Josh McLean

Beach-house bargains Thanks to the real estate crash, these days you might just be able to afford that condo by the sea. Here's where to shop. By Jon Birger, senior writer

(Fortune Magazine) -- Three years ago, while writing for Fortune's sister publication Money, I embarked on what seemed like an oxymoronic (or maybe just moronic) quest: to find affordable beach houses at a time of real estate insanity. Beachfront prices were soaring, which made my mission - finding vacation getaways right on the ocean for less than $500,000 - seem like a long shot.

In the end, I did find a few beach locales where bargains still existed, such as North Padre Island in Texas and Prince Edward Island in Canada (see "The Last Affordable Beach House"). For the most part, though, my travels confirmed what the experts had warned me going in: The beach-house retirement dream is out of reach for many upper-middle-class Americans. "We get calls all the time from people who say that all they want is a little house on the beach - nothing too fancy," one real estate agent told me. "It's heartbreaking, but the problem is that even those homes come with a fancy price tag."

Three years and one real estate crash later, the beach-house market has changed. Prices are coming down, especially in America's vacation-home capital of Florida. But so far the correction hasn't been nearly as dramatic as prospective buyers might hope.

Paul Grover, a top Cape Cod real estate agent based in Osterville, Mass., tells me the story of a well-heeled buyer who came to him looking to spend up to $4 million for a big home with a tony address and a lawn that backs right up to the beach. Unfortunately, the starting price for such a house on the cape is closer to $8 million than $4 million. "There are a lot of buyers expecting to find bargains," says Grover, "but the bargains generally aren't out there."

Part of the problem is that the folks who can afford homes right on the beach are, for the most part, those least affected by the economic downturn. In the Hamptons - summer home to New York City's upper crust - you won't find many desperate sellers. "It's a totally different mentality," East Hampton real estate agent Diane Saatchi says of her clientele. "The value of their real estate is just so insignificant compared with their overall wealth."

So where are the beach bargains these days? I posed this question to two of the most active vacation-home buyers in North America - Cathy Ross, executive vice president for real estate with Exclusive Resorts, and Richard Keith, CEO of Private Escapes.

Exclusive Resorts and Private Escapes are leading "destination clubs," which are essentially luxury time-shares for the well-to-do. (Members pay a six-figure membership fee, plus annual dues, and are entitled to use the clubs' stable of luxury vacation homes for several weeks a year.) Ross says she sees "great value" right now in Hawaii, where prices have fallen some 10%. Keith is finding deals in the Caribbean archipelago of Turks and Caicos - particularly the Grace Beach section, where developers overbuilt during the boom.

One market where both Ross and Keith see buying opportunities galore is Florida. The best Florida bargains are in condominiums. Kerry McNulty, a real estate agent in the Panhandle resort town of Destin, says Panhandle prices have fallen 25% to 30% since 2005. A two-bedroom beachfront condo that might have sold for $600,000 in 2005 can now be had for $425,000, he says.

But before booking a flight to the Sunshine State to start your bargain hunting, consider the risks. The Florida market may have further to fall. Property taxes and insurance bills are soaring. And if you're a believer in the devastating impact of global warming (I'm a tad skeptical, but that's another column), an investment in property on the Gulf or Atlantic coast probably isn't for you.

Not only is the hurricane risk higher, but the three-foot rise in sea level predicted by most experts would swamp most Florida beaches, according to real estate consultant Climate Appraisal Services. (The West Coast and the New England coast fare best in CAS's computer models, the Gulf Coast the worst.) David Purcell, an ex-banker who founded CAS in 2006 with a trio of University of Arizona scientists, views Florida beachfront as an incredibly risky investment. "Twenty years from now," Purcell says, "if you're looking to sell, you may find there's nobody willing to step into your shoes."

www.JoshMcleanHomes.com

The Real Estate market has been on a wild ride over the past several years. With the huge gains that were experienced for several years it is only natural that the market has now readjusted. Although the readjustment has not been kind to many people, it will be an important factor in the future health of our Real Estate market. In 2006 we had a 45% decrease in sales compared to 2005. Many of the so called economists predicted that the sales would continue to slide for years to come. Not so fast, 2007 sales were up 7.5% over those of 2006. I can only see this as a positive sign of what is to come in 2008.

Will we have another increase in 2008? I believe the answer is.........absolutely so! Many investors and those looking to purchase second homes have been patiently waiting on the sidelines for the past 5 years. People are beginning to see the deals available and buy them up now. There are many properties priced below the cost to rebuild and many back to pre-boom prices. This is just another indicator that we are near the bottom of the market. Many foreign investors are working with local developers to buy up stagnant projects, just another key sign that we are close.

Despite all of the positive signs that the market has leveled off, it will still take time to eat up the outstanding inventory. I think we are looking at two to three years before our inventory is back in line with the sales. The day of the flip is over for now, but this will continue to be a great investment for the future. I tell of my clients that if they are looking for an investment to hang on to for the next five years, the time to buy is now. You can't beat everything we have to offer in this area and we are still very undervalued compared to other regions of Florida. Look for sales to be stronger than we saw in 2007 with overall sales price possibly falling slightly. Mortgage rates being stronger than we have seen in years, a large inventory, and short sales and foreclosures have created an excellent buying opportunity here in the panhandle.

All percentages include single family homes from Destin through Inlet Beach.

Josh McLean

Realtor

Clay and Company, LLC

850-502-0470

www.JoshMcleanHomes.com

JACKSONVILLE , Fla. -
The St. Joe Company announced today that it intends to significantly accelerate its value creation process in Northwest Florida and is restructuring the company to accomplish that objective.
The restructured JOE is designed to increase its financial flexibility and strengthen its balance sheet. To improve its financial performance the company intends to:


. Significantly reduce capital expenditures;
. Meaningfully decrease selling, general and administrative expenses;
. Divest non-core assets;
. Aggressively lower company debt; and
. Eliminate the current dividend and over time return value to shareholders through JOE's share repurchase program.





"Going forward, a restructured JOE will enable us to accelerate the transition of our land to higher and better uses," JOE's Chairman and CEO Peter S. Rummell said. "At the same time, we will limit our capital investments by shifting more development to a range of best-of-class strategic business partners that include branded builders, project developers, venture partners, alliances and key long-term customers. Capital investment for horizontal developments will be limited to our most strategic and valuable places. We believe this approach will accelerate our land sales and development."

"We are repositioning JOE from an "end-to-end" developer to Northwest Florida's primary supplier of entitled land and development partner," Rummell said. "By better managing our fixed overhead costs, we will be able to preserve the low basis in our land, which is fundamental to our ability to use price as a competitive advantage, to put time back on our side and to create significant value over the long term."

"We are dramatically changing the company to become more efficient," said Rummell. "Through our restructuring process, we will significantly reduce capital expenditure requirements and operate with a leaner infrastructure. We believe JOE will benefit from a stronger balance sheet and, over time, a meaningful increase in our financial flexibility."



JOE TO DIVEST NON-CORE ASSETS

JOE intends to harvest value from its land assets that are no longer strategic, that have already been moved to their highest and best uses, or whose full potential value is beyond the time-value curve. JOE intends to divest, over a reasonable time period given current market conditions, assets that include:
. Sunshine State Cypress Mill
. Selected non-contiguous parcels with commercial entitlements
. Approximately 100,000 acres of long-term rural lands
Also priced to sell are approximately 1,200 developed home sites and approximately 190 homes.







REDUCE AND TIGHTLY FOCUS CAPITAL EXPENDITURES

The restructuring plan calls for a major reduction in capital expenditures and tighter focus on our high-growth assets. Currently located primarily in Walton, Bay and Gulf Counties, these high-growth assets are the primary targets for future new business, partners and ventures. Examples of these growth assets include:
. The 75,000-acre WestBay Sector to be anchored by the relocated Panama City - Bay County International Airport. After nearly 10 years of study, analysis and permitting, the local airport authority is nearing the start of construction of the airport.
. JOE's resorts at WaterSound and WindMark Beach which define the Northwest Florida experience.
. In Walton and Gulf counties, JOE resorts are existing keys to future value creation. The Town of WaterSound is designed to drive value inland, across U.S. Highway 98 all the way to the Intracoastal Waterway. The thousands of acres within this development zone are capable of supporting dozens of land uses.
. A hundred miles to the east of WaterSound, JOE is seeking additional strategic partners who share our vision to accelerate growth at WindMark Beach and for Port St. Joe's planned waterfront town center.
. Multiple entitled commercial parcels for mixed-use, retail, office and industrial uses.








A NEW JOE ORGANIZATIONAL STRUCTURE

To accomplish these objectives will require a realigned JOE. To that end, the company is:
. Creating a streamlined corporate and regional staff to support our new structure, instead of an organization designed to support full-scale development.
. Partnering with nationally recognized leisure, hospitality and lifestyle brands to operate our hospitality, recreational and golf assets.
. Seeking relationships with strategic partners to leverage existing investment and expertise.




The new JOE will consist of a lean corporate center focused on regional planning, land-use entitlements, and business-to-business relationships with strategic partners and customers. JOE will increase its efforts to stimulate regional economic development and to identify and manage key regional inducers.

Before the end of the year, JOE intends to transfer the day-to-day operations of its hospitality, recreational and golf assets to recognized leisure, hospitality and lifestyle companies. For many of the approximately 500 employees in these units, this change will provide significant new professional opportunities. JOE will continue to own the assets to keep the revenue stream and ensure they continue to be managed in a way that increases the value of the surrounding JOE land.
Approximately 260 additional positions company-wide, particularly in project development and related support staff, will be either eliminated or transferred to strategic partners and customers between now and the end of 2008.


In connection with this restructuring, JOE expects to take a charge to earnings of approximately $7 million consisting of severance benefits to employees. This charge will be expensed substantially in 2007 and 2008. JOE's restructuring is expected to generate annual savings of approximately $10 million in 2008, approximately $18 million in 2009 and approximately $20 million in later years.

In addition, JOE expects to take charges aggregating approximately $25 to $30 million in the third quarter of 2007 related to contract termination costs, the write-off of capitalized costs at certain projects, the impairment of completed spec homes in several communities and the write-off of goodwill related to Sunshine State Cypress Mill.
The charges outlined in this release are not expected to cause a violation of any debt covenants in 2007. The company is currently negotiating modifications to the bank credit facility with our bank group in order to mitigate the potential for any covenant breach in 2008. JOE also intends to seek similar covenant modifications from its Senior Note holders.

www.JoshMcleanHomes.com