JOE

Day, thank you for standing by. Welcome to The St. Joe Company Q1 2026 Earnings Conference Call. At this time, all participants on a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link at any time during the conference. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker host for today, Mr. Jorge Gonzalez, President, CEO, and Chairman of The St. Joe Company. Please go ahead, sir.

Thank you. Good afternoon. I'm Jorge Gonzalez, President, CEO, and Chairman of The St. Joe Company. It is my pleasure to welcome you to our quarterly earnings call. I'm joined today by Marek Bakun, our Chief Financial Officer. On Wednesday, after the market closed, we issued our first quarter of 2026 earnings press release, which can be found in the investor relations section of our corporate website at joe.com. This afternoon, we are continuing our commitment to quarterly earnings calls to provide our shareholders and the investor community with an opportunity to ask questions about our business and performance. We have always been an open and transparent company that welcomed all feedback and opinions. Because of the types of assets that we own, we always encourage shareholders to visit us in person so they may assess firsthand the progress of the region and of our assets.

If you want to send us questions for later in the call, you may do so by visiting the top right-hand corner of your screen where the words submit a question are visible. Clicking on that text will take you to the text entry box, where you can type in your question and then click submit for later in the call. Before we begin discussing our results and answering your questions, I would like to remind everyone that Wednesday's press release and the statements made during this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission.

Additionally, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. A reconciliation of these measures can be found in our earnings release. Let's go ahead and get started. We assume everyone has already carefully reviewed our earnings release, which provides comprehensive details about our performance. We are only gonna mention a few key highlights of the first quarter before we move on to your questions. For the first quarter, we had a 5% increase in revenue and an 8% increase in operating income. The first quarter revenue of $99.1 million was the company's highest first quarter revenue outside of the one-time timberland sale in 2014. The increase in total revenue included a 13% increase in hospitality revenue and a 4% increase in real estate revenue when compared to the same period last year.

Leasing revenue decreased by 10%, which was primarily due to the sale of the Watercrest senior living property in September of 2025. Net income decreased by 21%, primarily because of a decrease in equity and income from unconsolidated joint ventures. Equity and income was $3.5 million for the quarter when compared to $10.2 million in the first quarter of 2025. The decrease was primarily attributed to a lower home closing volume in the Latitude Margaritaville Watersound unconsolidated joint venture. Latitude is a large-scale, long-term project that will have ebbs and flows in quarterly and even year volume and provides benefits to us beyond its financial performance with consumers for our commercial and the hospitality segments.

We continue to successfully execute our strategy of growing recurring revenue, as evidenced by the first quarter record of $44.7 million in hospitality revenue and $14.7 million in leasing revenue, which together accounted for 60% of the total revenue in the quarter. As a result of the successful execution of the strategy to grow recurring revenue, the company has a sustainable business model that is poised for future growth with a demonstrated ability to grow multiple revenue streams, all while simultaneously increasing the value of the underlying land assets. In addition to the growth in recurring revenue, we are also improving profitability, as evidenced by the increase in gross margins in hospitality and leasing revenue.

As we have previously mentioned, since opening five new hotels in 2023 and expanding our club membership program, we have been focused on improving our hospitality operations and increasing margins. The gross margin improved across all hospitality categories to a total of 24% for the first quarter of 2026 as compared to 18% for the first quarter of 2025. Similarly, we have been focused on improving gross margins and leasing revenue with 61% for the first quarter of 2026 when compared to 55% for the first quarter of 2025. Leasing revenue is not as operationally intensive as hospitality revenue, so the strategy to increase profitability and gross margins is to invest in projects with higher margins and divest from projects with lower margins. We are systematically evaluating our leasing portfolio to execute this strategy.

An example of investment in higher margin projects is the WaterSound Town Center, and an example of divesting is the 2025 sale of the lower margin Watercrest senior living property. In the first quarter, we continued to implement a measured and multifaceted capital allocation strategy. With $20.7 million in capital expenditures primarily for growth, $9.2 million in cash dividends, $5 million in share repurchases, and $10.9 million in reduction of project debt. Project debt is a real cash expense, and not all project debt is the same. The focus of our project debt reduction strategy is on the variable shorter term, higher interest rate debt, like for our hospitality assets, as opposed to our fixed longer term, lower interest rate debt, like for our apartment assets. Outside of the financial numbers, we continue to fill the pipeline for potential future growth.

In the first quarter, we were pleased to announce the execution of a contract with PulteGroup for up to 2,653 home sites in our most recently approved Detailed Specific Area Plan or DSAP. PulteGroup is the third-largest home builder in the country, this is their first entry into the Northwest Florida market. In the first quarter, we were also pleased to execute a long-range utility, water, and sewer agreement with the utility provider that will service the Lake Powell and West Laird DSAPs with the potential for thousands of future residential home sites. Work on this infrastructure is planned to commence later this year. Speaking of the future, most developers and national home builders will admit that two of the most challenging aspects of their future growth are acquiring and entitling land.

In addition to the demonstrated ability to execute our business strategy, it is important to remember that we already own over 165,000 acres of land with many entitlements in the growing part of Florida. Our competitive advantage is clear. Now, Marek and I are going to answer your questions. As a reminder, in the top right-hand corner of the screen, the words Submit a Question are visible. Clicking that text will take you to the text entry box where you can type your question and click Submit. Marek?

Thank you, Jorge Gonzalez. We have a few questions. Can you elaborate on the pace of takedown at Pigeon Creek DSAP? 1,300 home sites is great, but obviously, whether it's over three, five, or 10 years makes a big difference. Also, are there protections in the takedown schedule as it relates to the value of the land?

Thank you for the question. First of all, as I mentioned in my opening remarks, we're really happy, really pleased with the execution of the agreement with PulteGroup. PulteGroup is the third-largest national home builder in the country. They obviously made the decision to enter this market, and it's the first time they are in the Northwest Florida market because they see the growth potential of the market. We're very pleased with the addition of PulteGroup to our builder group, and builder relationships. The best way to answer the question is ultimately, pace is set by market. PulteGroup is planning on having various product types in this community.

Each product type will be a little bit different in terms of pricing, the consumer that will be interested in that product. In terms of the agreement itself, we learn every time we do an agreement, particularly of this scale or similar scale, going back to many years ago. We learn, we understand how things end up happening in the field in real life, and we adjust. Certainly, all those lessons that we've learned over the years are lessons that we've incorporated in this agreement and will continue to incorporate in subsequent agreements. Yep.

Jorge, just adding, our disclosure was intentional. We use the term significant variable of revenue and because we do have built-in protections as the question requests.

One last thing. When you look at agreements that we executed five, six, seven years ago, those agreements had a time and place and a context. Certainly, the way that we look at new agreements is based on lessons learned and based on what's happening in the market at the moment.

Next question. There was a nice uptick in the RevPAR at the hotels this quarter. Was any of that attributable to the New York City marketing campaign?

Thank you for the question. The majority of the uptick was organic. So far we've been pleased with the early part of season in our hospitality segment. We have been tracking very carefully the increase in bookings from the New York City market that may be based on the campaign that we launched in December. We are cautiously optimistic. We're pleased. It's still very early in the campaign. We're in the process of assessing the campaign as we've been measuring every day in making decisions about future phases of the campaign. Again, the growth that the question asks about in terms of RevPAR, we believe is primarily organic.

Based on the measurement we've been doing, on the New York City market, we have seen an increase from that market in booking so far this year.

With strong national demand for data centers driven by AI, have you considered or pursued marketing positions of VentureCrossings Enterprise Centre for data center development? If so, how does that fit into your recurring revenue and land monetization strategy?

We have had discussions with those type of users specifically about VentureCrossings. In terms of the business structure and specific to the question of how we would monetize it, like we do in all of those discussions, we would have conversations about a ground lease potentially, which would be a recurring revenue, and or potentially a sale depending on facts and circumstances, and time frame and various different factors. Yes, we've had discussions with those type of users specific to that location.

Can you provide additional color on the brokerage revenue, either by county, average transaction value, or number of transactions?

We've been so far very pleased with the commencement of the real estate brokerage agency. We started in one location, the WaterColor Town Center. We quickly opened in a second location, the WaterSound Town Center. We have plans right now to open three additional locations. Those three additional locations will be two in Bay County and one in Walton County. We've been pleased with the reception from the agent community. We have received a lot of interest from agents in joining the agency. We still don't have a full year worth of data. The agency literally opened its doors right before summer of last year.

After we finish this year, we're gonna have one full year of data, and that's the kind of data that we'll look at and make some decisions on moving forward.

Pier Park City Center is a beautiful location. When do you expect lease payments to start on the surf park? Has there been any progress towards monetizing the space beyond the surf park?

The answer to both questions is yes. We've made significant progress with the surf park. In terms of when that project is gonna commence, it's gonna be relatively soon. We do have plans and have been in discussion with other potential users in that location. We're being very thoughtful about the users that go into that location because it's a special location. It's a special piece of property in the middle of Panama City Beach, where there's a lot of energy, a lot of activity. We're being very thoughtful about the type of users that should go to Pier Park City Center. Yes, we have made progress on both counts of the question.

Southwood was part of the residential under contract dollar numbers last quarter. Did something change in the contract with SouthWood that led you to remove it this quarter? The answer is no, there have been no changes to the contract. With adding Pigeon Creek, contract, which is a long-term contract, in the quarter, it made more sense to show it excluding the dollars related to those two specific contracts. There were no changes to the actual contract itself. Over the past several years, not only has migration seemingly accelerated, but also local migration seems to really be picking up, with more folks leaving the area south of Highway 98 to go north of it.

The area on both sides of 331 below the bridge are one of the hottest in the region, and I'm curious if, given that we have over 20,000 entitlement homes in Walton County, including over 3,000 listed in the pipeline, if we are looking to accelerate our offerings from current pace. Given local demand and price points being paid for lots, it does not seem unrealistic for St. Joe to be selling at 250-300 home sites per year in Walton County at prices of at least $250,000 per lot, should we open things up to more than just the current small group of builders. It seems really evident that there is not only demand, but also willingness for folks to pay premiums to current pricing if we open things up a bit.

Is this something we're able to do in the next few years?

Thank you for the question. It's a great question, and we agree, by the way, with the majority of the observations made in the question. Couple different answers to that question. Number one, pace is ultimately determined by market. One of the things that we always try to be very careful with, we try to have product and inventory available to meet market demand. We also don't wanna get too far ahead of market demand where we have inventory sitting in the ground for too many years, where we could be using that capital for other purposes like buying shares back, for example.

It's a delicate balance of making sure that we have inventory to meet the demand but not overextend ourselves in a way where we risk capital being in the ground for too many years where we could be using that capital for share repurchase. We have opened it up quite a bit. An example is Camp Creek. Just about every custom home builder has participated in Camp Creek, and they're building homes and have built homes in Camp Creek. In Origins, I wouldn't say we have a small group of builders. We have five or six builders right now, and we're always talking to three or four new ones. We're currently doing that right now. We do agree with the sentiment of the question.

We do agree with the great things that are happening in Walton County and the demand. We feel very bullish about how the company's positioned to meet that demand at the highest prices and highest margins possible.

The regional growth story remains very strong, yet St. Joe current commercial development activities seem modest compared to the broader market pace. As the dominant landowner, how are you thinking about this? Should we expect St. Joe to take a larger percentage of the area's development activity at some point? How are you thinking about the pros and cons of becoming a more active commercial developer?

Commercial development. Great question. Commercial development, similar to residential, there's a market component to that. In terms of how proactive we're gonna be, obviously it's gonna be dependent on market demand. I will say this, and I've mentioned it before, we have mentioned it before in earnings releases, and in earnings calls, we are getting a lot more calls from prospective commercial tenants, particularly national tenants, than we ever have. Many years ago when we started this journey and started really almost from scratch, in terms of building our commercial leasing portfolio, we weren't getting a lot of those phone calls. We were the ones making phone calls.

But now, we are getting a lot more phone calls, particularly from national retailers, which is very encouraging. If that trend continues, we're certainly gonna make decisions to meet that demand and accelerate our commercial development.

Yeah. Just adding to that, again, I think the market demand and our goal is always to have a high lease percentage as well out there. Building for market demand is important. Latitude available lots are declining. When would you expect to add more lots to that partnership, and do you expect it would be contiguous to the existing project?

We've been in discussion with our partner about the next phase. We've made some really good progress in those discussions. Yes, it would be to the immediate west of the existing joint venture.

Do you see a point at which the Watersound Club membership will be full until more facilities are built? Example, golf course, tennis, gym amenities, et cetera. If so, what is the approximate number?

Well, we've made some significant investments in facilities for the club to expand capacity in the last few years. Obviously Camp Creek, which is a very sizable facility that accommodates a lot of different activities for our club members. That was a very significant expansion of capacity for our club membership program. The other one, of course, is the opening of a brand-new golf course, the third, which opened last year. We have been expanding facilities. We constantly are having discussions about where are we gonna do the next new facilities, what's gonna be the programming that's gonna be involved in those facilities, constantly monitoring capacity usage, and also trying to create more experiences for our members.

At this moment, we feel our existing facilities have a good balance of usage. We don't think we're at capacity, but we're constantly planning and looking at where the new facilities are gonna be.

There was a $5 million change within the other expense line item in the Latitude joint venture this quarter. Could you give us more color on what drove this, and if it will continue into the future quarters? Looking at the disclosures, the costs are very consistent. There are no operating cost changes. The income was pure driven by volume, the number of closings that were delivered in a quarter compared to the first quarter of 2025. There were no real changes in cost. The actual margins on a per unit were actually above the margins a year ago quarter. Any updates or information on the custom home sites near the future Art Park? Anticipate a number of lots.

We have been planning another custom residential home site product in Origins West to the west of the Art Park that's in a planning process right now. We don't have the specifics yet in terms of the number of home sites, the timeframe, but it is a real project that we're planning. We've done some preliminary development work in that phase. Look for us to share more information about that project in the subsequent weeks and months.

Is there any color you can give us on recent migration, population, or even tourism growth and trends in the Bay Walton area? If you don't have any quantitative figures, even anecdotal examples would be greatly appreciated.

Yeah. I think the beyond the tables and charts and data, which certainly show that the migration and the tourism in our region is growing, maybe a good way I can answer that is how does it feel to us since we're in the market every day. It still feels really positive. It feels like the migration is continuing, not only in terms of numbers, but also in terms of the broadening of the geography where the migration is coming from. The migration is not just coming from historical locations. They're coming from places that haven't been historical in terms of where people have moved from to our area in the past.

Similar with our hospitality segment in terms of tourists and guests in our hotels, we continue to feel that we're seeing more and more guests in our hotels from a broader range of locations, and we're seeing a good uptick in our occupancy and rates as one of the earlier questions noted. Obviously, our first quarter results for hospitality show a pretty good uptick in revenue, which is really a by-product of what we feel the migration is continuing, and we feel the awareness about our region from a broader range of locations in the country is continuing.

Any notable updates on the Intracoastal Waterway Marina?

We started work on that marina. We still have a couple more permits that we have to obtain. We're in the process of obtaining those permits. Once we do, we're gonna accelerate the work that has been done on that marina. We still feel really good, really positive about the market demand for that marina. We don't see any major regulatory challenges in terms of obtaining those permits. It's just a process. As soon as we get the final permits, we're gonna move forward and finalize the marina.

Based on lot sales and lots under development, it seems like there has been an increase in activity demand growth at WindMark. Can you give us some color on what's going on there? What future plans and opportunities could occur there and in the area?

We feel the residential component of WindMark has been one of our success stories. We've been very pleased with the results of WindMark ever since we made the decision to partner with that one builder. The pace has been pretty good. We see the traffic and the demand continuing in the pipeline continuing to be very positive. We're meeting the demand that the builder is experiencing in their home sales. In terms of future, we're always assessing what other areas can we look at in that market. Again, we feel very positive about WindMark. We think it's a success story in terms of the residential component and constantly assessing future opportunities.

Clubs seem to be doing very well. Given the timelines for development and also perhaps a little bit of growing pains related to the size and success of what it has become, do you think it makes sense to accelerate the Lake Powell amenity or anything north of 98? The truth of development is that it can take a long time. The marina has been at various stages of progress for over half a decade. I'd imagine now the club amenities are at least three years out at best. My concern is that because of this, future growth or even quality of club may be limited until more opens up. Can you share your thoughts on this and elaborate perhaps on the timelines?

Great question, part of the answer is what I mentioned earlier. In terms of the capacity of our club, the experiences our members are having in adding future capacity, that's something that we look at and evaluate constantly. Right now we feel we're in a really good place. You don't wanna be on either extreme where there's more demand than capacity or way more capacity than demand. We feel we're in a good place right now. We're balanced in terms of the demand and capacity that's available. We do have several new amenities that we have been planning. We have mentioned before one of them is in Lake Powell. We're actively in the planning and design process for that amenity.

In terms of when we would start construction, we don't have an exact timeframe yet. We're also looking at other locations for future club amenities. But again, we don't wanna be too far ahead where we have too much capacity for the usage. But at the same time, we don't wanna be behind either. Right now we feel we're in a sweet spot, where we feel we are pretty balanced.

What is the expected timeline for starting to realize revenue from home sites at Pigeon Creek and also Southwood?

Pigeon Creek, in terms of closings, it's probably gonna be early part of 2028, excuse me, 2027. We are actively working on the engineering and permitting of the first phase of Pigeon Creek, working very closely with PulteGroup. In terms of closings, transactions, realizing revenue, probably first part of 2027. In terms of Southwood, in Southwood, we don't have a home site development strategy. In Southwood, we sell tracts with master infrastructure to home builders. We've got several contracts that we're working on, and we're always in discussion with home builders in that market who wanna purchase those tracts.

How can we interpret the increase in the advanced deposits figure as a year-over-year increase in bookings demand when it comes to hotels?

Like I said before, so far, we feel pretty good about the start that we've had to the season. Our revenue numbers for the first quarter show that. Even looking beyond the first quarter and looking at what we have in terms of bookings and just how does it feel, how does the demand feel, we feel pretty good. We are cautiously optimistic that our hospitality segment is gonna have a good year and a good season this year.

Okay. There are no more questions.

Let's give it a couple more minutes in case there's any last-minute questions. These have all been great questions. We always greatly appreciate the quality of the questions, the depth of knowledge that the individuals asking the questions have about our business, about our region. Those type of questions only make us better, so we really greatly appreciate the quality of the questions. Okay. We don't see any more questions. Again, thank you for joining us today. We appreciate your interest in us, in our company, and we look forward to speaking with you again next quarter. As a quick reminder, we are holding our annual meeting of shareholders on May 12 at 9:00 A.M. Central Time at Camp Creek Inn. We hope to see many of you then. Thank you.

Good day, and thank you for standing by. Welcome to The St. Joe Company Fourth Quarter 2025 Earnings Conference. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your speaker today, Jorge Gonzalez, Chairman and CEO of The St. Joe Company. Please go ahead.

Thank you, and good morning. I'm Jorge Gonzalez, President, CEO and Chairman of The St. Joe Company. It is my pleasure to welcome you to our quarterly earnings call. I'm joined today by Marek Bakun, our Chief Financial Officer. On Wednesday after the market closed, we issued our fourth quarter and full year 2025 earnings press release, which can be found in the Investors section of our corporate website at joe.com. [Operator Instructions] Before we begin discussing our results and answering your questions, I would like to remind everyone that Wednesday's press release and the statements made during this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that can cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission. Additionally, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. A reconciliation of these measures can be found in our earnings release. This morning, we are continuing our commitment to quarterly earnings calls to provide our shareholders and the investor community with an opportunity to ask questions about our business and performance. We have always been an open and transparent company that welcomes all feedback and opinions. Because of the types of assets that we own, we encourage shareholders to visit us in person so they may assess firsthand the progress of the region and of our assets. Let's go ahead and get started. We assume everyone has already carefully reviewed our earnings release, which provides comprehensive details about our performance, so we are only going to mention a few key highlights of both the fourth quarter and full year before we move on to your questions. For the fourth quarter, we continued the year-over-year growth of the previous 3 quarters with a 24% increase in revenue and a 58% increase in net income. Capital allocation in the fourth quarter was $18.5 million in capital expenditures, primarily for growth, $15.1 million for stock repurchase, $9.2 million for dividends and $8 million for debt reduction. The $15.1 million in stock repurchase was the highest of any quarter in 2025. For the full year, revenue increased by 27% to $513.2 million from $402.7 million, and net income increased by 56% to $115.6 million from $74.2 million. Earnings per share increased to $2 from $1.27. Not including the onetime large timberland sale in 2014, we surpassed $500 million in revenue for the first time in 20 years and reached $2 per share for the first time in 23 years. However, we are now a different company than we were 20 years ago. Back then, the company's financial performance was achieved primarily as a bulk seller of assets with only 15% recurring revenue. Today, the company is a diversified real estate operating company with 56% recurring revenue. The company now has a more sustainable and diverse business model with a demonstrated ability to grow multiple revenue streams, all while simultaneously increasing the value of the underlying land assets and what we call the virtuous circle of value creation, where an investment in one segment creates value for the other segments. In addition to the growth we had for the full year, we continue to refine our operations and improve profitability. Homesite gross margins increased to 51% from 47%. Leasing gross margins increased to 57% from 54%. Hospitality gross margins had a slight decrease to 31% from 32%, which was primarily due to opening expenses associated with the new golf course, The Third, and the renovation of the Shark's Tooth Clubhouse. It is important to note that the hospitality gross margin of 32% in 2024 was a significant increase from 20% in 2023. For the full year, we continued a measured and multifaceted capital allocation strategy, with 47% for capital expenditures, primarily for growth, 33% for dividend payments and stock repurchases and 20% for project debt reduction. We accelerated stock repurchases with the repurchase of 798,622 shares as compared with a repurchase of 70,985 shares in 2024. The average price of shares repurchased in 2025 was $50.10, which considering the share price as of the close of the market yesterday, it was a good value for our shareholders. Since 2015, the company has used $653.6 million to repurchase 34.9 million shares of the company's stock, representing 37.8% of the original shares, bringing the outstanding share balance below 58 million for the first time in nearly 30 years. Outside of the financial numbers, we continue to fill the pipeline for potential future growth. We have local and state government approval for 10 detailed specific area plans, or DSAP, each with at least 1,000 acres of fully entitled mixed-use projects. We have only started to develop 3 of the 10 approved DSAPs, so we have a long runway for future growth. An encouraging sign is that we continue to receive inquiries from new potential homebuilders from outside of this market who want to join our homebuilder program. So we plan on breaking ground on 2 more DSAPs in 2026 to accommodate our growing homebuilder demand. At the end of the year, our residential homesite pipeline had approximately 23,900 homesites in various stages of planning, engineering, permitting or development, which is an increase of 2,200 homesites as compared to the end of 2024. At the end of the year, our commercial segment had 94,500 square feet under construction in the WaterSound Town Center and West Bay Center, of which approximately 76% is preleased. We continue to receive inquiries from national and regional tenants who are noticing the growth of this market and are interested in leasing space from us. In order to continue to meet this growing demand, in 2026, we plan on breaking ground on new commercial buildings in the WaterSound Town Center and West Bay Center totaling approximately 54,000 square feet. We are also planning on breaking ground in a new apartment complex and executing several new commercial ground leases. In our hospitality segment, we continue to increase our club membership program, and we continue to be focused on increasing occupancy and margins in our hotels while continuing to assess and plan for opportunities for new hotels, marinas and club amenities. Now Marek and I are going to answer your questions. [Operator Instructions] We're going to do this in the same way that we've done the last several calls. Marek is going to read the questions and then we're going to answer them. Marek?

Thank you, Jorge. We have a few questions. The first one, are there any new multifamily units on the horizon for 2026 or 2027, any new hotel operations or acquisitions planned?

In my opening remarks, I mentioned that we do have plans on breaking ground in a new apartment complex. The location of it is really focused on the potential of the FSU Health campus. So it's in that vicinity. The -- in terms of new hotels, we're constantly planning and getting prepared for the right timing of when we may move forward with new hotels. Similar with acquisitions, we're always looking at the market, and if the timing is good and there's an opportunity for us to gain value, we will execute those opportunities.

Next question. After the opening of Topgolf at the Pier Park, any new developments coming in the near future, for the area?

So Pier Park East is an important project for us. We believe that is going to be the city center of the Pier Park area. We are being very thoughtful in planning that property and in choosing tenants. We've always wanted to have 2 major anchors for Pier Park East. We have one, as the questioner asked, in Topgolf. The second anchor, we're pleased to report that we finalized a ground lease with a really exciting family-oriented surf park concept. So that's going to be the second anchor for Pier Park East. We're currently in the process of planning the balance of that property, including potentially breaking ground on infrastructure in 2026.

Share prices have climbed nearly 40% since the last quarter. Does management still view buybacks as a prudent allocation of capital at this price?

Capital allocation, as we've said many times, is multifaceted for us and buying shares back is always a component of capital allocation. Also, as we've said many times, there's a facts and substances context to that depending on what's happening in the quarter at the macro and micro level. But the short answer to the question is, yes.

Awesome year. Why pay down debt here when the stock seems unusually priced relative to the per acre implied value? So interest is a real dollar expense, minimizing interest and increasing earnings is always a positive. As Jorge just mentioned, in 2025, 47% of our capital was allocated for dividends and repurchases. At the same time, we were able to pay down debt. Some of the debt that was paid down was related to the Watercrest sale, but we feel that lowering interest is always a positive.

And I think, if I can just add, anybody that has owned or run a business before, understands the importance of paying down project debt because it is not a GAAP expense, it's a real cash expense.

Can you help break down the 47% year-over-year increase in real estate revenue in Q4? The higher average price on homesite sales and the sale of the 136 North Splash Drive plus Watersound Villas make up some of the lower homesite sales number. But what accounts for the rest of the delta, higher residuals? So specifically to the residuals, we do disclose in our 10-K the flow-through of the residuals. And just for the full year, there was $13.6 million of new residuals that did go across all 4 quarters. But yes, there were residuals. But in addition to the average sales price, the villas of the townhome sales, there were also normal land sales that we have had and will continue to have within the company. So that really details it out just through normal activity that we have. How are you thinking about replacing the high-value homesites at Camp Creek as we start running out of lots? Are there plans for other similar high-price point neighborhoods, more commercial land sales?

We always think about having a higher end retail custom homesite product. It's not just Camp Creek. We've also done that in Origins as an example, Powell Landing West, where we sold quite a few retail custom homesites at a very high value. We are in the process of planning and permitting a replacement product, and they're not exact replacements. There is some overlap in terms of pricing and so forth. This one is going to be in Origins West right next to a very exciting art park that we think is going to be very attractive to residents. We don't have an exact time frame for this new product, but we are pretty far along in the planning and permitting of this neighborhood.

Do you have any updates on lake amenity or Pigeon Creek neighborhood?

So the lake amenity is, I believe, referencing an amenity that we have been planning on Lake Powell for the Watersound Club. We are pretty far along in planning that concept. We're spending a lot of time thinking about the right programming. And it's a project that we feel really good about, but we're still in the planning phase -- programming phase. Pigeon Creek is one of the DSAPs that we have talked about before. We have been in discussion with one builder that's going to be new to the market for this project. We are pretty far along in those discussions, and we feel cautiously optimistic about executing those discussions into action relatively soon.

And with a relative question, what is the status and current timing around Pigeon Creek? At the Annual Meeting and prior calls, it was mentioned that the lots could possibly be sold outright to a single developer. Is this still on the table? And is there any update or timing?

So first, what we said at the Annual Meeting was that Pigeon Creek, even though it's sizable, over 3,000 potential units, what we said is that we're in discussion with just one builder. We never indicated that we had a particular preference for a business structure on that project. So that still holds true. We're in discussion with one homebuilder who is new to the market for all of Pigeon Creek, which is over 3,000 units. And like I said in the previous answer to the previous question, we're pretty far along in those discussions, and we're cautiously optimistic that we'll be able to execute those discussions into action relatively soon.

Could you talk about the progress of some of the big projects along State Road 79 corridor? FSU Health Campus, potential commercial around it and potential new residential builders along the corridor?

State Road 79, as I mentioned in our last Annual Meeting is an area of our land holdings that currently has a lot of energy, a lot of interest. In fact, we created a video in case the listeners want to take a look at it. You can go to our web page about the State Road 79 corridor. Ward Creek is moving along very nicely with our 4 homebuilders constructing homes with a pretty wide range of price and product types. The FSU Health Campus is very exciting. It is progressing very well. The first phase of that campus, as most listeners know, a medical office building, 80,000 square feet, has been finished for a couple of years. It is essentially full with clinical practitioners. The second phase is a teaching hospital, an academic health center that takes advantage of the synergies between research, teaching and clinical delivery. It's going to be under the FSU Health concept. That hospital is progressing well. We believe it's going to be a pretty significant catalyst, not only for the State Road 79 corridor, but for the region, not just because the fact that it's a hospital and there's clinical delivery that will occur there, but because of the academic health center model, where research and teaching are also going to add a significant amount of value to that region -- to that part of our holdings in the region.

Your LTV is under 25% when looking at your income-producing assets. Your LTV is well below 25%, and your cost of debt is in the low single digits. Why do you believe that paying down debt is a good use of capital? Why isn't the ideal -- what is the -- why isn't the ideal debt level a lot higher than where you are today?

So like I said before, anybody that has owned the business, has run a business, they understand the importance of managing debt because at the end of the day, cash is king. Cash is what matters. Free cash flow is what matters. And when you have real expense associated with debt, it makes sense for that to be part of the capital allocation strategy. We've been very thoughtful, very methodical in how we pay down debt. And we feel pretty good about what we've done so far, and we intend to continue the same strategy.

And Jorge, if I may add, I want to say that not all debt that we have is equal. So if I look at the apartments debt, which is long-term HUD insured up to 42 years at a very low fixed rate, that's the type of debt that we're not paying down. It's just amortizing over normal life. It's the debt that's shorter life that we may choose to pay down and to save interest. But as far as the debt, as you mentioned, the new apartment community, it would be normal and consistent with our strategy to have debt on the new apartment community, especially if we could continue to obtain long-term HUD insured financing.

Absolutely. And that's what we mean about us being thoughtful in how we pay down our project debt. We're not doing that randomly in across kind of a -- from a top line perspective. We're looking at each project, we're looking at the specifics of the debt of each project, and the ones that we believe are going to create a savings for the company, we're going to pay down that debt. And generally speaking, as Marek said, the debt we have, the HUD loans we have for our apartments are terrific. We have yet to find any program as good as the HUD loan program for apartments. So we do intend to continue when we have apartments to follow that loan program. And we're also not paying down the debt for the apartments. We're paying the debt down for projects that have higher interest rates and kind of present more challenges for us.

Thank you for all the hard work. Greatly appreciate this call, and management continued execution in recent years. Over the past 10 years, there appears to be a high correlation between return on investment capital, earnings per share and the stock price. In 2023 and 2024, the company's recurring income grew significantly, but earnings per share, return on invested capital declined as a result of lower lot income and land or asset sales. During this period, Joe's stock price underperformed. Over the past 12 months, earnings per share and return on invested capital have increased meaningfully, heavily driven by increase in income and asset sales and the stock price has gone up considerably. Assuming we all agree the company's NAV is meaningfully higher than the current stock price, does the company agree that future stock appreciation is highly dependent on the company's ability to continue growing EPS and increasing return on investment capital from its current levels? And the company -- and is the company aware of the importance of driving return on investment capital growth when it comes to long-term stock performance? Thank you again.

That's a very insightful, detailed and well thought-through question. And the best way we can answer that is with a simple yes.

Over the past year, in areas surrounding St. Joe's land as well as areas immediately adjacent to our developments, there have been numerous lot sale transactions at significant premiums to where we have been selling lots. Just last year, D.R. Horton appeared to have paid $146,000 per lot near Breakfast Point. Lots in SweetBay in Panama City were recently sold for over $130,000 per lot. Even at lowest entry level in Freeport, lots have been selling to -- close to $100,000 each. These lot prices appear to be significantly higher than what St. Joe has been transacting even as recently as this year. i.e., low to high 80s, 90s at Breakfast Point or around $90,000 at Breakfast Point East. Furthermore, these transactions seem to be a typical market -- at typical market rates of 20% or more of the eventual home price, and we seem to be selling our lots at a discount to these rates, in some cases, low teens, if I'm willing to be correctly. My belief is that some of the lowest hanging fruit as it relates to materially growing our cash flows is the coming -- in the coming years, especially in more DSAPs come online is to bring MPC low prices to level that most appropriately reflects market value, i.e., 20% to 25% of finished home price. Furthermore, given our competitive positioning in the area, it's hard to understand why we would not be more of a price maker than a price taker? Is this something you can elaborate on? Thank you.

Again, another long and thoughtful and detailed question, and I can assure the individual who submitted the question, this is something that we monitor very closely, literally every day. We have a pretty good handle on what's happening in the market with direct competitors. Not all communities are direct competitors to our communities. I can also assure the questioner that we don't sell lots at a discount. One of the things that may not be obvious to folks is, we believe we're the only developer that has a back-end participation when we sell homesites to builders. We don't believe anybody else in the market has that. So when you just go on the Property Appraiser web page and just take a quick simple look at comps, you have to be careful, and I caution readers not to assume that, that's an apple to an apple with our transactions with homebuilders because again, we're the only developer to our knowledge that has a back-end participation where we get a part of the profit of the sales price of the home that the builder sells. Our back-end participation is also not uniformed. It's not one size fits all. They're all different based on the homebuilder, based on the price point, based on the community. So again, I would caution folks when they go on the Property Appraiser web page to take a look at comps that there's a couple of layers deeper than that, particularly with us because of the back-end participation. I will also assure the questioner that we don't sell lots at a discount.

What is the company's short- and long-term goals for the percent of revenue that is recurring?

Our -- probably we have several different important parts of our business strategy. And as most -- everybody knows, arguably, the most important one is to continue to grow recurring revenue. So that is going to continue to be an important part of our business strategy, and we want to continue to grow our reoccurring revenue because that is a more sustainable and scalable revenue stream than just pure transactions.

How is AI going to be implemented into the infrastructure of operations inside of St. Joe?

Like every operating company and business in really not just the country, but the world, we continue to explore AI as a tool to improve our operations, like everybody else is doing. It's an emerging technology. It's very dynamic. It changes literally day-to-day, and we continue to explore how we can use those tools to improve the efficiency of our operations.

What is the company's estimate of the average value per unused acre of land in the portfolio? And if answered per developable acre of land, then please disclose how many acres of land will not be able to be developed? Thank you.

That's a question that requires a lot of time to respond to because there are many different layers of what makes an acre developable, not developable. There's a lot of different layers of different types of development, different types of open space, green space conservation. We don't have a one-size-fits-all number. We have -- if you look at our previous disclosures, we do have a lot of different information in our tables and in our footnotes that perhaps if somebody just read those and put them together, they can start making some assumptions. But there's not a one-size-fits-all headline number to answer the question.

And Jorge, just, under disclosure, as you mentioned, we have also disclosed, including in last year's shareholder meeting presentation, how many acres we have been using on an annual basis to generate the revenue that we have been generating. So that data is also available for a number of years back. That would be a good way to think about it. Based on the current market demand and pricing, what's you're planning to develop? Do you think you can achieve $750,000-plus lot prices on our future premium communities?

Like I said to an earlier question, our goal is always to have a high-end premium retail custom lot product. It's going to ebb and flow over time in terms of location, in terms of what the actual price is. So yes, we're always working at trying to create the highest premium, the highest value communities in the region.

I've noticed you guys typically transfer land to LLCs when a monetization event is on the horizon. In this slide, you recently transferred land atop sale the parcel across from Powder Room and the Pier Park City Center into such entities. You mentioned the surf park at city center, would you care to detail the other 2 locations, and how/when you envision the monetization occurring?

When we create LLCs or special purpose entities for our projects or land holdings, it's not exclusively because we intend to transact or sell that asset. There's a couple of different reasons why we do that. So I wouldn't just assume that just because we created an LLC, it means that we're anticipating selling an asset. As I mentioned during the last earnings call, we are looking at all of our assets because we consider particularly all of our operating assets as piggy banks. I have said that many times before. We have said that many times before. We're constantly looking at the piggy banks and making assessments about how those piggy banks fit in to the broader strategy of the company, how accretive they are to our other segments and what return they provide to us and what would be the price if we monetize them right now. So when we look at all those factors, we will -- we get conclusions where some assets we believe they are in the best interest of the company to monetize and sell, others are not.

Any color you can provide on how the nonstop flight from New York has been performing for Delta? Do you think the flight is here to stay?

So to answer the last question first, time will tell. It's still early. So it's very difficult for Delta or anybody to say definitively what the long-term plans are. But I can tell you, preliminarily, we believe it's been performing well. We have started a campaign to increase awareness in that market. And so far, we're pleased with the early results of that campaign in terms of how many folks in that market go to our web pages to look at hospitality offerings. Also, that has translated and has started to translate into higher occupancies and reservations from that market. So early preliminary results are, we're encouraged. We're cautiously optimistic. And we hope that not only is the flight here to stay, but our hope is that Delta will add flights because the demand is so great.

One more question. Great to see the brokerage business growing. Could you talk about the progress there? And anything that surprised you with how it's been received in the market?

The biggest surprise is the reception from the agent community. We have been very surprised in a positive way about how many agents call us expressing an interest in joining our brokerage. We had anticipated some of that would happen, but not to the scale that we have. And yes, we're pretty pleased with the start of the brokerage business. It's just in -- it's still in its infancy. So we still have a lot of way to go in terms of achieving our business goals with it. But so far, we have been very pleased with the reception of the agent community and the way that business is progressing.

Okay. Is there any new info on West Bay Parkway Walton segment? It is good to see that at least part of the road is underway.

We 100% agree. We also are very happy to see that, that part of the road is underway. We continue to work very closely with the transportation planning organizations, with the FDOT in moving forward with the next step in the process, which is in civil engineering and permitting of the road. There's been good progress made on that end, and we are cautiously optimistic about the road and the potential timing.

There are no more questions.

Okay. We'll wait just 1 more second in case there's a last-minute question. Okay. I think then that's the last question. Thank you again for joining us today, and for your interest in The St. Joe Company, and look forward to speaking with you again next quarter. And again, we welcome anybody and everybody to come to our market and look at the area and look at our assets. Thank you.

Thank you.

This concludes today's conference. Thank you for participating. You may now disconnect.