Good day, and welcome to the Consolidated-Tomoka Third Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to John Albright, President and CEO. Please go ahead.

Thank you, operator. Good morning and welcome to today’s conference call to review the operating results of Consolidated-Tomoka Land Company for the third quarter and nine months ended September 30. My name is John Albright, President and CEO of the company. On the call with me is Mark Patten, our Chief Financial Officer; and Dan Smith, our General Counsel and Corporate Secretary. I’ll turn it over to Mark to provide you with the customary disclosures regarding our comments on this call today.

Thanks, John. Good morning, everyone. During our call today, we may make certain statements that may be considered to be forward-looking statements under federal securities law. The company’s actual future results may differ significantly from the matters discussed in these forward-looking statements. And we may not release revisions to these forward-looking statements to reflect changes after the statements were made. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time-to-time in greater detail in the company’s filings with the SEC and in our earnings release issued last night. Also we’ll be filing our third quarter investor presentation later today, which will be available on our website. Our investor presentation provides additional information you may find useful and reviewing our third quarter results. With that, I’ll turn it back over to John.

Thanks, Mark. At this time, we’ll open it up for questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Bruce Garrison of Chilton Capital. Please go ahead sir.

John, would you mind going through the rationale for the big land sale, when in your own presentation you had the value at $158 million to $193 million and you’re selling the land for $93 million? Just wondering why you did it.

Sure. Yes, $193 million is $97 million. But as you’ve seen in the past and we’ve discussed, we’ve had, for instance, a parcel that was the Minto Phase II parcel that had dropped, and then we had a subsequent purchaser of the land who had dropped their contract. So all the land contracts are fairly dynamic and have been elongated in time and a lot of them are in the permitting process and so forth. And we get a lot of questions from our shareholders about how long it will take you to sell the land, what’s going on with that parcel, what’s going on with the market, that sort of thing. And we felt like this was an opportunity to monetize a fair amount of the economics in the land portfolio today, while retaining an interest going forward. And so it basically allows our shareholders to realize a significant amount of capital out of the land day one, de-risk the land portfolio, takes out a lot of the questions about land parcels and this and that, and the market wasn’t valuing the land whatsoever as far as where our stock’s been trading. So the market certainly didn’t appreciate the land value, and this basically crystallizes a significant portion of that, while having a interest carry for possible proceeds in the future.

How does that promote into future work? And is it a significant hurdle before you would earn anything extra?

So, we’ll have additional disclosures here in the coming days. And so – and then after we have that disclosure, we can basically have a discussion. But it’s a typical kind of joint venture-type scenario, much like what we did with BlackRock on the Mitigation land. And so we can discuss it once we have more disclosure in the coming days.

Thank you, John.

Sure. Thank you. Thanks, Bruce.

The next question will come from Nat Stewart with NAS Capital. Please go ahead sir.

Hi, good morning. Interesting news with the big land sell. The other guy asked one of my questions, but clearly it kind of accelerates the transformation, it pulls forward when you’re kind of going to become a more pure play with your new strategy. I’m just curious what kind of triggered you wanting to do this. I guess you just went over it, but is it something in the market where you thought there’s a very opportunistic time to maybe convert to a REIT or sell the entire portfolio? I just want to hear the other side of your strategic considerations.

Thank you. So, a big component of this is to reinvest those proceeds because it was done in a 1031 transaction. So right now, we are very focused on investing that capital in the income-producing properties. And the Board has certainly been in dialogue and in discussion about what this does to the company, what’s the next chapter. And so as the first thing was getting this transaction closed and took a lot of resources – human resources here to get that closed, and now a lot of the focus is on the reinvestment. And so after we kind of come out of that, we’ll have more communication as the Board contemplates the next move given that the land really is basically in somewhat of the rearview mirror.

Good. Well, I look forward to hearing what those next moves will be. Certainly getting the stock price at a good level will probably assist with any growth you guys want to do. So I look forward to hearing about that.

Thanks, Nat.

Thanks.

Thank you.

The next question will come from Raymond Howe of CFP, Inc. Please go ahead sir.

Hey, John and Mark, how are you?

Great. How are you doing?

How are you doing?

Good. Can you tell me, does the land sell include the subsurface interest?

It does not.

Okay. And going forward, can you tell me this transaction, what kind of impact it’ll have on SG&A, if any at all?

I mean, I think – I’m not sure that’s really going to impact the G&A materially. We are obviously managing the venture, which really means we’re managing the transactional-level activity in the venture, which is kind of similar to what we were doing before that.

Okay. And I’m guessing this will speed up the conversation about the REIT conversion?

It definitely speeds up the conversation about what’s next for CTO, given that this focus on the land has been more or less – the value has been more crystallized in kind of fair amount of proceeds. So as I mentioned, we’re looking to reinvest it, and certainly, there’ll be more communication on what the next step is for us.

And lastly, can you give us any color on, sort of, how the lands transaction came about? I mean was this something you were marketing or did they come to you? Was this before – did you start talking with them before or after the 1600- acre land sale fell through, so on and so forth?

Yes. It’s safe to say that we’ve been working on this for a while. It’s not something we are out there marketing. Some groups had seen what we did on the Mitigation Bank with BlackRock, and I think that was an interesting structure to groups. And so we engaged in conversation and this is what transpired. But it’s been over certainly, many months and really kind of came out after doing the JV with BlackRock on the Mitigation Bank.

Okay, great. Thank you.

Thanks, Raymond.

The next question will come from Brian Rohman with Boston Partners. Please go ahead sir.

Good morning. Congrats on announcing this transaction. I just want to say up front, I give my vote towards becoming a REIT sooner rather than later, but that’s not new news. First of all, the – you said you sold the controlling interest in the land for $97 million. Did you – you don't give a percentage, obviously they own 51%-plus.

It is greater than 51%, yes. And they have certain decision capabilities around pricing and parcels and things like that.

I’m sorry, what does that mean?

So setting the price for one of the parcels in the portfolio. So they have – Brian, they have, obviously as you mentioned, above 31% interest. And there – in the agreement, we have certain release prices and so forth and so we're managing the venture. And so it's business as usual as far as selling the land and talking to land developers in the contracts that we had are still in place. And so it's really coming to end with an early monetization of a majority share of it. So you'll see more details here in a subsequent filing.

Okay. So, you – they're buying greater than 51% of the land and then they're going to be – who is – let me ask the question, who's going to be responsible for managing this joint venture?

We are, we are. Yes.

And you’re going to get a management fee for that?

We are.

How significant is that?

Not tremendously significant. And then obviously, it decreases over time as the portfolio is monetized.

And could you just – since you referenced it several times the Blackstone [ph] subsurface joint venture as a template for what to look for here, could you just remind us of what that looks – what that agreement looks like?

Yes. So, we did with BlackRock on the Mitigation Bank.

Yes. So, it went on the subsurface. So basically, we've sold there over a 51% interest to BlackRock. We're managing the Mitigation Bank, and that was to take a significant amount of acreage and create a Mitigation Bank, and we're selling credits to developers. And so there's basically yield threshold. And after yield thresholds, we get a promoted interest, if you will. So typical JV structure.

But get – so – but getting back to the transaction with Magnetar, you're still going to have an asset then on your balance sheet that is your minority stake in this land. Is that correct?

That’s right.

And we won't know about that, that what that number is until you reveal it? Mark

Yes, because it's a fourth quarter transaction. So it's – but we're going to come out with something in connection with either an 8-K that follows up to this or in the queue.

Okay. And then last question. On your NAV worksheet as of July 15, in the presentation you got subsurface interests of $15 million, is that your piece of the Blackstone?

No. That’s – like I mentioned, that's totally different than the Mitigation Bank. So the subsurface – Brian, it might predate you, but we had the subsurface under contract three or four years ago at $24 million, and that group obviously did not end up buying the portfolio. So, we basically had given a approximate value of $15 million assuming that, since the $24 million contract didn't go through, it's worth less and just kind of gave a rough estimate. And so that's wholly owned by us right now. The Mitigation Bank JV interest is really in other. We don't basically project values of the JV interest that we retain. And certainly, on this venture that we just closed, there'll be a balance sheet recognition of our interest but we don't want to get ahead of our – over our skis and giving you some sort of value that is – we're basically trying to be a little bit more conservative. And Brian, on the Mitigation Bank, on the balance sheet, it's the investment and joint venture, which is about $6.8 million.

All right. And then the other two little pieces here, the Daytona – Downtown Daytona Beach Land and the Golf + Mitigation fee impact credits, $5.3 million and $4.3 million respectively, those also are not part of this?

Correct.

Okay, great. All right. Thank you.

Thanks, Brian.

[Operator Instructions] Our next question will come from Matt Werner of Chilton Capital. Please go ahead, sir.

Good morning, guys. Sorry to keep repeating this, but on the $97 million and the – and given the fact that there was a controlling interest that was sold, what is the implied valuation of the land on a gross basis at 100%?

So at 100%, the implied is about $146 million.

Yes, that’s helpful. And what was the closing date on the transaction?

Yesterday.

Okay. And I assume all that was included in the new guidance for the year in terms of – on that line item for land sales for the year?

We didn’t adjust guidance, we just reported, sort of, where we were against the guidance. So we didn't really – because it was kind of – transaction involved all the remaining lands, sort of adjusting guidance for that, we just – we didn't go through that yet.

Okay. Will you be doing that, I mean in this 8-K you're talking about?

Most likely, yes. We'll give the impact and that'll kind of reflect and update where we think things end up on an earnings front.

Okay. And then on an accounting basis, you said you sold a controlling interest, but you're still going to be managing the joint venture. So does that mean it's going to be a consolidated joint venture or unconsolidated?

Yes, that's what John was referring to when we come out with the 8-K, that'll kind of – we'll kind of lay it out for you, so that you can take a look at the accounting for it.

Okay. And then if – I know you told the other gentlemen that the golf course in Downtown land would not be included. Would ownership of either of those properties prevent or be a roadblock in a REIT conversion?

No. The Downtown assemblage is real estate so that would fit. The golf, on the other hand, could potentially be, if you didn't transact, which I think we've been pretty out in front in terms of disclosing that as an asset held for sale that we think transacts within the next year, frankly, by the end of the year. But should that be around if you were to convert to a REIT, that income might be bad income so you might have to structure around that.

All right. Great. Thanks. That’s all I have.

Thanks, Matt.

Our next question is a follow-up from Raymond Howe of CFP, Inc. Please go ahead, sir.

John, is any of the $97 million at risk based on performance of the sell the land?

No.

Okay. Thank you.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to John Albright for any closing remarks. Please go ahead, sir.

Thank you very much for attending this call and look forward to talking with you in the future.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.