By Mark Basch
PANAMA CITY – Wearing a hard hat amid the construction dust of the passenger terminal for the new Northwest Florida International Beaches Airport, it’s hard to imagine that Southwest Airlines’ first flight out of Panama City will take off on schedule on May 23. But Airport Authority Chairman Joe Tannehill insists the new airport will open as planned next month.
“We’ll make it. The windows may not be washed, but we’ll make it,” he said.
They’d better. This is the first international airport built in the U.S. in 15 years, so it’s receiving a lot of attention.
“In my view, it’s not an option. It’s [May 23] a fixed date,” said Lisa Walters, a Panama City attorney who is the immediate past chairwoman of the Bay County Economic Development Alliance.
“The globe is watching us,” she said.
In particular, a group of executives who currently work in a Riverside Avenue office in Jacksonville are watching closely. Many economic development officials in the Panama City area are hoping the new airport will make the region more accessible and open up new opportunities. But no one will benefit more than The St. Joe Co., the Jacksonville-based company that owns 71,000 acres immediately surrounding the airport and 300,000 acres within 40 miles of the site.
“This is really the future of our company,” said Rod Wilson, president of the West Bay Sector for St. Joe. West Bay is the name given to the land adjacent to the airport that St. Joe intends to develop.
The new airport is in a remote area of Bay County surrounded by largely undeveloped land. But St. Joe and area economic officials envision practically a new city sprouting from the airport.
“We are creating a new central business district for the region,” said Kevin Johnson, St. Joe’s vice president of economic development who was brought in last fall to market West Bay.
“We have a greenfield opportunity,” Johnson said, referring to the vast area that is basically wide open for new and planned development.
“Greenfield opportunities are an anomaly.
“This is a very tide-changing opportunity for the state of Florida.”
The opportunity is so important to St. Joe that after being headquartered in Jacksonville for three-quarters of a century, the company will move its offices to a new building in West Bay next year so it can monitor development of the region more closely.
“To me, it’s about moving the company where the shareholders’ assets are,” said St. Joe Chief Executive Officer Britt Greene.
A brief history
St. Joe was formed after the death of Alfred I. duPont in 1935 as a holding company for duPont’s vast business assets. The businesses included a paper mill in Port St. Joe, which gave the company its name, but the corporate office was located in Jacksonville, where duPont lived. His brother-in-law who ran St. Joe after duPont’s death, Ed Ball, also lived in Jacksonville.
St. Joe’s diverse holdings included about 1 million acres of Florida real estate, much of that timberland in the Panhandle that duPont and Ball accumulated at discount prices in the 1920s.
The trust established by duPont’s estate controlled most of St. Joe’s stock. But after more shares were distributed to the general public in the 1990s, St. Joe came under pressure to increase profits by exploiting the development potential of its land holdings, which included prime beachfront locations along the Gulf of Mexico. St. Joe sold off its industrial properties and transformed into a real estate development company, bringing in Walt Disney Co. real estate executive Peter Rummell as CEO in 1997 to lead the transformation.
Over the next decade, St. Joe began creating new communities on the land it owned. Its signature development was WaterColor, a 499-acre residential community in Walton County that includes a resort hotel called the WaterColor Inn.
As the housing market slowed in the past few years, St. Joe again shifted its focus. In 2007, it announced a restructuring in which it transferred much of the development and management responsibilities of its properties to strategic partners. For example, while it still owns the WaterColor Inn, the hotel is operated by a third-party management company.
Rummell retired in 2008 and was succeeded by Greene at a time when home sales at St. Joe’s communities were drying up. St. Joe reported net losses in 2008 and 2009, but company officials have been largely unconcerned about short-term results, turning their attention instead to the opportunities presented by the opening of the Panama City airport. And they are looking at opportunities far into the future.
“This is not a five-year deal for us. This is not a 10-year deal. This is a 50- to 75-year deal for us,” said Johnson.
High hopes for airport
The new airport is being built on 4,000 acres donated by St. Joe. Although it gave up the land free, the deal created a big business opportunity for St. Joe because of all the land it owns surrounding the airport. But St. Joe did not initiate the project.
The relocation of the existing Panama City airport began in the mid-1990s when the Airport Authority was considering ways to extend its runway to bring in larger jets. The current airport can accommodate only regional carriers, which limits the flights that go in and out of Panama City.
“We have just a few places you could go,” said Tannehill. But with the 10,000-foot runway at the new airport, “we can land the 747s in here.”
After determining there was no room at the current location to extend the runway, the airport authority approached St. Joe in 1998 about using some of its land to build a new airport.
As the project proceeded, it faced opposition from environmental groups that were concerned about the impact of the airport construction. And it also faced opposition from local residents who didn’t see the need for a new airport. In fact, Bay County residents rejected the airport in a nonbinding referendum in 2004 by a vote of 54 percent to 46 percent. But the business community embraced the airport and the project continued.
“Panama City’s historically been a tough place to get to,” said Wayne Stubbs, executive director of the Port of Panama City.
“We’re all going to benefit from the accessibility.”
After fending off several legal challenges from environmental groups, ground was broken for the airport in 2007.
Already, the airport, aided by St. Joe, secured a deal with Southwest Airlines to begin service May 23 with eight daily flights in and out of Panama City. St. Joe showed its interest in bringing more flights to Panama City by agreeing to reimburse Southwest for any losses during its first three years of operation at the airport.
“My guess is it’s not going to be a large number,” said Greene.
The St. Joe CEO said he sees the Southwest deal as a marketing investment to make sure more people visit Panama City and see what the region has to offer.
“Once they’re there, we know we can win them over,” he said.
St. Joe had originally targeted people in the Southeastern U.S. to buy property in its residential communities as vacation or retirement homes, because those people can drive to the Panhandle. But Greene said the
Southwest flights open the market to people in Chicago and Northeastern cities who can now get to Panama City more easily.
“We can connect to areas of the country that were inaccessible,” he said.
Plans for West Bay
St. Joe’s development of the West Bay Sector, the 71,000 acres it owns surrounding the airport, begins with a three-phase plan totaling 1,000 acres. The first phase consists of 100 acres on the road leading to the airport that will be used for office space plus potential retail uses, such as an airport hotel and restaurants.
So far, the only project that’s actually been announced for the site is the office building St. Joe will construct for its headquarters. But Johnson expects interest to pick up as the airport opens.
“We’re at a stage now where we can really see that this is happening. There’s no mystery to this event any longer,” he said.
The plan includes 600 acres immediately accessible to the airport runway that can accommodate aerospace businesses.
But Johnson said the company is not limiting the type of businesses that can move into West Bay.
“We define it as a place where you can create virtually any type of opportunity that fits into our model,” he said.
The Panhandle region is already an aerospace center with a navy base and six aviation-related military bases, and 1,900 aerospace and defense-related businesses, according to Florida’s Great Northwest, an economic development organization for the region. So bringing in more aerospace companies is a natural fit for the airport.
“The low-hanging fruit is the aerospace industry,” said Wilson of St. Joe.
But Al Wenstrand, president of Florida’s Great Northwest, expects to see the region open to businesses such as health services, medical technologies and logistics and distribution.
Wenstrand sees the potential to create a new metropolitan area on the now vacant land around the airport.
“It has the opportunity to be done correctly,” he said. “This is an opportunity I didn’t see anywhere else.”
Walters of the Economic Development Alliance said it’s up to the community to take advantage of the opportunity.
“We have to make a great first impression. We have to continually market ourselves,” she said.
“Shame on us if we don’t take advantage of that opportunity.”
‘Aerotropolis’ concept
The notion of a new “city” sprouting from the Panama City airport is not far-fetched, according to John Kasarda, director of the Kenan Institute of Private Enterprise at the University of North Carolina.
Kasarda has developed the concept of an “aerotropolis” to describe new development of business and entertainment venues within a 15-minute drive of an airport.
“The key to the aerotropolis is time-cost accessibility,” said Kasarda. “What the aerotropolis does is lay out a plan for intelligent growth.”
He sees the Panama City airport as “the ideal proof of concept” for his theory.
“It’s basically a blank canvas,” he said. “There are so few greenfield airports.”
Kasarda thinks St. Joe has done a good job with its plans for the airport area.
“The West Bay Sector plan is an excellent aerotropolis plan,” he said.
But St. Joe is not getting unanimous support. John Hedrick, chairman of the Panhandle Citizens Coalition, a group that opposed the airport, is concerned about the pace of development in the region.
“Short of no airport, probably having as little development as possible” is his hope for the region.
Hedrick’s group is now trying to drum up support for Amendment 4, the Florida ballot measure that would allow the public to vote on comprehensive land-use changes.
“We’re hoping to minimize [the airport's] impact and we hope that things like Amendment 4 will help us do that. The citizens did not want this in the first place,” he said, referring to the 2004 vote.
But Greene said St. Joe acts responsibly in developing its properties, including environmental concerns.
“We believe there’s inherent value in protecting the environment around development. All our projects are environmentally tuned to the land,” he said.
Greene points specifically to the West Bay plan, which sets aside 39,000 of St. Joe’s 71,000 acres to be preserved for nature.
“It’s very rare for a company to set aside 39,000 acres around a new airport for environmental protection. I think that’s extraordinary,” he said.
First Coast still in play
The West Bay Sector is St. Joe’s immediate concern, but it also owns the 300,000 acres within 40 miles of the airport and 577,000 acres in total. Much of that is unplanned for development right now.
“There are probably going to be a number of opportunities that we’re not even thinking about yet,” said Greene.
One project in the Jacksonville area that remains is the 4,170-acre RiverTown residential community in northern St. Johns County, where home sales have stopped because of the recession. But Greene is still optimistic about that project when the economy improves.
“RiverTown is still a viable project,” he said.
St. Joe also has a joint venture with Regency Centers Corp. to build a mixed-use development including a Publix supermarket in the San Marco area of Jacksonville, but that has also been put on hold by the recession.
“We’re just waiting for the market to get right with that,” he said.
But for the most part, St. Joe will be getting less visible in the Jacksonville area as it prepares to move its headquarters to Panama City. St. Joe has only about 50 employees at its Jacksonville headquarters and the Jacksonville-based duPont trust, which controlled St. Joe for decades, sold off its shares in the company several years ago.
Greene said St. Joe’s announcement last month that it would move its headquarters to West Bay was important for its marketing efforts in that region. It demonstrates the viability of the project to companies that are thinking of moving there, he said.
“It’s very hard to ask them to make the move early in the development if we’re not there too,” he said.
And with the focus of St. Joe’s operations on West Bay and other property in the Panhandle, it will be much easier for Greene and the rest of his team if they relocate to the region.
“We’ve been doing it from afar,” he said. “But it’s going to be a lot more difficult as the pace of development accelerates.”