A Stretch of Pristine Land in Florida Is Finally Booming During Covid

(Bloomberg) -- Tucked away in Florida’s panhandle, Walton County is one of the fastest growing regions in the country, home to the best beach in the U.S. and some of the last pristine undeveloped land in the Sunshine State.

One developer has a lock on it.

St. Joe Co., a real estate firm in northwest Florida, has seen its stock more than double since the end of September as the Covid-19 pandemic has fueled a migration from the densely populated cities of the Northeast to Florida’s sand and surf.

For Bruce Berkowitz’s Fairholme Fund, the largest shareholder in St. Joe, the stock’s rise after more than a decade of fits and starts has provided vindication of his long held belief that the area was a treasure waiting to be discovered.

“People for the longest time thought there was nothing going on there and for a long time that was true,” Berkowitz, 62, said. “But the time has come. This is an area that should have been developed a long time ago.”

Fairholme first invested in St. Joe in 2007. In 2011, Berkowitz sought to remove the company’s then chief executive officer and three other directors -- a fight that he won and which resulted in his being elected chairman of the board, a role he still holds -- but the tactic roused criticism for using a mutual fund to run an activist campaign.

Upending the board of directors wasn’t the only uphill battle he had to face.

David Einhorn’s Greenlight Capital shorted the developer’s shares from 2006 until it closed the position in 2015, racking up profits of about 50% in the process as the stock plunged in the aftermath of the 2008 real estate crash and came under U.S. Securities and Exchange Commission scrutiny.

It was one of several bets that went wrong for Berkowitz’s fund, which runs a concentrated portfolio that produces wildly varying results. That year the fund lost 11%.

But as Covid-19 ushered in an era of work from home, places like Walton County that offer low taxes, natural attractions and a welcoming climate have become top destinations for those able and willing to relocate.

Swamp Land

“The place is hitting an inflection point,” said Berkowitz. “For a long time when I was invested people were valuing it like it was swampland.”

St. Joe’s stock has jumped 48% this month through Monday and the $1.6 billion Fairholme Fund is up 25% over the period. It marks a remarkable year for Berkowitz, whose fund is up 61%, beating 99% of rivals, according to data compiled by Bloomberg.

The stock fell as much as 14.7% in intraday trading Tuesday, its biggest drop since 2008, according to data compiled by Bloomberg.

Owning more than 175,000 acres throughout Walton and neighboring Bay County, St. Joe is the only game in town for anyone looking to put their stamp on one of the last overlooked stretches of the Gulf Coast’s white sand shores. Currently the company has entitlements to build over 170,000 residential units near Florida’s Gulf Coast, according to its latest annual report.

“To my knowledge, that’s the largest entitlement in the U.S.,” Berkowitz said. “It’s really the last place left.”

The projects St. Joe is developing include a Jimmy Buffett-themed Latitude Margaritaville active adult community in Watersound. The project is expected to have about 3,500 homes in its initial phase, with prices starting at less than $250,000.

The land in Walton County is unique for the state of Florida: Much of the property St. Joe plans to develop in the region is well above sea level, which Berkowitz said few people realize.

Britton Hill, Florida’s highest point at 345 feet above sea level, is located in Walton and a 2010 flood study by the Federal Emergency Management Agency said the county’s “terrain along the Gulf of Mexico is high enough to form a barrier against many of the hurricane inland penetration surges.”

That elevation could provide comfort to those looking to purchase a home in an area where the effects of rising sea levels has become a commonplace concern.

“I would move there tomorrow if my family would follow me,” said Berkowitz. “A few years from now you’re going to be able to take an electric golf cart to the beach and to an international airport.”

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