EconSouth (Third Quarter 2005)
Q & A
An Interview with Jerry M. Ray of St. Joe Co.
Jerry M. Ray is senior vice president of corporate communications for the St. Joe Co., the largest private landholder in Florida. St. Joe owns 820,000 acres of low-cost land, most of it in northwest Florida, including 300,000 acres within 10 miles of the Gulf of Mexico. Alfred I. du Pont, scion of the family that founded the DuPont Chemical Co., bought most of this land in the 1930s for dollars an acre. Today, St. Joe is a developer of resorts, residential communities, and commercial and industrial properties and is also involved in real estate services and timber.
EconSouth: What are the demographic factors that affect your business?
Jerry M. Ray: When you ask about demographics in Florida, we think of demand. And right now we see our business at an almost perfect moment in time with the arrival of baby boomers. We’re talking about 76 million people born between 1946 and 1964. The number of Americans between 45 and 64 reached a record low in the 1980s and has been steadily climbing for 20 years. We project the number of baby boomers who are planning retirement will hit a record high in 2111 and stay strong for another 10 or 11 years. As their lives are unfolding, the baby boomers are having profound effects on this country and our business.
ES: What does the aging of the baby boomers mean to Florida and St. Joe?
Ray: At this point, baby boomers are beginning to buy second homes and migrate to warm climates. There are millions more people today who are thinking about moving to Florida for a place in the sun than there were three years ago. There will be millions more. This trend is not going to stop for 10 years unless there is some huge impediment.
ES: What is your forecast for growth in Florida?
Ray: The population of Florida will grow 80 percent in the next 20–30 years. That’s 12 million people, or the same as the entire population of Pennsylvania moving here on top of the population here now. That means from 1,000 to 1,100 people a day moving to Florida.
ES: What does this migration mean to Florida’s economy?
Ray: Let’s compare Florida and Texas. Both places are growing rapidly, but in Texas you have more births and less migration. There is much less population growth in Florida from natural births. But there’s no wealth created when a baby is born; in fact, after a baby is born, wealth gets consumed for quite a while. But the people immigrating to Florida are transferring their wealth here. We call them “splitters”—people who take 10 years splitting a home in one place with a second home in Florida. For a while, they go back and forth, and they take JetBlue or another discount airline. Eventually, they move and take their wealth out of their old home and move it into Florida. Every couple that relocates here creates 1.8 jobs. Then the population grows again because of that transfer of jobs. Demand is strong and growing stronger.
ES: Is there enough land in Florida to accommodate all of the people who are moving there?
Ray: Florida is a hollow state where you have about 82 percent of the population within 10 miles of salt water. And if you take out Orlando that figure is close to 90 percent. Basically, there’s a ring around Florida because the fact is people like to be close to the water.
ES: What about beachfront land?
Ray: We call the 10-mile-wide coastal zone “the edge,” and there’s not much left [undeveloped]. Miami, Fort Lauderdale, and much of south Florida are already developed. There are some swamps, and they’re inaccessible. Huge portions are owned by the government—the U.S. Forest Service, water management, and defense [agencies]—and people can’t live there. We’ve plotted a map with the available developable acres in that edge zone, and we’ve catalogued every coastal lot. If you look at this database, you’ll see there’s no more beachfront. Excluding what St. Joe owns, there’s only one parcel that’s suitable for a master plan community within the 1,700 miles of Florida’s coastline. There are fewer than 50 lots left. Yes, there are condo pads. But there’s virtually no beachfront land left except what St. Joe owns. We own 39 miles along the beach. Our longest piece is in Gulf County, and it’s 3.5 miles. We’ll start selling next year. Being along the edge is what makes something rare and expensive.
ES: Why are housing prices in Florida appreciating so rapidly?
Ray: At the same time you have increasing demand, supply is very constrained and becoming more so. That’s why you see prices increasing. It’s straightforward economics. Now, a further constraint on supply is the approval process. St. Joe’s entitlements pipeline is 35,000 units. That’s the actual supply number where we can build. Everybody has trouble getting approvals. The timeframe is getting longer. Approvals, or entitlements, are so precious that they’re moving up the value chain. We don’t think there’s a bubble.
ES: Why is it becoming harder to gain approval to build in Florida?
Ray: There are parts of society that wish to stop growth. Some parts of the state haven’t done well responding to growth, so you get resistance. There are legitimate concerns about managing people, health care, schools, and transportation. There’s a hometown democracy growing in response to these issues. All of this is being tested.
ES: Are you concerned that Florida is becoming spoiled by growth?
Ray: There are huge parts of the state that are very rural. In northwest Florida we have an opportunity to get ahead of the curve. We think we’re excellent planners. We’re looking out a full generation, maybe two generations, and thinking about how the infrastructure needs to be accommodated. We’re in this for the long term, and we have a high-quality approach. Looking ahead, we see a trend that we call “new ruralism,” which is all about baby boomers moving into a phase of their lives where they’re at the end of primary parenting and they want to connect with something, maybe nature or community. This idea is about diversifying our property for different groups. It’s a concept that has the potential to increase the value of our holdings and make northwest Florida very interesting.