. In order to optimize the value of our core real estate assets in Northwest Florida, our strategic plan calls for us to reposition our substantial timberland holdings for higher and better uses. We increase the value of our raw land assets, most of which are currently managed as timberland, through the development and subsequent sale of parcels, home sites, and homes, or through the direct sale of unimproved land. In addition, we reinvest qualifying asset sales proceeds into like-kind properties under our tax deferral strategy which has enabled us to create a significant portfolio of commercial rental properties. We also provide commercial real estate services, including brokerage, property management, and construction management for Company-owned assets as well as for third parties.

We have four operating segments: Towns & Resorts development; commercial real estate development and services; land sales; and forestry.

Our Towns & Resorts development segment generates revenues from:


	•	the sale of housing units built by us;

	•	the sale of developed home sites;

	•	rental income;

	•	club operations;

	•	investments in limited partnerships and joint ventures;

	•	brokerage, title issuance and mortgage origination fees on certain transactions within our Towns & Resorts developments; and

	•	management fees.

Our commercial real estate development and services segment generates revenues from:


	•	the rental and/or sale of commercial buildings owned and/or developed by us;

	•	the sale of developed and undeveloped land for commercial, retail, apartment, and industrial properties;

	•	realty revenues, consisting of property and asset management fees, construction revenues and lease and sales brokerage commissions; and

	•	investments in limited partnerships and joint ventures.

Our land sales segment generates revenues from:


	•	the sale of parcels of undeveloped land; and

	•	the sale of developed home sites primarily within rural settings.

Our forestry segment generates revenues from:


	•	the sale of pulpwood and timber;

	•	the sale of cypress lumber and mulch; and

	•	the sale of bulk land.

Our ability to generate revenues, cash flows and profitability is directly related to the real estate market, primarily in Florida, and the economy in general. Considerable economic and political uncertainties exist that could have adverse effects on consumer buying behavior, construction costs, availability of labor and materials and other factors affecting us and the real estate industry in general. Additionally, increases in interest rates could reduce the demand for homes we build and home sites we develop, particularly primary housing and home sites, and commercial properties we develop or sell. However, we believe our secondary resort housing markets are less sensitive to changes in interest rates. We have the ability to mitigate these risks by building to contract as well as building in phases.

Management periodically conducts market research in the early stages of a project’s development to ensure our product meets expected customer demand. We also continuously and actively monitor competitors’ product offerings to evaluate the competitive position of our products. We are disciplined about the release of new product in Northwest Florida. Our goal is to ensure that as much of our land as possible benefits from the appreciation that we are building with the region’s increased visibility, infrastructure development and place-making.

Our commercial real estate development and services segment continues to build on strong market interest in Northwest Florida’s retail, office, multi-family and other mixed-use products caused by historical constraints on supply in the area as well as high interest by developers.

Real estate market conditions in our regions of development, particularly for residential and resort property in Northwest Florida, have been exceptionally strong. These current market conditions place us in an unusually favorable position which may not continue in the future. However, we believe that long-term prospects of job growth, coupled with strong in-migration population expansion in Florida, indicate that demand levels may remain favorable over at least the near term horizon.


	*Forward-looking Statements*

Management’s discussion and analysis contains forward-looking statements, including statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions, as well as trends and uncertainties that could affect our results. These statements are subject to risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. For additional information concerning these factors and related matters, see “Risk Factors” and “Forward-looking Statements” in Item 1 of this Report.


	*Critical Accounting Estimates*

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We base these estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances. Additionally, we evaluate the results of these estimates on an on-going basis. Management’s estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Investment in Real Estate and Cost of Real Estate Sales. Costs associated with a specific real estate project are capitalized once we determine that the project is economically viable. We capitalize costs directly associated with development and construction of identified real estate projects. Indirect costs that clearly relate to a specific project under development, such as internal costs of a regional project field office, are also capitalized. We capitalize interest based on the amount of underlying expenditures (up to total interest expense), and real estate taxes on real estate projects under development. If we determine not to complete a project, any previously capitalized costs are expensed.

Real estate inventory costs include land and common development costs, such as roads, sewers, and amenities, home construction costs, property taxes, capitalized interest, and certain indirect costs. A portion of real estate inventory and estimates for costs to complete are allocated to each unit based on the relative sales value of each unit as compared to the estimated sales value of the total project. These estimates are reevaluated at least annually, with any adjustments being allocated prospectively to the remaining units available for sale. The accounting estimate related to inventory valuation is susceptible to change due to the use of assumptions about future sales proceeds and related real estate expenditures. Management’s assumptions about future housing and home site sales prices, sales volume and sales velocity require significant judgment because the real estate market is cyclical and is highly sensitive to changes in economic conditions. In addition, actual results could differ from management’s estimates due to changes in anticipated development, construction and overhead costs. Although we have not made significant adjustments affecting real estate gross profit margins in the past, there can be no assurances that estimates used to generate future real estate gross profit margins will not differ from our current estimates.

Revenue Recognition — Percentage-of-Completion. In accordance with Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate, revenue for multi-family residences under construction is recognized using the percentage-of-completion method when 1) construction is beyond a preliminary stage, 2) the buyer is committed to the extent of being unable to require a refund except for nondelivery of the unit, 3) sufficient units have already been sold to assure that the entire property will not revert to rental property, 4) sales price is assured, and 5) aggregate sales proceeds and costs can be reasonably estimated. Revenue is recognized in proportion to the percentage of total costs incurred in relation to estimated total costs.

Revenue for our multi-family residences which were under construction at WaterSound Beach in 2003 was recognized using the percentage-of-completion method of accounting. Since the project was substantially completed as of December 31, 2003, we recorded substantially all of the activity related to this property during the year ended December 31, 2003. During the period ended March 31, 2004, we incurred $2.0 million in construction cost adjustments for this project. Had these costs been quantified in 2003, they would have been included in our budgets and thus have had an impact on our results for the year ended December 31, 2003. If these costs had been included in the total project budget, 2003 gross profit would have been reduced by $3.6 million (pre-tax), $2.3 million (after tax), since a lower

percentage of revenue would also have been recognized. The results for the year ended December 31, 2004 would have been increased by $3.6 million (pre-tax), $2.3 million (after tax).

Management has evaluated the impact of this item, which represented 3% of net income ($0.03 per diluted share) for both years ended December 31, 2004 and 2003, and concluded that it is not significant to our 2004 or 2003 results of operations.

Impairment of Long-lived Assets and Goodwill. Our long-lived assets, primarily real estate held for investment, are carried at cost unless circumstances indicate that the carrying value of the assets may not be recoverable. We review long-lived assets for impairment whenever events or changes in circumstances indicate such an evaluation is warranted. This review involves a number of assumptions and estimates used in determining whether impairment exists, including estimation of undiscounted cash flows. Depending on the asset, we use varying methods to determine fair value, such as (i) discounting of expected future cash flows, (ii) determining resale values by market, or (iii) applying a capitalization rate to net operating income using prevailing rates in a given market. These methods of determining fair value can fluctuate up or down significantly as a result of a number of factors, including changes in the general economy of our markets and demand for real estate. If we determine that impairment exists due to the inability to recover an asset’s carrying value, a provision for loss is recorded to the extent that the carrying value exceeds estimated fair value.

Goodwill is carried at the lower of cost or fair value and is tested for impairment at least annually, or whenever events or changes in circumstances indicate such an evaluation is warranted, by comparing the carrying amount of the net assets of each reporting unit with goodwill to the fair value of the reporting unit taken as a whole. The impairment review involves a number of assumptions and estimates including estimating discounted future cash flows, net operating income, future economic conditions, fair value of assets held, and discount rates. If this comparison indicates that the goodwill of a particular reporting unit is impaired, the aggregate of the fair value of each of the individual assets and liabilities of the reporting unit are compared to the fair value of the reporting unit to determine the amount of goodwill impairment, if any.

Intangible Assets. We allocate the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values, using customary estimates of fair value, including data from appraisals, comparable sales, discounted cash flow analysis, and other methods. These fair values can fluctuate up or down significantly as a result of a number of factors and estimates, including changes in the general economy of our markets, demand for real estate, amortization periods, and fair market values assigned to leases as well as fair value assigned to customer relationships.

Pension Plan. The Company sponsors a defined benefit pension plan covering a majority of our employees. Currently, our pension plan is over-funded and contributes income to the Company. The accounting for pension benefits is determined by standardized accounting and actuarial methods using numerous estimates, including discount rates, expected long-term investment returns on plan assets, employee turnover, mortality and retirement ages, and future salary increases. Changes in these key assumptions can have a significant impact on the income contributed by the pension plan. We engage the services of an independent actuary and investment consultant to assist us in determining these assumptions and in the calculation of pension income. For example, in 2004, a 1% increase in the assumed long-term rate of return on pension assets would have resulted in a $2.4 million increase in pre-tax income ($1.5 million net of tax). A 1% decrease in the assumed long-term rate of return would have caused an equivalent decrease in pre-tax income. A 1% increase in the assumed discount rate on pension obligations would have resulted in a $0.4 million decrease in pre-tax income ($0.3 million net of tax). A 1% decrease in the assumed discount rate would have resulted in a $0.6 million increase in pre-tax income ($0.4 million net of tax).

Income Taxes. In preparing our consolidated financial statements, significant management judgment is required to estimate our income taxes. Our estimates are based on our interpretation of federal and state tax laws. We estimate our actual current tax due and assess temporary differences resulting from differing treatment of items for tax and accounting purposes. The temporary differences result in deferred tax assets

and liabilities, which are included in our consolidated balance sheet. Adjustments may be required by a change in assessment of our deferred tax assets and liabilities, changes due to audit adjustments by federal and state tax authorities, and changes in tax laws. To the extent adjustments are required in any given period we would include the adjustments in the tax provision in the statement of operations and/or balance sheet. These adjustments could materially impact our financial position and results of operation.

Recently Issued Accounting Standards

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123(R) (“FAS 123(R)”), Share-Based Payment, a revision of FAS 123. FAS 123(R) requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award (with limited exceptions), eliminating the alternative previously allowed by FAS 123 to use the intrinsic value method of accounting. The grant date fair value will be estimated using option-pricing models adjusted for the unique characteristics of the instruments using methods similar to those required by FAS 123 and currently used by the Company to calculate pro forma net income and earnings per share disclosures. The cost will be recognized ratably over the period during which the employee is required to provide services in exchange for the award. For public entities like the Company that do not file as small business issuers, FAS 123(R) is effective as of the beginning of the first interim or annual period that begins after June 15, 2005. The Company plans to adopt FAS 123(R) as of July 1, 2005. As a result of adopting FAS 123(R), the Company will recognize as compensation cost in its financial statements the unvested portion of existing options granted prior to the effective date and the cost of stock options granted to employees after the effective date based on the fair value of the stock options at grant date.

Also in December 2004, the FASB issued Statement of Financial Accounting Standards No. 152, Accounting for Real Estate Time-Sharing Transactions (“FAS 152”). FAS 152 clarifies the accounting for sales and other transactions involving real estate time-sharing transactions and is effective for financial statements for fiscal years beginning after June 15, 2005. Upon adoption, the Company does not expect FAS 152 to have a material effect on its financial position or results of operations.

Also in December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, Exchanges of Nonmonetary Assets (“FAS 153”). FAS 153 eliminates a previous exception from fair value reporting for nonmonetary exchanges of similar productive assets and introduces an exception from fair value reporting for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange is considered to have commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. FAS 153 is applicable to nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005, with earlier application permitted. Upon adoption, the Company does not expect FAS 153 to have a material effect on its financial position or results of operations.

Results of Operations

Net income for 2004 was $90.1 million, or $1.17 per diluted share, compared with $75.9 million, or $0.98 per diluted share, in 2003 and $174.4 million, or $2.14 per diluted share, in 2002. The results for 2003 included a non-cash charge of $8.8 million, or $0.11 per diluted share, to reduce the carrying value of goodwill associated with Advantis Real Estate Services (“Advantis”), our commercial real estate services unit. The results for 2002 included a gain on the forward sale of securities of $86.4 million, or $1.06 per diluted share, and earnings and a net gain on the sale of Arvida Realty Services (“ARS”), our former residential real estate services segment. The gain on sale of ARS was $20.7 million, or $0.25 per diluted share, and earnings from the discontinued operations of ARS were $2.3 million, or $0.03 per diluted share.

We report revenues from our four operating segments: Towns & Resorts development, commercial real estate development and services, land sales, and forestry. Real estate sales are generated from sales of housing units and developed home sites in our Towns & Resorts development segment, developed and undeveloped land and in-service buildings in our commercial real estate development and services segment

which are not reported as discontinued operations, parcels of undeveloped land and developed home sites in rural settings in our land sales segment and occasionally sales of bulk land from our forestry segment. Realty revenues, consisting of property and asset management fees, construction revenues, and lease and sales commissions, are generated from the commercial real estate development and services segment. Timber sales are generated from the forestry segment. Rental revenue is generated primarily from lease income related to our portfolio of investment and development properties as a component of the commercial real estate development and services segment. Other revenues are primarily club operations and management fees from the Towns & Resorts development segment.


	*Consolidated Results*

Revenues and Expenses. The following table sets forth a comparison of the revenues and expenses for the three years ended December 31, 2004.


			Years Ended December 31,						2004 vs. 2003						2003 vs. 2002

			2004		2003		2002		Difference			% Change			Difference			% Change

			(Dollars in millions)
Revenues:
	Real estate sales		$	734.3	$	592.2	$	484.0	$	142.1			24	%	$	108.2			22	%
	Realty			98.1		62.5		58.5		35.6			57			4.0			7
	Timber sales			35.2		36.6		40.7		(1.4	)		(4	)		(4.1	)		(10	)
	Rental			40.5		31.0		24.2		9.5			31			6.8			28
	Other			43.4		28.5		19.0		14.9			52			9.5			50

		Total		951.5		750.8		626.4		200.7			27			124.4			20

Expenses:
	Cost of real estate sales			484.7		353.2		290.8		131.5			37			62.4			21
	Cost of realty sales revenues			63.9		36.2		33.2		27.7			77			3.0			9
	Cost of timber sales			21.8		24.2		28.9		(2.4	)		(10	)		(4.7	)		(16	)
	Cost of rental revenues			15.9		14.1		11.2		1.8			13			2.9			26
	Cost of other revenues			37.6		27.2		23.1		10.4			38			4.1			18
	Other operating expenses			102.2		91.6		84.1		10.6			12			7.5			9

		Total	$	726.1	$	546.5	$	471.3	$	179.6			33	%	$	75.2			16	%

The increases in revenues from real estate sales and costs of real estate sales were in each case primarily due to increased sales in the Towns & Resorts development segment and land and building sales in the commercial real estate development and services segment. These increases were partially offset by a decrease in sales of conservation land. Additionally, during 2004, two buildings were sold by the commercial real estate development and services segment and recorded as discontinued operations. Also, in 2004, costs of real estate sales increased due to actual construction costs in excess of estimates at WaterSound Beach, one of our residential communities. (For a more detailed discussion of this increase, see Revenue Recognition — Percentage-of-Completion under Critical Accounting Estimates above.) The increases in realty revenues and cost of realty revenues were in each case primarily due to increases in construction and brokerage activity. The increases in rental revenues and costs of rental revenues were in each case primarily due to the purchase of commercial buildings and, from 2002 to 2003, to improved leased percentages of rental property in the commercial real estate development and services segment. Timber revenue decreased due to a reduction in volume harvested from Company-owned lands and an intentional reduction in production at the cypress mill operation for the purpose of improving margins and profitability, partially offset by price increases. Cost of timber revenues decreased due to lower costs in the timber operation and increased efficiencies in the cypress mill operation. Other revenues and costs of other revenues increased, from 2003 to 2004, primarily due to increases in resale brokerage activity in the Towns & Resorts development segment and, from 2002 to 2003, primarily due to an increase in club

operations in the Towns & Resorts development segment. Other operating expenses increased primarily due to increases in the Towns & Resorts development segment and the commercial real estate development and services segment. For further discussion of revenues and expenses, see Segment Results below.

Corporate Expense. Corporate expense, representing corporate general and administrative expenses, increased $9.3 million, or 27%, to $43.8 million in 2004, from $34.5 million in 2003. The increase was due to increases of $3.8 million in compensation expense on restricted stock issuances, $3.2 million in salaries and other employee benefits, $1.7 million in audit and audit related fees, and $0.6 million in miscellaneous other corporate expenses. Corporate expense increased $7.0 million, or 25%, to $34.5 million in 2003, from $27.5 million in 2002. The increase was primarily due to a $4.3 million decrease in the income contribution from the St. Joe Company Pension Plan, an increase in employee benefit costs of $2.3 million and an increase of $0.4 million in miscellaneous other corporate expenses.

Depreciation and Amortization. Depreciation and amortization increased $6.7 million, or 24%, to $35.1 million in 2004, compared to $28.4 million in 2003. The increase was due to a $3.3 million increase in depreciation resulting primarily from additional investments in commercial investment property and residential operating property and property, plant and equipment and a $3.4 million increase in amortization resulting from an increase in intangible assets associated with our commercial operating properties. Depreciation and amortization increased $8.3 million, or 41%, to $28.4 million in 2003, compared to $20.1 million in 2002. The increase was due to a $7.4 million increase in depreciation resulting primarily from additional investments in commercial investment property and residential operating property and property, plant and equipment and a $0.9 million increase in amortization resulting from an increase in intangible assets.

Impairment Losses. During 2004, we recorded a $2.0 million impairment loss related to one of our Towns & Resorts projects in North Carolina pursuant to Statement of Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. During 2003, we recorded an impairment loss to reduce the carrying amount of Advantis’ goodwill from $28.9 million to $14.8 million, pursuant to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. The impairment related to Advantis resulted in an impairment loss of $14.1 million pre-tax, or $8.8 million net of tax. See note 9 of Notes to Consolidated Financial Statements. Additionally, impairment losses of $0.3 million were recorded in 2003 related to commercial properties. No impairment losses were recorded in 2002.

Other Income (Expense). Other income (expense) consists of investment income, interest expense, gains on sales and dispositions of assets and other income and, in 2002, gains and losses on the valuation and settlement of forward sale contracts. Other income (expense) was $(9.2) million in 2004, $(6.9) million in 2003, and $122.0 million in 2002.

The gains and losses on the valuation and settlement of forward sale contracts in 2002 were related to a forward sale transaction that we entered into with a major financial institution in October 1999 that, in effect, provided for the monetization of our long-held portfolio of equity investments which, at December 31, 1998, had a cost of approximately $1.7 million and a fair value of approximately $144 million. Under the forward sale agreement, we received approximately $111.1 million in cash and were required to settle the forward transaction by October 15, 2002, by delivering either the securities or the equivalent value of the securities in cash to the financial institution. The agreement permitted us to retain that amount of the securities representing appreciation up to 20% of their value on October 15, 1999 should the value of the securities increase. The securities were recorded at fair value on the balance sheet and the related unrealized gain, net of tax, was recorded in accumulated other comprehensive income. At the time of entering into the forward sale contracts, we recorded a liability in long-term debt for approximately $111.1 million, subject to increase as interest expense was imputed at an annual rate of 7.9%. The liability was also subject to increase by the amount, if any, that the fair value of the securities increased beyond the retained 20%.

In 2002, in two separate transactions, we settled our forward sale contracts by delivering equity securities to the financial institution for an aggregate pre-tax gain of $132.9 million. The aggregate liability related to the contracts settled was $135.6 million at the times of settlement and the resulting gain recognized in 2002 was $132.9 million pre-tax.

Investment income decreased to $0.9 million for both 2004 and 2003 from $2.9 million in 2002, primarily due to lower dividend income resulting from the disposition of securities. Interest expense increased $2.2 million to $12.9 million in 2004 from $10.7 million in 2003, primarily due to an increase in the average amount of debt in 2004. Interest expense decreased $4.9 million to $10.7 million in 2003 compared to $15.6 million in 2002 due to the settlement of the debt related to the forward sale contracts, which was partially offset by interest expense attributable to medium term notes we issued in 2002 and debt secured by commercial buildings. Other income was $2.8 million in 2004, $2.9 million in 2003, and $1.8 million in 2002. Other income included a loss on the valuation of forward sale contracts of $(0.9) million in 2002.

Equity in Income (Loss) of Unconsolidated Affiliates. We have investments in affiliates that are accounted for by the equity method of accounting. Equity in income (loss) of unconsolidated affiliates totaled $5.6 million in 2004, $(2.2) million in 2003, and $10.9 million in 2002.

The Towns & Resorts development segment recorded equity in the income (loss) of unconsolidated affiliates of $5.8 million in 2004, $(4.1) million in 2003, and $11.9 million in 2002. The 2004 results were primarily due to increases in closings at two unconsolidated affiliates that are developing residential property in Florida. For 2003 and 2002, equity in income (loss) of unconsolidated affiliates included our 26% limited partnership interest in Arvida/ JMB Partners, L.P. (“Arvida/ JMB”). Arvida/ JMB completed its operations in 2003 and is winding up its affairs. Arvida/ JMB had no contribution to equity in income (loss) of unconsolidated affiliates in 2004, reported a $(3.5) million loss in 2003 made up of a pre-tax charge based on estimates of future costs and future cash distributions associated with the completion of operations, and recorded $13.2 million in income in 2002.

The commercial real estate development and services segment recorded equity in the income (loss) of unconsolidated affiliates of $(0.2) million in 2004, $1.9 million in 2003, and $(1.0) million in 2002. Included were losses of $(1.5) million in 2004, $(0.3) million in 2003, and $(0.3) million in 2002 related to our 50% interest in Codina Group, Inc. (“Codina”), a commercial services company headquartered in Coral Gables, Florida. We expect Codina to return to profitability in the near term. The remainder of the decrease from 2003 to 2004 is primarily due to the sale in 2003 of our 45% partnership interest in the 355 Alhambra building for a gain of $1.0 million which is included in income of unconsolidated affiliates. The increase from 2002 to 2003 is primarily due to the equity in income of Deerfield, LLC, which increased $2.6 million to $1.4 million in 2003 compared to 2002 due to an increase in income from land sales and decreased $0.3 million to $1.1 million in 2004 compared to 2003 due to decreases in income from land sales as that company’s operations wind down.

Income Tax Expense. Income tax expense on continuing operations totaled $53.3 million in 2004, $42.2 million in 2003, and $89.0 million in 2002. Our effective tax rate was 38% in 2004, 36% in 2003, and 37% in 2002. Our effective tax rate increased in 2004 due to increases in restricted stock deferred compensation, a portion of which is not deductible for tax purposes. Our effective tax rate decreased in 2003 because the deferred tax liability for state taxes was reduced to reflect the effect of a previously implemented strategy.

Discontinued Operations. Discontinued operations include the operations and subsequent sales of two commercial office buildings which were sold in 2004, the gain on sale and the operations of ARS and the gain on sale and operations of two commercial office buildings which were sold in 2002. These entities’ results are not included in income from continuing operations.

On July 30, 2004, we sold 1750 K Street for proceeds of $47.3 million ($21.9 million, net of the assumption of a mortgage by the purchaser) and a pre-tax gain of $7.5 million ($4.6 million, net of taxes). Prior to its sale, during 2004, 2003, and 2002, 1750 K Street generated revenues of $3.4 million,

$5.6 million, and $5.4 million, respectively, operating expenses of $2.0 million, $3.4 million, and $2.8 million, respectively, and net income of $0.2 million, $0.2 million, and $0.8 million, respectively. We sold Westchase Corporate Center on August 16, 2004, for proceeds of $20.3 million and a pre-tax gain of $0.2 million ($0.1 million net of taxes). Prior to its sale, during 2004, 2003, and 2002, Westchase Corporate Center generated revenues of $2.5 million, $4.2 million, and $3.5 million, respectively, operating expenses of $2.2 million, $3.4 million, and $3.2 million, respectively, and net income of $0.2 million, $0.5 million, and $0.2 million, respectively.

We completed the sale of ARS, our wholly-owned subsidiary, on April 17, 2002, with a gain recorded on the sale of $33.7 million before taxes, or $20.7 million net of taxes. Prior to its sale, ARS generated revenues of $76.2 million, operating expenses of $71.7 million and net income of $2.3 million during 2002. Also in 2002, we sold two commercial buildings with aggregate proceeds of $0.3 million and an aggregate pre-tax gain of $0.2 million ($0.1 million, net of taxes). Prior to these sales, these two buildings in total generated less than $0.1 million in revenue and pre-tax income during 2002.


	*Segment Results*

Towns & Resorts Development. The table below sets forth the results of operations of our Towns & Resorts development segment for the three years ended December 31, 2004.


			Years Ended December 31,

			2004			2003		2002

			(In millions)
Revenues:
	Real estate sales		$	575.0		$	467.3	$	371.2
	Rental revenues			1.1			0.8		0.8
	Other revenues			41.5			26.8		14.7

		Total revenues		617.6			494.9		386.7

Expenses:
	Cost of real estate sales			419.1			332.9		260.8
	Cost of rental revenues			1.2			1.6		1.6
	Cost of other revenues			36.5			26.6		20.6
	Other operating expenses			48.7			44.6		38.7
	Depreciation and amortization			10.0			8.6		4.4
	Impairment loss			2.0			—		—

		Total expenses		517.5			414.3		326.1

Other income (expense)				(0.2	)		—		0.2

Pre-tax income from continuing operations			$	99.9		$	80.6	$	60.8

Our Towns & Resorts development division develops large-scale, mixed-use communities primarily on land with very low cost basis. We own large tracts of land in Northwest Florida, including significant Gulf of Mexico beach frontage and waterfront properties, and land near Jacksonville, in Deland, and near Tallahassee, the state capital. Our residential homebuilding in North Carolina and South Carolina is conducted through Saussy Burbank, Inc. (“Saussy Burbank”), a wholly owned subsidiary. We made a strategic decision to carefully manage inventories at our beachfront communities and, consequently, we released no new inventory in these communities in the fourth quarter of 2004.


	Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Real estate sales include sales of homes and home sites and sales of land. Cost of real estate sales for homes and home sites includes direct costs, selling costs and other indirect costs. In 2004, the components

of cost of real estate sales for homes and home sites were $350.0 million in direct costs, $29.9 million in selling costs, and $38.5 million in other indirect costs. In 2003, the components of cost of real estate sales for homes and home sites were $276.4 million in direct costs, $23.6 million in selling costs, and $31.3 million in other indirect costs. The overall increases in real estate sales and cost of real estate sales were due to an increase in the number of units sold and higher overall selling prices.

Sales of homes in 2004 totaled $462.0 million, with related costs of sales of $382.9 million, resulting in a gross profit percentage of 17%, compared to sales of homes in 2003 of $348.4 million, with costs of sales of $287.8 million, resulting in a gross profit percentage of 17%. As discussed above (see Revenue Recognition — Percentage-of-Completion under Critical Accounting Estimates), a small increase in the gross profit percentage was offset by $2.0 million in construction costs that we incurred in 2004 due to contract adjustments on a multi-family property for which substantially all of the activity had been recorded during 2003.

Cost of real estate sales for homes in 2004 consisted of $323.4 million in direct costs, $24.7 million in selling costs, and $34.8 million in other indirect costs. Cost of real estate sales for homes in 2003 consisted of $242.1 million in direct costs, $17.8 million in selling costs, and $27.9 million in indirect costs.

Sales of home sites in 2004 totaled $109.8 million, with related costs of sales of $35.5 million, resulting in a gross profit percentage of 68%, compared to sales of home sites in 2003 of $115.7 million, with costs of sales of $43.5 million, resulting in a gross profit percentage of 62%. The increase in gross profit percentage was due to increased pricing at WaterColor, WaterSound Beach, and WindMark Beach, partially offset by increases in the average per-unit costs of sales at WaterColor and Windmark Beach. Cost of real estate sales for home sites in 2004 consisted of $26.6 million in direct costs, $5.2 million in selling costs, and $3.7 million in other indirect costs. Cost of real estate sales for home sites in 2003 consisted of $34.3 million in direct costs, $5.8 million in selling costs, and $3.4 million in indirect costs. There were fewer home sites sold in our resort communities in 2004 compared to 2003 as we continued to manage inventory to maximize value to benefit from expected near-term price increases caused by strong demand in the market.

The following table sets forth home and home site sales activity by individual developments:


				Year Ended December 31, 2004									Year Ended December 31, 2003

				Closed				Cost of		Gross			Closed				Cost of		Gross
				Units		Revenues		Sales		Profit			Units		Revenues		Sales		Profit

				(Dollars in millions)
Northwest Florida:
	Walton County:
		WaterColor:
			Single-family homes		11	$	9.9	$	7.3	$	2.6			12	$	9.6	$	6.4	$	3.2
			Multi-family homes		—		—		—		—			18		2.6		2.7		(0.1	)
			Private Residence Club		87		17.0		9.3		7.7			—		1.2		0.7		0.5
			Home sites		148		71.9		22.2		49.7			206		57.1		22.5		34.6
		WaterSound Beach:
			Single-family homes		1		5.1		2.7		2.4
			Multi-family homes		51		55.4		34.1		21.3			30		72.1		45.1		27.0
			Home sites		29		15.1		3.7		11.4			93		38.1		12.6		25.5
	Bay County:
		The Hammocks:
			Homes		77		11.5		11.0		0.5			48		6.8		6.1		0.7
			Home sites		70		2.6		1.3		1.3			30		0.9		0.7		0.2
		Palmetto Trace: Homes			92		13.8		12.4		1.4			88		13.6		12.1		1.5
		Summerwood: Homes			—		—		1.7		(1.7	)		—		—		—		—
		Woodrun: Homes			—		—		—		—			—		—		0.4		(0.4	)


				Year Ended December 31, 2004								Year Ended December 31, 2003

				Closed				Cost of		Gross		Closed				Cost of		Gross
				Units		Revenues		Sales		Profit		Units		Revenues		Sales		Profit

				(Dollars in millions)
	Leon County:
		SouthWood:
			Homes		174		41.0		35.7		5.3		133		27.0		23.2		3.8
			Home sites		58		5.5		3.0		2.5		63		5.7		2.6		3.1
	Gulf County:
		Windmark Beach: Home sites			4		4.0		0.6		3.4		13		7.3		1.2		6.1
Northeast Florida:
	St. Johns County:
		St. Johns Golf & Country Club:
			Homes		104		36.5		29.4		7.1		124		39.6		33.1		6.5
			Home sites		35		2.9		1.1		1.8		40		2.2		1.0		1.2
	Duval County:
		James Island: Homes			11		4.3		3.8		0.5		59		19.8		17.1		2.7
		Hampton Park: Homes			61		21.7		19.0		2.7		50		16.1		14.0		2.1
Central Florida:
	Volusia County:
		Victoria Park:
			Homes		179		39.7		34.1		5.6		124		24.3		21.7		2.6
			Home sites		53		4.2		2.4		1.8		32		2.3		1.4		0.9
		Artisan Park:
			Single-family homes		64		25.9		19.2		6.7
			Multi-family homes		—		14.8		11.9		2.9
			Home sites		17		3.6		1.2		2.4		10		1.3		0.7		0.6
North and South Carolina:
		Saussy Burbank:
			Homes		748		165.4		151.3		14.1		555		115.7		105.2		10.5
			Home sites		—		—		—		—		32		0.8		0.8		—

Total					2,074	$	571.8	$	418.4	$	153.4		1,760	$	464.1	$	331.3	$	132.8

Revenue and costs of sales associated with multi-family units and Private Residence Club (“PRC”) units under construction are recognized using the percentage-of-completion method of accounting. Revenue is recognized in proportion to the percentage of total costs incurred in relation to estimated total costs. If a deposit is received for less than 10% for a multi-family unit or a PRC unit, percentage-of-completion accounting is not utilized. Instead, full accrual accounting criteria is used, which generally recognizes revenue when sales contracts are closed and adequate investment from the buyer is received. In the WaterSound Beach community, deposits of 10% are required upon executing a contract and another 10% is required 180 days later. For PRC units, a 10% deposit is required. Additional deposits may be collected at other locations depending on the specifics of each contract. All deposits are non-refundable (subject to a 10-day waiting period as required by law), except for non-delivery of the unit. In the event a contract does not close for reasons other than non-delivery, we are entitled to retain the deposit. However, the revenue and margin related to the previously recorded contract would be reversed. Revenues and cost of sales associated with multi-family units where construction has been completed before contracts are signed and deposits made are recognized on the full accrual method of accounting, as contracts are closed.

At WaterColor, the gross profit percentage from single-family residence sales decreased to 26% in 2004 from 33% in 2003, primarily due to the mix of relative location and size of the home sales closed in each period. The average price of a single-family residence sold in 2004 was $897,000, compared to $799,000 in 2003. In 2004, there was no revenue or gross profit recognized on the sale of multi-family residences due to the wind up of the first phase of multi-family residences in 2003. Revenues and cost of revenues recorded for the PRC were higher in 2004 than in 2003 because percentage-of-completion

accounting on PRC units did not begin until late in 2003. The average price of a home site sold in 2004 was $486,000, compared to $277,000 in 2003. The gross profit percentage from home site sales was 69% in 2004 and 61% in 2003. Increases were due to an increase in prices of comparable units and to a change in the mix of relative locations of the home sites sold, partially offset by increases in development costs associated with amenities and roadway improvement.

At WaterSound Beach, the gross profit percentage on sales of multi-family residences increased to 38% in 2004 from 37% in 2003. Increased margins in 2004 were partially offset by an increase in the cost of revenues associated with the 80 completed and sold multi-family residences caused by actual construction costs exceeding estimates in the first quarter of 2004, as discussed above (see Critical Accounting Estimates). Most of the contribution from income for the 51 multi-family units that closed in 2004 was recorded in 2003 due to percentage of completion accounting. The gross profit percentage on home sites increased to 75% in 2004 from 67% in 2003, primarily due to price increases.

At The Hammocks, the gross profit percentage on home sales decreased to 4% in 2004 from 10% in 2003 due to an increase in construction costs on the townhouse product. The gross profit percentage on home site sales increased to 50% in 2004 from 22% in 2003, primarily due to price increases, the mix of relative location of the home sites closed, and a decrease in development costs. The average price of a home site sold in 2004 was $38,000 compared to $30,000 in 2003.

At Summerwood, there was a $1.7 million expense recorded in 2004 for warranty costs in excess of warranty reserves.

At St. Johns Golf and Country Club, the gross profit percentage on home sales increased to 19% in 2004 from 16% in 2003, primarily due to price increases on comparable units and a change in the mix of relative size and location of homes sold. The average price of a home sold in 2004 was $351,000 compared to $319,000 in 2003. The gross profit percentage on home site sales increased to 62% in 2004 from 55% in 2003, primarily due to price increases and the mix of the relative size of the home sites sold in each period. The average price of home sites sold in 2004 was $84,000 compared to $56,000 in 2003.

At Artisan Park, the gross profit percentage on home site sales increased to 67% in 2004 from 46% in 2003, primarily due to increased prices. The average price of a home site sold in 2004 was $211,000, compared to $128,000 in 2003.

At Victoria Park, the gross profit percentage on home sales increased to 14% in 2004 from 11% in 2003. The gross profit percentage on home site sales increased to 43% in 2004 from 39% in 2003. Increases in gross profit percentages were in each case due to price increases on comparable homes and home sites and changes in the mix of relative locations of home sites sold in each period. The average price of a home sold in 2004 was $222,000 compared to $196,000 in 2003. The average price of a home site sold in 2004 was $80,000 compared to $74,000 in 2003.

At Saussy Burbank, the gross profit percentage on home sales decreased to 8.5% in 2004 from 9.1% in 2003 primarily due to selective discounting of house prices. Average prices of homes sold in 2004 and 2003 were approximately $221,000 and $209,000, respectively. During 2004, we recorded an impairment loss of $2.0 million related to one of Saussy Burbank’s community development projects.

Other revenues included revenues from the WaterColor Inn, other resort operations, and management fees. Other revenues were $41.5 million in 2004 with $36.5 million in related costs, resulting in a gross profit percentage of 12%, compared to revenues totaling $26.8 million in 2003 with $26.6 million in related costs, resulting in a gross profit percentage of 1%. The increases in other revenues, cost of other revenues, and gross profit percentage were each primarily due to increases in resale brokerage and vacation rental activity.

Other operating expenses, including salaries and benefits of personnel and other administrative expenses, increased $4.1 million during 2004 compared to 2003, primarily due to increases in marketing and project administration costs attributable to the increase in Towns & Resorts development activity.

Overall, we expect margins in the Towns & Resorts development segment to remain stable in the near future.


	Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

In 2003, the components of cost of real estate sales for homes and home sites were $276.4 million in direct costs, $23.6 million in selling costs, and $31.3 million in other indirect costs. In 2002, the components of cost of real estate sales for homes and home sites were $220.5 million in direct costs, $17.8 million in selling costs, and $22.5 million in other indirect costs.

Sales of homes in 2003 totaled $348.4 million, with related costs of sales of $287.8 million, resulting in a gross profit percentage of 17%, compared to sales in 2002 of $271.3 million, with costs of sales of $226.6 million, resulting in a gross profit percentage of 17%. Cost of real estate sales for homes in 2003 consisted of $242.1 million in direct costs, $17.8 million in selling costs, and $27.9 million in indirect costs. Cost of real estate sales for homes in 2002 consisted of $193.8 million in direct costs, $12.8 million in selling costs, and $20.0 million in indirect costs.

Sales of home sites in 2003 totaled $115.7 million, with related costs of sales of $43.5 million, resulting in a gross profit percentage of 62%, compared to sales in 2002 of $99.3 million, with related costs of sales of $34.2 million, resulting in a gross profit percentage of 66%. Cost of real estate sales for home sites in 2003 consisted of $34.3 million in direct costs, $5.8 million in selling costs, and $3.4 million in indirect costs. Cost of real estate sales for home sites in 2002 consisted of $26.7 million in direct costs, $5.0 million in selling costs, and $2.5 million in indirect costs. The increase in real estate sales was due to an increase in the number of units sold and higher selling prices. Cost of real estate sales increased primarily due to the increased volume of sales. The following table sets forth home and home site sales activity by individual developments:


				Year Ended December 31, 2003									Year Ended December 31, 2002

				Closed				Cost of		Gross			Closed				Cost of		Gross
				Units		Revenues		sales		Profit			Units		Revenues		sales		Profit

				(Dollars in millions)
Northwest Florida:
	Walton County:
		WaterColor:
			Single-family homes		12	$	9.6	$	6.4	$	3.2			13	$	10.5	$	6.5	$	4.0
			Multi-family homes		18		2.6		2.7		(0.1	)		45		23.3		17.8		5.5
			Private Residence Club		—		1.2		0.7		0.5			—		—		—		—
			Home sites		206		57.1		22.5		34.6			172		42.7		15.0		27.7
		WaterSound Beach:
			Multi-family homes		30		72.1		45.1		27.0			—		18.5		11.4		7.1
			Home sites		93		38.1		12.6		25.5			64		25.6		10.0		15.6
	Bay County:
		The Hammocks:
			Homes		48		6.8		6.1		0.7			32		4.6		4.1		0.5
			Home sites		30		0.9		0.7		0.2			36		1.1		0.6		0.5
		Palmetto Trace: Homes			88		13.6		12.1		1.5			43		6.4		5.6		0.8
		Summerwood: Homes			—		—		—		—			12		1.8		1.8		—
		Woodrun: Homes			—		—		0.4		(0.4	)		1		0.3		0.4		(0.1	)
		Other Bay County: Home sites			—		—		—		—			1		0.1		0.1		—
	Leon County:
		SouthWood:
			Homes		133		27.0		23.2		3.8			115		21.3		18.5		2.8
			Home sites		63		5.7		2.6		3.1			65		6.1		2.8		3.3


				Year Ended December 31, 2003								Year Ended December 31, 2002

				Closed				Cost of		Gross		Closed				Cost of		Gross
				Units		Revenues		sales		Profit		Units		Revenues		sales		Profit

				(Dollars in millions)
	Gulf County:
		Windmark Beach: Home sites			13		7.3		1.2		6.1		67		22.1		4.6		17.5
Northeast Florida:
	St. Johns County:
		St. Johns Golf & Country Club:
			Homes		124		39.6		33.1		6.5		111		34.1		27.6		6.5
			Home sites		40		2.2		1.0		1.2		21		1.0		0.7		0.3
	Duval County:
		James Island: Homes			59		19.8		17.1		2.7		72		22.5		19.3		3.2
		Hampton Park: Homes			50		16.1		14.0		2.1		35		11.3		9.9		1.4
Central Florida:
	Volusia County:
		Victoria Park:
			Homes		124		24.3		21.7		2.6		77		14.1		12.0		2.1
			Home sites		32		2.3		1.4		0.9		12		0.6		0.4		0.2
		Artisan Park: Home sites			10		1.3		0.7		0.6		—		—		—		—
North and South Carolina:
		Saussy Burbank:
			Homes		555		115.7		105.2		10.5		523		102.6		91.7		10.9
			Home sites		32		0.8		0.8		—		—		—		—		—

Total					1,760	$	464.1	$	331.3	$	132.8		1,517	$	370.6	$	260.8	$	109.8

At WaterColor, the average price of a single-family residence sold in 2003 was $799,000, compared to $800,000 in 2002, which was due solely to the product mix sold. In general, sales prices for homes with similar sizes and locations increased in 2003. The gross profit percentage from single-family residence sales decreased to 33% in 2003 from 38% in 2002 due to an increase in construction costs at one of the multi-family projects and a change in the mix of multi-family projects recorded in each year. The decrease in revenue and cost of revenue on multi-family residences was due to a decline in the number of units for sale. The gross profit percentage on multi-family home sales decreased to (4)% in 2003 from 24% in 2002 primarily due to increased development and construction costs in 2003 associated with the wind up of the first phase of multi-family residences. The gross profit percentage from home site sales decreased to 61% in 2003 from 65% in 2002 primarily due to increases in development costs associated with amenities and roadway improvement.

At WaterSound Beach, multi-family unit percentage-of-completion contributions to income began in the fourth quarter of 2002 and continued for the full year in 2003. The gross profit percentage on home sites increased to 67% in 2003 from 61% in 2002 primarily due to increases in sales prices.

At WindMark Beach, revenues have decreased as a result of a decrease in units offered for sale. The gross profit percentage on home site sales has increased to 84% in 2003 from 79% in 2002 due a change in the mix of relative locations of the home sites sold and to sales price increases on comparable home sites.

At St. Johns Golf and Country Club, the gross profit percentage on home sales decreased to 16% in 2003 from 19% in 2002 primarily due to higher development and construction costs in 2003. The gross profit percentage on home site sales increased to 55% in 2003 from 30% in 2002 primarily due to higher parcel development costs in 2002.

At Victoria Park, the gross profit percentage on home sales decreased to 11% in 2003 from 15% in 2002 because the mix of homes sold in 2003 included more homes located in the active adult community,

which has higher parcel development costs. The gross profit percentage on home site sales increased to 39% in 2003 from 33% in 2002 primarily due to the deferral of revenue in 2002 on several of the home sites as a result of contingencies in the sales contracts.

At Saussy Burbank, the gross profit percentage on home sales has decreased to 9% in 2003 from 11% in 2002 primarily due to an increase in lot costs and a change in the mix of locations of homes sold.

Other revenues totaled $26.8 million in 2003 with $26.6 million in related costs, compared to revenues totaling $14.7 million in 2002 with $20.6 million in related costs. These included revenues from the WaterColor Inn, which began operations in 2002, other resort operations and management fees.

Other operating expenses, including salaries and benefits of personnel and other administrative expenses, increased $5.9 million during 2003 compared to 2002. The increase was primarily due to increases in project administration costs and marketing costs attributable to the increase in Towns & Resorts development activity.

Commercial Real Estate Development and Services. The table below sets forth the results of operations of our commercial real estate development and services segment for the three years ended December 31, 2004.


			Years Ended December 31,

			2004			2003			2002

			(In millions)
Revenues:
	Real estate sales		$	87.2		$	25.6		$	28.2
	Realty revenues			98.1			62.5			58.5
	Rental revenues			39.5			30.2			23.5
	Other revenues			1.9			1.8			1.1

		Total revenues		226.7			120.1			111.3

Expenses:
	Cost of real estate sales			58.9			7.0			20.8
	Cost of realty revenues			63.9			36.2			33.2
	Cost of rental revenues			14.7			12.4			9.4
	Other operating expenses			43.6			36.6			32.7
	Depreciation and amortization			17.0			12.2			7.6
	Impairment loss			—			14.4			—

		Total expenses		198.1			118.8			103.7

Other income (expense)				(5.6	)		(6.0	)		(6.2	)

Pre-tax income (loss) from continuing operations			$	23.0		$	(4.7	)	$	1.4


	Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Real estate sales. Total proceeds from land sales in 2004 were $62.4 million, with a pre-tax gain of $25.4 million. Land sales during 2004 included the following:


		Number of		Acres		Gross Sales		Average
Land		Sales		Sold		Price		Price/Acre

						(In millions)		(In thousands)
Florida:
	Unimproved		12		220	$	8.4	$	38
	Improved		31		192		51.8		270
Texas			3		8		2.2		274

Total/ Average			46		420	$	62.4	$	149

Included in improved land sales in Florida was the sale of 93 acres in and near the Company’s Pier Park development in Panama City Beach, Florida, to the Simon Property Group (“Simon”) for $26.5 million, or $286,000 per acre, for a retail, restaurant and entertainment project. Simon also has the right to purchase an additional 125 acres in and near Pier Park. The Company will retain approximately 13 acres near the beach in Pier Park and approximately 60 adjacent acres near the beach with zoning allowing high-density residential uses.

During 2003, total proceeds from land sales were $25.6 million, with a pre-tax gain of $18.6 million. Land sales included the following:


		Number of		Acres		Gross Sales		Average
Land		Sales		Sold		Price		Price/Acre

						(In millions)		(In thousands)
Florida:
	Unimproved		18		268	$	13.1	$	49
	Improved		30		129		11.5		89
Texas			1		2		1.0		449

Total/ Average			49		399	$	25.6	$	64

Total proceeds for building sales recorded in continuing operations in 2004 were $24.8 million, with a pre-tax gain of $2.9 million. There were no building sales in 2003. Building sales in 2004 consisted of:


	•	the sale of the 99,000-square-foot TNT Logistics building located in Jacksonville, Florida, for $12.8 million, with a pre-tax gain of $3.0 million; and

	•	the sale of the 100,000-square-foot Westside Corporate Center building located in Plantation, Florida, for $12.0 million, with a pre-tax loss of $(0.1).

The operations of TNT Logistics and Westside Corporate Center have not been recorded as discontinued operations because one of our affiliates continues to provide brokerage and leasing services for these buildings.

Realty revenues. Advantis’ realty revenues in 2004 increased $35.6 million, or 57%, over 2003 due to increases in construction and brokerage revenues. Cost of Advantis’ realty revenue increased $27.7 million, or 77%, due to increased costs associated with the increase in construction and brokerage revenues. The gross profit percentage was 35% for 2004, compared to 42% for 2003. The decrease in gross profit percentage was due to increases in broker agent compensation rates related to the increase in brokerage activity and due to the expansion of the construction business to include base building projects which have a lower margin than tenant renovation projects. Advantis’ other operating expenses, consisting of office administration expenses, increased to $32.8 million in 2004 from $28.9 million in 2003, a 13% increase, primarily due to an increase in staffing costs. Advantis’ results were break-even after eliminating intercompany profit of $1.7 million, compared to $(17.8) million for 2003, including the 2003 impairment

loss of $(14.1) million and after eliminating intercompany profit of $2.0 million. During 2003, although management had previously believed that Advantis’ performance would continue to improve despite a very difficult environment for commercial services companies, results of operations declined and expectations for future periods were reduced. As a result, the Company recorded an impairment loss to reduce the carrying amount of Advantis’ goodwill from $28.9 million to $14.8 million, pursuant to FAS 142. This resulted in an impairment loss of $14.1 million pre-tax ($8.8 million net of tax). We believe that Advantis’ performance will continue to improve based on our current expectations.

Rental revenues. Rental revenues generated by our commercial real estate development and services segment on owned operating properties increased $9.3 million, or 31%, in 2004 compared to 2003, primarily due to the purchases of four buildings placed in service in the second half of 2003 with an aggregate of 623,000 square feet and six buildings placed in service in 2004 with an aggregate of 583,000 square feet, partially offset by the sale of a building with 100,000 square feet on February 12, 2004. Operating expenses relating to these revenues increased $2.3 million, or 19%, primarily due to the buildings placed in service. This segment’s results include rental revenue and cost of rental revenue from 24 rental properties with 2.8 million total rentable square feet in service at December 31, 2004 and 20 rental properties with 2.4 million total rentable square feet in service at December 31, 2003. Additionally, this segment had an interest in one building totaling approximately 0.1 million square feet and two buildings totaling approximately 0.2 million square feet at December 31, 2004 and 2003, respectively, that were owned by partnerships and accounted for using the equity method of accounting. Excluding buildings accounted for using the equity method of accounting, the overall leased percentage increased to 85% at December 31, 2004, compared to 82% at December 31, 2003. Further information about commercial income producing properties majority owned or managed, excluding those reported as discontinued operations, along with results of operations for 2004 and 2003, is presented in the tables below.


			Net Rentable		Percentage			Net Rentable		Percentage
			Square Feet at		Leased at			Square Feet at		Leased at
			December 31,		December 31,			December 31,		December 31,
	Location		2004		2004			2003		2003

Buildings purchased with tax-deferred proceeds:
Harbourside		Clearwater, FL		153,000		78	%		147,000		92	%
Prestige Place I and II		Clearwater, FL		147,000		82			144,000		86
Lakeview		Tampa, FL		127,000		82			125,000		77
Palm Court		Tampa, FL		62,000		76			60,000		68
Westside Corporate Center		Plantation, FL		(a)		(a)			100,000		86
280 Interstate North		Atlanta, GA		127,000		64			126,000		71
Southhall Center		Orlando, FL		159,000		48			155,000		88
1133 20th Street		Washington, DC		119,000		97			119,000		99
Millenia Park One		Orlando, FL		158,000		90			158,000		68
Beckrich Office I		Panama City Beach, FL		34,000		100			34,000		96
Beckrich Office II(c)		Panama City Beach, FL		33,000		48			(c)		(c)
5660 New Northside		Atlanta, GA		273,000		96			272,000		91
SouthWood Office One		Tallahassee, FL		89,000		92			88,000		73
Crescent Ridge		Charlotte, NC		158,000		100			158,000		100
Windward Plaza		Atlanta, GA		465,000		89			465,000		89
245 Riverside(c)		Jacksonville, FL		136,000		57			(b)		(b)
Overlook		Richmond, VA		129,000		99			(b)		(b)
Deerfield Point		Atlanta, GA		204,000		89			(b)		(b)
Parkwood Point		Atlanta, GA		220,000		93			(b)		(b)

Subtotal				2,793,000		85			2,151,000		86

Net Rentable

Percentage

Net Rentable

Percentage

Square Feet at

Leased at

Square Feet at

Leased at

December 31,

Location

2004

2003

Development property:

TNT Logistics

Jacksonville, FL

(a)

99,000

245 Riverside

Jacksonville, FL

(c)

134,000

Nextel Two

Tallahassee, FL

30,000

100

(b)

Beckrich Office II

Panama City Beach, FL

(c)

34,000

Subtotal

30,000

100

267,000

Total

2,823,000

2,418,000


(a)		Westside Corporate Center and TNT Logistics were sold during 2004.

(b)		These properties were completed or acquired after the date reported.

(c)		During 2004, 245 Riverside and Beckrich Office II were transferred from development property to buildings purchased with tax-deferred proceeds.


	Year Ended December 31, 2004													Year Ended December 31, 2003

											Pre-tax													Pre-tax
	Rental		Operating		NOI			Adjustments			Income			Rental		Operating		NOI			Adjustments			Income
	Revenues		Expenses		(a)			(b)			(Loss)			Revenues		Expenses		(a)			(b)			(Loss)

	(In millions)
Buildings purchased with tax- deferred proceeds:
Harbourside	$	2.9	$	1.0	$	1.9		$	(1.7	)	$	0.2		$	3.0	$	1.0	$	2.0		$	(1.4	)	$	0.6
Prestige Place I and II		2.3		1.0		1.3			(1.3	)		—			2.3		1.0		1.3			(1.4	)		(0.1	)
Lakeview		2.1		0.9		1.2			(1.3	)		(0.1	)		1.9		0.7		1.2			(1.3	)		(0.1	)
Palm Court		0.6		0.3		0.3			(0.2	)		0.1			0.5		0.2		0.3			(0.5	)		(0.2	)
Westside Corporate Center		0.2		0.1		0.1			(0.2	)		(0.1	)		1.9		0.7		1.2			(1.1	)		0.1
280 Interstate North		1.6		0.7		0.9			(1.0	)		(0.1	)		1.7		0.8		0.9			(0.9	)		—
Southhall Center		1.5		0.8		0.7			(1.6	)		(0.9	)		2.8		1.0		1.8			(1.5	)		0.3
1133 20th Street		4.1		1.5		2.6			(2.0	)		0.6			4.0		1.3		2.7			(2.1	)		0.6
Millenia Park One		2.7		1.0		1.7			(1.4	)		0.3			1.7		0.8		0.9			(1.5	)		(0.6	)
Beckrich Office I		0.4		0.2		0.2			(0.2	)		—			0.4		0.2		0.2			(0.3	)		(0.1	)
Beckrich Office II(c)		0.2		0.1		0.1			(0.2	)		(0.1	)		—		—		—			—			—
5660 New Northside		5.7		1.7		4.0			(2.4	)		1.6			5.8		1.8		4.0			(1.4	)		2.6
SouthWood Office One		0.9		0.5		0.4			(0.6	)		(0.2	)		0.4		0.3		0.1			(0.4	)		(0.3	)
Crescent Ridge		3.2		0.8		2.4			(1.8	)		0.6			1.2		0.3		0.9			(0.4	)		0.5
Windward Plaza		7.6		1.9		5.7			(3.5	)		2.2			0.8		0.2		0.6			(0.6	)		—
245 Riverside(c)		0.4		0.7		(0.3	)		(1.0	)		(1.3	)		—		—		—			—			—
Overlook		1.4		0.4		1.0			(0.7	)		0.3			—		—		—			—			—
Parkwood Point		0.1		—		0.1			(0.1	)		—			—		—		—			—			—
Deerfield Point		0.1		—		0.1			(0.1	)		—			—		—		—			—			—

Subtotal	$	38.0	$	13.6	$	24.4		$	(21.3	)	$	3.1		$	28.4	$	10.3	$	18.1		$	(14.8	)	$	3.3
Development property:
TNT Logistics		1.4		0.5		0.9			(0.7	)		0.2			1.4		0.6		0.8			(0.7	)		0.1
245 Riverside(c)		—		—		—			—			—			0.2		0.5		(0.3	)		(1.0	)		(1.3	)
Nextel Call Center		0.1		—		0.1			(0.1	)		—			—		—		—			—			—
Beckrich Office II(c)		—		—		—			—			—			—		—		—			(0.1	)		(0.1	)
Other		—		0.6		(0.6	)		—			(0.6	)		0.2		1.0		(0.8	)		(1.3	)		(2.1	)

Subtotal	$	1.5	$	1.1	$	0.4		$	(0.8	)	$	(0.4	)	$	1.8	$	2.1	$	(0.3	)	$	(3.1	)	$	(3.4	)

Total	$	39.5	$	14.7	$	24.8		$	(22.1	)	$	2.7		$	30.2	$	12.4	$	17.8		$	(17.9	)	$	(0.1	)


(a)		NOI is Net Operating Income.

(b)		Adjustments include interest expense, depreciation and amortization.

(c)		245 Riverside and Beckrich Office II were transferred from development property to buildings purchased with tax-deferred proceeds in 2004.

At Southhall Center, Harbourside and 280 Interstate North, the loss of tenants caused a decrease in the leased percentages and rental revenues. At Millenia Park One, SouthWood Office One, 245 Riverside, and Beckrich Office II, leased percentages and revenues increased due to the addition of new tenants for these recently developed properties.

Depreciation and amortization, primarily consisting of depreciation on income producing properties and amortization of lease intangibles, was $17.0 million in 2004 compared to $12.2 million in 2003.

Discontinued operations. Building sales in 2004 included the sales of 1750 K Street and Westchase Corporate Center, both of which are reported as discontinued operations. 1750 K Street was sold on July 30, 2004, for $47.3 million ($21.9 million, net of the assumption of a mortgage by the purchaser) and a pre-tax gain of $7.5 million. Westchase Corporate Center was sold on August 16, 2004, for $20.3 million and a pre-tax gain of $0.2 million.


	Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Real estate sales. As discussed above, total proceeds from land sales in 2003 were $25.6 million, with a pre-tax gain of $18.7 million. There were no building sales in 2003. Land sales included the following:


		Number of		Acres		Gross Sales		Average
Land		Sales		Sold		Price		Price/Acre

						(In millions)		(In thousands)
Florida:
	Unimproved		18		268	$	13.1	$	49
	Improved		30		129		11.5		89
Texas			1		2		1.0		449

Total/ Average			49		399	$	25.6	$	64

During 2002, total proceeds from land sales were $11.0 million, with a pre-tax gain of $4.3 million. Land sales included the following:


		Number of		Acres		Gross Sales		Average
Land		Sales		Sold		Price		Price/Acre

						(In millions)		(In thousands)
Florida:
	Unimproved		5		44	$	2.8	$	63
	Improved		8		27		2.6		98
Texas			3		20		5.6		285

Total/ Average			16		91	$	11.0	$	121

Total proceeds for building sales in 2002 were $17.2 million, with a pre-tax gain of $3.1 million. Building sales consisted of:


	•	The sale of the 67,000-square-foot Nextel building located in the Beckrich Office Park in Panama City Beach for $8.1 million, with a pre-tax gain of $1.9 million; and

	•	the sale of the 69,000-square-foot Tree of Life building located in St. Augustine, Florida, for $9.1 million, with a pre-tax gain of $1.2 million.

Realty revenues. Advantis’ realty revenues in 2003 increased $4.0 million, or 7%, over 2002 due to increases in brokerage and construction revenues, which were partially offset by a small decrease in property management revenues. Cost of Advantis’ realty revenue increased $3.0 million, or 9%, due to increased broker commissions. Advantis’ other operating expenses, consisting of office administration expenses, increased to $28.9 million in 2003 from $25.6 million in 2002, primarily due to an increase in staffing costs. Advantis recorded a pre-tax loss of $17.8 million for 2003, compared to a pre-tax loss of

$1.5 million for 2002, after excluding profit of $2.0 million in 2003 and $1.3 million in 2002 related to intercompany transactions. As discussed above, the Company recorded an impairment loss in 2003 to reduce the carrying amount of Advantis’ goodwill from $28.9 million to $14.8 million, pursuant to FAS 142. This resulted in an impairment loss of $14.1 million pre-tax ($8.8 million net of tax).

Rental revenues. Rental revenues generated by our commercial real estate development and services segment owned operating properties increased $6.7 million, or 29%, in 2003 compared to 2002, due to six buildings placed in service or acquired during 2003 and an increase in the overall leased percentage of rental properties. Operating expenses relating to these revenues increased $3.0 million, or 32%, primarily due to the six buildings placed in service and increased occupancy as well as increases in property taxes, utilities and upgraded security at most of the buildings. This segment’s income from continuing operations included rental revenue and cost of rental revenue from 20 operating properties with 2.4 million total rentable square feet in service during 2003 and 14 operating properties with 1.6 million total rentable square feet in service during 2002. Additionally, this segment had interests in two buildings totaling approximately 0.2 million square feet and three buildings totaling approximately 0.4 million square feet at December 31, 2003 and 2002, respectively, that were owned by partnerships and accounted for using the equity method of accounting. The overall leased percentage increased to 82% at December 31, 2003, compared to 78% at December 31, 2002. Further information about commercial income producing properties majority owned by the Company, excluding those reported as discontinued operations, along with results of operations for 2003 and 2002, is presented in the tables below.


			Net Rentable		Percentage			Net Rentable		Percentage
			Square Feet at		Leased at			Square Feet at		Leased at
			December 31,		December 31,			December 31,		December 31,
	Location		2003		2003			2002		2002

Buildings purchased with tax-deferred proceeds:
Harbourside		Clearwater, FL		147,000		92	%		146,000		86	%
Prestige Place I and II		Clearwater, FL		144,000		86			143,000		84
Lakeview		Tampa, FL		125,000		77			125,000		76
Palm Court		Tampa, FL		60,000		68			62,000		61
Westside Corporate Center		Plantation, FL		100,000		86			100,000		86
280 Interstate North		Atlanta, GA		126,000		71			126,000		67
Southhall Center		Orlando, FL		155,000		88			155,000		94
1133 20th Street		Washington, DC		119,000		99			119,000		99
Millenia Park One		Orlando, FL		158,000		68			158,000		44
Beckrich Office I		Panama City Beach, FL		34,000		96			34,000		88
5660 New Northside		Atlanta, GA		272,000		91			275,000		96
SouthWood Office One		Tallahassee, FL		88,000		73			(a)		(a)
Crescent Ridge		Charlotte, NC		158,000		100			(b)		(b)
Windward Plaza		Atlanta, GA		465,000		89			(b)		(b)

Subtotal				2,151,000		86			1,443,000		81

Net Rentable

Percentage

Net Rentable

Percentage

Square Feet at

Leased at

Square Feet at

Leased at

December 31,

Location

2003

2002

Development property:

TNT Logistics

Jacksonville, FL

99,000

245 Riverside

Jacksonville, FL

134,000

(b)

SouthWood Office One

Tallahassee, FL

(a)

88,000

Beckrich Office II

Panama City Beach, FL

34,000

(b)

Subtotal

267,000

187,000

Total

2,418,000

1,630,000


(a)	During 2003, SouthWood Office One was transferred from development property to buildings purchased with tax-deferred proceeds.


(b)		These properties were acquired or completed after the date reported.


	Year Ended December 31, 2003													Year Ended December 31, 2002

											Pre-tax													Pre-tax
	Rental		Operating		NOI			Adjustments			Income			Rental		Operating		NOI			Adjustments			Income
	Revenues		Expenses		(a)			(b)			(Loss)			Revenues		Expenses		(a)			(b)			(Loss)

	(In millions)
Buildings purchased with tax- deferred proceeds:
Harbourside	$	3.0	$	1.0	$	2.0		$	(1.4	)	$	0.6		$	2.4	$	1.0	$	1.4		$	(1.4	)	$	—
Prestige Place I and II		2.3		1.0		1.3			(1.4	)		(0.1	)		2.0		1.0		1.0			(1.1	)		(0.1	)
Lakeview		1.9		0.7		1.2			(1.3	)		(0.1	)		2.4		1.0		1.4			(1.2	)		0.2
Palm Court		0.5		0.2		0.3			(0.5	)		(0.2	)		0.8		0.3		0.5			(0.4	)		0.1
Westside Corporate Center		1.9		0.7		1.2			(1.1	)		0.1			1.9		0.8		1.1			(1.0	)		0.1
280 Interstate North		1.7		0.8		0.9			(0.9	)		—			2.2		0.8		1.4			(1.0	)		0.4
Southhall Center		2.8		1.0		1.8			(1.5	)		0.3			3.4		1.3		2.1			(1.6	)		0.5
1133 20th Street		4.0		1.3		2.7			(2.1	)		0.6			4.1		1.3		2.8			(2.1	)		0.7
Millenia Park One		1.7		0.8		0.9			(1.5	)		(0.6	)		1.0		0.5		0.5			(0.6	)		(0.1	)
Beckrich Office I		0.4		0.2		0.2			(0.3	)		(0.1	)		0.3		0.2		0.1			(0.2	)		(0.1	)
5660 New Northside		5.8		1.8		4.0			(1.4	)		2.6			0.3		—		0.3			—			0.3
SouthWood Office One		0.4		0.3		0.1			(0.4	)		(0.3	)		—		—		—			—			—
Crescent Ridge		1.2		0.3		0.9			(0.4	)		0.5			—				—			—			—
Windward Plaza		0.8		0.2		0.6			(0.6	)		—			—				—			—			—

Subtotal	$	28.4	$	10.3	$	18.1		$	(14.8	)	$	3.3		$	20.8	$	8.2	$	12.6		$	(10.6	)	$	2.0
Development property:
Tree of Life		—		—		—			—			—			1.0		0.4		0.6			(0.6	)		—
TNT Logistics		1.4		0.6		0.8			(0.7	)		0.1			1.1		0.3		0.8			(0.8	)		—
245 Riverside		0.2		0.5		(0.3	)		(1.0	)		(1.3	)		—		—		—			—			—
Nextel Call Center		—		—		—			—			—			0.4		0.1		0.3			(0.4	)		(0.1	)
Beckrich Office II		—		—		—			(0.1	)		(0.1	)
Other		0.2		1.0		(0.8	)		(1.3	)		(2.1	)		0.2		0.4		(0.2	)		(0.4	)		(0.6	)

Subtotal	$	1.8	$	2.1	$	(0.3	)	$	(3.1	)	$	(3.4	)	$	2.7	$	1.2	$	1.5		$	(2.2	)	$	(0.7	)

Total	$	30.2	$	12.4	$	17.8		$	(17.9	)	$	(0.1	)	$	23.5	$	9.4	$	14.1		$	(12.8	)	$	1.3


(a)	NOI is Net Operating Income.


(b)		Adjustments include interest expense, depreciation and amortization.

Depreciation and amortization was $12.2 million in 2003 compared to $7.6 million in 2002. It was primarily made up of depreciation on the operating properties and amortization of lease intangibles.

Land Sales. The table below sets forth the results of operations of our land sales segment for the three years ended December 31, 2004.


			Years Ended December 31,

			2004		2003		2002

			(In millions)
Real estate sales			$	72.1	$	99.2	$	84.1

Expenses:
	Cost of real estate sales			6.7		13.3		9.0
	Cost of other revenues			1.0		0.5		0.2
	Other operating expenses			7.0		6.8		6.9
	Depreciation and amortization			0.4		0.2		0.2

		Total expenses		15.1		20.8		16.3

Other income				0.2		0.1		0.3

Pre-tax income from continuing operations			$	57.2	$	78.5	$	68.1

Land sales activity for 2004, 2003, and 2002, excluding conservation lands and RiverCamps, was as follows:


	Number		Number of		Average Price		Gross		Gross
Period	of Sales		Acres		Per Acre		Sales Price		Profit

							(In millions)		(In millions)
2004		169		18,376	$	3,543	$	65.1	$	59.3
2003		166		29,904	$	1,874	$	56.0	$	47.6
2002		176		28,071	$	1,820	$	51.1	$	44.1

Land sales for 2004 included two parcels with an aggregate of 20,000 feet of frontage on North Bay in Bay County, Florida, and a parcel with approximately 5,000 feet of frontage on East Bay in Bay County. The two North Bay parcels, of approximately 349 and 323 acres, sold for $8.7 million, or $25,000 per acre, and $8.7 million, or approximately $27,000 per acre, respectively. The East Bay parcel of 866 acres sold for $10.0 million, or approximately $11,550 per acre. Since average sales prices per acre vary according to the characteristics of each particular piece of land being sold, our average prices may vary from one period to another.

Conservation land sales activity for 2004, 2003, and 2002 was as follows:


	Number		Number of		Average Price		Gross		Gross
Period	of Sales		Acres		Per Acre		Sales Price		Profit

							(In millions)		(In millions)
2004		3		1,799	$	1,668	$	3.0	$	2.7
2003		7		34,999	$	1,157	$	40.5	$	36.7
2002		7		16,512	$	1,999	$	33.0	$	30.5

Although we have designated certain parcels of our land as available for conservation land sales, we continually evaluate the possibility of developing these parcels for other uses. We consider such transactions when we believe that we can obtain fair value for our property. We cannot assure that our historic levels of conservation land sales will continue in the future.

During 2004, we released 42 home sites at RiverCamps on Crooked Creek, 41 of which were closed in 2004. The remaining home site, which was released for sale in the fourth quarter of 2004, was closed in January of 2005. Work also continues on other potential RiverCamps locations in Northwest Florida. During 2004, the land sales segment recognized $4.0 million in revenue related to RiverCamps with related costs of $1.2 million. In 2003, RiverCamps generated $2.7 million in revenues with $1.8 million in related costs, including revenues of $0.7 million and related costs of $0.7 million for the sale of the 2003 HGTV Dream Home, located on East Bay in Bay County, Florida.

Forestry. The table below sets forth the results of operations of our forestry segment for the three years ended December 31, 2004.


			Years Ended December 31,

			2004		2003		2002

			(In millions)
Revenues:
	Timber sales		$	35.2	$	36.6	$	40.7
	Real estate sales			—		—		0.6

		Total revenues		35.2		36.6		41.3

Expenses:
	Cost of timber sales			21.8		24.2		28.9
	Cost of real estate sales			—		—		0.2
	Other operating expenses			2.6		2.6		2.6
	Depreciation and amortization			4.1		4.1		4.1

		Total expenses		28.5		30.9		35.8

Other income (expense)				2.4		2.4		2.5

Pre-tax income from continuing operations			$	9.1	$	8.1	$	8.0

Revenues for the forestry segment in 2004 decreased 4% compared to 2003. Revenues in 2003 decreased 11% compared to 2002. Total sales under our fiber agreement with Smurfit-Stone Container Corporation were $13.0 million (681,000 tons) in 2004, $11.8 million (677,000 tons) in 2003, and $12.2 million (686,000 tons) in 2002. Sales to other customers totaled $14.5 million (653,000 tons) in 2004, $16.3 million (837,000 tons) in 2003, and $18.3 million (782,000 tons) in 2002. The 2004 increase in revenues under the fiber agreements was primarily due to increasing prices under the terms of the agreement. The 2003 decrease in revenues under the fiber agreement was primarily due to the sales of higher priced wood chips in 2002 with no such sales in 2003. In 2004, sales to other customers decreased as we reduced the volume harvested from Company-owned lands. The 2003 decrease in revenues from sales to other customers was due to a change in the product mix. Revenues from the cypress mill operation were $7.7 million in 2004, $8.5 million in 2003, and $10.2 million in 2002. Revenues from the cypress mill decreased as we intentionally reduced production to help improve margins and profitability in response to challenges in finding wood supplies at acceptable prices.

Cost of timber sales decreased $2.4 million, or 10%, in 2004 and decreased $4.7 million, or 16%, in 2003. Cost of sales as a percentage of revenue was 62% in 2004, 66% in 2003, and 71% in 2002. The 2004 decrease in cost of sales as a percentage of revenue was due to increased efficiencies in our cypress mill operation and slightly lower cost of sales for timber in 2004 compared to 2003. The 2003 decrease in cost of sales was primarily due to changes in the product mix. Cost of sales for the cypress mill operation were $5.4 million, or 70% of revenue, in 2004, $7.4 million, or 87% of revenue, in 2003, and $8.8 million, or 86% of revenue, in 2002. Cost of sales for timber was $16.4 million, or 59% of revenues, in 2004, $16.8 million, or 60% of revenue, in 2003, and $20.1 million, or 66% of revenue, in 2002.

Liquidity and Capital Resources

We generate cash from:


	•	Operations;

	•	Sales of land holdings, other assets and subsidiaries;

	•	Borrowings from financial institutions and other debt; and

	•	Issuances of equity, primarily from the exercise of employee stock options.

We use cash for:


	•	Operations;

	•	Payments of taxes;

	•	Real estate development;

	•	Construction and homebuilding;

	•	Repurchases of our common stock;

	•	Payments of dividends;

	•	Repayments of debt; and

	•	Investments in joint ventures and acquisitions.

Management believes that our financial condition is strong and that our cash, real estate and other assets, operating cash flows, and borrowing capacity, taken together, provide adequate resources to fund ongoing operating requirements and future capital expenditures related to the expansion of existing businesses, including the continued investment in real estate developments. If our liquidity were not adequate to fund operating requirements, capital development, stock repurchases and dividends, we have various alternatives to change our cash flow, including eliminating or reducing our stock repurchase program, eliminating or reducing dividends, altering the timing of our development projects and/or selling existing assets.


	*Cash Flows from Operating Activities*

Net cash provided by operations in 2004, 2003 and 2002 was $135.8 million, $117.8 million, and $106.2 million, respectively. During such periods, expenditures relating to our Towns & Resorts development segment were $488.8 million, $342.5 million, and $272.5 million, respectively. Expenditures for operating properties in 2004, 2003 and 2002 totaled $69.0 million, $43.1 million and $38.9 million, respectively, and were made up of commercial property development and residential club and resort property development.

The expenditures for operating activities relating to our Towns & Resorts development and commercial real estate development and services segments are primarily for site infrastructure development, general amenity construction and construction of homes and commercial space. Approximately one-half of these expenditures are for home construction that generally takes place after the signing of a binding contract with a buyer to purchase the home following construction. As a consequence, if contract activity slows, home construction will also slow. We expect this general expenditure level and relationship between expenditures and housing contracts to continue in the future.

We have generated a net operating loss for tax purposes in each of the three prior tax years, thereby negating the cash payment of federal income taxes during 2001-2003. While we do not believe that federal taxable income will exceed our net operating loss and other carryforwards for 2004, it is possible that we may be required to make a cash payment for federal income taxes for that year. In 2005, it is highly likely that we will be obligated to make cash payments of federal income taxes.


	*Cash Flows from Investing Activities*

Net cash used in investing activities in 2004 was $36.2 million and included $64.4 million for the purchase of five commercial office buildings and related intangible assets and $41.1 million in proceeds from the sale of discontinued operations. Net cash used in investing activities in 2003 was $116.5 million and included $93.4 million for the purchase of four commercial buildings and related intangible assets. In 2002, net cash provided by investing activities was $48.9 million and included proceeds from the sale of discontinued operations of $138.7 million and $65.4 million for the purchase of commercial buildings.

The purchase of commercial buildings, comprising the majority of the cash used in investing activities, generally follow the sale of real estate, principally land sales and commercial sales on a tax deferred basis which requires the reinvestment of proceeds over a required time frame. As a consequence, if sales activity slows, the purchase activity will also slow. We expect this relationship to continue going forward.


	*Cash Flows from Financing Activities*

Net cash used in financing activities was $62.2 million in 2004, $17.2 million in 2003, and $122.8 million in 2002.

We have approximately $22.0 million of debt maturing in 2005. We expect to spend $125 million to $175 million for the repurchase of shares and dividend payments in 2005.

The Company assumed an existing mortgage of $29.8 million on a commercial building purchased in 2004. Also in 2004, the purchaser of a building sold by the Company assumed the remaining mortgage balance of $25.4 million. In 2002, we secured borrowings, collateralized by our commercial property, of $26.0 million. No such borrowings originated in 2003.

We have a $250 million senior revolving credit facility (the “credit facility”), which matures on March 30, 2006, and can be used for general corporate purposes. The credit facility includes financial performance covenants relating to our leverage position, interest coverage and a minimum net worth requirement. The credit facility also has negative pledge restrictions. Management believes that we are currently in compliance with the covenants of the credit facility. There was no outstanding balance at December 31, 2004. The balance was $40.0 million at December 31, 2003. During 2004, we repaid $40.0 million on the credit line, net of borrowings. During 2003, we borrowed $40.0 million on the credit line, net of repayments.

On June 8, 2004, we issued senior notes in a private placement with an aggregate principal amount of $100 million, with $25 million maturing on June 8, 2009 with a fixed interest rate of 4.97% and $75 million maturing on June 8, 2011 with a fixed interest rate of 5.31%. Interest is payable semiannually. These senior notes include financial performance covenants relating to our leverage position, fixed charge coverage, and a minimum net worth requirement. Management believes that we are currently in compliance with the covenants.

On February 7, 2002, we issued a series of senior notes with an aggregate principal amount of $175.0 million in a private placement. At issuance, the notes ranged in maturity from three to ten years and bear fixed rates of interest ranging from 5.64% to 7.37%, depending upon maturity. Interest on the notes is payable semiannually. The net proceeds of the notes were used to pay down our revolving credit facility. These senior notes include financial performance covenants relating to our leverage position, fixed charge coverage, and a minimum net worth requirement. Management believes that we are currently in compliance with the covenants.

We have used community development district (“CDD”) bonds to finance the construction of on-site infrastructure improvements at four of our projects. The principal and interest payments on the bonds are paid by assessments on, or from sales proceeds of, the properties benefited by the improvements financed by the bonds. We record a liability for future assessments which are fixed or determinable and will be levied against our properties. At December 31, 2004, CDD bonds totaling $109.5 million had been issued, of which $88.9 million had been expended, including $11.1 million allocated to the purchaser of a parcel of commercial land. At December 31, 2003, CDD bonds totaling $99.5 million had been issued, of which $79.0 million had been expended. At December 31, 2002, CDD bonds totaling $83.5 million had been issued, of which $49.4 million had been expended. In accordance with Emerging Issues Task Force Issue 91-10, Accounting for Special Assessments and Tax Increment Financing, we have recorded as debt $26.4 million, $30.0 million and $11.3 million of this obligation as of December 31, 2004, 2003, and 2002, respectively.

Through December 31, 2004, our Board of Directors had authorized, through a series of five specific authorizations ranging from $150 million to $200 million, a total of $800.0 million for the repurchase of

our outstanding common stock from time to time on the open market (the “Stock Repurchase Program”), of which $123.5 million remained available at December 31, 2004. In addition to repurchases on the open market, the Company has also repurchased shares from The Alfred I. duPont Testamentary Trust and its beneficiary, The Nemours Foundation (collectively, the “Trust”), from time to time on a proportionate basis to shares repurchased on the open market. This program with the Trust was discontinued as of August 9, 2004.

From the inception of the Stock Repurchase Program through December 31, 2004, we had repurchased from shareholders 25,292,411 shares (17,356,066 shares on the open market and 7,936,345 shares from the Trust), and executives surrendered 2,036,494 shares of our stock in payment of strike prices and taxes due on exercised stock options and taxes due on vested restricted stock, for a total of 27,328,905 acquired shares. During 2004, we repurchased from shareholders 1,561,565 shares (1,298,200 shares on the open market and 263,365 shares from the Trust), and executives surrendered 884,633 shares of our stock in payment of strike prices and taxes due on exercised stock options and taxes due on vested restricted stock. During 2003, we repurchased from shareholders 2,555,174 shares (1,469,800 shares on the open market and 1,085,374 shares from the Trust), and executives surrendered 812,802 shares of our stock in payment of strike prices and taxes due on exercised stock options and taxes due on vested restricted stock. During the year ended December 31, 2002, we repurchased from shareholders 5,169,906 shares (2,583,700 shares on the open market and 2,586,206 shares from the Trust), and executives surrendered 256,729 shares of our stock in payment of the strike price and taxes due on exercised stock options and taxes due on vested restricted stock. Through December 31, 2004, a total of $676.5 million had been expended as part of the Stock Repurchase Program, including $69.7 million in 2004, $77.3 million in 2003, and $150.3 million in 2002.


	*Off-Balance Sheet Arrangements*

We are not currently a party to any material off-balance sheet arrangements as defined in Item 303 of Regulation S-K.


	*Contractual Obligations and Commercial Commitments at December 31, 2004*


	Payments Due by Period

			Less Than						More Than
Contractual Cash Obligations	Total		1 Year		1-3 Years		3-5 Years		5 Years

	(In millions)
Debt	$	421.1	$	22.0	$	74.9	$	128.0	$	196.2
Interest related to debt		26.3		1.2		4.9		7.9		12.3
Operating leases		9.2		3.8		4.5		0.9		—

Total Contractual Cash Obligations	$	456.6	$	27.0	$	84.3	$	136.8	$	208.5


	Amount of Commitment Expirations Per Period

	Total Amounts		Less Than						More Than
Other Commercial Commitments	Committed		1 Year		1-3 Years		3-5 Years		5 Years

	(In millions)
Surety bonds	$	36.9	$	35.6	$	1.1	$	0.2	$	—
Standby letters of credit		15.4		13.4		2.0		—		—

Total Commercial Commitments	$	52.3	$	49.0	$	3.1	$	0.2	$	—


Item 7A.	*Quantitative and Qualitative Disclosures About Market Risk*

Our primary market risk exposure is interest rate risk related to our long-term debt. As of December 31, 2004, there was no balance outstanding under our $250 million credit facility, which matures on March 30, 2006. This debt accrues interest at different rates based on timing of the loan and our preferences, but generally will be either the one, two, three or six month London Interbank Offered

Rate (“LIBOR”) plus a LIBOR margin in effect at the time of the loan. This loan potentially subjects us to interest rate risk relating to the change in the LIBOR rates. We manage our interest rate exposure by monitoring the effects of market changes in interest rates. If LIBOR had been 100 basis points higher or lower, the effect on net income with respect to interest expense on the $250 million credit facility would have been a respective decrease or increase in the amount of $0.2 million pre-tax ($0.1 million net of tax.)

The table below presents principal amounts and related weighted average interest rates by year of maturity for our long-term debt. The weighted average interest rates for our fixed-rate long-term debt are based on the actual rates as of December 31, 2004. Weighted average variable rates are based on implied forward rates in the yield curve at December 31, 2004.

Expected Contractual Maturities


																								Fair
			2005			2006			2007			2008			2009			Thereafter			Total			Value

			$ in millions
Long-term Debt
	Fixed Rate			22.0			4.2			69.2			69.4			40.6			196.2			401.6			446.4
		Wtd. Avg. Interest Rate		5.5	%		6.4	%		6.6	%		7.3	%		5.7	%		6.3	%		6.4	%
	Variable Rate			—			—			1.5			16.8			1.2			—			19.5			17.2
		Wtd. Avg. Interest Rate		—			—			2.4	%		3.0	%		2.5	%		—			2.9	%

Management estimates the fair value of long-term debt based on current rates available to us for loans of the same remaining maturities. As the table incorporates only those exposures that exist as of December 31, 2004, it does not consider exposures or positions that could arise after that date. As a result, our ultimate realized gain or loss will depend on future changes in interest rate and market values.


Item 8.	*Financial Statements and Supplementary Data*

The Financial Statements in pages F-2 to F-31 and the Report of Independent Registered Accounting Firm on page F-1 are filed as part of this Report and incorporated by reference thereto.


Item 9.	*Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.*

None.


Item 9A.	*Controls and Procedures*

(a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in bringing to their attention on a timely basis material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic filings under the Exchange Act.

(b) Management’s Annual Report on Internal Control Over Financial Reporting.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external

purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:


	(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

	(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

	(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. In making this assessment, management used the criteria described in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on our assessment and those criteria, management believes that the Company’s internal control over financial reporting as of December 31, 2004 was effective.

The Company’s independent auditors, KPMG LLP, a registered public accounting firm, has issued an audit report on management’s assessment of the Company’s internal control over financial reporting, which report appears below.

(c) Attestation Report of the Registered Public Accounting Firm.

The Board of Directors and Shareholders

The St. Joe Company:

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that The St. Joe Company maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The St. Joe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or

timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that The St. Joe Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by COSO. Also, in our opinion, The St. Joe Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The St. Joe Company and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flow for each of the years in the three-year period ended December 31, 2004, and our report dated March 11, 2005 expressed an unqualified opinion on those consolidated financial statements.

KPMG LLP

Jacksonville, Florida

March 11, 2005

(d) Changes in Internal Controls Over Financial Reporting. During the quarter ended December 31, 2004, there have not been any changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.


Item 9B.	*Other Information*

None.

PART III


Item 10.	*Directors and Executive Officers of the Registrant*

Information concerning our directors, nominees for director and executive officers and our code of conduct is described in our proxy statement relating to our 2005 annual meeting of shareholders to be held on May 17, 2005. This information is incorporated by reference.


Item 11.	*Executive Compensation*

Information concerning compensation of our executive officers for the year ended December 31, 2004, is presented under the caption “Executive Compensation and Other Information” in our proxy statement. This information is incorporated by reference.


Item 12.	*Security Ownership of Certain Beneficial Owners and Management*


	•	Information concerning the security ownership of certain beneficial owners and of management is set forth under the caption “Security Ownership of Certain Beneficial Owners, Directors and Executive Officers” in our proxy statement and is incorporated by reference.


	•	Information concerning Section 16 of the Securities Exchange Act of 1934 is set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our proxy statement and is incorporated by reference.

Equity Compensation Plan Information

Our shareholders have approved all of our equity compensation plans. These plans are designed to further align our directors’ and management’s interests with the Company’s long-term performance and the long-term interests of our shareholders.

The following table summarizes the number of shares of our common stock that may be issued under our equity compensation plans as of December 31, 2004:

Number of Securities

Remaining Available for

to be Issued

Weighted-Average

Future Issuance Under

Upon Exercise of

Exercise Price of

Equity Compensation Plans

Outstanding Options,

(Excluding Securities Reflected

Plan Category

Warrants and Rights

in the First Column)

Equity compensation plans approved by security holders

1,886,164

27.09

1,451,327

Equity compensation plans not approved by security holders

Total

1,886,164

27.09

1,451,327


Item 13.	*Certain Relationships and Related Transactions*

Information concerning certain relationships and related transactions during 2004 is set forth under the caption “Certain Transactions” in our proxy statement. This information is incorporated by reference.


Item 14.	*Principal Accountant Fees and Services*

Information concerning our independent auditors is presented under the caption “Audit Committee Information” in our proxy statement and is incorporated by reference.

PART IV


Item 15.	*Exhibits and Financial Statement Schedule*

(a)(1) Financial Statements

The financial statements listed in the accompanying Index to Financial Statements and Financial Statement Schedule and Report of Independent Registered Public Accounting Firm are filed as part of this Report.

(2) Financial Statement Schedule

The financial statement schedule listed in the accompanying Index to Financial Statements and Financial Statement Schedule is filed as part of this Report.

(3) Exhibits

The exhibits listed on the accompanying Index to Exhibits are filed or incorporated by reference as part of this Report.

All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission on the schedule or because the information required is included in the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements.

INDEX TO EXHIBITS


Exhibit
Number			Description

	3	.1	Restated and Amended Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 of the registrant’s registration statement on Form S-3 (File 333-116017)).

	3	.2	Amended and Restated By-laws of the registrant (incorporated by reference to Exhibit 3 to the registrant’s Current Report on Form 8-K dated December 14, 2004).

	4	.1	Registration Rights Agreement between the registrant and The Alfred I. duPont Testamentary Trust, dated December 16, 1997 (incorporated by reference to Exhibit 4.01 to the registrant’s Amendment No. 1 to the registration statement on Form S-3 (File No. 333-42397)).

	4	.2	Amendment No. 1 to the Registration Rights Agreement between The Alfred I. duPont Testamentary Trust and the registrant, dated January 26, 1998 (incorporated by reference to Exhibit 4.2 of the registrant’s registration statement on Form S-1 (File 333-89146)).

	4	.3	Amendment No. 2 to the Registration Rights Agreement between The Alfred I. duPont Testamentary Trust and the registrant, dated May 24, 2002 (incorporated by reference to Exhibit 4.3 of the registrant’s registration statement on Form S-1 (File 333-89146)).

	4	.4	Amendment No. 3 to the Registration Rights Agreement between The Alfred I. duPont Testamentary Trust and the registrant dated September 5, 2003 (incorporated by reference to Exhibit 4.4 of the registrant’s registration statement on Form S-3 (File No. 333-108292)).

	4	.5	Amendment No. 4 to the Registration Rights Agreement between the Alfred I. duPont Testamentary Trust and the registrant dated December 30, 2003 (incorporated by reference to Exhibit 4.5 of the registrant’s registration statement on Form S-3 (File No. 333-111658)).

	10	.1	Second Amended and Restated Credit Agreement dated as of February 7, 2002, among the registrant, First Union National Bank, as agent, and the lenders party thereto. (incorporated by reference to Exhibit 10.1 of the registrant’s annual report on Form 10-K for the year ended December 31, 2003).

	10	.2	First Amendment to Second Amended and Restated Credit Agreement dated as of May 7, 2003, among the registrant, Wachovia Bank, National Association (formerly known as First Union National Bank), as agent, and the lenders party thereto (incorporated by reference to Exhibit 99.02 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003).

	10	.3	Second Amendment to Second Amended and Restated Credit Agreement dated as of July 10, 2004 among the registrant, Wachovia Bank, National Association (formerly known as First Union National Bank), as agent, and the lenders party thereto. (incorporated by reference to Exhibit 10.3 of the registrant’s annual report on Form 10-K for the year ended December 31, 2003).

	10	.4	Third Amendment to Second Amended and Restated Credit Agreement dated as of June 8, 2004 among the registrant, Wachovia Bank, National Association, as agent, and the lenders party thereto (incorporated by reference to Exhibit 10.2 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.

	10	.5	Note Purchase Agreement dated as of June 8, 2004, among the registrant and the purchasers party thereto ($100 million Senior Secured Notes)(incorporated by reference to Exhibit 10.3 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.

	10	.6	Employment Agreement between the registrant and Peter S. Rummell dated August 19, 2003 (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).

	10	.7	Employment Agreement between the registrant and Kevin M. Twomey dated August 19, 2003 (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).

	10	.8	Severance Agreement between Christine M. Marx and the registrant dated as of March 24, 2003 (incorporated by reference to Exhibit 99.04 to the registrant’s Form 10-Q for the quarter ended March 31, 2003).


Exhibit
Number			Description


	10	.9	Retirement Agreement of Robert M. Rhodes, dated August 24, 2004 (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004)

	10	.10	Form of Severance Agreement for Mr. Regan (incorporated by reference to Exhibit 10.07 to the registrant’s registration statement on Form S-3 (File No. 333-42397)).

	10	.11	Long-term Incentive Compensation Agreement of Robert M. Rhodes, dated as of August 21, 2001 (incorporated by reference to Exhibit 10.10 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).

	10	.12	Directors’ Deferred Compensation Plan, dated December 28, 2001 (incorporated by reference to Exhibit 10.10 of the registrant’s registration statement on Form S-1 (File 333-89146)).

	10	.13	Deferred Capital Accumulation Plan, as amended and restated effective January 1, 2002 (incorporated by reference to Exhibit 10.11 of the registrant’s registration statement on Form S-1 (File 333-89146)).

	10	.14	1999 Employee Stock Purchase Plan, dated November 30, 1999 (incorporated by reference to Exhibit 10.12 of the registrant’s registration statement on Form S-1 (File 333-89146)).

	10	.15	Amendment to the 1999 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.13 of the registrant’s registration statement on Form S-1 (File 333-89146)).

	10	.16	Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2002 (incorporated by reference to Exhibit 10.15 of the registrant’s registration statement on Form S-1 (File 333-89146)).

	10	.17	Employment Agreement of Michael N. Regan, dated November 3, 1997 (incorporated by reference to Exhibit 10.17 of the registrant’s registration statement on Form S-1 (File 333- 89146)).

	10	.18	1997 Stock Incentive Plan (incorporated by reference to Exhibit 10.21 of the registrant’s registration statement on Form S-1 (File 333-89146)).

	10	.19	1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.22 of the registrant’s registration statement on Form S-1 (File 333-89146)).

	10	.20	1999 Stock Incentive Plan (incorporated by reference to Exhibit 10.23 of the registrant’s registration statement on Form S-1 (File 333-89146)).

	10	.21	2001 Stock Incentive Plan (incorporated by reference to Exhibit 10.24 of the registrant’s registration statement on Form S-1 (File 333-89146)).

	10	.22	Form of Stock Option Agreement (incorporated by reference to Exhibit 10.23 of the registrant’s annual report on Form 10-K for the year ended December 31, 2003).

	10	.23	Form of Restricted Stock Agreement-Bonus Award (incorporated by reference to Exhibit 10.24 of the registrant’s annual report on Form 10-K for the year ended December 31, 2003).

	10	.24	Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10 of the registrant’s Current Report on Form 8-K dated September 23, 2004).

	10	.25	Note Purchase Agreement dated as of February 7, 2002, among the registrant and the purchasers party thereto ($175 million Senior Secured Notes) (incorporated by reference to Exhibit 10.25 of the registrant’s annual report on Form 10-K for the year ended December 31, 2003)

	10	.26	Severance Agreement between Wm. Britton Greene and the registrant, dated January 5, 2005.

	10	.27	Summary of Non-Employee Director Compensation (incorporated by reference to the registrant’s Current Report on Form 8-K dated January 5, 2005).

	10	.28	Form of Non-Employee Director Stock Agreement (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated January 5, 2005).

	10	.29	Form of 2005 Director Investment Election Form (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K dated January 5, 2005).


Exhibit
Number			Description


	10	.30	Summary of 2005 Executive Officer Salaries (incorporated by reference to the information set forth under the caption “Approval of 2005 Base Salaries” contained in the registrant’s Current Report on Form 8-K dated March 1, 2005).

	10	.31	Summary of the 2005 Annual Incentive Plan (incorporated by reference to the information set forth under the caption “Approval of the 2005 Annual Incentive Plan” contained in the registrant’s Current Report on Form 8-K dated March 1, 2005).

	10	.32	Summary of Awards to Executive Officers Under the 2004 Annual Incentive Plan (incorporated by reference to the information set forth under the caption “Awards Under the 2004 Annual Incentive Plan” contained in the registrant’s Current Report on Form 8-K dated March 1, 2005).

	21	.1	Subsidiaries of The St. Joe Company.

	23	.1	Consent of KPMG LLP, independent registered public accounting firm for the registrant.

	31	.1	Certification by Chief Executive Officer.

	31	.2	Certification by Chief Financial Officer.

	32	.1	Certification by Chief Executive Officer.

	32	.2	Certification by Chief Financial Officer.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned authorized representative.


	The St. Joe Company


	By:	/s/ Kevin M. Twomey



	Kevin M. Twomey
	President, Chief Operating Officer
	and Chief Financial Officer

Dated: March 14, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 14, 2005 by the following persons on behalf of the registrant in the capacities and dates indicated.


Signature	Title	Date


/s/ Peter S. Rummell Peter S. Rummell	Chairman of the Board Chief Executive Officer (Principal Executive Officer)	March 14, 2005

/s/ Kevin M. Twomey Kevin M. Twomey	President, Chief Operating Officer Chief Financial Officer (Principal Financial Officer)	March 14, 2005

/s/ Michael N. Regan Michael N. Regan	Senior Vice President Finance and Planning (Principal Accounting Officer)	March 14, 2005

/s/ Michael L. Ainslie Michael L. Ainslie	Director	March 14, 2005

/s/ Hugh M. Durden Hugh M. Durden	Director	March 14, 2005

/s/ Dr. Adam W. Herbert, Jr. Dr. Adam W. Herbert, Jr.	Director	March 14, 2005

/s/ Delores Kesler Delores Kesler	Director	March 14, 2005

/s/ John S. Lord John S. Lord	Director	March 14, 2005

/s/ Walter L. Revell Walter L. Revell	Director	March 14, 2005

/s/ William H. Walton, III William H. Walton, III	Director	March 14, 2005

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE


Report of Independent Registered Public Accounting Firm			F-1
Consolidated Balance Sheets			F-2
Consolidated Statements of Income			F-3
Consolidated Statements of Changes in Stockholders’ Equity			F-5
Consolidated Statements of Cash Flow			F-6
Notes to Consolidated Financial Statements			F-7
Schedule III — Real Estate and Accumulated Depreciation			S-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

The St. Joe Company:

We have audited the accompanying consolidated balance sheets of The St. Joe Company and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flow for each of the years in the three-year period ended December 31, 2004. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedule III. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The St. Joe Company and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004 in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of The St. Joe Company’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 11, 2005 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

KPMG LLP

Jacksonville, Florida

March 11, 2005

F-1

THE ST. JOE COMPANY

CONSOLIDATED BALANCE SHEETS


	December 31,

	2004			2003

	(Dollars in thousands)
ASSETS
Investment in real estate	$	942,630		$	886,076
Cash and cash equivalents		94,816			57,403
Accounts receivable, net		89,813			75,692
Prepaid pension asset		94,079			91,768
Property, plant and equipment, net		33,562			36,272
Goodwill, net		51,679			48,721
Intangible assets, net		47,415			37,795
Other assets		49,635			42,003

	$	1,403,629		$	1,275,730

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Debt	$	421,110		$	382,176
Accounts payable		76,916			60,343
Accrued liabilities		135,425			105,524
Deferred income taxes		264,374			232,184

Total liabilities		897,825			780,227
Minority interest in consolidated subsidiaries		10,393			8,188
STOCKHOLDERS’ EQUITY:
Common stock, no par value; 180,000,000 shares authorized; 103,123,017 and 100,824,269 issued at December 31, 2004 and 2003, respectively		263,044			199,787
Retained earnings		994,172			944,000
Restricted stock deferred compensation		(19,649	)		(18,807	)
Treasury stock at cost, 27,229,767 and 24,794,178 shares held at December 31, 2004 and 2003, respectively		(742,156	)		(637,665	)

Total stockholders’ equity		495,411			487,315

	$	1,403,629		$	1,275,730

See notes to consolidated financial statements.

F-2

THE ST. JOE COMPANY

CONSOLIDATED STATEMENTS OF INCOME


			Years Ended December 31,

			2004			2003			2002

			(Dollars in thousands except
			per share amounts)
Revenues:
	Real estate sales		$	734,251		$	592,211		$	484,026
	Realty revenues			98,133			62,525			58,534
	Timber sales			35,218			36,552			40,727
	Rental revenues			40,520			31,008			24,191
	Other revenues			43,381			28,530			18,962

		Total revenues		951,503			750,826			626,440

Expenses:
	Cost of real estate sales			484,753			353,225			290,816
	Cost of realty revenues			63,892			36,218			33,171
	Cost of timber sales			21,782			24,212			28,853
	Cost of rental revenues			15,931			14,076			11,247
	Cost of other revenues			37,627			27,235			23,060
	Other operating expenses			102,160			91,626			84,085
	Corporate expense, net			43,759			34,467			27,528
	Depreciation and amortization			35,052			28,427			20,131
	Impairment losses			1,994			14,359			—

		Total expenses		806,950			623,845			518,891

		Operating profit		144,553			126,981			107,549

Other income (expense):
	Investment income, net			873			884			2,932
	Interest expense			(12,863	)		(10,704	)		(15,608	)
	Gain on settlement of forward sale contracts			—			—			132,915
	Other, net			2,772			2,878			1,779

		Total other income (expense)		(9,218	)		(6,942	)		122,018

Income from continuing operations before equity in income (loss) of unconsolidated affiliates, income taxes, and minority interest				135,335			120,039			229,567
Equity in income (loss) of unconsolidated affiliates				5,600			(2,168	)		10,940
Income tax expense (benefit):
	Current			19,831			5,929			(781	)
	Deferred			33,427			36,238			89,741

		Total income tax expense		53,258			42,167			88,960

Income from continuing operations before minority interest				87,677			75,704			151,547
Minority interest				2,594			553			1,366

Income from continuing operations				85,083			75,151			150,181

Discontinued operations:
	Income from discontinued operations (net of income taxes of $108, $459, and $2,070, respectively)			178			764			3,295
	Gain on sales of discontinued operations (net of income taxes of $2,903 and $13,110, respectively)			4,839			—			20,887

		Total income from discontinued operations		5,017			764			24,182

		Net income	$	90,100		$	75,915		$	174,363

F-3

THE ST. JOE COMPANY

CONSOLIDATED STATEMENTS OF INCOME


		Years Ended December 31,

		2004		2003		2002

		(Dollars in thousands except
		per share amounts)
EARNINGS PER SHARE
Basic
Income from continuing operations		$	1.13	$	0.99	$	1.92
Earnings from discontinued operations			—		0.01		0.04
Gain on sale of discontinued operations			0.06		—		0.26

	Net income	$	1.19	$	1.00	$	2.22

Diluted
Income from continuing operations		$	1.11	$	0.97	$	1.84
Earnings from discontinued operations			—		0.01		0.04
Gain on sale of discontinued operations			0.06		—		0.26

	Net income	$	1.17	$	0.98	$	2.14

See notes to consolidated financial statements.

F-4

THE ST. JOE COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


		Common Stock									Accumulated Other			Restricted Stock
								Retained			Comprehensive			Deferred			Treasury
		Shares			Amount			Earnings			Income			Compensation			Stock			Total

		(Dollars in thousands, except per share amounts)
Balance at December 31, 2001			79,509,608		$	83,154		$	724,832		$	88,137		$	(951	)	$	(377,099	)	$	518,073

Comprehensive income:
	Net income		—			—			174,363			—			—			—			174,363
	Reversal of unrealized gain on settlement of forward sale contracts		—			—			—			(88,137	)		—			—			(88,137	)

Total comprehensive income			—			—			—			—			—			—			86,226

Dividends ($0.08 per share)			—			—			(6,573	)		—			—			—			(6,573	)
Issuances of common stock			1,877,443			30,877			—			—			—			—			30,877
Tax benefit on exercises of stock options			—			8,678			—			—			—			—			8,678
Amortization of restricted stock deferred compensation			—			—			—			—			439			—			439
Purchases of treasury shares			(5,382,653	)		—			—			—			—			(157,627	)		(157,627	)

Balance at December 31, 2002			76,004,398		$	122,709		$	892,622		$	—		$	(512	)	$	(534,726	)	$	480,093

Comprehensive income:
	Net income		—			—			75,915			—			—			—			75,915

Total comprehensive income			—			—			—			—			—			—			75,915

Issuances of restricted stock			609,251			20,995			—			—			(20,995	)		—			—
Dividends ($0.32 per share)			—			—			(24,537	)		—			—			—			(24,537	)
Issuances of common stock			2,784,418			40,398			—			—			—			—			40,398
Tax benefit on exercises of stock options			—			15,685			—			—			—			—			15,685
Amortization of restricted stock deferred compensation			—			—			—			—			2,700			—			2,700
Purchases of treasury shares			(3,367,976	)		—			—			—			—			(102,939	)		(102,939	)

Balance at December 31, 2003			76,030,091		$	199,787		$	944,000		$	—		$	(18,807	)	$	(637,665	)	$	487,315

Comprehensive income:
	Net income		—			—			90,100			—			—			—			90,100

Total comprehensive income			—			—			—			—			—			—			90,100

Issuances of restricted stock			161,465			7,486			—			—			(7,486	)		—			—
Forfeitures of restricted stock			(3,123	)		(130	)		—			—			130			—			—
Dividends ($0.52 per share) and other distributions			—			—			(39,928	)		—			—			—			(39,928	)
Issuances of common stock			2,140,406			36,591			—			—			—			—			36,591
Tax benefit on exercises of stock options			—			19,310			—			—			—			—			19,310
Amortization of restricted stock deferred compensation			—			—			—			—			6,514			—			6,514
Purchases of treasury shares			(2,446,198	)		—			—			—			—			(104,998	)		(104,998	)
Issuance of treasury shares			10,609			—			—			—			—			507			507

Balance at December 31, 2004			75,893,250		$	263,044		$	994,172		$	—		$	(19,649	)	$	(742,156	)	$	495,411

See notes to consolidated financial statements.

F-5

THE ST. JOE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOW


				Years Ended December 31,

				2004			2003			2002

				(Dollars in thousands)
Cash flows from operating activities:
	Net income			$	90,100		$	75,915		$	174,363
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			36,838			31,504			23,406
		Deferred compensation			7,944			2,382			2,018
		Minority interest in income			2,594			553			1,366
		Equity in (income) loss of unconsolidated joint ventures			(5,600	)		2,168			(10,940	)
		Distributions from unconsolidated community residential joint ventures			18,045			16,979			41,363
		Deferred income tax expense			33,427			36,238			93,449
		Tax benefit on exercise of stock options			19,310			15,685			8,678
		Impairment losses			1,994			14,359			—
		Cost of operating properties sold			524,933			354,636			283,170
		Expenditures for operating properties			(557,756	)		(385,639	)		(311,364	)
		Gains on sale of discontinued operations			(4,839	)		—			(20,887	)
		Loss on valuation of derivatives			—			—			894
		Gains on settlement of forward sale contracts			—			—			(132,915	)
		Imputed interest on long-term debt			—			—			4,292
		Origination of mortgage loans, net of proceeds from sales			—			—			(3,641	)
		Proceeds from mortgage warehouse line of credit, net of repayments			—			—			(13,951	)
		Changes in operating assets and liabilities:
			Accounts receivable		(28,005	)		(35,711	)		(24,071	)
			Other assets and deferred charges		(37,191	)		(8,034	)		(3,499	)
			Accounts payable and accrued liabilities		33,612			10,968			(5,540	)
			Income taxes payable		429			(14,190	)		—

Net cash provided by operating activities				$	135,835		$	117,813		$	106,191

Cash flows from investing activities:
	Purchases of property, plant and equipment				(9,958	)		(6,909	)		(16,722	)
	Purchases of investments in real estate				(75,753	)		(93,379	)		(65,399	)
	Purchases of short-term investments, net of maturities and redemptions				—			511			2,297
	Investments in joint ventures and purchase business acquisitions, net of cash received				(3,411	)		(23,231	)		(11,710	)
	Proceeds from dispositions of assets				11,830			6,540			—
	Proceeds from sale of discontinued operations				41,053			—			138,743
	Proceeds from settlement of forward purchase contracts				—			—			1,735

Net cash (used in) provided by investing activities				$	(36,239	)	$	(116,468	)	$	48,944

Cash flows from financing activities:
	Proceeds from revolving credit agreements, net of repayments				(40,000	)		40,000			(210,764	)
	Proceeds from other long-term debt				119,481			34,022			233,689
	Repayments of other long-term debt				(44,952	)		(12,761	)		(15,640	)
	Distributions to minority interests				(2,765	)		—			—
	Proceeds from exercises of stock options				15,140			23,351			26,757
	Dividends paid to stockholders and other distributions				(39,928	)		(24,537	)		(6,573	)
	Treasury stock purchases				(69,159	)		(77,290	)		(150,271	)

Net cash used in financing activities				$	(62,183	)	$	(17,215	)	$	(122,802	)

Net increase (decrease) in cash and cash equivalents					37,413			(15,870	)		32,333
Cash and cash equivalents at beginning of year					57,403			73,273			40,940

Cash and cash equivalents at end of year				$	94,816		$	57,403		$	73,273

See notes to consolidated financial statements.

F-6

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002


1.	Nature of Operations

The St. Joe Company (the “Company”) is a real estate operating company primarily engaged in town, resort, commercial and industrial development, land sales and commercial real estate services. The Company also has significant interests in timber. While the Company’s real estate operations are in several states throughout the southeast, the majority of the real estate operations, as well as the timber operations, are within the state of Florida. Consequently, the Company’s performance, and particularly that of its real estate operations, is significantly affected by the general health of the Florida economy.

During the year ended December 31, 2004, the Company sold two of its commercial buildings. During the year ended December 31, 2002, the Company completed the sale of Arvida Realty Services (“ARS”), its residential real estate services segment and two commercial buildings. The Company has reported the sales of the buildings and ARS and their operations prior to sale as discontinued operations for all periods presented.


	*Real Estate*

The Company currently conducts its real estate operations in four principal segments: Towns & Resorts development, commercial real estate development and services, land sales, and forestry.

The Company’s Towns & Resorts development segment develops large-scale, mixed-use communities primarily on land the Company has owned for a long period of time. The Company owns large tracts of land in Northwest Florida, including significant Gulf of Mexico beach frontage and waterfront properties, and in west Florida near Tallahassee, the state capital. In addition, the Company conducts residential homebuilding in North Carolina and South Carolina through Saussy Burbank, Inc. (“Saussy Burbank”), a wholly owned subsidiary. The Company is also a partner in five joint ventures that own and develop residential property.

The Company’s commercial real estate development and services segment sells developed and undeveloped land and in-service buildings, generates rental revenue through its portfolio of buildings purchased with tax-deferred proceeds and buildings developed by the Company, and owns and develops commercial properties through several wholly owned subsidiaries and partnership ventures. Through the Company’s wholly owned subsidiary, Advantis Real Estate Services Company (“Advantis”), this segment provides commercial real estate services including brokerage, property management and construction management. The Company is also a partner in three joint ventures that own, develop and manage commercial property in Florida and Georgia.

The land sales segment markets developed and undeveloped parcels of land for a variety of rural, residential, and recreational uses on a portion of the Company’s long-held timberlands primarily in Northwest Florida.


	*Forestry*

The forestry segment focuses on the management and harvesting of the Company’s extensive timberland holdings as well as on the ongoing management of lands which may ultimately be used by other divisions of the Company. The Company believes it is the largest private owner of land in Florida, most of which is reported as timberland. The principal products of the Company’s forestry operations are pine pulpwood and timber products. In addition, the Company owns and operates a cypress sawmill and mulch plant (“Sunshine State Cypress”) which converts cypress logs into wood products and mulch.

A significant portion of the wood harvested by the Company is sold under a long-term wood fiber supply agreement with Jefferson Smurfit, also known as the Smurfit-Stone Container Corporation. The

F-7

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12-year agreement, which ends on June 30, 2012, requires an annual pulpwood volume of 700,000 tons per year that must come from company-owned fee simple lands. At December 31, 2004, approximately 284,000 acres were encumbered, subject to certain restrictions, by this agreement, although the obligation may be transferred to a third party if a parcel is sold.


2.	Summary of Significant Accounting Policies


	*Principles of Consolidation*

The consolidated financial statements include the accounts of the Company and all of its majority-owned and controlled subsidiaries. The operations of ARS and four commercial buildings are included in discontinued operations through the dates that they were sold. Investments in joint ventures and limited partnerships in which the Company does not have majority voting control are accounted for by the equity method. All significant intercompany transactions and balances have been eliminated.

In December 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46R (“FIN 46R”), Consolidation of Variable Interest Entities, to replace Interpretation No. 46 (“FIN 46”) which was issued in January 2003. FIN 46R addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and whether it should consolidate the entity. FIN 46R was applicable immediately to variable interest entities created after January 31, 2003 and as of the first interim period ending after March 15, 2004 to those created before February 1, 2003 and not already consolidated under FIN 46 in previously issued financial statements. The Company does not normally participate in variable interest entities. The Company has adopted FIN 46R, analyzed the applicability of this interpretation to its structures, and determined that the Company is not a party to any variable interest entities that should be consolidated.

In May 2003, the FASB issued Statement of Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“FAS 150”). FAS 150 requires companies having consolidated entities with specified termination dates to treat minority owners’ interests in such entities as liabilities in an amount based on the fair value of entities. Although FAS 150 was originally effective July 1, 2003, the FASB has indefinitely deferred certain provisions related to classification and measurement requirements for mandatorily redeemable financial instruments that become subject to FAS 150 solely as a result of consolidation. As a result, FAS 150 has no impact on the Company’s Consolidated Statements of Income for the years ended December 31, 2004 and 2003. The Company has one consolidated entity with a specified termination date: Artisan Park, L.L.C. (“Artisan Park”). At December 31, 2004, the carrying amount of the minority interest in Artisan Park was $10.3 million and the fair value was $14.7 million. The Company has no other material financial instruments that are affected currently by FAS 150.


	*Revenue Recognition*

Revenues consist primarily of real estate sales, realty revenues (consisting of property and asset management fees, construction revenues, and lease and sales commissions), timber sales, rental revenues, and other revenues (primarily consisting of revenues from club operations).

Revenues from real estate sales, including sales of residential homes and home sites, land, and commercial buildings, are recognized upon closing of sales contracts in accordance with Statement of Financial Accounting Standards No. 66, “Accounting for Sales of Real Estate” (“FAS 66”). A portion of real estate inventory and estimates for costs to complete are allocated to each housing unit based on the relative sales value of each unit as compared to the sales value of the total project. Revenue for multi-family residences and Private Residence Club (“PRC”) units under construction is recognized, in accordance with FAS 66, using the percentage-of-completion method of accounting when (1) construction

F-8

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

is beyond a preliminary stage, (2) the buyer is committed to the extent of being unable to require a refund except for nondelivery of the unit, (3) sufficient units have already been sold to assure that the entire property will not revert to rental property, (4) sales price is collectible and (5) aggregate sales proceeds and costs can be reasonably estimated. Revenue is recognized in proportion to the percentage of total costs incurred in relation to estimated total costs. Any amounts due under sales contracts, to the extent recognized as revenue, are recorded as contracts receivable. We review the collectibility of contracts receivable and, in the event of cancellation or default, adjust the percentage-of-completion calculation accordingly. Contracts receivable total $65.6 million and $57.7 million at December 31, 2004 and 2003, respectively. Revenue for multi-family residences and PRC units is recognized at closing using the full accrual method of accounting if the criteria for using the percentage of completion method are not met before construction is substantially completed.

Realty revenues from lease and sales commissions are earned when the underlying transactions are closed.

Real estate service and development fees are recognized in the period in which the services are performed. Rental revenues are recognized as earned, using the straight-line method over the life of the lease. Tenant reimbursements are included in rental revenues.

Revenues from sales of forestry products are recognized generally on delivery of the product to the customer.

Other revenues consist of resort and club operations and management fees. Such fees are recorded as the services are provided.


	*Percentage-of-Completion Adjustment*

Revenue for the Company’s multi-family residences under construction at WaterSound Beach in 2003 was recognized, in accordance with FAS 66, using the percentage-of-completion method of accounting. Under this method, revenue is recognized in proportion to the percentage of total costs incurred in relation to estimated total costs. Since the project was substantially completed as of December 31, 2003, the Company had recorded substantially all of the activity related to this property during the year ended December 31, 2003. During the period ended March 31, 2004, the Company incurred $2.0 million in construction costs for contract adjustments related to the project. These costs represented changes to the original construction cost estimates for this project. Had these costs been quantified in 2003, they would have been included in the Company’s budgets and thus have had an impact on its results for the year ended December 31, 2003. If these costs had been included in the total project budget, 2003 gross profit would have been reduced by $3.6 million (pre-tax), $2.3 million (after tax), since a lower percentage of revenue would also have been recognized. The results for the year ended December 31, 2004 would have been increased by $3.6 million (pre-tax), $2.3 million (after tax).

Management has evaluated the impact of this item, which represented 3% of net income ($0.03 per diluted share) for both of the years ended December 31, 2004 and 2003, and concluded that it is not significant to results of operations in either year.


	*Cash and Cash Equivalents*

Cash and cash equivalents include cash on hand, bank demand accounts, money market accounts, and repurchase agreements having original maturities at acquisition date of 90 days or less.

F-9

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	*Investment in Real Estate*

Investment in real estate is carried at cost, net of depreciation and timber depletion. Depreciation is computed on straight-line and accelerated methods over the useful lives of the assets ranging from 15 to 40 years. Depletion of timber is determined by the units of production method. An adjustment to depletion is recorded, if necessary, based on the continuous forest inventory analysis prepared every 5 years.


	*Property, Plant and Equipment*

Depreciation is computed using both straight-line and accelerated methods over the useful lives of various assets. Gains and losses on normal retirements of these items are credited or charged to accumulated depreciation.


	*Goodwill and Intangible Assets*

Pursuant to Statement of Financial Accounting Standards No. 141, Business Combinations (“FAS 141”), and Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“FAS 142”), it is the Company’s policy to test goodwill and intangible assets with indefinite useful lives at least annually for impairment, to use the purchase method of accounting for all business combinations, and to ensure that, in order for intangible assets acquired in a purchase method business combination to be recognized and reported apart from goodwill, the applicable criteria specified in FAS 141 are met.

In 2003, an impairment of Advantis’ goodwill was recorded in the amount of $14.1 million pre-tax, or $8.8 million net of tax. (See note 9.)

The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, buildings on an as-if vacant basis, and tenant improvements. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Identifiable intangible assets include amounts allocated to acquired leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships.

Above- and below-market rate lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the acquired leases and (ii) management’s estimate of fair market lease rates for corresponding leases, measured over a period equal to the non-cancelable term of the acquired lease. Above-market and below-market lease values are amortized to rental income over the remaining terms of the respective leases.

In-place lease value consists of a variety of components including, but not necessarily limited to, (i) the value associated with avoiding costs of originating the acquired in-place leases (i.e. the market cost to execute a lease, including leasing commission, legal, and other related costs); (ii) the value associated with lost revenue from existing leases during the re-leasing period; (iii) the value associated with lost revenue related to tenant reimbursable operating costs estimated to be incurred during the re-leasing period (i.e. real estate taxes, insurance, and other operating expenses); and (iv) the value associated with avoided incremental tenant improvement costs or other inducements to secure a tenant lease. In-place lease values are recognized as amortization expense over the remaining estimated occupancy period of the respective tenants.

F-10

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Further, the value of the customer relationship acquired is considered by management. Customer relationship values are recognized as amortization expense over a period based on renewal probabilities for the respective tenants.


	*Stock-Based Compensation*

Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“FAS 123”), permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, FAS 123 allows entities to apply the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants as if the fair-value based method defined in FAS 123 has been applied. Under APB 25, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.

Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure (“FAS 148”), requires prominent disclosure in both annual and interim financial statements of the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As permitted under FAS 148 and FAS 123, the Company has elected to continue to apply the provisions of APB 25 and provide the pro forma disclosure in accordance with the provisions of FAS 148 and FAS 123. Accordingly, no compensation cost has been recognized for its stock options in the consolidated financial statements.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123(R) (“FAS 123(R)”), Share-Based Payment, a revision of FAS 123. FAS 123(R) requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award (with limited exceptions), eliminating the alternative previously allowed by FAS 123 to use the intrinsic value method of accounting. The grant date fair value will be estimated using option-pricing models adjusted for the unique characteristics of the instruments using methods similar to those required by FAS 123 and currently used by the Company to calculate pro forma net income and earnings per share disclosures. The cost will be recognized ratably over the period during which the employee is required to provide services in exchange for the award. For public entities, like the Company, that do not file as small business issuers, FAS 123(R) is effective as of the beginning of the first interim or annual period that begins after June 15, 2005. The Company plans to adopt FAS 123(R) as of July 1, 2005. As a result of adopting FAS 123(R), the Company will recognize as compensation cost in its financial statements the unvested portion of existing options granted prior to the effective date and the cost of stock options granted to employees after the effective date based on the fair value of the stock options at grant date.

The Company has four stock incentive plans (the 1997 Stock Incentive Plan, the 1998 Stock Incentive Plan, the 1999 Stock Incentive Plan and the 2001 Stock Incentive Plan), whereby awards may be granted to certain employees and non-employee directors of the Company in the form of restricted shares of Company stock or options to purchase Company stock. Awards are discretionary and are determined by the Compensation Committee of the Board of Directors. The total amount of restricted shares and options originally available for grant under the Company’s four plans were 8.5 million shares, 1.4 million shares, 2.0 million shares, and 3.0 million shares, respectively. The options are exercisable in equal installments on the first through fourth or fifth anniversaries, as applicable, of the date of grant and expire generally 10 years after date of grant. At December 31, 2004, there were 1,451,327 ungranted shares remaining available for grant.

During 2004 and 2003, the Company granted certain members of the executive management team a total of 161,465 and 640,812 restricted shares of the Company’s common stock, respectively. Effective

F-11

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

August 19, 2003, the Company granted 303,951 restricted shares of the Company’s common stock to Mr. Rummell, Chairman and CEO of the Company, and 243,161 restricted shares to Mr. Twomey, President, COO and CFO. The weighted average grant-date fair values of shares of restricted stock granted in 2004 and 2003 were $46.35 and $32.57, respectively. All restricted shares vest over three-year, four-year, and five-year periods, beginning on the date of each grant. The Company carried deferred compensation of $19.6 million and $18.8 million for the unamortized portions of restricted shares granted as of December 31, 2004 and 2003, respectively. Compensation expense related to restricted stock grants totaled $6.5 million, $2.7 million, and $0.4 million for the years ended December 31, 2004, 2003, and 2002, respectively. Deferred compensation is being amortized on a straight-line basis over three- to five-year vesting periods, which are deemed to be the periods for which services are performed.

Stock option activity during the period indicated is as follows:


	Number of			Weighted Average
	Shares			Exercise Price

Balance at December 31, 2001		7,827,421		$	16.65
Granted		775,000			29.24
Forfeited		(284,628	)		18.33
Exercised		(1,833,463	)		16.47

Balance at December 31, 2002		6,484,330			18.11
Granted		573,200			32.20
Forfeited		(170,651	)		19.67
Exercised		(2,679,528	)		15.16

Balance at December 31, 2003		4,207,351			21.95
Granted		29,000			40.21
Forfeited		(209,781	)		28.66
Exercised		(2,140,406	)		17.01

Balance at December 31, 2004		1,886,164		$	27.09

All options were granted at the Company’s then current market price.

Presented below are the per share weighted-average fair value of stock options granted/converted during 2004, 2003, and 2002 using the Black Scholes option-pricing model, along with the assumptions used.


	2004			2003			2002

Per share weighted-average fair value	$	11.53		$	8.97		$	12.60
Expected dividend yield		1.20	%		1.31	%		0.3	%
Risk free interest rate		3.78	%		3.87	%		4.26	%
Weighted average expected volatility		23.0	%		23.1	%		24.01	%
Expected life (in years)		7			7			7.5

F-12

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Had the Company determined compensation costs based on the fair value at the grant date for its stock options under FAS 123, the Company’s net income would have been reduced to the pro forma amounts indicated below (in thousands, except per share amounts):


	2004			2003			2002

Net income as reported	$	90,100		$	75,915		$	174,363
Add: stock-based employee compensation expense included in reported net income, net of taxes		4,071			1,724			270
Deduct: total stock-based employee compensation expense determined under fair value based methods for all awards, net of taxes		(8,289	)		(7,407	)		(5,304	)

Net income — pro forma	$	85,882		$	70,232		$	169,329

Per share — Basic:
Earnings per share as reported	$	1.19		$	1.00		$	2.22
Earnings per share — pro forma	$	1.14		$	0.93		$	2.16
Per share — Diluted:
Earnings per share as reported	$	1.17		$	0.98		$	2.14
Earnings per share — pro forma	$	1.13		$	0.92		$	2.10

The following table presents information regarding all options outstanding at December 31, 2004:


	Weighted Average		Range of		Weighted Average
Number of Options Outstanding	Remaining Contractual Life		Exercise Prices		Exercise Price

404,492		4.6 years	$	14.67-$21.99	$	17.83
1,410,172		7.5 years	$	22.00-$32.99	$	29.27
71,500		7.0 years	$	33.00-$49.50	$	36.47

1,886,164		6.8 years	$	14.67-$49.50	$	27.09

The following table presents information regarding options exercisable at December 31, 2004:


	Range of		Weighted Average
Number of Options Exercisable	Exercise Prices		Exercise Price

288,921	$	14.67-$21.99	$	17.91
505,176	$	22.00-$32.99	$	28.55
18,493	$	33.00-$49.50	$	33.64

812,590	$	14.67-$49.50	$	24.88


	*Earnings Per Share*

Earnings per share (“EPS”) is based on the weighted average number of common shares outstanding during the year. Diluted EPS assumes weighted average options have been exercised to purchase 1,201,453, 1,968,440, and 2,903,902 shares of common stock in 2004, 2003, and 2002, respectively, and that 243,403 shares of unvested restricted stock were issued in 2004, each net of assumed repurchases using the treasury stock method.

From August 1998 through December 31, 2004, the Board of Directors authorized a total of $800.0 million for the repurchase of the Company’s outstanding common stock from time to time (the “Stock Repurchase Program”), of which a total of approximately $676.5 million had been expended through December 31, 2004. In addition to repurchases on the open market, the Company has also

F-13

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

repurchased shares from The Alfred I. duPont Testamentary Trust and its beneficiary, The Nemours Foundation (collectively, the “Trust”), from time to time on a proportionate basis to shares repurchased on the open market. This program with the Trust was discontinued as of August 9, 2004.

From the inception of the Stock Repurchase Program to December 31, 2004, the Company repurchased from shareholders 25,292,411 shares (17,356,066 shares on the open market and 7,936,345 shares from the Trust), and executives surrendered 2,036,494 shares as payment for strike prices and taxes due on exercised stock options and taxes due on vested restricted stock, for a total of 27,328,905 acquired shares. During 2004, the Company repurchased from shareholders 1,561,565 shares (1,298,200 shares on the open market and 263,365 shares from the Trust), and 884,633 shares were surrendered by executives as payment for strike prices and taxes due on exercised stock options and taxes due on vested restricted stock. During 2003, the Company repurchased from shareholders 2,555,174 shares (1,469,800 shares on the open market and 1,085,374 shares from the Trust), and executives surrendered 812,802 shares as payment for strike prices and taxes due on exercised stock options and taxes due on vested restricted stock.

Shares of Company stock issued upon the exercise of stock options in 2004, 2003, and 2002 were 2,140,406 shares, 2,690,580 shares, and 1,833,463 shares, respectively.

Weighted average basic and diluted shares, taking into consideration shares issued, weighted average unvested restricted shares, weighted average options used in calculating EPS and treasury shares repurchased, for each of the years presented are as follows:


	2004		2003		2002

Basic		75,463,445		75,857,350		78,436,713
Diluted		76,908,300		77,825,790		81,340,615


	*Comprehensive Income*

For the years ended December 31, 2004 and 2003, the Company’s comprehensive income is equal to net income because there was no other comprehensive income. For the year ended December 31, 2002, the Company’s comprehensive income differs from net income due to changes in the net unrealized gains on investment securities available for sale and derivative instruments. The Company has elected to disclose comprehensive income in its Consolidated Statements of Changes in Stockholders’ Equity.


	*Income Taxes*

The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.


	*Settlement of Forward Sale Contracts on Marketable Securities*

Prior to October 15, 2002, the Company owned a portfolio of marketable equity securities and related derivative instruments which, together, were classified as available-for-sale securities. Unrealized gains and losses, net of related income tax effects, were excluded from earnings and reported as a separate component of stockholders’ equity until realized.

F-14

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The forward sale contracts held by the Company were designated as hedges of the fair value of the Company’s marketable securities. Until the final settlement of the Company’s forward sale contracts on October 15, 2002 (see note 7), changes in the intrinsic value of the related derivatives were recorded through the statements of income and offset by changes in the fair value of the hedged marketable securities. Changes in the time value component of the change in fair value were recorded through the statement of income as these amounts were excluded from the Company’s assessment of hedge effectiveness.


	*Long-Lived Assets*

In accordance with Statement of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“FAS 144”), the operations and gains on sales reported in discontinued operations include operating properties sold during the year for which operations and cash flows can be clearly distinguished and for which the Company will not have continuing involvement after disposition. The operations from these properties have been eliminated from ongoing operations. Prior periods have been restated to reflect the operations of these properties as discontinued operations. The operations and gains on sales of operating properties for which the Company has some continuing involvement are reported as income from continuing operations.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the asset.

During 2004, the Towns & Resorts development segment recorded a $2.0 million impairment loss related to a residential project in North Carolina. During 2003, the commercial real estate development and services segment recorded an impairment loss on a commercial property of $0.3 million.


	*Reclassifications*

Certain prior year amounts have been reclassified to conform with the current year’s presentation.


	*Supplemental Cash Flow Information*

The Company paid $22.7 million, $21.3 million, and $17.1 million for interest in 2004, 2003, and 2002, respectively. The Company paid income taxes of $3.1 million, net of refunds in 2004, received income tax refunds, net of income tax payments made, of $7.4 million in 2003, and paid income taxes, net of refunds received, of $2.0 million in 2002. The Company capitalized interest expense of $11.2 million, $8.9 million, and $8.1 million in 2004, 2003, and 2002, respectively.

The Company’s non-cash activities included several debt related transactions, the surrender of shares of Company stock by executives of the Company as payment for the exercise of stock options, the tax benefit on exercises of stock options, and the settlement in 2002 of forward sale contracts. During 2004, a mortgage in the amount of $25.4 million was assumed by the purchaser of a commercial building that the Company sold, the Company assumed an existing mortgage in the amount of $29.8 million in the purchase of a commercial building, the Company transferred to a purchaser of a commercial land parcel debt secured by the land in the amount of $11.0 million, and the Company executed a debt agreement in the amount of $11.4 million as payment for its interest in a new unconsolidated affiliate (see note 11). During the years ended December 31, 2004, 2003, and 2002, executives surrendered Company stock worth $21.5 million, $17.0 million, and $4.1 million, respectively, as payment for the strike price of stock options.

F-15

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company recorded a tax benefit on exercises of stock options of $19.3 million, $15.7 million, and $8.7 million for the years ended December 31, 2004, 2003, and 2002, respectively. During the year ended December 31, 2002, the Company settled forward sale contracts that provided for the sale of a portfolio of marketable securities held by the Company to a third party. In addition to cash received, the Company transferred equity securities with a fair value of $96.6 million to a financial institution and settled the forward sale contracts with a fair market value of $43.3 million to satisfy the debt associated with the forward sale of the equity securities of $135.6 million. (See note 7.)

Cash flows related to Towns & Resorts development and related amenities, sales of undeveloped and developed land by the land sales segment, the Company’s timberlands, and land and buildings developed by the Company and used for commercial rental purposes are included in operating activities on the statement of cash flows. Cash flows related to the Company’s commercial buildings purchased with tax-deferred proceeds are included in investment activities on the statement of cash flows. Cash flows for the year ended December 31, 2002 have been reclassified to be consistent with this presentation.


	*Fair Value of Financial Instruments*

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses, approximate their fair values due to the short-term nature of these assets and liabilities. The fair value of the Company’s long-term debt, including the current portion, was $447.7 million and $401.9 million at December 31, 2004 and 2003, respectively. Management estimates the fair value of long-term debt based on current rates available to the Company for loans of the same remaining maturities.


	*Estimates*

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


	*Recent Accounting Pronouncements*

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 152, Accounting for Real Estate Time-Sharing Transactions (“FAS 152”). FAS 152 clarifies the accounting for sales and other transactions involving real estate time-sharing transactions and is effective for financial statements for fiscal years beginning after June 15, 2005. Upon adoption, the Company does not expect FAS 152 to have a material effect on its financial position or results of operations.

Also in December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, Exchanges of Nonmonetary Assets (“FAS 153”). FAS 153 eliminates a previous exception from fair value reporting for nonmonetary exchanges of similar productive assets and introduces an exception from fair value reporting for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary change is considered to have commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. FAS 153 is applicable to nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005, with earlier application permitted. Upon adoption, the Company does not expect FAS 153 to have a material effect on its financial position or results of operations.

F-16

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


3.	Business Combinations

During 2004, the Company purchased two commercial buildings in Richmond, Virginia, called Overlook, for $19.1 million, two commercial buildings in Atlanta, Georgia, called Deerfield Point, for $30.1 million, and a commercial building in Atlanta, Georgia, called Parkwood Point, for $45.0 million. Of the total purchase prices, $15.5 million, $23.7 million, and $36.1, respectively, were allocated to investment in real estate and $3.6 million, $6.4 million, and $8.9 million, respectively, were allocated to lease-related intangible assets.

Also during 2004, the Company made a final payment of additional contingent consideration to the former owners of Sunshine State Cypress in the amount of $2.9 million.

On July 2, 2003, the Company purchased the 26% interest in St. Joe/ Arvida Company, L.P. (“St. Joe/ Arvida”) that it did not previously own for $20.0 million in cash, including the resolution of a dispute regarding the use of the Arvida name by the Company and its affiliates (see note 4). As a result of this purchase, St. Joe/ Arvida became a wholly owned subsidiary of the Company. In connection with this purchase, the Company recorded $9.1 million in additional goodwill and $7.0 million in intangible assets representing the fair value of the acquired contractual rights relative to St. Joe/ Arvida. The operations of St. Joe/ Arvida are reported as part of the Towns & Resorts development segment.

During 2003, the Company purchased Crescent Ridge, a commercial building in Charlotte, North Carolina, for $22.5 million and Windward Plaza, three commercial buildings in Atlanta, for $63.5 million. Of the total purchase prices, $17.1 million and $47.4, respectively, was allocated to investment in real estate and $5.4 million and $16.1, respectively, was allocated to lease-related intangible assets.

During 2003, the Company accrued additional contingent consideration of $0.3 million related to the acquisition of McNeill Burbank, a wholly-owned homebuilding subsidiary.

These acquisitions were accounted for as purchases and as such, the results of their operations are included in the consolidated financial statements from the date of acquisition. None of the acquisitions were significant to the financial condition and operations of the Company in the year in which they were acquired or the year preceding the acquisition.


4.	Discontinued Operations

Discontinued operations include the operations and subsequent sales of two commercial office buildings that were sold in 2004. On July 30, 2004, the Company sold 1750 K Street for proceeds of $47.3 million ($21.9 million, net of the assumption of a mortgage by the purchaser) and a pre-tax gain of $7.5 million ($4.6 million net of taxes). For the years ended December 31, 2004, 2003, and 2002, revenues from the operations of 1750 K Street were $3.4 million, $5.6 million, and $5.4 million, respectively. Pre-tax income was $0.4 million, $0.4 million, and $1.2 million, respectively, for the years ended December 31, 2004, 2003 and 2002. On August 16, 2004, the Company sold Westchase Corporate Center for proceeds of $20.3 million and a pre-tax gain of $0.2 million ($0.1 million net of taxes). For the years ended December 31, 2004, 2003, and 2002, revenues from the operations of Westchase were $2.5 million, $4.2 million, and $3.6 million, respectively, and pre-tax income was $0.3 million, $0.8 million, and $0.3 million, respectively. Prior to each sale, the operations of both buildings were previously reported in the commercial real estate development and services segment.

As a result of rapid consolidation in the real estate services business, the Company had the opportunity to sell ARS, its wholly-owned residential real estate services subsidiary, at an attractive value. On April 17, 2002, the Company completed the sale of ARS for a gain of $33.7 million, or $20.7 million net of tax. In connection with the sale, a liability was recorded related to a dispute with an outside party over the use of the Arvida name. Subsequently, the dispute was resolved and the liability was reversed

F-17

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(see note 3). The Company has reported its residential real estate services operations as discontinued operations for the year ended December 31, 2002. Revenues and net income from ARS for the year ended December 31, 2002 were $76.2 million and $2.3 million, respectively. Prior to the decision to sell ARS, its operations made up the entirety of the residential real estate services segment. In 2004, discontinued operations included a $0.4 million charge due to an increase in the accrual of legal costs associated with ARS.

Also included in discontinued operations is the sale in 2002 of two commercial office buildings which generated a gain $0.3 million, or $0.2 million net of tax. Revenues and pre-tax income from the buildings were each less than $0.1 million in 2002. Prior to each sale, the operations of both buildings were reported in the commercial real estate development and services segment.


5.	Investment in Real Estate

Real estate by segment as of December 31 consists of (in thousands):


		2004		2003

Operating property:
	Towns & Resorts development	$	76,644	$	74,547
	Commercial real estate development and services		11,762		94,904
	Land sales		1,095		959
	Forestry		77,431		80,617
	Other		164		2,225

Total operating property			167,096		253,252

Development property:
	Towns & Resorts development		331,319		262,893
	Land sales		9,247		5,591

Total development property			340,566		268,484

Investment property:
	Commercial real estate development and services		420,778		350,456
	Land sales		182		167
	Forestry		973		981
	Other		6,883		4,802

Total investment property			428,816		356,406

Investment in unconsolidated affiliates:
	Towns & Resorts development		29,461		22,626
	Commercial real estate development and services		11,579		15,744

Total investment in unconsolidated affiliates			41,040		38,370

			977,518		916,512
Less: Accumulated depreciation			34,888		30,436

		$	942,630	$	886,076

Included in operating property are Company-owned amenities related to Towns & Resorts, the Company’s timberlands and land and buildings developed by the Company and used for commercial rental

F-18

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

purposes. Development property consists of Towns & Resorts land and inventory currently under development to be sold. Investment property includes the Company’s commercial buildings purchased with tax-deferred proceeds and land held for future use.

Real estate properties having a net book value of approximately $336.5 million (net of accumulated depreciation of $23.2 million) at December 31, 2004 are leased by the commercial real estate development and services segment under non-cancelable operating leases expiring in various years through 2015. Expected future aggregate rentals related to these leases are approximately $193.8 million, of which $44.2 million, $39.5 million, $34.3 million, $29.2 million, and $22.7 million is due in the years 2005 through 2009, respectively, and $23.9 million thereafter.

Depreciation expense reported on operating properties was $16.7 million in 2004, $10.0 million in 2003, and $10.1 million in 2002.

The Company reports lease-related intangible assets separately for commercial buildings purchased subsequent to the effective date of FAS 141. See note 9.


6.	Investment in Unconsolidated Affiliates

Investments in unconsolidated affiliates, included in real estate investments, are recorded using the equity method of accounting and, as of December 31, consist of (in thousands):


	Ownership			2004		2003

Arvida/ JMB Partners, L.P.		26	%	$	11,791	$	11,791
Port St. Joe Development		50	%		11,435		—
Codina Group, Inc.		50	%		9,410		10,880
Rivercrest, L.L.C		50	%		3,276		4,246
Paseos, L.L.C		50	%		2,811		6,557
Deerfield Commons I, L.L.C		50	%		1,757		2,473
Deerfield Park, L.L.C		38	%		412		2,391
Residential Community Mortgage Company, L.L.C		49.9	%		148		32

				$	41,040	$	38,370

During 2004, the Company purchased a 49.9% interest in Port St. Joe Development, entering into a debt agreement in the amount of $11.4 million as payment (see note 11). The other party to the joint venture contributed land with a fair value of equal amount.

F-19

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Summarized financial information for the unconsolidated investments on a combined basis is as follows (in thousands):


		2004		2003

BALANCE SHEETS:
Investment property, net		$	89,643	$	91,203
Other assets			105,580		109,584

	Total assets		195,223		200,787

Notes payable and other debt			49,951		55,357
Other liabilities			42,293		57,479
Minority interest			8,416		—
Equity			94,563		87,951

	Total liabilities and equity	$	195,223	$	200,787


		2004		2003		2002

STATEMENTS OF INCOME:
Total revenues		$	184,264	$	116,978	$	310,651
Total expenses			169,267		114,821		277,079

	Net income	$	14,997	$	2,157	$	33,572


7.	Settlement of Forward Sale Contracts on Marketable Securities

In October 1999, the Company entered into a forward sale transaction with a major financial institution that, in effect, provided for the monetization of its long-held portfolio of equity investments. Under the forward sale agreement, the Company received approximately $111.1 million in cash and was required to settle the forward transaction by delivering either the securities or the equivalent value of the securities in cash to the financial institution by October 15, 2002. The agreement permitted the Company to retain an amount of the securities that represented appreciation of up to 20% of their value on October 15, 1999, should the value of the securities increase. The securities were recorded at fair value on the balance sheet and the related unrealized gain, net of tax, was recorded in accumulated other comprehensive income. At the time of entering into the forward sale contracts, the Company recorded a liability in long-term debt of approximately $111.1 million, subject to increase as interest expense was imputed at an annual rate of 7.9%. The liability was also subject to increase by the amount, if any, that the fair value of the securities increased beyond the 20% that the Company retained.

During 2002, in two separate transactions, the Company settled its forward sale contracts by delivering equity securities to the financial institution for an aggregate pre-tax gain of $132.9 million. The aggregate liability related to the contracts settled was $135.6 million at the times of settlement and the resulting gain recognized in 2002 was approximately $132.9 million pre-tax.

Prior to settlement, the change in intrinsic value of the forward sale contracts was recorded through the statement of income, offset by the change in fair value of the underlying securities. The net impact to the statement of income for the year ended December 31, 2002 was a loss of $(0.9) million, which was included in other income and represents the time value component of the change in fair value of the forward sale contracts which the Company excluded from its assessment of hedge effectiveness.

F-20

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


8.	Property, Plant and Equipment

Property, plant and equipment, at cost, as of December 31 consists of (in thousands):


					Estimated
	2004		2003		Useful Life

Transportation property and equipment	$	34,058	$	34,074		3
Machinery and equipment		36,628		32,117		5-10
Office equipment		16,067		15,060		5-10
Leasehold improvements		1,000		1,348		Lease term
Autos, trucks, and airplane		6,108		4,976		2-10

		93,861		87,575
Less: Accumulated depreciation		60,299		51,303

	$	33,562	$	36,272

Depreciation expense on property, plant and equipment was $10.7 million in 2004, $12.5 million in 2003, and $9.3 million in 2002.


9.	Goodwill and Intangible Assets

During 2003, as a result of declining operations due to the very difficult economic environment for commercial real estate services companies, the Company utilized a discounted cash flow method to determine the fair value of Advantis and recorded an impairment loss to reduce the carrying amount of Advantis’ goodwill from $28.9 million to $14.8 million. This resulted in an impairment loss of $14.1 million pre-tax, or $8.8 million net of tax. The Company recorded no goodwill impairment during 2004 or 2002.

Changes in the carrying amount of goodwill for the years ended December 31, 2004 and 2003 are as follows (in thousands):


			Commercial
	Towns &		Real Estate
	Resorts		Development
	Development		and Services			Forestry
	Segment		Segment			Segment		Consolidated

Balance at December 31, 2002	$	18,553	$	28,892		$	5,629	$	53,074
Goodwill acquired with purchase of 26% interest in St. Joe/ Arvida		9,104		—			—		9,104
Other additions		280		54			292		626
Impairment loss		—		(14,083	)		—		(14,083	)

Balance at December 31, 2003		27,937		14,863			5,921		48,721
Contingent consideration payments		—		83			2,875		2,958

Balance at December 31, 2004	$	27,937	$	14,946		$	8,796	$	51,679

F-21

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Intangible assets at December 31, 2004 and 2003 consisted of the following (dollars in thousands):


	2004					2003					Weighted
											Average
	Gross Carrying		Accumulated			Gross Carrying		Accumulated			Amortization
	Amount		Amortization			Amount		Amortization			Period

											(In years)
In-place lease values	$	40,354	$	(5,804	)	$	30,282	$	(2,327	)		8
Customer relationships		3,718		(115	)		346		(32	)		11
Above-market rate leases		5,323		(885	)		3,417		(67	)		5
Management contracts		6,983		(2,534	)		6,983		(1,131	)		12
Other		467		(92	)		377		(53	)		10

Total	$	56,845	$	(9,430	)	$	41,405	$	(3,610	)		8

Amortization of intangible assets is recorded in the account in the consolidated statements of income which most properly reflects the nature of the underlying intangible asset as follows: (i) above-market rate lease intangibles are amortized to rental revenue, (ii) in-place lease values are amortized to amortization expense, and (iii) management contracts are amortized to amortization expense. The aggregate amortization of intangible assets for 2004, 2003, and 2002 was $6.2 million, $1.6 million, and $0.3 million, respectively.

The estimated aggregate amortization from intangible assets for each of the next five years is as follows (in thousands):


	Rental		Amortization
	Revenue		Expense

Year Ending December 31,
2005	$	1,309	$	7,518
2006		1,091		6,246
2007		993		5,589
2008		665		3,828
2009		266		2,777


10.	Accrued Liabilities

Accrued liabilities as of December 31 consist of (thousands):


	2004		2003

Property, intangible, income and other taxes	$	41,473	$	40,613
Payroll and benefits		47,797		33,556
Accrued interest		6,301		5,130
Environmental liabilities		4,094		3,952
Other accrued liabilities		35,760		22,273

Total accrued liabilities	$	135,425	$	105,524

F-22

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


11.	Debt


	Debt and credit agreements at December 31, 2004 and 2003 consisted of the following (in thousands):


	2004		2003

Medium term notes, interest payable semiannually at 4.97% to 7.37%, due February 7, 2005 - February 7, 2012	$	275,000	$	175,000
Non-recourse debt, interest payable monthly at 5.52% - 7.67%, secured by mortgages on certain commercial property, due January 1, 2008-January 1, 2013		85,428		82,171
Community Development District debt, secured by certain real estate, due May 1, 2005 - May 1, 2034, bearing interest at 5.95% to 7.15%		26,409		29,951
Recourse debt, interest payable monthly at 6.95%, secured by a commercial building, due September 1, 2008		17,998		18,339
Promissory note to an unconsolidated affiliate, interest payable annually at LIBOR + 100 basis points (3.4% at December 31, 2004), due at the earlier of the date of the first partnership distribution or December 31, 2008		10,934		—
Industrial Development Revenue Bonds, variable-rate interest payable quarterly based on the Bond Market Association index (2.20% at December 31, 2004), secured by a letter of credit, due January 1, 2008		4,000		4,000
Various secured and unsecured notes and capital leases, bearing interest at various rates		1,341		150
Senior revolving credit agreement, interest payable monthly to quarterly at LIBOR + 80 - 120 basis points, matures March 30, 2006		—		40,000
Development loan, interest payable at least quarterly at LIBOR + 122.5 basis points (3.1% at December 31, 2003), secured by certain commercial property, due April 10, 2004		—		32,565

Total debt	$	421,110	$	382,176

The aggregate maturities of long-term debt subsequent to December 31, 2004 are as follows; 2005, $22.0 million; 2006, $4.2 million; 2007, $70.7 million; 2008, $86.1 million; 2009, $41.8 million; thereafter, $196.3 million.

During 2004, the Company issued senior notes (“medium-term notes”) in a private placement with an aggregate principal amount of $100 million, with $25 million maturing on June 8, 2009 with a fixed interest rate of 4.97% and $75 million maturing on June 8, 2011 with a fixed interest rate of 5.31%. Interest is payable semiannually.

During 2004, the Company purchased a commercial building and assumed an existing mortgage on the property in the amount of $29.8 million, maturing on January 1, 2013. Interest is payable monthly at an annual fixed rate of 5.52%. Also during 2004, the Company sold a commercial building and the purchaser assumed the remaining balance on the related mortgage in the amount of $25.4 million. During 2004, the Company transferred $11.0 million of its Community Development District debt to the purchaser when it sold the land that secured that portion of the debt and, during 2004 and 2003, the Company repaid debt secured by commercial buildings in the amount of $12.3 million and $1.3 million, respectively.

During 2004, the Company entered into a debt agreement with a new joint venture in the amount of $11.4 million. The other party to the joint venture contributed land with a fair value of equal amount. This

F-23

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

debt reflects the Company’s agreement to pay all of the expenses of the joint venture up to the amount of principal and interest owed. Thereafter, all expenses of the joint venture will be shared equally. The $11.4 million debt bears interest at one-month LIBOR plus 100 basis points. The principal is due at the earlier of December 31, 2008 or the date of the first partnership distribution. Interest is payable annually on the anniversary of the date of the agreement.

The $275.0 million medium-term notes and the $250.0 million senior revolving credit agreement contain financial covenants, including a minimum net worth requirement of $425.0 million, maximum debt ratios, and fixed charge coverage requirements, plus some restrictions on pre-payment. At December 31, 2004, the Company was in compliance with the covenants.


12.	Income Taxes

Total income tax expense for the years ended December 31 was allocated as follows (in thousands):


	2004			2003			2002

Income from continuing operations	$	53,258		$	42,167		$	88,960
Stockholders’ equity, for recognition of unrealized gain on debt and marketable equity securities		—			—			(47,458	)
Gain on the sale of discontinued operations		2,903			—			13,110
Earnings from discontinued operations		108			459			2,070
Tax benefit on exercise of stock options credited to stockholders’ equity		(19,310	)		(15,685	)		(8,678	)

	$	36,959		$	26,941		$	48,004

Income tax expense attributable to income from continuing operations differed from the amount computed by applying the statutory federal income tax rate of 35% to pre-tax income as a result of the following (in thousands):


	2004		2003			2002

Tax at the statutory federal rate	$	48,419	$	41,061		$	83,699
State income taxes (net of federal benefit)		3,157		1,354			5,613
Other, net		1,682		(248	)		(352	)

	$	53,258	$	42,167		$	88,960

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities as of December 31 are presented below (in thousands):


			2004		2003

Deferred tax assets:
	Net operating loss carryforward		$	18,573	$	15,778
	Impairment losses			10,469		9,830
	Deferred compensation			10,323		9,477
	Accrued casualty and other reserves			4,889		4,123
	Charitable contributions carryforward			3,018		2,812
	Intangible asset amortization			3,487		2,527
	Other			11,090		4,876

		Total deferred tax assets	$	61,849	$	49,423

F-24

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


			2004		2003


Deferred tax liabilities:
	Deferred gain on land sales and involuntary conversions		$	254,375	$	216,237
	Prepaid pension asset			35,279		34,851
	Income of unconsolidated affiliates			5,888		6,085
	Depreciation			5,087		6,632
	Goodwill amortization			2,736		450
	Other			22,858		17,352

		Total gross deferred tax liabilities		326,223		281,607

		Net deferred tax liability	$	264,374	$	232,184

Based on the timing of reversal of future taxable amounts and the Company’s history of reporting taxable income, management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets and a valuation allowance is not considered necessary. There were no significant current deferred tax assets at December 31, 2004 or 2003.

The net operating loss carryforward expires in various years through 2023.


13.	Employee Benefits Plans


	*Pension Plan*

The Company sponsors a defined benefit pension plan that covers substantially all of its salaried employees (the “Pension Plan”). The benefits are based on the employees’ years of service and compensation. The Company complies with the minimum funding requirements of ERISA. The measurement date of the Pension Plan is January 1, 2004.

Because the Pension Plan has an overfunded balance, no contributions to the Pension Plan are expected in the near future.

The weighted average percentages of the fair value of total plan assets by each major type of plan asset are as follows:


Asset class	2004			2003

Equities		64	%		64	%
Fixed income including cash equivalents		35	%		35	%
Timber		1	%		1	%

The Company’s investment policy is to ensure, over the long-term life of the Pension Plan, an adequate pool of assets to support the benefit obligations to participants, retirees and beneficiaries. In meeting this objective, the Pension Plan seeks the opportunity to achieve an adequate return to fund the obligations in a manner consistent with the fiduciary standards of ERISA and with a prudent level of diversification. Specifically, these objectives include the desire to:


	•	invest assets in a manner such that contributions remain within a reasonable range and future assets are available to fund liabilities

	•	maintain liquidity sufficient to pay current benefits when due

	•	diversify, over time, among asset classes so assets earn a reasonable return with acceptable risk of capital loss

F-25

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The asset strategy established to reflect the growth expectations and risk tolerance is as follows:


Asset Class		Tactical range

Large Cap Equity			17%-23%
Large Cap Value Equity			10%-16%
Mid Cap Equity			4%-8%
Small Cap Equity			7%-11%
International Equity			9%-15%

	Total equities		55%-65%
Fixed Income including cash equivalents			35%-45%
Timber and other			0%-1%

To develop the expected long-term rate of return on assets assumption, the Company considered the current level of expected returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. This resulted in the selection of the 8.5% assumption for 2004 and 2003.

A summary of the net periodic pension credit follows (in thousands):


		2004			2003			2002

Service cost			5,588			4,777			4,465
Interest cost			8,508			8,529			8,969
Expected return on assets			(19,487	)		(17,765	)		(20,308	)
Actuarial gain			—			—			(2,214	)
Prior service costs			777			747			721
Curtailment loss			—			—			377

	Total pension income	$	(4,614	)	$	(3,712	)	$	(7,990	)

Assumptions used to develop net benefit cost:


	2004			2003			2002

Discount rate		6.00	%		6.50	%		6.50	%
Expected long term rate of return on Plan assets		8.50	%		8.50	%		8.50	%
Rate of compensation increase		4.00	%		4.00	%		4.00	%

A reconciliation of projected benefit obligation as of December 31 follows (in thousands):


	2004			2003

Projected benefit obligation, beginning of year	$	146,475		$	135,098
Service cost		5,588			4,777
Interest cost		8,508			8,529
Actuarial loss		7,983			8,863
Benefits paid		(14,550	)		(13,123	)
Plan amendment		1,746			2,331

Projected benefit obligation, end of year	$	155,750		$	146,475

F-26

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Assumptions used to develop end-of period obligations:


	2004			2003

Discount rate		5.65	%		6.00	%
Rate of compensation increase		4.00	%		4.00	%

A reconciliation of plan assets as of December 31 follows (in thousands):


	2004			2003

Fair value of assets, beginning of year	$	237,045		$	210,831
Actual return on assets		28,507			41,328
Transfer to retiree medical plan		(950	)		(950	)
Benefits and expenses paid		(15,602	)		(14,164	)

Fair value of assets, end of year	$	249,000		$	237,045

A reconciliation of funded status as of December 31 follows (in thousands):


	2004			2003

Accumulated benefit obligation	$	153,423		$	143,491
Projected benefit obligation	$	155,750		$	146,475
Market value of assets		249,000			237,045
Funded status	$	93,250		$	90,570
Unrecognized prior service costs		6,694			7,082
Unrecognized actuarial net (loss) gain		(5,865	)		(5,884	)

Prepaid pension asset	$	94,079		$	91,768

Expected benefit payments for the next ten years are as follows:


	Net Expected
Year Ended	Benefit Payments

	(In thousands)
2005	$	11,107
2006		10,879
2007		11,265
2008		11,506
2009		10,914
2010-2014		55,393


	*Postretirement Benefits*

The Company’s Board of Directors approved a partial subsidy to fund certain postretirement medical benefits of currently retired participants, and their beneficiaries, in connection with the previous disposition of several subsidiaries. No such benefits are to be provided to active employees. The Board reviews the subsidy annually and may further modify or eliminate such subsidy at their discretion. A liability of $3.1 million and $2.3 million has been included in accrued liabilities to reflect the Company’s obligation to fund postretirement benefits at December 31, 2004 and 2003, respectively.

F-27

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	*Deferred Compensation Plans and ESPP*

The Company also has other defined contribution plans that cover substantially all its salaried employees. Contributions are at the employees’ discretion and are matched by the Company up to certain limits. Expense for these defined contribution plans was $2.6 million, $2.2 million, and $1.8 million in 2004, 2003, and 2002, respectively.

The Company has a Supplemental Executive Retirement Plan (“SERP”) and a Deferred Capital Accumulation Plan (“DCAP”). The SERP is a non-qualified retirement plan to provide supplemental retirement benefits to certain selected management and highly compensated employees. The DCAP is a non-qualified defined contribution plan to permit certain selected management and highly compensated employees to defer receipt of current compensation. The Company has recorded expense in 2004, 2003, and 2002 related to the SERP of $1.3 million, $1.7 million, and $1.8 million, respectively, and related to the DCAP of $1.1 million, $1.0 million, and $1.0 million, respectively.

Beginning in November 1999, the Company also implemented an employee stock purchase plan (“ESPP”), whereby all employees may purchase the Company’s common stock through payroll deductions at a 15% discount from the fair market value, with an annual limit of $25,000 in purchases per employee. As of December 31, 2004, 172,250 shares of the Company’s stock had been sold to employees under the ESPP Plan.

During 2001, certain executives of the Company were granted long-term incentive contracts. In connection with a new employment agreement for one of the executives in 2003, the Company paid $2.3 million to the executive and the remaining $2.7 million was forfeited. The amount recorded as a liability on the remaining long-term incentive contract as of December 31, 2004 and 2003 was $3.1 million and $1.7 million, respectively. The Company will record the remaining minimum liability of $0.1 million in the first quarter of 2005 and will also record an additional liability of up to $0.1 million based on changes in the Company’s stock price over the vesting period.


14.	Segment Information

The Company conducts primarily all of its business in four reportable operating segments: Towns & Resorts development, commercial real estate development and services, land sales, and forestry. The Towns & Resorts development segment develops and sells housing units and home sites and manages residential communities. The commercial real estate development and services segment owns, leases, and manages commercial, retail, office and industrial properties throughout the Southeast and sells developed and undeveloped land and buildings. The land sales segment sells parcels of land included in the Company’s holdings of timberlands. The forestry segment produces and sells pine pulpwood and timber and cypress products. Prior to the sale of ARS on April 17, 2002, the Company also had a residential real estate services segment which provided real estate brokerage services. The operations of the residential real estate services segment are reflected as discontinued operations.

The Company currently uses income from continuing operations before equity in income (loss) of unconsolidated affiliates, income taxes and minority interest for purposes of making decisions about allocating resources to each segment and assessing each segment’s performance, which we believe more accurately represents current performance measures. We have presented prior year segments consistent with the current performance measure. The Company no longer uses earnings before interest, taxes, depreciation and amortization as a performance measure.

The accounting policies of the segments are the same as those described above in the summary of significant accounting policies. Total revenues represent sales to unaffiliated customers, as reported in the Company’s consolidated income statements. All intercompany transactions have been eliminated. The caption entitled “Other” consists of general and administrative expenses, net of investment income, the

F-28

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

settlement of the forward sales contracts, and operations of the Company’s former transportation segment. “Other” includes gains on the settlement of the Company’s forward sales contracts of $132.9 million for the year ended December 31, 2002 (see note 7). “Other” also includes operations of the Company’s former transportation segment which, due to the sale of the rolling stock of Apalachicola Northern Railroad in 2002, is no longer material enough to be reported as a separate segment.

The Company’s reportable segments are strategic business units that offer different products and services. They are each managed separately and decisions about allocations of resources are determined by management based on these strategic business units.

Information by business segment follows (in thousands):


		2004			2003			2002

OPERATING REVENUES:
	Towns & Resorts development	$	617,588		$	494,919		$	386,726
	Commercial real estate development and services		226,707			120,060			111,254
	Land sales		72,046			99,206			84,048
	Forestry		35,183			36,562			41,247
	Other		(21	)		79			3,165

Consolidated operating revenues		$	951,503		$	750,826		$	626,440

Income from continuing operations before equity in income (loss) of unconsolidated affiliates, income taxes and minority interest
	Towns & Resorts development	$	99,930		$	80,633		$	60,825
	Commercial real estate development and services		23,043			(4,737	)		1,431
	Land sales		57,241			78,448			68,094
	Forestry		9,091			8,059			7,964
	Other		(53,970	)		(42,364	)		91,253

Consolidated income from continuing operations before equity in income (loss) of unconsolidated affiliates, income taxes and minority interest			135,335			120,039			229,567
TOTAL ASSETS:
	Towns & Resorts development	$	584,256		$	496,072		$	435,271
	Commercial real estate development and services		534,113			527,157			433,657
	Land sales		32,150			15,093			7,780
	Forestry		90,169			90,837			101,993
	Corporate		162,941			146,571			191,186

Total assets		$	1,403,629		$	1,275,730		$	1,169,887

F-29

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


		2004		2003		2002


CAPITAL EXPENDITURES:
	Towns & Resorts development	$	495,298	$	347,207	$	287,972
	Commercial real estate development and services		134,378		123,718		98,428
	Land sales		7,253		3,306		190
	Forestry		3,463		3,437		3,435
	Other		2,770		8,259		2,881
	Discontinued operations		305		—		579

Total capital expenditures		$	643,467	$	485,927	$	393,485


15.	Commitments and Contingencies

The Company has obligations under various noncancelable long-term operating leases for office space and equipment. Some of these leases contain escalation clauses for operating costs, property taxes and insurance. In addition, the Company has various obligations under other office space and equipment leases of less than one year. Total rent expense was $5.9 million, $5.3 million, and $6.5 million for the years ended December 31, 2004, 2003, and 2002, respectively.

The future minimum rental commitments under noncancelable long-term operating leases due over the next five years and thereafter are as follows (in thousands):


2005	$	3,812
2006		2,610
2007		1,921
2008		495
2009		393
Thereafter		—

	$	9,231

The Company and its affiliates are involved in litigation on a number of matters and are subject to various claims which arise in the normal course of business, none of which, in the opinion of management, is expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity. However, the aggregate amount being sought by the claimants in these matters is presently estimated to be several million dollars.

The Company has retained certain self-insurance risks with respect to losses for third party liability, worker’s compensation, property damage, group health insurance provided to employees and other types of insurance.

At December 31, 2004, the Company was party to surety bonds and standby letters of credit in the amounts of $36.9 million and $15.4 million, respectively, which may potentially result in liability to the Company if certain obligations of the Company are not met.

At December 31, 2004, the Company was not liable as guarantor on any credit obligations that relate to unconsolidated affiliates in accordance with FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. At December 31, 2003, the Company was wholly or jointly and severally liable as guarantor on two credit obligations entered into by partnerships in which the Company had equity interests. The maximum amount

F-30

THE ST. JOE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of the debt available to these partnerships that was guaranteed by the Company totaled $7.6 million; the amount outstanding at December 31, 2003 totaled $6.7 million.

The Company is subject to costs arising out of environmental laws and regulations, which include obligations to remove or limit the effects on the environment of the disposal or release of certain wastes or substances at various sites, including sites which have been previously sold. It is the Company’s policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred and an amount can be reasonably estimated. As assessments and cleanups proceed, these accruals will be reviewed and adjusted, if necessary, as additional information becomes available.

Pursuant to the terms of various agreements by which the Company disposed of its sugar assets in 1999, the Company is obligated to complete certain defined environmental remediation. Approximately $5.0 million of the sales proceeds remain in escrow pending the completion of the remediation. The Company has separately funded the costs of remediation. In addition, approximately $1.7 million is being held in escrow representing the value of the land subject to remediation. Remediation was substantially completed in 2003. The Company expects remaining remediation to be complete and the amounts held in escrow to be released to the Company in 2005.

The Company is currently a party to, or involved in, legal proceedings directed at the cleanup of Superfund sites. The Company is also involved in regulatory proceedings related to the Company’s former mill site in Gulf County, Florida. The Company has accrued an allocated share of the total estimated cleanup costs for these sites. Based upon management’s evaluation of the other potentially responsible parties, the Company does not expect to incur additional amounts even though the Company has joint and several liability. Other proceedings involving environmental matters such as alleged discharge of oil or waste material into water or soil are pending or threatened against the Company. It is not possible to quantify future environmental costs because many issues relate to actions by third parties or changes in environmental regulation. However, based on information presently available, management believes that the ultimate disposition of currently known matters will not have a material effect on the Company’s consolidated financial position, results of operations or liquidity. Environmental liabilities are paid over an extended period and the timing of such payments cannot be predicted with any confidence. Aggregate environmental-related accruals were $4.1 million and $4.0 million as of December 31, 2004 and 2003, respectively.


16.	Quarterly Financial Data (Unaudited)


	Quarters Ended

	December 31		September 30		June 30		March 31

	(Dollars in thousands, except per share amounts)
2004
Operating revenues	$	291,272	$	246,147	$	232,545	$	181,539
Operating profit		46,619		37,083		38,506		22,345
Net income		28,087		26,303		22,749		12,961
Earnings per share — Basic		0.37		0.35		0.30		0.17
Earnings per share — Diluted		0.37		0.34		0.30		0.17
2003
Operating revenues	$	223,893	$	197,129	$	182,064	$	147,740
Operating profit		44,138		37,009		17,363		28,471
Net income		28,614		22,979		9,931		14,391
Earnings per share — Basic		0.38		0.30		0.13		0.19
Earnings per share — Diluted		0.37		0.30		0.13		0.18

F-31

THE ST. JOE COMPANY

SCHEDULE III (CONSOLIDATED) — REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004


		Initial Cost to Company								Carried at Close of Period
								Costs Capitalized
						Buildings &		Subsequent to		Land & Land		Buildings and				Accumulated
Description		Encumbrances		Land		Improvements		Acquisition		Improvements		Improvements		Total		Depreciation

		(In thousands)
Bay County, Florida
	Land with infrastructure	$	—	$	673	$	—	$	20,579	$	21,252	$	—	$	21,252	$	135
	Buildings		—		—		1,287		13,192		—		14,479		14,479		1,346
	Residential		—		1,006		—		20,086		21,092		—		21,092		—
	Timberlands		—		3,896		—		12,052		15,948		—		15,948		375
	Unimproved land		—		494		—		—		494		—		494		—
Calhoun County, Florida
	Timberlands		—		1,774		—		5,388		7,162		—		7,162		170
	Unimproved land		—		693		—		—		693		—		693		—
Duval County, Florida
	Land with infrastructure		—		258		—		—		258		—		258		—
	Buildings		—		3,450		12		21,352		—		24,814		24,814		2,384
	Residential		—		808		—		1,775		2,583		—		2,583		—
	Timberlands		—		—		—		1		1		—		1		—
Franklin County, Florida
	Land with infrastructure		—		—		—		135		135		—		135		—
	Residential		—		7,130		—		9,705		16,835		—		16,835		—
	Timberlands		—		1,241		—		1,482		2,723		—		2,723		64
	Unimproved Land		—		471		—		110		581		—		581		—
	Buildings		—		—		84		31		—		115		115		37
Gadsden County, Florida
	Land with infrastructure		—		—		—		2,406		2,406		—		2,406		—
	Timberlands		—		1,302		—		2,735		4,037		—		4,037		96
	Unimproved land		—		1,148		—		—		1,148		—		1,148		—
			—		—		—		—		—		—		—		—

S-1

THE ST. JOE COMPANY

SCHEDULE III (CONSOLIDATED) — REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004


		Initial Cost to Company								Carried at Close of Period
								Costs Capitalized
						Buildings &		Subsequent to		Land & Land		Buildings and				Accumulated
Description		Encumbrances		Land		Improvements		Acquisition		Improvements		Improvements		Total		Depreciation

		(In thousands)
Gulf County, Florida
	Land with infrastructure		—		326		—		261		587		—		587		119
	Buildings		—		—		536		412		—		948		948		147
	Residential		—		278		—		11,102		11,380		—		11,380		—
	Timberlands		—		5,238		—		17,058		22,296		—		22,296		470
	Unimproved land		—		388		—		—		388		—		388		—
Hillsborough County, Florida
	Buildings		—		—		18,358		1,691		—		20,049		20,049		2,623
Jefferson County, Florida
	Buildings		—		—		—		198		—		198		198		29
	Timberlands		—		1,547		—		1,613		3,160		—		3,160		46
	Unimproved land		—		246		—		—		246		—		246		—
Leon County, Florida
	Land with infrastructure		—		1,418		—		14,119		15,537		—		15,537		573
	Buildings		—		—		5,580		10,332		—		15,912		15,912		1,336
	Residential		—		207		—		42,240		42,447		—		42,447		—
	Timberlands		—		923		—		2,872		3,795		—		3,795		90
	Unimproved land		—		623		—		—		623		—		623		—
Liberty County, Florida
	Buildings		—		—		777		66		—		843		843		6
	Timberlands		—		3,244		205		8,279		11,728		—		11,728		394
	Unimproved land		—		19		—		—		19		—		19		—
Orange County, Florida
	Land with infrastructure		—		4,753		—		228		4,981		—		4,981		36
	Buildings		—		—		40,733		5,919		—		46,652		46,652		4,910
			—		—		—		—		—		—		—		—

S-2

THE ST. JOE COMPANY

SCHEDULE III (CONSOLIDATED) — REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004


		Initial Cost to Company								Carried at Close of Period
								Costs Capitalized
						Buildings &		Subsequent to		Land & Land		Buildings and				Accumulated
Description		Encumbrances		Land		Improvements		Acquisition		Improvements		Improvements		Total		Depreciation

		(In thousands)
Osceola County
	Residential		—		8,895		—		13,742		22,637		—		22,637		—
	Buildings		—		—		180		—		—		180		180		5
Palm Beach County, Florida
	Land with infrastructure		—		—		—		—		—		—		—		—
	Buildings		—		—		4		138		—		142		142		51
Pinellas County, Florida
	Buildings		—		—		28,683		4,255		—		32,938		32,938		4,748
St. Johns County, Florida
	Land with infrastructure		—		8,254		—		3,189		11,443		—		11,443		470
	Buildings		—		—		1,793		827		—		2,620		2,620		303
	Residential		—		3,598		—		25,444		29,042		—		29,042		—
Volusia County, Florida
	Land with infrastructure		—		6,045		—		367		6,412		—		6,412		851
	Buildings		—		—		1,644		128		—		1,772		1,772		315
	Residential		—		4,648		—		50,604		55,252		—		55,252		—
Wakulla County, Florida
	Land with infrastructure		—		—		—		106		106		—		106		—
	Buildings		—		—		—		122		—		122		122		53
	Timberlands		—		1,175		—		2,258		3,433		—		3,433		69
	Unimproved Land		—		149		—		9		158		—		158		—
Walton County, Florida
	Land with infrastructure		—		14,472		—		5,299		19,771		—		19,771		2,111
	Buildings		—		—		26,210		2,272		—		28,482		28,482		2,735
	Residential		—		8,730		—		46,009		54,739		—		54,739		—
	Timberlands		—		354		—		968		1,322		—		1,322		31
	Unimproved land		—		5		—		—		5		—		5		—
			—		—		—		—		—		—		—		—

S-3

THE ST. JOE COMPANY

SCHEDULE III (CONSOLIDATED) — REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004


			Initial Cost to Company								Carried at Close of Period
									Costs Capitalized
							Buildings &		Subsequent to		Land & Land		Buildings and				Accumulated
Description			Encumbrances		Land		Improvements		Acquisition		Improvements		Improvements		Total		Depreciation

			(In thousands)
Other Florida Counties
	Land with infrastructure			—		—		—		5		5		—		5		—
	Timberlands			—		685		—		358		1,043		—		1,043		24
	Unimproved land			—		91		—		—		91		—		91		—
District of Columbia
	Buildings			—		—		24,913		151		—		25,064		25,064		1,552
Georgia
	Land with infrastructure			—		18,138		—		1,765		19,903		—		19,903		74
	Buildings			—		—		151,492		5,740		—		157,232		157,232		5,132
	Timberlands			—		214		—		—		214		—		214		5
	Unimproved land			—		151		—		—		151		—		151		—
North Carolina
	Residential			—		18,204		—		61,806		80,010		—		80,010		—
	Buildings			—		—		17,163		—		—		17,163		17,163		661
Tennessee
	Unimproved Land			—		—		—		—		—		—		—		—
Texas
	Land with infrastructure			—		3,170		—		1,302		4,472		—		4,472		79
	Building			—		—		—		—		—		—		—		1
Virginia
	Land with infrastructure			—		5,582		—		1,018		6,600		—		6,600		—
	Building			—		—		15,409		—		—		15,409		15,409		232

		TOTALS	$	—	$	146,114	$	335,063	$	455,301	$	531,344	$	405,134	$	936,478	$	34,888

S-4

THE ST. JOE COMPANY

SCHEDULE III (CONSOLIDATED) — REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

Notes:


(A)	The aggregate cost of real estate owned at December 31, 2004 for federal income


tax purposes is approximately $546 million.


(B)	Reconciliation of real estate owned (in thousands of dollars):


	2004			2003			2002

Balance at Beginning of Year	$	878,141		$	764,579		$	661,971
Amounts Capitalized		615,733			446,830			378,745
Amounts Retired or Adjusted		(557,396	)		(333,268	)		(276,137	)

Balance at Close of Period	$	936,478		$	878,141		$	764,579


(C)	Reconciliation of accumulated depreciation (in thousands of dollars):


Balance at Beginning of Year	$	30,436		$	17,223		$	9,468
Depreciation Expense		14,962			24,841			13,861
Amounts Retired or Adjusted		(10,510	)		(11,628	)		(6,106	)

Balance at Close of Period	$	34,888		$	30,436		$	17,223

S-5



                                                                   EXHIBIT 10.26

                               SEVERANCE AGREEMENT

      THIS AGREEMENT is entered into as of January 5, 2005 (the "Effective
Date"), by and between WM. BRITTON GREENE (the "Employee") and THE ST. JOE
COMPANY, a Florida corporation (the "Company").

1.    TERM OF AGREEMENT

      This Agreement shall become effective on the Effective Date and, except to
      the extent provided in Section 9.5, shall terminate five (5) years after
      the Effective Date; provided, however, that if a Qualifying Termination of
      Employment occurs prior to the expiration of such five (5) year period,
      this Agreement shall remain in effect until the Company has met all of its
      obligations hereunder.

2.    DEFINITIONS

      2.1.  Cause means any of the following: the willful commission of, or the
            willful omission to take, an action in bad faith and to the material
            detriment of the Company; commission of an act of active and
            deliberate dishonesty or fraud against the Company; a material
            breach of this Agreement or the Company's policies; conviction
            following final disposition of any available appeal of a felony; or
            pleading guilty or no contest to a felony.

      2.2   Change in Control means the occurrence of any of the following
            events after the date of this Agreement:

            a)    The consummation of a merger or other transaction as a result
                  of which the Company's shareholders own 50% or less of the
                  combined voting power, directly or indirectly, of the
                  continuing or surviving entity's securities outstanding
                  immediately after such merger or other transaction;

            b)    The sale, transfer, exchange or other disposition of all or
                  substantially all of the Company's assets;

            c)    The liquidation or dissolution of the Company; or

            d)    Any transaction as a result of which any person is the
                  "beneficial owner" (as defined in Rule 13d-3 under the
                  Securities Exchange Act of 1934, as amended), directly or
                  indirectly, of securities of the Company representing 25% or
                  more of the total voting power represented by the Company's
                  then outstanding voting securities. For purposes of this
                  Paragraph, the term "person" shall have the same meaning as
                  when used in sections 13(d) and 14(d) of the Securities
                  Exchange Act of 1934, but shall exclude (1) a trustee or other
                  fiduciary holding securities under an employee benefit plan

                                       1



                  of the Company or a parent or subsidiary of the Company, and
                  (2) a corporation owned directly or indirectly by the
                  stockholders of the Company in substantially the same
                  proportions as their ownership of the common stock of the
                  Company.

            A transaction shall not constitute a Change in Control if its sole
            purpose is to change the state of the Company's incorporation or to
            create a holding company that will be owned in substantially the
            same proportions by the persons who held the Company's securities
            immediately before such transaction. Furthermore, the Company's
            purchase of Company stock from the Alfred I. duPont Testamentary
            Trust and/or the Nemours Foundation shall in no event be deemed to
            result in a Change in Control.

      2.3   Continuation Period means the period commencing on the date of the
            Employee's Qualifying Termination of Employment and ending on the
            earlier of:

            a)    The date thirty-six (36) months after the Qualifying
                  Termination of Employment; or

            b)    The date of the Employee's death.

      2.4   Disability means the Employee's disability which constitutes a
            long-term disability under the Company's long-term disability plan
            then in effect.

      2.5   Good Reason means any of the following:

            a)    The Employee has experienced a demotion with the Company that
                  results in a substantial and material reduction in duties or
                  responsibilities with the Company from that in effect
                  immediately prior to a Change in Control;

            b)    The Employee has incurred a 10% or more reduction in total
                  compensation as an employee of the Company (consisting of
                  annual base salary and target bonus percentage);

            c)    The Employee has been notified that his principal place of
                  work as an employee of the Company will be relocated, without
                  his permission, by more than fifty (50) miles; or

            d)    A successor to the Company fails to comply with Section 10.1.

            The Company and the Employee, upon mutual written agreement, may
            waive any of the foregoing provisions with respect to an event that
            otherwise would constitute Good Reason.

                                       2



      2.6.  Qualifying Termination of Employment means a termination of the
            Employee's employment under any of the following circumstances:

            a)    The Employee resigns for Good Reason; or

            b)    The Company terminates the Employee's employment for any
                  reason other than Cause, death or Disability.

            The determination of whether the Employee's employment has
            terminated shall be made without regard to whether the Employee
            continues to provide services to the Company as a member of its
            Board of Directors or otherwise in the capacity of an independent
            contractor. A transfer of the Employee's employment from the Company
            to a successor of the Company shall not be considered a termination
            of employment if such successor complies with the requirements of
            Section 10.1.

3.    AMOUNT OF SEVERANCE PAY

      Within thirty (30) business days after a Qualifying Termination of
      Employment, the Company shall pay the Employee as follows:

      3.1   If the Qualifying Termination of Employment occurs within the first
            twenty-four (24) months after the occurrence of a Change in Control,
            a lump sum equal to the product of two (2) times the sum of:

            a)    The Employee's base salary at the greater of (1) the annual
                  rate in effect on the date when the Qualifying Termination of
                  Employment is effective, or (2) the annual rate in effect on
                  the date of the Change in Control; plus

            b)    The Employee's annual bonus based on the target percentage
                  amount for the most recent year completed prior to the date
                  when the Qualifying Termination of Employment is effective.

      3.2   If the Qualifying Termination of Employment does not meet the
            requirements of Section 3.1 above, a lump sum equal to the product
            of one (1) times the sum of:

            a)    The Employee's base salary at the annual rate in effect on the
                  date when the Qualifying Termination of Employment is
                  effective; plus

            b)    The Employee's annual bonus based on the target percentage
                  amount for the most recent year completed prior to the date
                  when the Qualifying Termination of Employment is effective.

            For purposes of determining the Employee's annual base salary and
            annual bonus percentage under Sections 3.1 and 3.2 above, any
            reduction in annual base salary

                                       3



            or annual target bonus that would constitute Good Reason under this
            Agreement shall be deemed not to have occurred.

4.    GROUP INSURANCE AND OUTPLACEMENT SERVICES

      4.1   Group Insurance. In the event of a Qualifying Termination of
            Employment, during the Continuation Period the Employee (and, where
            applicable, the Employee's dependents) shall be entitled to medical
            and dental benefits under the Company's welfare benefit plans (as
            that term is defined in Subsection 3(1) of the Employee Retirement
            Income Security Act of 1974, as amended), as if the Employee were
            still employed during such period. Such medical and dental benefits
            shall be provided at the same level and at the same after-tax cost
            to the Employee as is generally available to similar Company
            executives. The Employee's salary, for purposes of such plans, shall
            be determined using the method set forth in Section 3.1 or 3.2,
            whichever is applicable. To the extent the Company is unable or does
            not wish to cover the Employee under its plans during the
            Continuation Period, the Company shall provide the Employee with
            substantially equivalent benefits on an individual basis at no
            additional after-tax cost to the Employee. The foregoing
            notwithstanding, in the event the Employee becomes eligible for
            comparable insurance coverage in connection with new employment, the
            coverage provided by the Company under this Section shall terminate
            immediately. Any medical or dental coverage provided pursuant to
            this Section shall be applied, to the extent permitted by law, to
            reduce the Company's group health continuation coverage
            responsibilities under the Consolidated Omnibus Budget
            Reconciliation Act of 1985.

      4.2   Outplacement Services. In the event of a Qualifying Termination of
            Employment, the Employee shall be entitled to senior executive level
            outplacement services at the Company's expense for up to three (3)
            months. The Company reserves the right to select the outplacement
            firm.

5.    EXCISE TAXES

      5.1   No Gross-Up Payment. In the event it shall be determined by an
            Accounting Firm (within the meaning of Section 5.2 below) that any
            payment or distribution by the Company to or for the benefit of the
            Employee, whether paid or payable or distributed or distributable
            pursuant to the terms of this Agreement or otherwise (a "Payment"),
            would be subject to the excise tax imposed by Section 4999 of the
            Internal Revenue Code of 1986, as amended (or any successor thereto)
            or comparable state or local tax or any interest or penalties with
            respect to such excise tax or comparable state or local tax (such
            excise tax, together with any such interest and penalties, are
            hereinafter collectively referred to as the "Excise Tax"), then the
            amount of the Payment due to the Employee shall be reduced (but not
            below zero) to the extent necessary that no portion thereof shall be
            subject to the Excise Tax and no gross-up payment shall be made. If
            the Accounting Firm

                                       4



            determines that the total Payments are to be reduced under the
            preceding sentence, then the Company shall promptly give the
            Employee notice to that effect and a copy of the detailed
            calculation thereof. The Employee may then elect, in the Employee's
            sole discretion, which and how much of the total Payments are to be
            eliminated or reduced (as long as after such election no Excise Tax
            will be payable) and shall advise the Company in writing of the
            Employee's election within ten (10) days of receipt of notice. If no
            such election is made by the Employee within such ten (10) day
            period, then the Company may elect which and how much of the total
            Payments are to be eliminated or reduced (as long as after such
            election, no Excise Tax will be payable) and shall notify the
            Employee promptly of such election. No additional payments by the
            Company or return of payments by the Employee shall be required or
            made if a late determination based on case law, an IRS holding, or
            otherwise, would result in a recalculation of the Excise Tax
            implications.

      5.2   Determination by Accountant. All determinations and calculations
            required to be made under this Section shall be made by an
            independent accounting firm selected by the Company from among the
            largest four accounting firms in the United States (the "Accounting
            Firm"), which shall provide its determination (the "Determination"),
            together with detailed supporting calculations both to the Company
            and the Employee within fourteen (14) days of the Qualifying
            Termination of Employment. Any Determination by the Accounting Firm
            shall be binding upon the Company and the Employee, absent manifest
            error.

6.    TERMINATION UPON DEATH

      In the event of the Employee's death prior to termination of employment,
      this Agreement shall terminate and the Company shall only be obligated to
      (a) pay to the Employee's estate or legal representative the annual base
      salary to the extent earned by the Employee prior to the Employee's death,
      and (b) pay any other benefits to the extent required by the Company's
      retirement and benefits plans. The Company may, however, pay the estate or
      legal representative a bonus that the Employee has earned prior to his
      death. After making such payment(s) and providing such benefits, the
      Company shall have no further obligations under this Agreement. If the
      Employee dies after termination of employment but before receiving all
      payments to which he has become entitled hereunder, payment shall be made
      to the estate of Employee.

7.    DISABILITY

      In the event of the Employee's Disability, the Company shall have the
      right, at its option, to terminate the Employee's employment. Unless and
      until so terminated, during any period of Disability during which the
      Employee is unable to perform the services required of him, the Employee's
      salary shall be payable to the extent of, and subject to, the Company's
      policies and practices then in effect with regard to sick leave and
      disability benefits. In the event of the Employee's termination due to the
      Employee's Disability,

                                       5



      the Company shall only be obligated to (a) pay to the Employee or his
      personal representative the Employee's annual base salary to the extent
      earned by the Employee prior to the termination of employment, (b) pay any
      disability benefits as provided under the Company's long-term disability
      plan then in effect, and (c) pay any other benefits to the extent required
      by the Company's retirement and benefits plans. After making such
      payment(s) and providing such benefits, the Company shall have no further
      obligations under this Agreement; provided, however, that nothing
      contained in this Section shall restrict the Employee's eligibility to
      receive disability and other related benefits offered pursuant to the
      Company's plans, policies, or programs.

8.    TERMINATION FOR CAUSE OR WITHOUT GOOD REASON.

      In the event that the Company terminates the Employee's employment for
      Cause or the Employee terminates his employment without Good Reason, the
      Company shall only be obligated to pay to the Employee the Employee's
      annual base salary to the extent earned by the Employee prior to the
      termination of employment. After making such payment, the Company shall
      have no further obligations under this Agreement.

9     RESTRICTIVE COVENANTS

      9.1   Confidential Information. During the period of his employment, the
            Employee shall hold in a fiduciary capacity for the benefit of the
            Company and its affiliates all trade secrets, proprietary or
            confidential information, knowledge or data relating to the Company,
            its affiliates, and/or their respective businesses, which shall have
            been obtained by the Employee. Trade secret information includes,
            but is not limited to, customer lists, pricing information, sales
            reports, financial and marketing data, reserves estimations, or
            procedures, techniques, or processes that: (a) derive independent
            economic value, actual or potential, from not being generally known
            to the public or to persons who can obtain economic value from their
            disclosure or use, and (b) are the subject of reasonable efforts
            under the circumstances to maintain their secrecy. After termination
            of the Employee's employment with the Company, Employee shall not,
            without the prior written consent of the Company, use, communicate
            or divulge any such information, knowledge or data to anyone at any
            time.

      9.2   Return of Property. Upon termination of the employment period, the
            Employee will surrender to the Company all property belonging to the
            Company or its affiliates.

      9.3   Compliance with Business Ethics and Conflict of Interest Policy.
            During the Employee's employment with the Company, the Employee
            shall comply in all respects with the Company's Code of Conduct as
            amended from time to time.

      9.4   Survival; Injunctive Relief. The Employee agrees that Sections 9.1
            through 9.4 shall survive the termination of this Agreement and the
            period of his employment

                                       6



            hereunder. The Employee acknowledges that the Company and its
            affiliates have no adequate remedy at law and would be irreparably
            harmed if Employee breaches or threatens to breach any of the
            provisions of this Section and, therefore, agrees that the Company
            and its affiliates shall be entitled to injunctive relief to prevent
            any such breach or threatened breach thereof and to specific
            performance of the terms of this Section (in addition to any other
            legal or equitable remedy the Company or the affiliate may have).
            The Employee further agrees that the Employee shall not, in any
            equity proceeding relating to the enforcement of this Section, raise
            the defense that the Company or the affiliate has an adequate remedy
            at law. Nothing in this Agreement shall be construed as prohibiting
            the Company or any affiliate from pursuing any other remedies at law
            or in equity that it may have under and in respect of this Agreement
            or any other agreement.

10.   SUCCESSORS

      10.1  Company's Successors. The Company shall require any successor
            (whether direct or indirect by purchase, lease, merger,
            consolidation, liquidation or otherwise) to all or substantially all
            of the Company's business or assets, by an agreement in substance
            and form satisfactory to the Employee, to assume this Agreement and
            to agree expressly to perform this Agreement in the same manner and
            to the same extent as the Company would be required to perform it in
            the absence of a succession. For all purposes under this Agreement,
            the term "Company" shall include any successor to the business or
            assets of the Company which executes and delivers the assumption
            agreement described in this Section 10.1 or which becomes bound by
            this Agreement by operation of law.

      10.2  Employee's Successors. This Agreement and all rights of the Employee
            hereunder shall inure to the benefit of, and be enforceable by, the
            Employee's personal or legal representatives, executors,
            administrators, successors, heirs, distributees, devisees and
            legatees.

11.   LIQUIDATED DAMAGES

      The payments and benefits provided in this Agreement are intended to be
      liquidated damages for a termination of the Employee's employment by the
      Company or for the actions of the Company and its affiliates leading to a
      termination of the Employee's employment by the Employee for Good Reason,
      and shall be the sole and exclusive remedy therefor.

12.   RELEASE

      Notwithstanding any provision herein to the contrary, the Company may
      require that, prior to payment of any amount or provision of any benefit
      under this Agreement, the Employee shall have executed a complete release
      of the Company and its successors,

                                       7



      affiliates and related parties in such form as is reasonably acceptable to
      both parties and any waiting periods contained in such release shall have
      expired.

13.   MISCELLANEOUS PROVISIONS

      13.1  Notice. Notices and all other communications contemplated by this
            Agreement shall be in writing and shall be deemed to have been duly
            given when personally delivered or when mailed by U.S. registered or
            certified mail, return receipt requested and postage prepaid. In the
            case of the Employee, mailed notices shall be addressed to the
            Employee at the home address that the Employee most recently
            communicated to the Company in writing. In the case of the Company,
            mailed notices shall be addressed to its corporate headquarters, and
            all notices shall be directed to the attention of its Secretary.

      13.2  Waiver. No provision of this Agreement shall be modified, waived or
            discharged unless the modification, waiver or discharge is agreed to
            in writing and signed by the Employee and by an authorized officer
            of the Company (other than the Employee). No waiver by either party
            of any breach of, or of compliance with, any condition or provision
            of this Agreement by the other party shall be considered a waiver of
            any other condition or provision or of the same condition or
            provision at another time.

      13.3  Other Agreements; Amendment. This Agreement does not supersede any
            stock option, restricted stock or other equity-based incentive
            compensation agreement between the Employee and the Company, except
            to the extent that the benefits provided by this Agreement are
            greater than the severance pay and similar benefits provided by such
            agreements. In no event shall the Employee be entitled to severance
            pay both under this Agreement and under any employment agreement
            following a termination of employment. This Agreement may be amended
            only in writing, by an instrument executed by both parties.

      13.4  No Setoff; Withholding Taxes. There shall be no right of setoff or
            counterclaim, with respect to any claim, debt or obligation, against
            payments to the Employee under this Agreement. All payments made or
            benefits provided under this Agreement shall be subject to reduction
            to reflect taxes required to be withheld by law. The payments
            received under this Agreement shall be in lieu of, and not in
            addition to, any payments or benefits received in connection with
            the Company's general severance policy then in effect. Should any
            payment be made or benefits be provided under any such severance
            policy, the payments and benefits provided hereunder shall be
            correspondingly reduced by such payments and/or benefits.

      13.5  Choice of Law. The validity, interpretation, construction and
            performance of this Agreement shall be governed by the laws of the
            State of Florida, except its choice-of-law provisions.

                                       8



      13.6  Severability. The invalidity or unenforceability of any provision or
            provisions of this Agreement shall not affect the validity or
            enforceability of any other provision hereof, which shall remain in
            full force and effect.

      13.7  Arbitration of Disputes and Related Claims. Any good faith dispute
            or controversy arising under or in connection with this Agreement
            shall be settled by binding arbitration, which shall be the sole and
            exclusive method of resolving any questions, claims or other matters
            arising under this Agreement or, to the extent permitted by
            applicable law, any claim that the Company has in any way violated
            the non-discrimination and/or other provisions of Title VII of the
            Civil Rights Act of 1964, as amended; the Age Discrimination in
            Employment Act of 1967, as amended; the Americans with Disabilities
            Act; the Family and Medical Leave Act, as amended; the Employee
            Retirement Income Security Act of 1974, as amended; and, in general,
            any federal law or state laws. Such proceeding shall be conducted in
            Jacksonville, Florida, by final and binding arbitration before a
            panel of one or more arbitrators in accordance with the laws and
            rules of the American Arbitration Association in effect at the time
            the arbitration is commenced, and as subsequently amended while the
            arbitration is pending, and under the administration of the American
            Arbitration Association. The Federal and state courts located in the
            United States of America are hereby given jurisdiction to render
            judgment upon, and to enforce, each arbitration award, and the
            parties hereby expressly consent and submit to the jurisdiction of
            such courts. Notwithstanding the foregoing, in the event that a
            violation of this Agreement would cause irreparable injury, the
            Company and the Employee agree that in addition to the other rights
            and remedies provided in this Agreement (and without waiving their
            rights to have all other matters arbitrated as provided above) the
            other party may immediately take judicial action to obtain
            injunctive relief.

      13.8  Legal Fees. In the event of any controversy or claim arising out of
            or relating to this Agreement, or the breach thereof, the Company
            shall pay (on an as-incurred basis) the reasonable fees and costs of
            the Employee's attorneys attributable to such controversy or claim
            (the "Legal Fees"); provided, that the Employee shall reimburse the
            Company for all such Legal Fees if the Employee does not prevail on
            at least one material issue arising in such controversy or claim.

      13.9  Not Compensation for Other Plans. The amounts paid and benefits
            provided hereunder are not to be considered compensation, earnings
            or wages for purposes of any employee benefit plan of the Company or
            its successors, affiliates, or related parties, including but not
            limited to the SERP, DCAP, and qualified retirement plans.

      13.10 No Assignment. Except to the extent provided in Section 10, the
            rights of any person to payments or benefits under this Agreement
            shall not be made subject to option or assignment, either by
            voluntary or involuntary assignment or by operation of law,
            including (without limitation) bankruptcy, garnishment,

                                       9



            attachment or other creditor's process, and any action in violation
            of this Section shall be void.

PLEASE READ CAREFULLY. BY SIGNING BELOW, EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS
READ, AND HAS HAD THE OPPORTUNITY TO CONSULT WITH AN ATTORNEY BEFORE SIGNING,
THIS AGREEMENT.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written.

EMPLOYEE: Wm. BRITTON GREENE                    THE ST. JOE COMPANY

By /s/ Wm. Britton Greene                       By /s/ Kevin M. Twomey
   --------------------------------------          --------------------------

Title  President - St. Joe Towns & Resorts      Title  President, COO and CFO

Date   1/6/2005                                 Date   1/6/2005


                                       10



                                                                    EXHIBIT 21.1

                               THE ST. JOE COMPANY
                              LIST OF SUBSIDIARIES
                (includes joint ventures, indirect ownership and
                          100% directly owned entities)



                                                                        State of
Name                                                                   Organization
                                                                    
280 INTERSTATE NORTH, L.L.C.                                                DE
- --------------------------------------------------------------
1133 D.C., L.L.C.                                                           FL
- --------------------------------------------------------------
1750 K, L.L.C.                                                              FL
- --------------------------------------------------------------
1750 K SPE COMPANY                                                          FL
- --------------------------------------------------------------
5660 NND, L.L.C.                                                            FL
- --------------------------------------------------------------
ADVANTIS CONSTRUCTION COMPANY                                               FL
- --------------------------------------------------------------
ADVANTIS REAL ESTATE SERVICES COMPANY                                       FL
- --------------------------------------------------------------
APALACHICOLA NORTHERN RAILROAD COMPANY                                      FL
- --------------------------------------------------------------
ARTISAN PARK, L.L.C.                                                        DE
- --------------------------------------------------------------
ARVIDA HOUSING L.P., INC.                                                   DE
- --------------------------------------------------------------
ARVIDA MID-ATLANTIC HOMES, INC.                                             NC
- --------------------------------------------------------------
ARVIDA/JMB PARTNERS, L.P.                                                   DE
- --------------------------------------------------------------
BEACON SQUARE, L.L.C.                                                       FL
- --------------------------------------------------------------
C RIDGE ONE, L.L.C.                                                         FL
- --------------------------------------------------------------
CODINA GROUP, INC.                                                          FL
- --------------------------------------------------------------
CROOKED CREEK REAL ESTATE COMPANY                                           FL
- --------------------------------------------------------------
CROOKED CREEK UTILITY COMPANY                                               FL
- --------------------------------------------------------------




                                                                         
DEER POINT I & II, LLC                                                      FL
- --------------------------------------------------------------
DEERFIELD COMMONS I, LLC                                                    DE
- --------------------------------------------------------------
DEERFIELD PARK, LLC                                                         GA
- --------------------------------------------------------------
EAGLE POINT, L.L.C.                                                         FL
- --------------------------------------------------------------
GEORGIA WIND I, LLC                                                         FL
- --------------------------------------------------------------
GEORGIA WIND II, LLC                                                        FL
- --------------------------------------------------------------
GEORGIA WIND III, LLC                                                       FL
- --------------------------------------------------------------
MCNEILL BURBANK HOMES, LLC                                                  NC
- --------------------------------------------------------------
MILLENIA PARK ONE, L.L.C.                                                   FL
- --------------------------------------------------------------
MONTEITH HOLDINGS, LLC                                                      NC
- --------------------------------------------------------------
OVERLOOK I & II, LLC                                                        FL
- --------------------------------------------------------------
PARK POINT LAND, LLC                                                        FL
- --------------------------------------------------------------
PARK POINT, LLC                                                             FL
- --------------------------------------------------------------
PASEOS MORTGAGE, LLC                                                        DE
- --------------------------------------------------------------
PASEOS TITLE, LLC                                                           DE
- --------------------------------------------------------------
PASEOS, LLC                                                                 DE
- --------------------------------------------------------------
PSJ DEVELOPMENT L.P.                                                        DE
- --------------------------------------------------------------
PSJ WATERFRONT, LLC                                                         FL
- --------------------------------------------------------------
RESIDENTIAL COMMUNITY MORTGAGE COMPANY, LLC                                 DE
- --------------------------------------------------------------
RESIDENTIAL COMMUNITY TITLE COMPANY                                         DE
- --------------------------------------------------------------
RIVERCREST MORTGAGE, LLC                                                    DE
- --------------------------------------------------------------
RIVERCREST TITLE, LLC                                                       DE
- --------------------------------------------------------------
RIVERCREST, LLC                                                             DE
- --------------------------------------------------------------





                                                                         
RIVERSIDE CORPORATE CENTER, L.L.C.                                          FL
- --------------------------------------------------------------
RIVERTOWN REAL ESTATE COMPANY                                               FL
- --------------------------------------------------------------
SAUSSY BURBANK, INC.                                                        NC
- --------------------------------------------------------------
SGW, INC.                                                                   FL
- --------------------------------------------------------------
SJA LICENSES ETC. COMPANY                                                   FL
- --------------------------------------------------------------
SJP TECHNOLOGY COMPANY                                                      FL
- --------------------------------------------------------------
SOUTHEAST BONDED HOMEBUILDER
WARRANTY ASSOCIATION, L.L.C.                                                FL
- --------------------------------------------------------------
SOUTHEAST INSURANCE COMPANY                                                 VT
- --------------------------------------------------------------
SOUTHHALL CENTER, L.L.C.                                                    FL
- --------------------------------------------------------------
SOUTHWOOD MORTGAGE, INC.                                                    FL
- --------------------------------------------------------------
SOUTHWOOD REAL ESTATE, INC.                                                 FL
- --------------------------------------------------------------
ST. JAMES ISLAND UTILITY COMPANY                                            FL
- --------------------------------------------------------------
ST. JOE CAPITAL I, INC.                                                     DE
- --------------------------------------------------------------
ST. JOE CENTRAL FLORIDA CONTRACTING, INC.                                   FL
- --------------------------------------------------------------
ST. JOE COMMERCIAL DEVELOPMENT, INC.                                        DE
- --------------------------------------------------------------
ST. JOE COMMERCIAL, INC.                                                    FL
- --------------------------------------------------------------
ST. JOE COMMUNITY SALES, INC.                                               FL
- --------------------------------------------------------------
ST. JOE DEERWOOD PARK, L.L.C.                                               FL
- --------------------------------------------------------------
ST. JOE DEVELOPMENT, INC.                                                   FL
- --------------------------------------------------------------
ST. JOE FINANCE COMPANY                                                     FL
- --------------------------------------------------------------
ST. JOE HOME BUILDING, L.P.                                                 DE
- --------------------------------------------------------------
ST. JOE LAND COMPANY                                                        FL
- --------------------------------------------------------------
ST. JOE NORTHEAST FLORIDA CONTRACTING, INC.                                 FL





                                                                        
- --------------------------------------------------------------
ST. JOE RESIDENTIAL ACQUISITIONS, INC.                                     FL
- --------------------------------------------------------------
ST. JOE RESORTS & CLUBS, L.L.C.                                            FL
d/b/a's:
Camp Creek Golf Club
WaterColor Inn
Fish Out of Water
Bait House
WaterColor Beach Club
St. Johns Golf & Country Club
Victoria Hills Golf Club
WaterColor Market
WaterColor Workout Center
SouthWood Golf Club
- --------------------------------------------------------------
ST. JOE TERMINAL COMPANY                                                   FL
- --------------------------------------------------------------
ST. JOE TIMBERLAND COMPANY OF DELAWARE, L.L.C.                             DE
- --------------------------------------------------------------
ST. JOE TOWNS & RESORTS, L.P.                                              DE
- --------------------------------------------------------------
ST. JOE UTILITIES COMPANY                                                  FL
- --------------------------------------------------------------
ST. JOE WEST FLORIDA CONTRACTING, INC.                                     FL
- --------------------------------------------------------------
ST. JOE/ARVIDA COMPANY, INC.                                               FL
- --------------------------------------------------------------
ST. JOE-SOUTHWOOD PROPERTIES, INC.,                                        FL
- --------------------------------------------------------------
SUNSHINE STATE CYPRESS, INC.                                               FL
- --------------------------------------------------------------
TALISMAN SUGAR CORPORATION                                                 FL
- --------------------------------------------------------------
THE PORT ST. JOE MARINA, INC.                                              FL
- --------------------------------------------------------------
VICTORIA PARK MORTGAGE, INC.                                               FL
- --------------------------------------------------------------
VICTORIA PARK REAL ESTATE, INC.                                            FL
- --------------------------------------------------------------
WATERCOLOR REAL ESTATE, INC.                                               FL
- --------------------------------------------------------------
WATERCOLOR VACATION RENTALS, INC.                                          FL
- --------------------------------------------------------------
WATERSOUND REAL ESTATE, INC.                                               FL
- --------------------------------------------------------------





                                                                         
WATERSOUND VACATION RENTALS, INC.                                           FL.
- --------------------------------------------------------------
WESTCHASE DEVELOPMENT VENTURE, L.P.                                         TX
- --------------------------------------------------------------



            Consent of Independent Registered Public Accounting Firm

The Board of Directors
The St. Joe Company:

We consent to the incorporation by reference in the registration statements
(No. 333-23571, No. 333-43007, No. 333-51726, No. 333-51728 and No.
333-106046) on Forms S-8 of The St. Joe Company of our reports dated March 11,
2005, with respect to the consolidated balance sheets of The St. Joe Company as
of December 31, 2004 and 2003, and the related consolidated statements of
income, changes in stockholders' equity, cash flow for each of the years in the
three-year period ended December 31, 2004, and related financial statement
schedule, management's assessment of the effectiveness of internal control over
financial reporting as of December 31, 2004 and the effectiveness of internal
control over financial reporting as of December 31, 2004, which reports appear
in the December 31, 2004, annual report on Form 10-K of The St. Joe Company.

/s/ KPMG LLP
Jacksonville, Florida

March 11, 2005



                                                                    EXHIBIT 31.1

                                  CERTIFICATION

I, Peter S. Rummell, certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended December
31, 2004 of The St. Joe Company;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors:

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date: March 14, 2005

                                                          /s/ Peter S. Rummell
                                                         -----------------------
                                                         Peter S. Rummell
                                                         Chief Executive Officer



                                                                    EXHIBIT 31.2

                                  CERTIFICATION

I, Kevin M. Twomey, certify that:


1. I have reviewed this Annual Report on Form 10-K for the year ended December
31, 2004 of The St. Joe Company;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors:

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date: March 14, 2005

                                                          /s/ Kevin M. Twomey
                                                         ----------------------
                                                         Kevin M. Twomey
                                                         Chief Financial Officer



                                                                    EXHIBIT 32.1

                                  CERTIFICATION

      Pursuant to 18 USC Section 1350, the undersigned officer of The St. Joe
Company (the "Company") hereby certifies that the Company's Annual Report on
ForM 10-K for the year ended December 31, 2004 (the "Report") fully complies
with the requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934 and that the information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.

                                                          /s/ Peter S. Rummell
                                                         ----------------------
                                                         Peter S. Rummell
                                                         Chief Executive Officer

Dated: March 14, 2005

      The foregoing certificate is being furnished solely pursuant to 18 USC
Section 1350 and is not being filed as part of the Report or as a separate
disclosure document.



                                                                    EXHIBIT 32.2

                                  CERTIFICATION

      Pursuant to 18 USC Section 1350, the undersigned officer of The St. Joe
Company (the "Company") hereby certifies that the Company's Annual Report on
ForM 10-K for the year ended December 31, 2004 (the "Report") fully complies
with the requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934 and that the information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.

                                                          /s/ Kevin M. Twomey
                                                         ----------------------
                                                         Kevin M. Twomey
                                                         Chief Financial Officer

Dated:  March 14, 2005

      The foregoing certificate is being furnished solely pursuant to 18 USC
Section 1350 and is not being filed as part of the Report or as a separate
disclosure document.