Experts split on role Disney-DeSantis feud played on Lake Nona project cancellation

Experts split on role Disney-DeSantis feud played on Lake Nona project cancellation

Many people were left wondering what role Florida Governor Rick Scott's feud had played in the Walt Disney Co. (NYSE:DIS) decision to abandon their proposed $1 billion corporate headquarters in Orlando's Lake Nona Community. Ron DeSantis was a factor in the decision.

Disney revealed in 2021 plans to build an office complex of 1.8 million square feet that would house 2,000 employees -- a mixture of Californians relocated and those who were hired -- in the master-planned community in southeast Orlando developed by Tavistock Development Co. LLC. Disney announced to its employees on May 18 that the plan had been scrapped.

In spring 2022, Disney began a public feud with DeSantis over the former Reedy Creek Improvement District Special Government of the theme park giant -- now known as the Central Florida Tourism Oversight District appointed by DeSantis. Disney filed a lawsuit in relation to its constitutional rights. The oversight district filed a countersuit in relation to its powers.

The DeSantis-versus-Disney battle garnered worldwide attention, even leading Disney's top brass to question the state of Florida's commitment to one of its largest businesses -- and Central Florida's biggest employer.

Disney has yet to directly state that DeSantis is responsible for the Lake Nona cancellation. In the letter of May 18, Disney Parks, Experiences and Products chairman Josh D'Amaro said that the decision was made due to "new leadership and changing economic conditions".

In a prepared press release, DeSantis Press Sec. Jeremy T. Redfern attributed Disney’s decision to its financial performance. "Disney first announced the possibility of a Lake Nona Campus nearly two years ago. The project never materialized, and the state was uncertain whether it would be realized. It is not surprising that the company would cancel failed ventures and restructure its business operations, given their financial situation, declining market cap, and falling stock price.

Orlando Business Journal reported that experts who closely follow the issue said the truth is somewhere between.

Edward Jones analyst David Heger, who closely follows Disney, said that the Lake Nona Campus cancellation was more likely due to the recent cost-cutting efforts the company had undertaken. Disney announced in February that it would be implementing cost-cutting and restructuring measures, which included the elimination of 7,000 jobs.

Heger told OBJ that the Lake Nona campus was a massive investment and "Disney" thought it could save money by not moving ahead.

Heger says that Disney's second major decision, announced on May 18, may also be a result of a desire to reduce spending. Disney announced that it would close the Star Wars: Galactic Starcruiser Hotel Experience at Walt Disney World this fall.

Heger said that he is watching the effect of this decision on the stockholders' perceptions about Disney taking such risks as the Lake Nona relocation or the Star Wars Hotel. He said that there could be some concerns if Disney announced other large expenses.

Heger stated that the company must continue to invest to grow, especially in theme parks, as new rides and shows will attract more customers.

Disney could potentially, due to their political games, delay projects in Florida for a short time. People keep coming back to new attractions, hotels, and experiences. "I don't believe [Disney] could afford to not go through with the project."

Heger noted that the Lake Nona cancellation was a political move by Disney to fight DeSantis. But in the end, Disney had to assess its internal costs, and this was likely the main reason for the decision.

DeSantis was blamed by many in the public and social media responses to the Lake Nona story, especially state legislators.

Aubrey Jewett, assistant director and associate professor at the University of Central Florida School of Politics, Security and International Affairs, said that Disney's move was in fact a response to DeSantis. "It is almost certain that it's not only related, but also the No. This decision was driven by the No. "They didn't say that, but one plus one equals 2 -- in this case one thing leads to another."

Jewett suggested that Disney's financial struggles, the rising inflation rate and other factors could also be at play. Jewett said that all of these factors pale in comparison to Disney’s feud against the state. DeSantis, as well as state legislators who supported DeSantis, miscalculated.

"They knew that Disney was in a tough spot because of the amount of money it has invested in Disney World. The sunk costs are so high that they will not be moving. While all that is true it's not the only investment or asset Disney has or could have made in Florida. We can see this when Iger says, "Florida has to decide if they want Disney to invest in the state and create jobs or not."

Jewett stated that Central Florida is the ultimate loser of all this. Jewett says that the Lake Nona project was a boon to the economy of the region. Now, however, the business climate is in danger if companies feel they cannot speak out freely.

There's no way to spin this... This is a huge loss."