St. Joe Company Stock

Good day, and thank you for standing by. Welcome to the St. Joe Company Second Quarter 2026 Earnings Call. [Operator Instructions] Please be advised this call is being recorded.

I'd now like to hand the conference over to your speaker today, Jorge Gonzalez, President, CEO and Chairman 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 second quarter of 2026 earnings press release, which can be found in the Investor Relations section of our corporate website at joe.com. 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.

If you like 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 word 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.

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. So we are only going to mention a few key highlights of the second quarter before we move on to your questions. We had a strong second quarter with total revenue increasing by 23% and net income increasing by 37% compared to the second quarter of 2025. The total revenue of $158.9 million was the highest in the second quarter in 20 years and the net income of $40.5 million was the highest in the second quarter in the company's history, not including the one-off gain on the sale of discontinued operations in 1996.

In addition to this growth, the company is also becoming more profitable with an increase in the gross margins of every segment. The gross margins in the residential segment increased to 48% from 45%. The hospitality segment increased to 42% from 39%, and the commercial segment increased to 65% from 57%. This growth in gross margin demonstrates our emphasis on profitability while we continue to scale up and grow. The increase in profitability is in part due to our continued focus on refining and improving operations.

In addition, we systematically evaluate our operating assets to identify nonstrategic lower-margin assets for their potential disposition. In the short term, these decisions may cause a slight reduction in revenue inside of the segment, but an increase in income and profitability as evidenced by last year's sale of the Watercrest Senior Living Community property in the commercial segment. This strategy is being executed with a deliberate and thoughtful process that seeks to maximize the value of these assets based on timing and market conditions.

Residential real estate revenue grew by 39% in the second quarter when compared to the prior year. This growth is in part due to the diverse portfolio of our residential communities, which contain a mixture of price points and product types to accommodate a wide cross-section of consumers moving to our region. The new home prices in our communities range from the high $200,000 to over $5 million. This diversity is deliberate to help insulate the residential segment from volatility in the market conditions of any one price point.

Later this year, the company plans on commencing the development of 2 utility corridors, one that will serve the future residential communities in the Lake Powell and West Laird Detail Specific Area Plans or DSAPs, and the other that will serve the Pigeon Creek and West Bay Creek DSAPs. These types of off-site utility extensions are capital intensive but necessary feeding to harvest many thousands of future residential homesites in these DSAPs. It is important to remember that because of the 1- to 2-year seeding and harvesting cycles and the mixture of homesite pricing, the results of the residential segment are not linear and may vary from quarter-to-quarter.

In the second quarter, we continued to implement a measured and multifaceted capital allocation strategy. We repurchased $32.7 million of the company's common stock, funded $24 million for capital expenditures, primarily for future growth, repaid $10.9 million of debt and paid $9.1 million in cash dividends. The allocation broke down is 43% for stock repurchases, 31% for capital expenditures, 14% for debt reduction and 12% for cash dividends. More than half or 55% of the capital allocation in the second quarter was to shareholders through stock repurchases and cash dividends.

As of July 27, the company had repurchased [ $41 million ] of common stock in 2026 when compared to $40 million in all of 2025. As of the same date, the company now has 56,930,451 outstanding shares, which is the lowest number of outstanding shares in nearly 30 years. With 165,000 acres of mostly entitled land in one of the fastest-growing areas of Florida and a diverse operations platform with a proven track record of growing revenue, increasing profitability, distributing profits to shareholders, reducing the number of outstanding shares and planning for the future, the company is uniquely positioned like few other companies.

Now Marek and I are going to answer your questions. [Operator Instructions]

Thank you, Jorge. First question, estimated residuals grew this quarter. Origins looks to have added to residuals. Did homesites in Bay County add to the estimated residual balance this quarter?

Yes. The answer to the question is homesites and Bay County did add to the estimated residual balance to this quarter.

Yes. And just to add a little bit, the increase was driven by higher price point communities. For the first half of 2026, we booked a total of $14.6 million of new true-ups, but we've also collected $5.3 million worth of existing true-ups. The buyback pace this quarter was appreciated. Given your tireless work increasing the value of land holdings, it was also nice to see some of the piggy banks open along with the operating improvements funding this capital allocation.

Thank you for the comment. We appreciate it. That is part of our measured and multifaceted capital allocation strategy, which we are planning to continue.

How is the new hospital on Highway 79 progressing?

The new hospital, which again, is an academic health center model with teaching research and clinical delivery or teaching hospital is progressing well. Construction is ongoing. There are many other components of operations that are in the works. The anticipated completion of that hospital is still in 2028.

While record quarterly income is notable, I believe the across-the-board increase in margins and the 50% growth in net income on a trailing 12-month basis on lower amount of invested capital is far more indicative of the superb job done by management when it comes to maximizing long-term value of this great company and assets. In regards to capital allocation, when the company looks at buybacks as a capital allocation tool, are you doing via a long-term model, i.e., are you thinking about [indiscernible] terms of can we reduce the share count by a certain percentage over a 5- or 10-year period? And how allocation along [indiscernible] will be able to impact future earnings on a per share basis?

Thank you for the question. That's a great question. Our capital allocation strategy and specifically our share buyback strategy is based on a longer-term model.

As the region continues to grow, are you attracting new interest from investment institutions in St. Joe? The company who have not visited the region before?

Obviously, we can't answer the question of individuals or institutions that haven't called us, but we, on a regular basis, do host entities that have not been here before that are looking at the company and the region.

Given another great quarter, what is management doing to attract more sell-side coverage? This is an amazing story to tell.

It's not something that is a primary focus of ours. But obviously, if there's an interest in that, we would speak to whoever has an interest in providing that service.

In the release, you said that capital allocation decisions may vary quarter-to-quarter based on the dynamic nature of our cash flows and for stock repurchases based on market conditions and the timing of open and close periods relative to our cash flows. While our lot sales and land sales are lumpy, it appears the company now has comfortably over $100 million of annualized recurring income, over $100 million in cash and highly unlevered balance sheet. At this point, why should buybacks be dependent on the timing of your cash flows? I would think given the above, we should be capable of repurchasing $100 million or more of our shares annually.

Another great question. That information we provided in our earnings release was not intended to mean that our share buybacks are exclusively based on the short-term cash flows. That was not the intent of that statement. It was an attempt at describing our capital allocation strategy in broad terms and cash flows is a factor in our broad capital allocation strategy, but it was not meant to be specific to share buybacks. Like I answered in a previous question, our capital allocation strategy as a whole and our share buyback strategy specifically is based on the long-term model.

Can you confirm that the 4.87 acre commercial parcel on the corner of 30A in Watersound Parkway is under contract?

We cannot disclose contractual matters in an earnings call, but we appreciate the question.

We read daily about various costs being driven higher by AI-related data center build-out demand. Are you seeing larger than previous increases in either trade personnel costs or other expenses?

Not anything significant or acute.

Is there a chance that recently increased lead time for power development and grid connection will constrain Joe's ability to execute on the growth plan?

If the question is specific to power generation and distribution, we don't anticipate that being a constraint at this moment in time.

While items like utility pipe improvement and new community launches are capital intensive, do we not have significant capital already within a lot development business, which can then be recycled into these community investments as our prior lots are sold? Meaning it is not as if we need to add significant additional capital into the business to fund these items.

That's a great question, and it's really a description of our broader capital allocation strategy in our cash flows. That's a factor -- what's mentioned in the question or the statement, it is a factor in how we execute that strategy.

Where is the new Park Place development going to be located?

We're not too clever in naming projects. So Park Place East is east of Park Place.

Could you talk about cadence of capital spend for utility expansions? Is it more lump sum or more steady periodic investment over time?

It's probably somewhere in between. Off-site utility extensions are capital intensive. But at the same time, they are things that we plan well ahead of time, and we incorporate into our overall business plan budget and capital allocation strategy.

How has demand for homes evolved in Northwest Florida over the last few years?

We continue to see an increase in demand, and it's really led by a continuation of in-migration into our region, not only in migration in terms of the actual numbers of people that are moving to our region, but we continue to also see a broader range of geography where those individuals are moving from, which is very encouraging. We're not seeing migration from a static historical set of states and locations. It's dynamic, and we continue to see more people moving to our region from a broader range of locations.

Okay. We have one more question. Given the negative impact fair home selling has had on the stock the last several years, have you guys given thought to a solution as far as it relates to the things in your control? As a shareholder, it becomes increasingly frustrating seeing any market enthusiasm down in a wave of Form 4. Even as it relates to attracting new investors, this dynamic is viewed very negatively, which is a shame given the outstanding assets, people and executions that occurring at St. Joe.

We appreciate the question, but we don't comment on individual shareholders.

Waterfront property across the country appears to be at record demand and at record pricing. Are these assets around the Bay or the intercoastal water frontage that the company has -- the company can unlock over the next several years for residential and commercial development?

Yes. The short answer to the question is absolutely yes, in all the locations mentioned in the question. It's part of our planning process. And part of the -- I guess, the best way to describe it is we don't look at those locations in isolation. We look at those locations to see how we can drive value away from the water also. So it's not just let's look at a property that's on the inter coastal or the bay and maximize the value, but how can us moving forward with the concept in those locations add value to all of our landholdings adjacent to it.

Could you talk a bit about the growth of aviation-related companies and the recent release on the Space Florida program in Bay County?

Aviation in aerospace has always been a focus of the regional and local economic development authorities for a number of reasons. That has been one of the target industries to attract. And we do continue to see interest from the industry in our region. There's also a concept that's in the process of being executed led by Florida State University in an aerospace research and development center that is in the planning stage in Bay County that we believe may be a catalyst for the aerospace aviation industry.

It appears build-to-lot inventory at Origins is dwindling, especially the bunch delivered in mid-2023. Does this not provide a huge window for growth in deliveries at Origins, Walton County over the next few years? More specifically, is it intentional that you're giving builders bigger communities such as the [ Huff/Arkon ] versus the previous piecemeal strategy? If so, would this open opportunities for builders like Toll, Fischer or even Kolter, who's finishing up NatureWalk to take their own communities in the future?

I guess the short answer to that question is we are considering every and all those options. We don't feel that our pipeline is dwindling. Again, it's a matter of when you look at the pipeline quarter-to-quarter because of that seeding and harvesting cycle, that we have a very long runway, a very long pipeline of potential residential home sites, both west of origins and east of origins.

There are no additional questions at this time.

Great questions, as always. Let's give it a couple more minutes in case there's any other questions.

There's one more that just came in. How do you guys view your land holdings around Southport? It seems to be a unique area where there's huge and growing opportunity, given the price points for inland around Lake Merial indicate these good values there.

So we look at our geography very broadly, again, going back to what I mentioned at the beginning of the call that we want to continue to have a residential segment that has diversity in price point and product type. And the Southport area is we do own property in that area. For example, the [ Ticheli ] DSAP, which we have talked about a number of times where we're planning on breaking ground on the first phase early next year, is an example of us, again, continuing to look at broader geographies, continue to maintain diversity in our residential segment.

Thank you for taking my questions. Great job as always.

That is an easy answer. Thank you. Okay. Well, we don't see any more questions. So again, thank you for joining us today. We greatly appreciate you joining us and asking great questions, and we look forward to speaking with you again next quarter. Thank you.

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

Good morning, everybody. Good morning. It's 9:00, so we're going to go ahead and get started. First of all, thank you for being here this morning on a rainy morning. I'm Jorge Gonzalez, President, Chief Executive Officer and Chairman of the Board of The St. Joe Company. It is my pleasure to welcome you to the 2026 Annual Shareholder Meeting.

In accordance with the Notice of Meeting, I officially call the meeting to order right at 9:00 Central Time, 10:00 Eastern Time. We will conduct this meeting in accordance with the agenda you were given when you registered this morning. If you have not registered, please do so at this time at the table just outside of the door.

On the reverse side of the agenda is a list of the rules of conduct for this meeting. To ensure an orderly meeting, we require all participants to abide by these rules. After the formal business portion of the meeting has been adjourned, we will have a presentation and then we will provide an opportunity for questions and answers. Only validated shareholders may ask questions in the Q&A session. Out of consideration for others, please limit yourself to no more than 2 questions. We'll answer as many questions as time allows.

Now I would like to introduce the other members of the Board, those present in person, Mr. Howard Frank, Ms. Elizabeth Franklin, Ms. Rhea Goff. We have Mr. Cesar Alvarez joining us through video. He's actually waving. You can see him on the screen. Mr. Tom Murphy is unable to join us this morning. Also with us today is Josh Nixon of Grant Thornton, the company's independent registered public accounting firm, who will be available to answer any appropriate questions during the Q&A. The company's Chief Legal Officer, Lisa Walters, will act as the Secretary of the meeting. We are being assisted today in the tabulation of proxies and ballots by Mr. James Hagan, agent for Broadridge Financial Solutions. At this time, I appoint Mr. James Hagan as Inspector of Elections.

The notice of the meeting has been mailed to each shareholder of record as of March 18, 2026. The Inspector of Elections has informed me that 52,079,637 shares of the company's voting stock are present in person or by proxy, constituting a quorum for today's meeting. The list of shareholders on March 18, 2026, the record date, is available and may be inspected during the meeting by any shareholder who has signed in. The final report of the Inspector of Elections will include the votes, if any, of shareholders present and voting during today's meeting. The company's mailing agent, Broadridge Financial Solutions, has provided an affidavit of mailing to show the notice of the meeting was given on or about March 31, 2026. A copy of both the notice and the affidavit will be incorporated into the minutes of this meeting.

Description of the proposals. Next, I will describe each proposal to be acted upon today and then we will take the vote. Since no director nominations or proposals for business were properly filed by a shareholder in advance of this meeting, the business of this meeting is limited to the following 3 proposals. The first proposal before the shareholders is the election of 6 directors to serve for a 1-year term until the next annual meeting. I am standing for reelection as a director today, along with the following nominees: Cesar Alvarez, Howard Frank, Elizabeth Franklin, Rhea Goff and Thomas Murphy. We recommend the election of these nominees. The second proposal is the ratification of the appointment of Grant Thornton as our independent registered public accounting firm for the 2026 fiscal year. The Audit Committee retained the services of Grant Thornton to audit the company's financial statements for 2026 and the Board recommends that the shareholders ratify the appointment of Grant Thornton.

The third proposal is a proposal to approve on a nonbinding advisory basis, the compensation paid to our named executive officers as described in the Compensation Discussion and Analysis section, the compensation tables and related narrative disclosure set forth in the company's 2026 proxy statement. We recommend approval of the compensation of our named executive officers. Now -- we will now vote on the proposals. Those shareholders voting in person should now mark their ballots. If you have previously voted by proxy, you do not need to vote again today unless you want to change your vote. If you would like a ballot, please raise your hand and one will be provided to you.

[Voting]

Okay. The Inspector of Elections will now collect any outstanding ballots.

Okay. Thank you. Since everyone wanting to vote by ballot has done so, the polls are now closed. The results of the voting, will the Inspector of Elections please report the results of the balloting when you're ready.

Mr. Chairman, this Initial tally is subject to verification and the final tabulation may reflect small changes in the vote I will announce. The final tabulation will set forth in the formal report of the Inspector of Election to the Secretary of the company, which will be made after the count has been verified. I certify that a majority of the votes cast has voted for the election of each of the nominees as director of the company. In addition, the votes cast favoring the ratification of the appointment of Grant Thornton has been -- has exceeded the votes cast opposing the action. The proposal to approve the compensation of the named executive officers has received more votes for than against. Thank you, Mr. Chairman.

I hereby declare that the director nominees have been duly elected, that the appointment of Grant Thornton as the company's independent registered public accounting firm has been ratified and that shareholders approved the compensation of the named executive officers.

On a personal note, I believe this is Mr. Hagan's last meeting with us.

Yes. I will be retiring. I've done this 17 years. I think it's time. [indiscernible]

Thank you. Thank you for all the service. We appreciate it.

This concludes the official business of the 2026 Annual Meeting. The annual meeting is adjourned and we will now continue to the informational portion of our meeting today. Before we -- before the market opened this morning, we filed a Form 8-K and attached an investor presentation that I'm going to review with you this morning. We also posted the presentation in the Investor Relations portion of our website at joe.com. So for those listening online, you can follow along as we go through the presentation. After the presentation, we'll have a question-and-answer session. We also have bound booklets that you -- most of you have already opened in your seats, so you can follow along and actually keep that and take that with you after the meeting is over.

So Slide 1 consistent business strategy. We always start our presentation by outlining our business strategy. We always want to provide clarity on what we're doing and why we're doing it. The first one is expand the portfolio of recurring income. The second one is develop residential communities with long-term scalable and repeatable revenue. The third one is to execute a multifaceted capital allocation strategy with CapEx, capital expenditures for business growth, stock repurchases and debt reduction. And then the final one is to execute a steady and growing dividend program. Slide #2 is the framework of how the company is positioned. We show this slide in our presentations also. These are high-level numbers, so there's not a lot of movement year-to-year but it's a good reminder of the framework that the company has to work with.

We own 165,000 acres, 87% of which are located in 3 counties, Bay, Walton and Gulf. We have entitlements or rights to develop for over 170,000 residential units and over 22 million square feet on nonresidential. And the majority of the current revenue is derived from less than 2% of those land holdings. The next set of slides are our financial slides. We include these slides every year and we include this time period from 2016 to 2025 or the preceding year because that's a time period that we've been executing that business strategy that I just went over. We get a lot of good feedback, positive feedback about these slides because it shows the trajectory in that time period when we've been executing the business strategy and it's all in one place. So a lot of prospective shareholders, they have one quick place to go to, to get a quick snapshot of the trajectory.

This is the first one of the financial slide is Slide 3, which is our balance sheet. And I think everybody know this but I still get unusual questions from time to time. The balance sheet is based on book basis or historical cost basis, not market. So the one small dip that you can see in 2025 in the balance sheet, that was primarily because of the sale of the Watercrest Senior Living property in the third quarter of last year. The next slide is revenue. So this is the combined consolidated and unconsolidated revenue for the company in that same time period. For 2025, our combined revenue consolidated and unconsolidated was $858.5 million and that consists of $513.2 million of consolidated revenue and $345.2 million of unconsolidated. So that $858 million is essentially $513 million of consolidated revenue, which was the highest consolidated revenue number we've had in 19 years, not counting 2014 when we had the onetime sale -- timber sale.

And 19 years ago, we were a totally different company. 19 years ago, we primarily sold bulk land and our recurring revenue at that time was 15%. Today, we're at 60%. So it's a pretty significant transformation of the company going from 15% recurring revenue to 60%. Something else I wanted to point out about this slide is our revenue by segment, 32% is residential, 43% is hospitality and 23% is commercial. The compound annual growth rate for this time period in our combined revenue is 27%. Slide #5 is our EBITDA. We do have a calculation in Slide 28, very traditional calculation of EBITDA. The compound annual growth rate is 27%, which was a little bit higher than last year when we showed the same slide, which was at 26%. Net income tends to be a little bit more lumpy because it includes other measures like depreciation, which is a noncash item. We did have a 56% increase in net income year-over-year. The compound annual growth rate is 25%, up from 21% when we had this slide last year.

Slide #7. Earnings per share. This follows very similarly to the revenue slide, $2 per share. It's the highest we've had in 19 years, not including 2014 with that onetime timberland sale. The compound annual growth rate is 28%, up from 25% when we had this slide last year. Something I wanted to point out, shares outstanding because obviously, this share is a calculation of weighted average shares outstanding with net income attributable to the company. In 2024, we had 58.3 million outstanding shares. As of May 11 of this year, we have 57.1 million. So that's a little bit over 1 million share reduction. Depreciation is something we track and we include in these financial slides because we do build assets that we bring into service. And this is just a tracking of the growth in depreciation, which, as a reminder, is a noncash item. Net income is reduced by depreciation. You can see kind of the growth of the company and the assets that we have built and brought into service.

Slide 9, free cash flow. This is where we take our net income, add back depreciation, since it's a noncash item and then subtract sustaining capital and sustaining capital is the capital that we need to maintain our existing properties. So for 2025, going through that math, our free cash flow was $158 million. That's compared to 2024 with the same calculation where the free cash flow was $112 million. So we had an increase from $112 million to $158 million of free cash flow. The next slide that we also track with this set of financial slides is project level debt. And again, that's all -- essentially the only debt we have, project level debt. The assets stand on their own cash flows. Everything in this chart is in the right direction. Everything improved from last year. Debt is now 25% of the company's total assets. Last year was 28%. The average weighted effective interest rate is now 4.7%. Last year, it was 4.8%. This year, 82.7% of outstanding debt is -- has a fixed or swapped interest rate. Last year was 73.8%. And then the average remaining life in years is 19.7. Last year was 18.8.

And as we've mentioned several times, the strategy with our debt reduction execution is to focus on shorter duration, higher variable interest rate debt. And that focus is essentially what's led to the improvement that you see in this slide when compared to last year. Capital allocation. This is a snapshot of capital allocation from January 1, 2015, to -- through the end of the first quarter of this year. There's been a total of $2.2 billion that has been allocated in this time frame. And you can see the breakdown by the major categories. 64% of that $2.2 billion was allocated to -- for capital expenditures for growth. 30% of that $2.2 billion was allocated for share repurchase and then 5% was allocated for dividends.

So speaking of stock repurchase, we wanted to show a snapshot of stock repurchase that we've had year-to-date. So this is for the first quarter, which we've already reported and we've disclosed. And then this also includes the month of April and through May 11, which was yesterday, the settlement date through yesterday. So this is very current. We haven't disclosed -- this is the first time we've disclosed the numbers for April and then through settlement date of yesterday. So for this time period, January 1 through May 11 of this year, we have repurchased 390,437 shares totaling $25.8 million. For the same period of time last year, January 1 through May 11, we repurchased 198,214 or $8.9 million. So that's a pretty significant increase for the same period of time. And as a reminder, for last year, the full year, the company repurchased 798,622 shares for $40 million.

The next slide is, as we have grown and we have, obviously, over this period of time, we have still kept a focus on efficiency. We've kept a focus on overhead, SG&A. And this is a slide that we have in our presentation every year, which tracks corporate and other operating expenses, what we call overhead as a percentage of consolidated revenue. And when we started our journey, that number was at 24%. Last year, we were at 5%. So that's a pretty significant downward trend in the right direction. This is one of the few line graphs that we like the trajectory being downward. And we actually had a decrease year-over-year from 6% to 5%.

So let's talk about the future. The next set of slides, we're going to take you through kind of where we are in planning and executing the next set of projects. So this Slide 14 is all the approved detailed specific area plans or DSAPs. And as a reminder, in our sector plan, the final step is to obtain approval of a DSAP from each respective county commission, Bay or Walton County. They have full public hearings. The reason why DSAPs are significant to us is that's really the last step that we need to obtain approval for before we get into the development orders and development permits where we can break ground on projects. So the DSAPs are a minimum of 1,000 acres and they're mixed use. We have both commercial and residential. And the numbers that you see here in terms of the residential units and commercial square feet, we also have the ability to move those numbers around based on market conditions. So we see an opportunity for any specific DSAP to do more residential. We can swap commercial square feet and do more residential and vice versa.

But this is a good baseline of what each DSAP is approved for. So we have 10 approved. We have 3 that we started and then we have 7 that we have not started yet. So I'm going to take you through where we are with all of these 10 DSAPs. So these -- Slide 15 shows the 3 slides, the 3 DSAPs that we have started. The Bay County DSAP 1, which is, of course, Latitude; Walton County DSAP 2, which is Watersound Origins West. And then the third one is Ward Creek, which include those 3 communities along State Road 79, Bayside, Breakwater and Sawgrass. Slide 16 shows the DSAPs that we have planned to break ground, start development in late 2026, early 2027. So late this year or early next year. The variability is obviously the time to permit with the local jurisdictions and state and federal jurisdictions. But we have these 2 DSAPs planned to start this year, late or early next year. One is Pigeon Creek, which is the DSAP that we made an announcement early this year. We executed a contract with PulteGroup, the third largest homebuilder in the country. This is their first entry into this market.

And by the way, Pigeon Creek is not the name of the community. Howard has asked me before, make sure it's not Pigeon Creek. That's just a placeholder name we use for the names of the DSAP. So the community will have its own brand name. The second DSAP is Teachee, again, that's just a placeholder name. We also plan on starting that DSAP either late this year or early next year. Slide 17. These are DSAPs that we have planned to start in the middle part of 2027 of next year. There's 3 of them, West Bay Creek, which is just to the west of Latitude, West Laird and Lake Powell. Those are the 2 other DSAPs. So a total of 3 that we're planning on starting in the middle part of next year. I mentioned in the -- I believe, in the Q1 earnings release that we had obtained approval from a utility provider for a utility corridor. I know that's not exciting. It's not sexy, water and sewer is not exciting but it's a necessity for what we do for a living.

And when you have utility corridors that span a long distance, it takes a long time to negotiate those agreements with the utility providers. We were happy to report in the first quarter that we obtained an approval and agreement for utility corridor that's essentially going to allow us to get forward, get moving with those 2 DSAPs, West Laird and Lake Powell. Then the last one are DSAPs that we have planned. So this totals the 10. And going through these 3 slides, these are all 10 that we have approved. These are 2 DSAPs that we don't have an exact time frame yet of when we're going to get started.

So the start date is to be determined. That's the Walton County DSAP 2, which is to the west of Origins West and then West Bay Crossings, which is in that intersection of State Road 79 and Philip Griffitts Boulevard. So with these last 2, that includes all 10. So I hope that gives you a pretty good snapshot of where we are timing-wise, what our expectations are in terms of what we're planning on commencing these new DSAPs. It goes without saying that we also have many other DSAPs that we have not submitted for approval yet. And those are decisions that we'll make along the way as we execute these 10 DSAPs that we have approval. We have a couple of others that are probably getting close to where we'll probably seek approval for those too.

So our residential homesite pipeline. We show this as an assembly line because that's the way it feels like to us. We have many active residential communities where we're actively developing, selling homesites, spanning a pretty broad range of price, demographic, consumer product type. But the seeding and harvesting cycle for residential infrastructure that's needed to monetize lots and close on lots, it's a 1- to 2-year cycle. And it's not a snapshot. It's not one moment in time. So we think of it as an assembly line, particularly in our large scalable communities where we have multiple phases. We have to constantly be feeding the assembly line. And these are just to give you an idea of the general steps or the general stations in the assembly line. So currently, through the end of the first quarter, we have 23,653 units in what we call in production in the assembly line.

The first stop in the assembly line is a concept plan, an actual site plan, master plan that gives us a really good feel for the yield of the land, how many units we can do, what the geometry of the infrastructure is going to be in terms of the road network. The next step or station in the assembly line is engineering and permitting. This gets very exact. We go from conceptual planning to very exact set of engineering construction documents. We have 3,840 units in that station. The next station is platted or under development where the infrastructure is being developed. And by infrastructure, I mean horizontal infrastructure, roads, water, sewer, natural gas, stormwater facilities. So we have 1,762 units in that station.

Of course, the last station is our favorite, which is closings. The text box on the right-hand side, as of March 31, we have 3,204 homesites under contract. That's a significant increase from last year, where we had 952. It's 237% increase. And that was primarily not exclusively but primarily because of the contract that we executed with PulteGroup for Pigeon Creek, which was a really big deal to have a new third national homebuilder coming to our market that wouldn't come to our market unless they saw the growth, unless they saw the opportunity. And we do have 18 active homebuilders in our builder program.

This is a map showing all the residential communities that comprise that pipeline. So if you look at the previous slide, so Slide 20 is residential homesite pipeline, a map of all the residential communities that are in that residential homesite pipeline. And you can see we have a pretty wide range of locations, again, consistent with what I said earlier. We have a pretty wide range of pricing, product type, consumer that are moving into these communities. So the next slide, we haven't shown before. It's same concept but this is our commercial leasing pipeline. We tend to think of this a little bit different than a pipeline -- than a assembly line. That's why we didn't show it in a assembly form because these are more discrete projects and properties. So we have a total of 3.9 million square feet in the commercial leasing space pipeline. The first step or the first station in that pipeline, similar to the residential homesite pipeline is where we have a concept plan.

We have a site plan and master plan where we have a really good feel for the geometry of the property, of the commercial asset. We feel we can accommodate those square feet. So we have 2.6 million square feet in that initial station, which is 3x the size of our existing commercial leasing portfolio. The next station in the pipeline is square feet under construction or planned to be under construction this year. That's 110,000 square feet. And that's broken down by 69,134 square feet that we actually have under construction today at this moment. And then we're going to have an additional 41,000 square feet that we're going to have under construction before the end of the year. And we feel pretty confident that we'll commence construction of those additional 41,000 square feet. Then, of course, the last station is the actual existing leasing portfolio, which consists of 1.2 million square feet. As of March 31, 96% of that 1.2 million square feet was leased. So that's a pretty good percentage. And then that 96% leased percentage consists of approximately 250 individual leases, 250 individual commercial leases.

So this leasing -- this slide, this segment, this leasing pipeline segment represents a generation of $8.2 million in revenue per quarter. And as of the end of the first quarter of this year, margins were 73.2%. So this is a part of a portfolio that we want to continue to grow. And I get asked questions often about the timing of growing this portfolio. And I want to give you a little bit of insight into that. So our strategy is to have full buildings paying the maximum lease rate. So there's a timing component of that, right? Because we can build a lot of buildings without looking at the timing of when they're going to get leased, when they're going to get occupied but we don't think that's in our best interest. So we're constantly calibrating the demand because we want to make sure that when we build these buildings in this commercial leasing portfolio, we're maximizing the lease rate and we're maximizing the occupancy.

The good news is we're getting phone calls from national retailers, national apparel brands that we didn't get years ago. So we used to have to call them. Now they're calling us. So that's indicative of the growth of the market, of the maturation of the market. We are -- in terms of our commercial leasing portfolio, we have the ability to ramp up. We have the ability to throttle up, if that -- if we feel that balance between starting construction and having a commitment to lease is there. But I want to give you kind of a feel for how we think about the strategy and the timing of growing this commercial leasing portfolio. Right now, the 3.9 million square feet, when we include what we have under planning, we feel pretty good about that size. That's a very realistic number to reach. But again, we're not going to do it recklessly where we have a bunch of empty buildings and then we have to reduce the lease rate. We want to maximize lease rate and always have a very high occupancy rate.

So this is a map, Slide 22 of those commercial properties. It doesn't include all the existing, so the 1.2 million square feet, it doesn't include all of those because those are really scattered all over the place. This is primarily the ones that are still active and we're going to be developing and adding. Slide 23. So the 2 most active for us and the ones that have the 2 -- the 2 that have the most energy are the Watersound Town Center, which is in front of Watersound Origins and then West Bay Center, which is in front of Latitude. So I'm going to show you a little bit more detail about each one of those 2. So Slide 23 shows the Watersound Town Center. We have 400,000 square feet planned, 155,962 square feet completed. So that's about 39% of what we have planned is completed. And of what's completed are -- we have 98% leasing occupancy. So that's a pretty good number, 98%, that's nearly 100%.

You can see in this site plan, the buildings that are shown in blue are completed. So those are the buildings that comprise 155,962 square foot number. We have one building shown hatched in blue and white, diagonal lines. That's a building that we have completed the shell and we're currently in the process of working with tenants to do the tenant improvement. That building was essentially pre-leased before we finished the shell. And this is one of the buildings where we're -- we're kind of focusing on national apparel brands. We -- like I said, we're getting a lot of phone calls from those retailers and they all want to be kind of together. So there's going to be -- we've announced some. There's a lot of others we haven't announced yet but we're pretty excited about the energy that we have with those retailers in the Watersound Town Center. So the 2 buildings shown in orange or red, those are 2 buildings that we're currently in design, permitting and we're going to start construction of those 2 buildings this year.

Slide 24 is the West Bay Center. So the orientation of this one because we try to orient everything north to south but this is a long rectangle. So this is oriented differently. So the north is to the left of this site plan. You can see State Road 79 right at the top. And Latitude is essentially to the west. So it's kind of down the lower part of this site plan. So this one has a lot of energy right now. So we have planned this for 500,000 square feet. We have about 15,000 square feet completed. We have 84,000 square feet currently under construction or planned to be in construction in 2026. So you can see in terms of the color convention, the dark blue at the very top or the left-hand side of the site plan, those are completed. We have that L-shaped building with diagonal lines that similar to the Watersound Town Center building, we completed the shell and then we're currently working on tenant improvements in that space. We've got pretty good momentum on pre-leasing that building.

The orange or red are the buildings that we have already started construction or we're going to start construction before the end of the year. Obviously, the big one, which we announced a few months ago is, we started construction of the Publix, which has been long anticipated in the Latitude community. And I believe we may be pouring footers this week or next week of that building. So the progression has been going very, very well. It's a footprint. That Publix is very similar to the Publix here in front of the Watersound Town Center. So it's one of the bigger Publix footprints. We enjoy a great relationship with Publix. We deal with them directly. We don't have a broker or middleman. We affectionately refer to them as Lakeland. They've been a really good partner with us and they're our top grocery store for our communities.

The one thing I wanted to mention, too, that this is 500,000 square feet. We also have a portion to the south, the extreme south portion of this master plan that we can do an additional 200,000 square feet. So this will be a total of 700,000 square feet, which is a lot. Just to give you a sense of scale, if you're familiar with Pier Park North, where we have Dick's and Fresh Market as our anchor tenants and the end caps, that's 320,000 square feet. So this is 700,000 square feet. So the growth potential of this center is pretty significant. And we are not planning it and designing it as a big power center with a big building. We want to create that villagey walkable feel. So as you can see from this site plan, we have a Boulevard road plan with on-street parking, smaller scale buildings fronting on that Boulevard and then parking in the back of those buildings. So this has tremendous potential and this is one that we can very easily throttle up as demand continues to grow.

So Slide 25. Speaking of Latitude. So Latitude is unconsolidated joint venture and it's a unique joint venture. So last year, we broke down the components of the cash flow to explain how it works. And this is an update of that slide. So Latitude, we have 3,700 homes that have been planned. 2,273 are completed as of the end of the first quarter. So that's about 61% of the homes are completed. The initial capital contribution of each partner was $11.7 million. And then earnings for each partner have been $92.1 million. That compared to last year, March 31, 2025, that number was $67 million. In addition to the cash flow generated from the actual operations and transactions, we have also been paid for contribution of the raw land, $22.3 million. That's on top of the $92 million. So it's got some moving pieces to it but you can see why we made the decision to do this joint venture as opposed to just selling the land. If we had just sold the land to a builder, the cash flow and the monetization of that would not have been anywhere near what this is.

So we've been very happy with this joint venture. We've been very happy with the community. We think it's a great community. I was there Sunday. I was driving around and there was a lot of happy people in golf carts eating and drinking and having a great time. We're very happy with our partner. Minto has been an exceptional partner. So something that I wanted to show this year, when we made the decision, when our Board of Directors made the decision to move forward with this joint venture, we were focused on the cash flows, obviously, which, by the way, the reality has far exceeded what we had originally projected, what we had in the original pro forma.

So cash flows was the core reason why we made the decision but we also had other reasons why we made the decision to move forward with this joint venture. At the time, this land was literally in the middle of our sector plan and had the least amount of energy. There was just pine trees everywhere. There was nothing going on. And we made the decision to move forward with this joint venture, again, in addition to the cash flows that we thought it would produce because we wanted to energize that part of our land holdings and Latitude has done that.

So when we made the decision on the Latitude joint venture, in addition to the cash flows, we were thinking about 3 different things. So that energy of consumers and homes that would generate demand for our commercial segment, West Bay Center, which I kind of gave you a snapshot of that. That was important to us because that was an investment we're making in a joint venture that has great cash flows. But in addition to that, it's creating consumers that we can monetize in our commercial segment. Similar in our hospitality segment, as everybody knows, we're working on a really tremendous marina concept on the Intercoastal Waterway. It won't just be open to Latitude residents but we anticipate a lot of Latitude residents will take advantage of that marina.

And then the third component is business services. As you've seen in our -- over the last year, in our earnings releases, we've been talking a little bit more and more about what we call our asset-light businesses, Watersound Real Estate, Watersound Insurance Agency and Watersound Title Agency. All 3 of these benefit significantly from this joint venture. And we're constantly thinking of adding business services to this group and we have several in the works. So it's something that we're going to continue to add over time. The thing that's not here that's also a reality, Latitude by creating energy in that part of our land holdings was also energy for projects like Pigeon Creek, right? If Latitude wasn't there, it would have been very difficult to execute a contract with PulteGroup for Pigeon Creek. So that's another secondary, tertiary benefit of this joint venture. And I would also argue Ward Creek has created some energy also because of Latitude.

So the last thing I want to go over is the -- what we call the virtuous circle of value creation. We showed this last year and I want to show it again because this is not just a onetime thing we show at an annual meeting, we live this. Every day, we kind of think about this. And when we make decisions to invest in a project, we're constantly thinking about, obviously, the cash flows, the financials of that project but we're also thinking about how that project benefits other parts of the company. So the front porch of our company is our hospitality segment. It's amazing how many people get introduced to the region, get introduced to the company, get introduced to our communities because they stay in one of our resorts. They stay in one of our hotels. So as we have guests in our hotels, that exposes the visitors to the lifestyle, the Watersound lifestyle and the high quality of life we have in our region. So it creates demand for our residential communities, our residential communities, our apartment communities.

And then when those communities get going, it creates a customer base for the hospitality assets. Somebody gets exposed to our region in one of our communities by staying in a resort, then they decide to buy a home in one of our communities. Then when they buy a home in one of our communities, they decide to join our club. That also creates a customer base for the commercial town center tenants, right? These are consumers that commercial tenants covet and that allows us to invest in our commercial segment, our town centers, medical space, office space. Then, of course, then those commercial town centers become amenities for our residential communities and enhances the quality of life of the residents in those communities. Then those commercial town centers and those commercial spaces, they also enhance the experience for our hotel guests, our resort guests because there's more things to do when they're here, more places to eat, more places to shop. And of course, our hospitality segment, our guests in our hotels become consumers, customers for our commercial segment.

So this is the way we think of the company literally every day. We think about this every day. It's not just a slide that we put together for the annual meeting. And for those of you following online, we're animating this. So we're introducing, every time I talk about these components, one shows up one at a time. It's a lot easier to see than the presentation that you're seeing online where it's just one graphic. As this virtuous circle is happening, it's also creating a need for public infrastructure. It's creating jobs and it's accommodating population growth. And this is the really most important thing that the shareholders that understand our company the most understand this one point the best. All this is creating value. It's driving value for all of our adjoining lands that we own around these properties. That's not captured in the financials but that's a very significant component of the company.

As the virtuous circle is happening, we're growing revenue, we're growing income. We're growing our communities, our commercial town centers. It's driving the value up of all the adjoining land that we own. That's really important for everybody to remember. And that concludes our presentation. This is the non-GAAP reconciliation for EBITDA. And then, of course, I'm not going to read the disclosure that our General Counsel does such a great job with every year.

So with that, I would love to open the floor up for questions.

As a resident of Latitude and with the influx of the other communities along that Highway 79 corridor, many of us are wondering if St. Joe has any interest in golf course development.

We're always thinking about everything. That's really the short answer. And we've thought about golf in different regions of our land holdings and that is one of them.

[indiscernible] I'm Latitude Watersound resident also. So what's going on with marina? It's pretty much been at a standstill over the last 12 months.

Yes. So we haven't obtained all the permits yet. So the standstill is what it usually is, government. We have obtained some of the permits and that's some of the work that you've seen. We're going to move forward with another component of it and we're going to start doing that pretty soon. And once we get all the final permits, then we're going to go full steam ahead.

First off, I just want to thank you and the team for all you've accomplished since the last meeting and also all you're doing to prepare for the future. I do not have an real estate background. So it would help for me if you would share your thoughts. I really like that slide on the commercial leasing pipeline, the role of people and partners to make the most out of that pipeline.

Absolutely. So we do have partners, joint venture partners. We do have some commercial assets that are part of the leasing portfolio that we have partners. We usually bring in partners because they have a particular expertise, they have relationships. It's usually not because of capital necessarily. So we try to be very thoughtful about, is there a partner that we can partner with in any segment but particularly the commercial leasing segment that can bring value to us in ways that we can't create ourselves. And if the answer is yes, then we're going to move forward with creating a joint venture and partner with that entity. We always have a couple of those going on and we have a couple of those going on right now with partners who are really experts and have a lot of relationships and a lot of expertise in specific lanes of that industry.

If we can't find a partner or we think the value we can add by ourselves is the value that's needed at that location, then we'll move forward with that by ourselves. So Watersound Town Center, for example, is one that we've been doing on our own. And we did reach that threshold where now national retailers, national apparel brands are calling us. For a while there, we were -- we tried different ideas about how to kind of get that momentum. Now we have it and we're going to be executing that. And in our town centers, we don't incur any project debt. So we don't have to discount lease rates because we have an anchor in any of those buildings. So we charge full rate from the very beginning. And usually, they're pre-leased before we start construction. So it's a really nice portfolio that's going to age very well over time.

More questions?

Yes. Name is Mark and I'm also a resident in Latitude. I've got a couple of questions, an easy one. So you mentioned home sites under contract around 3,200. Is that between you and the developer? Or is that with the consumer, those 32...

No, that's with our builder partners.

With the developer and yourself? Okay. And then there's been mention of a second area of Latitude. Any comment on how that's progressing or if that's still in the works?

Yes. And we mentioned early on that if the community was well received and was successful, which by every measure it has been, that we would try and continue that relationship and we have been in discussion with our joint venture partner about the kind of next phase to the west. There's nothing to report yet but we have been in discussion and we've made really good progress.

And then my last question on Pigeon Creek with Pulte, any insight as to what that development is going to look like? Is that going to be more under 55? And will there be infrastructure for schools that's going to come along with that down the road, if so?

Yes. So Pigeon Creek is not going to be an age-restricted active adult community. The only community that we have for that is Latitude. So PulteGroup is still working on the exact product lines but they're going to have probably 4 different product lines, not age-restricted, appealing to a wide range of consumers. They could be appealing to retirees, although it's not age-restricted, not going to be themed that way. They could be appealing to families. So it's -- could be a pretty broad range. So probably the closest thing, this is just my perspective and I'm certainly not speaking for PulteGroup, is something similar to Ward Creek. When you look at Ward Creek and you look at the broad range of product type and demographics, there's retirees there, there's families there. There's a mixture of both. It's probably going to be very similar to that.

[indiscernible] consider Breakwater at Ward Creek?

Ward Creek to us includes D.R. Horton on the east side, Fisher Holmes and Kolter on the west side and Toll Brothers on the west side, too. And in terms of schools, we're always working way ahead of, years ahead with our respective school board superintendents, planning, tracking demand, spatially, working with them on needs that they have for additional schools. We're usually way ahead, by the time you see a school break ground, we've been in discussion with that school district for 5, 6 years.

[indiscernible] If that second phase of the Latitude would happen, are the economics with Minto the same? Or is that part of your discussion?

It's part of the discussion.

Okay.

Part of the discussion.

And then I guess a follow-up would be, is there any appetite to do another joint venture elsewhere? Or was that just kind of a unique -- like you said, it was pine trees at the time and you guys got obviously a great deal on that. Is that something that you would entertain in the future in another area?

For age-restricted?

Yes.

Yes. The future is a long time away, right? So we're always open to entertaining. But right now, our focus is on just that one in terms of a joint venture for age-restricted community. It's been very successful. We want it to continue to be successful. And if there's opportunities in the future, we'll certainly look at those.

Jorge, I've just got a quick question or 2. Off of what he was talking about, do you see now that the area has kind of blossomed and you've brought in a lot of new national builders, the opportunity to either do something with Minto and other people or just open that, I guess, West Bay Creek DSAP up to a lot of the other builders that are now here that have 55-plus communities in terms of the product offering to maybe enhance what we're getting out of it.

Yes. We're always -- we have 18 active builders and at every moment, in addition to those builders that we report that are active in our program, we're in discussion with 5 to 10 additional builders. So yes, the short answer is yes. We're in discussion with builders on a daily basis almost that want to come into the market. It takes a process and some time to find a space for them because remember, we have the 1- to 2-year seeding cycle for development. And depending on when they come in and start talking to us, there may not be a lane for them right away.

But we also try to put a lot of thought into where we put them relative to our existing builders, right? Because we don't want to just recklessly think of, well, we're going to add 5 more builders, let's put them in here. Then the builders that are there start cannibalizing each other, right? And then there's a race to the bottom in terms of margins. So we try to be very thoughtful in where we place the builders, so they're complementary to the other builders in that community. So yes, we're constantly talking to many other builders that want to come to the market but that's a process of both them and us being thoughtful about where we're going to place them.

Okay. Then the last one, I know I've asked you before on it but is there any update on the 30A West project? Because again, I've seen the drawings for it. It looks beautiful but I also look at that and think that, that could represent a large chunk of stock being bought back if we chose to go a different route with this. So I was just wondering if there's any update.

Yes. Excellent question. So we're always in discussion and we're still in discussion with that -- on that project. But to your point, we're always calibrating the financials of any project, whether it's a joint venture or a project we're doing ourselves with -- calibrating it with a broader capital allocation, right? And the projects -- and there's an ebb and flow, right, because market conditions change, cost of construction changes. And we track that over a long period of time. And if we think it makes more sense to allocate capital in other projects or buy shares back or continue to grow a dividend program, we're going to do that. And that project is one that we've been in that process. We don't just -- once we conceptualize the project, we just don't put blinders on and go, right? We're always calibrating it just to see where it is and that's certainly one of those.

Has there been any discussion on the, I guess, you could call it the noncore 13% of the acreage and what to do there? I know in previous meetings that's been brought up about maybe timber sales again or something like that. Has that been discussed at all?

Yes. We do. And essentially, I call it our landholdings on the east side of the Big River, on, the east side of the Apalachicola River where we have a concentration of land ownership is in Leon County, for example, in Tallahassee. And we obviously have a project that preceded us, Southwood that was done in that community. In Southwood, we made a strategic decision many years ago that we would not invest in developing homesites. We think it's -- makes a lot more financial to invest here because we have growth here. We have a migration. We have higher margins. So what we're doing in Southwood because it does have master infrastructure is we're selling tracts of land to builders. So we're not investing any capital to develop homesites. We're selling tracts of land with entitlements and then the builders will build the infrastructure and build the homes. That's what we're doing in Southwood.

We've done that also outside of Southwood in Leon County. You may have seen we've had 2 or 3 land sales over the last couple of years to builders. We sell the land to them. They put the infrastructure in and they build the homes. We're going to continue that strategy. We don't have any perspective of investing capital in that market. So we're -- I often say we don't sell land, we're a picky seller of land. And that's really Bay, Walton and Gulf, right, in Leon County and some of the surrounding counties that we have some land. At the right price, we'll sell it. And that's key because we do get -- to your question about timberlands, would we sell timberlands in that market? We would. But now that the company has grown and our financials have grown, as you have seen, we don't have a sense of urgency to sell that land at a low price. So we get offers from folks and they're lowball offers, we don't even respond.

I think -- are we on time? Maybe one more question.

Can director ask a question?

Of course.

Could you talk, Jorge, it's less of a question but talk a little bit about health care facilities in the area because as we grow our -- all the people that are moving in, what's going on with health care, medical facilities and the new hospital that's under construction?

Absolutely. So great question, not just because you're a director. So health care to us is as critical to quality of life as anything else. It really is. Without good health care, it's hard to have high quality of life. And it's not just for one demographic, it's for the entire demographic. And we have great health care providers in our region. All of them are tenants of ours. We've enjoyed a relationship with them for a long time. They're great folks, great companies. But as our region has grown, we need more of everything, more of everything when it comes to health care. We need more general practitioners. We need more specialists. We need more diagnostics. We need more of everything.

So one of the -- a big bold idea that we had many years ago was to create a medical campus where we would target an academic health center model. And academic health center from all the research we've done is the most successful health care delivery system in the country where the synergies between teaching, research and clinical delivery really come to fruition because the days of doctors creating an LLC and being in business, those days are kind of in the rearview mirror. Doctors tend to be employees of large-for-profit health care companies like HCA, large not-for-profit health care companies like Ascension or employees of academic health centers. And there's many examples of academic health centers and they're usually the kind of the one of the main economic engines in that market, right, whether it's UAB, right, Schanz, NYU.

So we created that vision. We master planned the campus and it's the campus at the southeast corner of 79 and Philip Griffitts. And then we engage in a series of very -- these things are not easy, right? These are big bold ideas. We engage in a series of discussions with many potential partners. And those discussions have kind of landed, in the first phase of that campus, we opened a couple of years ago, the medical office building that's there and it's full of clinicians already and there's a really high-end outpatient surgery center that has already been opened. The second phase is the big deal. The second phase is an actual teaching hospital. We've been working on that very hard with our partners.

Again, nothing that has value is easy. But we're there. That hospital is -- if you drive by it, you can see the construction. We anticipate that hospital is going to be open middle part of '28. The hospital has been master planned and planned for future expansion. Phase 1 is going to be probably 100 to 150 beds. That hospital has been planned for almost 600 beds and with an ability to add wings very easily without disrupting the core operations of the hospital. So that's an asset that's going to be under FSU Health. So Florida State University, their College of Medicine, their research apparatus, which is very robust.

They're going to -- that's their asset and it's going to be a full-blown teaching hospital. We're going to have residencies there. That's the plan. That's really important to me. It's really important to our region because where docs do residencies, that's where they tend to stay. It's not where they go to medical school. And for us to eventually have -- it's not going to happen right away, it's going to take a little bit of time. But for us to have a reoccurring pipeline of residencies that go through that teaching hospital is pretty significant because that's reoccurring, right? That -- those are not physicians you have to recruit.

The goal of this academic health center is to bring resources from outside of the market, right, bring doctors from outside of the market. And I can't tell you, even though all the final mechanics of the deal structure are still being finalized, so there hasn't been a lot of branding that you've seen, right? You drive by there, you don't see FSU Health, that's going to change pretty soon when they finalize all the agreements and all the mechanics.

But even with very -- with no branding and really very little kind of external communication, I can't tell you how many club members of ours who are physicians in Atlanta, in Houston, in Nashville call and say, "Hey, let me know about that because I may have an interest in moving and being in that facility." That's without any effort, right, without any recruitment. And I get those phone calls on a regular basis. So that, in a way, kind of it's a toe in the water proving the concept, right? So we're pretty excited about that. It's not just something we're doing to help sell more homes at Latitude. I don't think we need that help. It's something for the community, right? It's a community asset that's going to help every single demographic in the community and it's a really big deal.

I think we have time for one more question. I think you had your hand up.

Last year [indiscernible] ongoing discussions [indiscernible].

Yes, it's beyond ongoing discussions. We have finalized. It's a ground lease and that's been finalized. So we expect to see kind of physical progress on that over the next few months, year.

Okay. All great questions. I really appreciate it. So you may continue with refreshments in the terrace. The reception at Watersound Beach Club will begin at noon, conclude at 1:30. Weather-wise, where are we? Are we still good? Okay. So have refreshments on the terrace. We'll have the reception at the Watersound Beach Club. We have a new second story deck that we just opened and that's where we're going to host the reception, so everybody can see it. We'll start that at noon, conclude at 1:30. We'll have shuttle service from here to the reception starting at 11:30. You can drive yourself too to the Beach Club, of course. There's no formal program. It's going to be just informal, so you can see the new deck.

The shuttle back here will be at 1:00, 1:20 and 1:40. And then we also -- for those of you, there's always a few of you that want to take a self-driven tour. We do have a nice asset map, I think, outside on the front desk that shows all the different properties, different locations. You're welcome to do that. We decided to take a break from the driving tour this year. We have been doing it, I think, 3 years in a row. We're probably going to start it again next year. This year, we thought we would do something a little bit more casual since we opened the new deck in the Beach Club. Everybody good? Great. Thank you for coming. I really appreciate it.

Good day, and thank you for standing by. Welcome to the St. Joe Company First Quarter 2026 Earnings Conference Call.

[Operator Instructions]

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. Jeorge Gonzalez, President, CEO, and Chairman of the St. Joe Company. Please go ahead, sir.

Thank you, and good afternoon. I'm George 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 welcomes 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 right-hand corner of your screen, where the word question is visible, to the text 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. So we are only going to 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 LatitudeMargaville Water Sound unconsolidated joint venture.

Latitude is a large-scale, long-term project that will have ebbs and flows in quarterly and even year-to-year volume and provides benefits to us beyond its financial performance with consumers for our commercial and 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 5 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 Water Sound Town Center, and an example of divesting is the 2025 sale of the lower-margin Watercrest senior living property.

In the first quarter, we continue 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 homesites in our most recently approved details-specific area plan, or DSAP.

PulteGroup is the third-largest homebuilder in the country, and 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 a 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 homebuilders will admit that 2 of the most challenging aspects of 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.

[Operator Instructions]

Thank you, Jorge. We have a few questions. Can you elaborate on the pace of takedown at Pigeon Creek DSAP? 1,300 homesites is great, but obviously, whether it's over 3, 5, or 10 years makes a big difference.

Also, are there protections in the takedown schedule as it relates to the value of the land?

So 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 homebuilder in the country. And 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.

So 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 the market. And 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 a 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. And certainly, all those lessons that we've learned over the years are lessons that we've incorporated in this agreement, and we'll continue to incorporate in subsequent agreements.

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

Yes. And one last thing. When you look at agreements that we executed 5, 6, 7 years ago, those agreements had a time in place in 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?

Again, thank you for the question. The majority of the uptick was organic. So far, we've been pleased with the early part of the 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. We have seen an uptick, but 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.

So again, the growth that the question asked about in terms of RevPAR, we believe, is primarily organic. But based on the measurement we've been doing on the New York City market, we have seen an increase from that market in bookings so far this year.

With strong national demand for data centers driven by AI, have you considered or pursued marketing positions at Venture Crossing Enterprise Center for data center development?

If so, how does that fit into your recurring revenue and land monetization strategy?

We have had discussions with those types of users, specifically about petropcessings.

In terms of the business structure and specific to the question of how we would monetize it, as 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, time frame, and various different factors.

But yes, we've had discussions with those types 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 very pleased with the commencement of the real estate brokerage agency.

We started in one location, the Watercooler Town Center. We quickly opened in a second location, the Water Town Center. And we have plans right now to open 3 additional locations.

Those 3 additional locations will be 2 in Bay County and 1 in Walton County. So 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's worth of data. The agency literally opened its doors right before the summer of last year.

So after we finish this year, we're going to have 1 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 going to commence, it's going to 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 who 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.

So we're being very thoughtful about the type of users that should go to Pier Park City Center. But 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?

So the answer is no. There have been no changes to the contract. Adding the Pigeon Creek contract, which is a long-term contract in the quarter, made more sense to show it excluding the dollars related to those 2 specific contracts, but 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 is 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 to 300 homesites 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.

So a couple of different answers to that question. Number one, pace is ultimately determined by the 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, but we also don't want to 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.

So it's a delicate balance of making sure that we have inventory to meet the demand and 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 homebuilder 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 5 or 6 builders right now, and we're always talking to 3 or 4 new ones, and we're currently doing that right now.

But 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, and we feel very bullish about how the company is positioned to meet that demand at the highest prices and highest margins possible.

The regional growth story remains very strong. Yet St. Joe's current commercial development activity seems modest compared to the broader market pace.

As a dominant landowner, how are you thinking about this? Should we expect St. Joe to take a larger percentage of the area development activity at some point?

How are you thinking about the pros and cons of becoming a more active commercial developer?

So, commercial development, great question. Commercial development, similar to residential, there's a market component to that.

So in terms of how proactive we're going to be, obviously, it's going to 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.

And if that trend continues, we're certainly going to make decisions to meet that demand and accelerate our commercial development.

Yes. And 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.

So it's building for market demand is important.

Latitude available lots is 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, and we've made some really good progress in those discussions. And yes, it would be to the immediate west of the existing joint venture.

Do you see a point at which the Waterstone Club membership will be full until more facilities are built, for example, a 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 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.

So we have been expanding facilities. We are constantly having discussions about where we are going to do the next new facilities, what's going to be the programming that's going to 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 going to 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?

So, looking at the disclosures, the costs are very consistent. There are no operating cost changes. The income was driven by volume, the number of closings that were delivered in the quarter compared to the first quarter of 2025.

There were no real changes in costs. The actual margins on the per unit were actually above the margins a year ago quarter.

Any updates or information on the custom home sites near the future Arc Park, anticipated number of lots?

We have been planning another custom residential homesite product in Origins West to the west of the Arc Park that's in the planning process right now.

We don't have the specifics yet in terms of the number of homesites, the time frame, but it is a real project that we're planning. We've done some preliminary development work in that phase.

So 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, then even anecdotal examples would be greatly appreciated.

Yes. I think 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. And 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 to 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.

And obviously, our first quarter results for hospitality show a pretty good uptick in revenue, which is really a byproduct of what we feel, which 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 update on the Intercoastal 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. And once we do, we're going to 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.

So as soon as we get the final permits, we're going to 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 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 the future, we're always assessing what other areas we can look at in that market. So 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 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 that the club amenities are at least 3 years out at best. And my concern is that because of this, future growth or even the quality of the club may be limited until more opens up.

Can you share your thoughts on this and elaborate, perhaps on the timelines?

Yes, great question. And 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 want to be on either extreme, where there's more demand than capacity or way more capacity than demand.

So 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 that 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 time frame yet. We're also looking at other locations for future club amenities.

But again, we don't want to be too far ahead where we have too much capacity for the usage. But at the same time, we don't want to be behind either. And 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 homesites at Pigeon Creek and also Southwood?

Pigeon Creek, in terms of closings, it's probably going to be the early part of 2027.

We are actively working on the engineering and permitting of the first phase of Pigeon Creek, working very closely with PulteGroup. So, in terms of closing transactions and realizing revenue, probably the first part of 2027.

In terms of Southwood, we don't have a home site development strategy. In Southwood, we sell tracks with master infrastructure to homebuilders.

We've got several contracts that we're working on, and we're always in discussion with homebuilders in that market who want to purchase those tracks.

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.

So we are cautiously optimistic that our hospitality segment is going to have a good year and a good season this year.

There are no more questions.

So let's give it a couple more minutes in case there are 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 types of questions only make us better. So we really greatly appreciate the quality of the questions.

Okay. We don't see any more questions. So 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.

And 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.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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.

Good day, and thank you for standing by. Welcome to The St. Joe Company Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to Mr. Jorge Gonzalez, President, CEO and Chairman. 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 release. I'm joined today by Marek Bakun, our Chief Financial Officer.

Yesterday afternoon, after the market closed, we issued our third quarter 2025 earnings release, which can be found in the Investor Relations portion of our website at joe.com, joe.com. This morning, we continue 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 can assess the progress of the region and of our company.

Before we begin, I would like to remind everyone that today'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. So I am only going to mention a few key highlights before we move on to your questions.

For the third quarter of 2025, we showed solid performance with 63% growth in revenue and 130% growth in net income when compared to the third quarter of 2024. Residential real estate revenue grew by 94% to $36.8 million from $19 million. The average homesite base price increased to $150,000 from $86,000 and the gross margin increased to 53% from 39%. We also continued to grow recurring revenue with leasing revenue increasing by 7% to an all-time quarterly record of $16.7 million, and hospitality revenue increasing by 9% to an all-time third quarter record of $60.6 million.

Our leasing and residential pipelines are also growing. For the first 9 months of 2025, we executed 40 new commercial leases and renewed 43 existing leases for a total of 83, compared to 26 new leases and 27 renewals for a total of 53 during the same period in 2024. At the end of the third quarter, we had 1,992 residential units under contract compared to 1,381 for the same period in 2024. We have over 24,000 entitled units in our residential pipeline in various stages of planning, engineering, permitting or development. This pipeline includes a wide range of locations, products and pricing which gives us the flexibility to respond to the ebb and flow of market conditions.

Included in commercial real estate revenue for the third quarter is the sale of Watercrest senior living to one of the nation's largest senior living REITs. This sale is part of our core business and an example of how we create value by developing successful operating properties. The land encompassed approximately 7.7 acres and was originally appraised in 2019 at approximately $2.7 million. After development and leasing of the property beginning in 2020, Watercrest was sold in the third quarter for $41 million, resulting in a gross profit of $19.4 million.

Senior living is an asset type that is needed for the regional ecosystem, but it is not an asset type we plan to grow as part of our commercial leasing portfolio because these types of assets take longer to lease in multifamily and because they entail considerable operational intensity. The sale of Watercrest is an example of how our operating properties generate recurring revenue, but they are also piggy banks that can be monetized with the right set of circumstances. We anticipate continuing to create asset value by developing operating properties, which we may own for recurring revenue or choose to monetize and reinvest strategic capital allocation. We will also continue to evaluate nonstrategic timberlands for opportunities to monetize and reinvest for strategic capital allocation.

For the third quarter, we continued to execute a measured and multifaceted capital allocation strategy with $20.4 million for capital expenditures, $8.7 million for share repurchase, $8.1 million for cash dividends and $28.4 million for project debt reduction. It is important to remember that the exact capital allocations will vary from quarter-to-quarter based on the circumstances of that quarter. For example, in the third quarter, project debt reduction includes $19.2 million for the loan payoff associated with the sale of Watercrest. With the $8.7 million in share repurchase for the third quarter, we are at $24.9 million in share repurchases through the first 9 months of 2025 compared to 0 share repurchases through the first 9 months of 2024, which is a significant year-over-year acceleration. The outstanding share balance is now below $58 million for the first time in nearly 30 years.

In the third quarter, we announced a 14% increase in the quarterly dividend to $0.16 per share payable on December 12 to all shareholders of record as of the close of business on November 13. Since we started this dividend program in 2020, we have increased dividend payments by 129%.

Beyond the numbers, we are excited about the new daily nonstop flights between Northwest Florida Beaches International Airport, ECP and LaGuardia Airport in New York City, which is the largest Metropolitan Statistical Area in the country with a population of approximately 20 million people. The company is poised to leverage this new opportunity by expanding marketing efforts to promote the quality of the Watersound lifestyle to this large population base. With this new flight, ECP now has non-stop flights to 7 of the 10 largest Metropolitan Statistical Areas in the country.

Now Marek and I are going to answer your questions. As a reminder, in the top right-hand corner of your 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?

Yes. Good morning. We have already received a number of questions. So we'll go ahead and start with the first one. At the current buyback rate, the company is repurchasing around 1% of the company on an annual basis. We have $126 million of cash. Our recurring income continues to increase. Our outstanding debt has declined by over $50 million and the capital intensity of our business continues to decline. Management deserves all of the credit here, but why are we building our cash balance rather than investing -- I'm sorry, rather than increasing the pace of our buyback?

That is a great question. I appreciate the question. In many ways, it outlines all the positive things that are happening in the company at this moment. Having cash is a high-class problem. And we have been generating real cash, not through gimmicks or short-term financial engineering techniques. Many other companies, to be honest with you, wish that we had -- they had this same high-class problem. So we're very happy with the way that the company is generating cash. It is something that we started planning years ago and the execution that we've had has essentially created the situation for us.

Having said all that, share repurchase is a priority for us, as we have said a number of times as part of our capital allocation strategy. Evidence of how much of a priority it is, is something I mentioned in the opening remarks. Through the first 9 months of 2025, we have invested $25 million in share repurchase when compared to $0 for the first -- for the same 9 months in 2024. Even after the third quarter, we have continued to repurchase shares. And something that's important to think about, the -- really the largest liquidity or cash event we had in the third quarter, the sale of Watercrest occurred literally a couple of days at the end of the third quarter.

Next question. Over the last year, there have been several land and real estate transactions -- there are several land real estate transaction in Bay and Walton Counties at valuation that would support an NAV that is materially higher than the current stock price. It seems there could be several more opportunities to either sell land or additional assets that are either outside of the Bay-Walton sector plan or where the major appreciation has already occurred. Why not sell more of these assets at values that are material relative to a current market cap and use the proceeds to meaningfully reduce our share count while we continue to own a century worth of future developable land?

As I mentioned -- great question again, as I mentioned in my opening remarks, we are continuing to evaluate not only our operating properties, but timberlands in our portfolio to determine which ones create the best opportunity for us to monetize and reallocate those resources into more strategic capital allocation strategies. What we're not going to do is sell assets at a discount. We're going to make sure that we get the value that our shareholders deserve when we monetize our assets, whether they're operating properties or timberlands.

So next question. Great quarter. Joe continues to shine in a sector that has seen some softness. Where does the company see cash levels 12 to 18 months from now? Also noting that the company has done some heavy lifting with CapEx during previous quarters, and we are on a side of reaping revenues from that CapEx. Also, what are the regulatory hurdles, execution, restrictions when the company is buying back its own shares. Also, what cash levels does the company feel comfortable with?

Great question. That's certainly a question from somebody who has followed the company for a long time and understands where the evolution of the company. Let me make sure I can answer all the subcomponents of the question. And If I miss any, Marek can chime in.

So the first one is where does the company see cash levels 12 to 18 months from now? It's really going to depend on facts and circumstances. Where are we in the evolution of the company? Where are we in our capital allocation strategy? What are the macroeconomic conditions? What are the microeconomic conditions? Certainly, as we have stated many times, we view our capital allocation strategy as being measured and multifaceted. Our capital allocation strategy is not singular to save cash. Certainly, our capital expenditures are a part of it. Share repurchase are part of it. Dividends are a part of it and project debt reduction are a part of it.

The next question or a sub-question is what are the regulatory hurdles, execution, restrictions when company buying back its own shares. There are a series of requirements that we have to abide by and navigate. And obviously, a lot of that depends on the open and close periods and when we can purchase in the open and closed periods. There's different requirements for each one. That's part of something that we consider in our capital allocation strategy, and that's one of the reasons why we mentioned -- and I mentioned in my opening remarks, that quarter-to-quarter capital allocation is going to may be different. But again, share repurchase is a priority for us as part of our capital allocation strategy.

The last part of the question is what cash levels does the company feel comfortable with? And the answer to that is similar to the answer to the first question. It just depends on facts and circumstances, what's happening at macroeconomic levels, micro. Where we are in the sending and harvesting process of our residential homesites. As anybody who has managed a diversified real estate operating company knows, liquidity is important. It's important for many reasons. So we obviously want to maintain liquidity, but we also want to make sure that we continue to execute our capital allocation strategy in a way that creates the best returns for our shareholders.

Yes. And Jorge talks about the seeding and harvesting. It is definitely great to see the harvesting and what you saw in this quarter is the growth in cash from some of the harvesting and it also allowed for us to accelerate repurchases and increase dividends to our shareholders.

Moving on to the next question. Great execution and appreciate the color and philosophy around Watercrest. Any progress update on the talks with a large-scale builder interested in the entire Pigeon Creek, DSAP.

Those talks are ongoing. We don't have anything specific to report at this moment in time, but we are encouraged with the progress that has been made in those talks.

So next question. We have stayed in one of your beautiful Twin Beachfront Vacation Homes in Panama City Beach, great place for the family, by the way, we love them. Just wondering if there are any plans for the beachfront lots about a block east, which also includes several acres across the street.

I think it's called Waverunner. So the project is actually called Wavecrest internally, so close on that stuff and it is a well-located property very close, including frontage on the beach, just east of those 2 homes that are mentioned in this question. If you look at the map directly to the north is a lot of our land holdings on the other side of 98, which if you look at the presentation we did at the shareholder meeting, had a couple of DSAP's. That is a future growth area. Clearly, having that growth to the north will continue to add value to this property that we have right at the beach directly south of there.

And if I could just quickly add to that, the Watercrest property that we're talking about has a pretty significant amount of frontage on the Gulf of Mexico. That frontage doesn't get created every day. So we've been very thoughtful about what are the highest and best uses for that property. We have been evaluating it for quite some time because it's a property that's unique by fronting in the Gulf of Mexico. And when we reach a conclusion of what the highest and best use is for that property that can create synergy, like Marek mentioned, with potentially other more inland land holdings, we'll execute that strategy.

Okay. Next question. Has management identified or received interest on additional opportunities to monetize some of the assets within the hospitality or leasing segments?

Like I mentioned in my opening remarks, we're constantly evaluating all of our assets, whether they're operating properties or timberlands to determine what is the best strategy, hold and continue to receive recurring revenue or monetize like we did with Watercrest. So yes, it's dialogue that we have, and it's an evaluation that's ongoing.

Given the look through implied piggy banks, would you consider increasing the pace of the measured capital allocation via share repurchases?

So we continue to, as Jorge stated in his press release, we continue to look at our assets, the piggy banks, as Jorge mentioned. We' also look at the cash and look at the forward cash to see what opportunities to continue to adjust to our measured capital allocation. As Jorge mentioned in his opening statement, we have increased this year's repurchases compared to prior years because we always look and evaluate our overall capital allocation strategy.

Okay. The company has 46 completed townhomes at Watersound Origins Crossings with only 14 leased. Are all of the currently unleased townhomes up for sale? So we are no longer executing long-term leases. It is our intent over time to go ahead and sell the remaining 46 townhomes that we have in there. So the 14 that you mentioned have already transacted. So we're managing the leases in order to be able to manage sales.

Yes. And if I could add, we made a decision because we thought it was -- would create the best value to sell the townhouses one at a time as opposed to selling the townhouses as a portfolio. And so far, that has proven out to be true. We've had good success in selling the townhouses for -- at the price levels that we anticipated, and we're going to continue doing that.

So as Marek mentioned, that's an asset that we are gradually transitioning from a commercial leasing asset into residential real estate sales.

Okay. It seems like there have been a significant uptick in lot sales at WindMark Beach. The community has expanded quite a bit over the past 5 years. Can you talk about what is going on there? Is there an area maybe hitting an inflection point? Is there an ability to expand the scale of the community in the future?

So we've been very pleased when we executed a new strategy for WindMark several years ago. In WindMark, we were selling originally lots or hub sites on a retail basis. And we made a decision that, that was a very difficult strategy to execute in that location. I believe at the time, we were selling 2 or 3 lots per year. It's a location that it's challenging for folks who are not from that area to purchase a home site, find a builder. So what we decided when we changed the strategy in WindMark was that we would get volume and absorption if we transition WindMark into a builder program and particularly a builder that would initially build a lot of spec homes because we thought keys would sell a lot better for consumers than going through the mechanics of buying a lot and finding a custom homebuilder.

That has -- that strategy has turned out to be true and has been very successful. We have been selling a lot of home sites and our builder in WindMark has been selling a lot of homes. We still have quite a few to go in WindMark, and we also own surrounding properties that if the trend continues, we'll have opportunities to expand the program.

Yes. And Jorge, just to add to that, there's about 800 developed lots. Most of them are now homes, and there's a couple of hundred more lots currently under development in there. So it will be very close to 1,000 units in the WindMark community within a reasonable period of time.

Absolutely. And just a quick follow-up. In the original WindMark master plan, there was a plan for a golf course. That's a potential area that we can look at transitioning into other higher and best uses.

Next question, early reads commentary from Discover Watersound Weekend, nice concept. So again, it's just a comment. It's one of the events, there were a lot of good events for that to really showcase the beautiful assets that are developing in that area was also a 5K & 10K run, which is nicely attended. It is really a fun event and the weather was magnificent for us. So it really was a great weekend. I encourage everybody to come out next time.

You saw a big jump in average home site prices this quarter, roughly 150,000 versus around 86,000 last year. Could you help us understand how much of that was driven by mix versus genuine like-to-like pricing strength and whether you think these margins are sustainable into 2026?

In our Qs and our earnings releases, we often say that our residential home site numbers quarter-to-quarter are based on the mix that we have in that particular quarter. We have a lot of active residential communities. Those communities offer a wide range of pricing, product, lifestyles. We have a wide range of margins. So we always caution shareholders when they look at our residential home site figures to look beyond quarter-to-quarter and look at the trends, particularly over a 12-month or 24-month period.

One of the reasons why we have deliberately diversified our residential segment with residential communities that offer a wide range of price points and product is because each community behaves differently in different economic times, which is a great portfolio to have. For example, our higher-end communities like Camp Creek tend to be more agnostic to interest rates, mortgage interest rates because the type of consumer that is purchasing that product is probably more focused on how, for example, the stock market is doing.

So really, it has more to do with mix of what closings we had in any particular moment than anything else. Marek?

Yes. Just to add in our shareholder presentation that we did in May, we did provide some history on margins on our residential, and they have been around that 50% mark for a number of years. And as Jorge just mentioned, different communities with different price points do have different margins. And we also place lots under contract that sometimes, in most cases, span longer than 12-month period. So you have to look at the community, the contract, how phasing works to kind of get the more specific numbers. But if you look back historically, we've been closer to that 50% margins on our residential lots.

Could you estimate cumulative capital spending over the next 3 to 5 years. Assuming it doesn't grow very significantly, I would echo the sentiment in favor of repurchasing more shares.

Like I mentioned in answering one of the earlier questions, we have the high-class problem of our operations generating actual cash. And generating actual cash in executing the strategy that we have been consistently executing for many years now. Capital allocation, again, we view it as a multifaceted strategy and share repurchase is a priority for us.

What is the St. Joe's estimate of the current value of its land inventory at the end of Q3 2025? What is St. Joe's estimate of its recurring revenue at the end of Q3 2025?

I'll start with the last part. I think the recurring revenue, that's an easy calculation to make. And I think Marek can maybe give you some high-level number of that because really, our hospitality revenue and our leasing revenue are the 2 traditional recurring revenue types. In terms of the land valuation, we, in our annual meeting, we did provide for the first time ever a snapshot of the valuation range done by a third party of our operating properties. We mentioned at that meeting that we were going to be over time, working on a similar approach for our timberlands, our land holdings. That's something that is currently in process.

Yes, Jorge, you're exactly right. I was -- we do disclose both the growth in recurring revenue, which we consider hospitality and leasing. Just for -- you mentioned in your opening, both the commercial at $16.7 million was the biggest single quarter that we've had in leasing in the history of the company. And then the $60.6 million in hospitality for the quarter was the biggest third quarter. We have seasonality. So usually quarter 2 is a little bit bigger than that. But for Q3, this was the biggest.

So for recurring, just to answer the question, it is $169 million in hospitality for the 9 months compared to $157 million last year. And then in leasing was $49.4 million versus $44.7 million.

Well, who is going to be the builder for LLP 3 and I think that's Longleaf Park 3.

So that phase of Watersound Origins is what we call Watersound Origins West. We have several different phases at various stages in our pipeline from engineering to permitting to development. Our plan in Origins West is to continue the same strategy we had in Origins, which is to have a group of builders that are semi-custom builders, custom builders that will create a product that's unique in our region by offering different floor plans, different approaches to elevations. We don't intend to change the strategy that we've had at Watersound Origins by just having one builder. We intend to continue the same strategy by having multiple builders. Just like Origins, we -- our intent is for Watersound Origins West after it's completed and the homes are built for it to feel -- look and feel like a customer or semi-custom neighborhood.

Okay. Average home site sale price of $150,000 versus $86,000 is a significant jump. How can you help me understand that increase? And how should we be thinking about this going forward?

Yes, I think the answer is similar to the previous couple of answers I've given. And we have consistently mentioned this in all of our disclosures. Our residential home site numbers are primarily driven by timing and mixture of communities.

Okay. Can you highlight with respect to the ebb and flow of the development cycle where hospitality and leasing is? For context, it seems the heavy load of investment from 2018 through 2024 period is concluded and the hyper growth is waning. People continue to view abating growth numbers in these segments as sign of slowdown rather than simply development cycle. Is there any color on when you expect growth to accelerate there?

So yes, we went through an exponential growth period, particularly in hospitality. As an example, we opened 5 new hotels in a 12-month calendar period, which is pretty amazing when you consider that hospitality assets are operating assets and not real estate assets. We continue to believe that there are market opportunities for us to continue to expand the hospitality segment. We have different concepts at different stages of planning in engineering and design and permitting.

As to whether we'll exactly match the same pace that we had in that 1 year, that it's hard to say. It's really a function of where we are in evaluating those projects. But we still have plans to continue to expand the hospitality segment at the right time and with the right product and right locations.

In terms of commercial leasing, we have, as we've been mentioning in all of our disclosures for a couple of years now, we are particularly focused in our WaterSound Town Center in our West Bay Town Center and in our FSU TMH health campus. Just those 3 areas alone have the potential to more than double our commercial leasing portfolio. And the way that you create valuable leasing assets is not by just looking up and down like a road like 98 and doing a series of strict commercial centers. You're never going to get the high leasing rates and create the value in those portfolios that we're trying to create. Our strategy to focus on those town centers is very deliberate and very measured because we believe if we focus in those town centers, we're going to create portfolios with the highest leasing rates in our region.

Jorge, if I -- I'm going to just add a little bit to it, too. West Bay specifically, 1 of the 3 places that you mentioned is really just beginning. Latitude has now over 2,200 homes built and occupied in that area. And so this is really a great location, and we're just beginning the development because the market conditions are right for that in that area with so much growth in residential.

And then one last quick thing. In the WaterSound Town Center, we mentioned this in the last couple of quarters. We've had a particular focus on attracting national apparel brands to the WaterSound Town Center, particularly in the building that we have under construction. And we've been pretty pleased with the progress we have made in attracting those brands to the WaterSound Town Center. And we plan on making some announcements about our progress in the near future.

Can you talk generally about pricing and the level of discounting versus a year ago? Kudos on a great performance.

Not sure if that pricing in terms of home sites. Well, we really haven't been discounting any of our pricing. So from a residential home site perspective across all of our residential communities, we don't discount pricing. We have a pretty good feel for what pricing we want to achieve, to achieve our margins in every residential community. When we negotiate with our homebuilders and our builder programs, pricing, pace, number of takedowns per quarter, product type because we want to make sure we don't have 2 builders in the same community building the exact same product to cannibalize each other.

So those are all the things that we discuss when we negotiate builder takedown agreements with our builders. But again, if the individual who asked a question meant home site pricing, we really have not been discounting home site pricing.

Yes. Jorge, just to add exactly what you just said, we transact with homebuilders, and we have not been discussing -- we have not been reducing any or discounting any of our prices.

In your view, how far away are we from the area becoming less of a secondary tertiary market for both national builders and institutional real estate firms? What else besides the hospital and direct flights is needed to get there? And are there any new signs emerging that you could share with us in terms of the area getting closer to that point?

Well, every area grows -- goes through a cycle of growth. And obviously, our area has been going through that growth. We have chronicled the growth rates in Bay-Walton County several times in our annual meetings. That growth continues. As we have often said, in order for the growth to continue, the ecosystem needs a series of assets.

The hospital is one of those. And I'm not sure everybody fully understands, it's an academic health center model with teaching, research and clinical delivery. When you look at the health care landscape across the country, arguably, academic health centers are the most successful health care delivery systems in the country. And everywhere you look at one of those facilities, they are a significant economic engine in that market. And we feel very optimistic about what the academic health center with FSU Health is going to create in our market. And the medical campus happens to be almost literally in the middle of our land holdings. So we're excited about that.

The question also referenced more direct flights. We strongly believe that the flights that are starting to the largest metropolitan statistical area in the country to New York City is also a big part of that because what it does, it creates more exposure to our area with a larger population base. So we -- the short answer to the question is we believe that we're trending in that direction. We certainly are growing. We're certainly exposing the area, both consumers and businesses to a broader range of individuals and companies. We get phone calls from businesses who have an interest in being in our region that we used to not get a couple of years ago. In fact, probably a couple of years ago, we had a hard time them returning our phone calls. Now they're calling us. So we certainly see that trend evolving.

Now that the business is more on a run rate, when will you show more midterm and long-term financial framework, KPIs, long-term revenue, cash flows and cash flows per share, et cetera?

I think it's fair that we have always considered the importance of providing good information to our shareholders. We will continue to look at options that we have and how we can present information that we hoped our shareholders appreciate and use. We've added a number of schedules to our MD&A disclosure on a quarterly basis that allows for hopefully consistent and recurring information that can be used to analyze our business.

Yes. And if I could just add to that, the question is spot on. We -- and again, this was all by design and deliberate by growing our recurring revenue. And certainly, that has grown. And when you look at that quarter-to-quarter, that run rate, there's a cadence is emerging. And with that cadence, that's going to allow the investor community as well as the company to have -- got more consistency in evaluating everything that was mentioned in the question, particularly cash flow.

Is it accurate to conclude that there is progress accelerating for home site pricing as older builder contracts conclude and new ones kick in? College station, for instance, seems to see about a 50% increase on lot prices from 2022.

Yes. So we always -- when we -- it's obviously all based on market conditions, but our market here has been growing as migration has been occurring. So every time we look at a new phase of one of our existing residential communities, whether it's with a new builder that we're bringing to the market or one of our existing builders. We obviously always try to increase the pricing of the home sites. Again, it is based on market conditions, and it varies from project to project and location to location. But that is a goal of ours.

So Jorge, these were great questions from informed shareholders. There are no more in the queue.

Okay. Maybe let's wait just a couple of seconds to see if there's any more questions that come in.

This call -- so it looks like last one here. This call is an incredible and highly unique example of shareholder transparency engagement. On behalf of shareholders, thank you both for the continued opportunity to learn more about the company and engage with management.

We greatly appreciate the comment. We feel that we are transparent, and we're going to continue to be transparent in every way we can with our disclosures and our earnings calls.

Again, thank you for joining us today. We appreciate your interest. We appreciate the great questions that we're asked today, and we look forward to speaking with you again next quarter. Thank you.

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