John Albright - President and Chief Executive Officer Mark Patten - Senior Vice President and Chief Financial Officer.

David Winters - WinterGreen Advisors Gregg Hillman - First Wilshire Securities.

Good morning and welcome to the Consolidated-Tomoka Third Quarter 2016 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] 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, Drew. Good morning, and welcome to today’s Consolidated-Tomoka Land Company Conference Call to update you on recent activities and to review our operating results for the quarter and year-to-date as of September 30, 2016. My name is John Albright, President and CEO of Consolidated-Tomoka Land Company.

On the call with me this morning is Mark Patten, our CFO; and Dan Smith, our General Counsel. Mark will review the details of our third quarter and year-to-date financial results. First, 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 will make certain statements that may be considered to be forward-looking statements under federal securities laws. 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 press release from last night.

With that, I’ll turn the call back over to John..

Thanks Mark. While we look forward to reviewing our year-to-date and third quarter results for 2016 and to highlight number of developments in our business, my opening remarks will address the state of our business and the progress we're making and achieving our business plan.

In addition, let me note that we filed our third quarter investor deck last night which is now available on our website. Our investor deck provides additional information you may find useful including NOI on each of our income properties.

As we stated during our first earnings call, last quarter our board and our company remained committed to maximizing long term value for all of our shareholders. We've been active in the acceleration of the remaining $7 million available on our $10 million buyback program we initiated at the beginning of this year.

From the third quarter through October 17, 2016 we've repurchased 55,000 shares, investing approximately $2.7 million representing average price of $49.10 per share. Including this activity we've acquired just over 117,000 shares this year representing investment of stock of approximately 5.7 million in the past seven months.

Now I'd like to highlight few aspects of our performance in the quarter and where we stand with our results for the year through September 30th.

With regard to our land and a contractor Minto is still anticipating closing on the 1,581 acres by year end, but closing this contention on the timing of receiving a federal wetlands permit which they're actively pursuing.

We are pleased to close the first 4.5 acres of the Minot contract, so that Minto can begin construction of their sale center which has already started.

ICI Homes Zoning & Entitlements permitting process for the 600 acres of Bayberry II, which is still anticipated to close at year end, but again it's subject to a federal wetlands permit and the city site plan approval.

Overall we're pleased with our land sales pipeline remains strong with over 4,000 acres on a contract are approximately 39% of our land holdings of which 95% are west of I-95 with potential proceeds of more than $98 million on average price per acre of approximately $24,000.

The pipeline reduced by $3 million for a 17 acre land sale which is on a Parcel South of the CarMax store on Tomoka farms road and a draft contract for 19 acres for approximately $325,000 on a small parcel just north SR 40.

Regarding our sub-surface contract, the potential purchaser approximately 500,000 acres of sub-surface interest recently submitted Title Objection seeking to significantly reduce the acreage included in this transaction.

While we noted in our release last night that we're currently reviewing their proposal, we are currently negotiating with potential purchaser to allow more due-diligence time, so as to better understand their title concerns. However there can be no assurances that these negotiation results in any transactions being completed.

Now, I'll turn it back over to Mark to review our results..

Thanks, John. Total revenue for the quarter ended September 30, 2016 increased by approximately $3.9 million to approximately $12.2 million as compared to $8.3 million a year ago for the same period.

Revenue from our real estate operations segment increased approximately $2.9 million, reflecting approximately $3.7 million in revenue from the percentage-of-completion revenue recognition that relates to our land sales in Tomoka Town Center from last year and the first quarter of this year.

In addition to final incentive payment related to the distribution land sale in 2014 was received, these compared to $1 million in land sales in the same period of 2015.

Revenue from our income property operations increased approximately $1 million reflecting approximately $1 million of incremental rent revenue due to the addition of the 245 Riverside Avenue property, acquired in July of last year and the Wells Fargo property acquired in November of last year, offset by a reduction of approximately $634,000 in single-tenant rent revenue due to our recent dispositions.

Included in the increased revenue during the quarter ended September 30, is approximately $559,000 in non-cash revenue related to the accretion of the below-market lease intangible which is primarily attributable to the Wells Fargo property.

For the quarter ended September 30, 2016 we achieved net income of $1.44 per share which was an increase of $1.08 per share compared to the same period in 2015, and our operating income increased approximately $10.7 million totalling approximately $15.9 million.

Our results in the third quarter of 2016 reflected the increased revenues as I mentioned earlier particularly from the percentage completion revenue and the increase profitability from our income property operations and also gains from the disposition of income properties during the quarter that exceeded gains from dispositions in the same period in 2015 by approximately $7.7 million.

Our increased income property portfolio also generate an increased in depreciation and amortization of approximately $528,000 and we had increased interest expense of approximately $562,000 reflecting our increased fixed rate debt, the write-off of approximately $367,000 of amortized loan cost related to the $23.1 million mortgage that was assume by the buyer of the 14 asset property portfolio that we sold in September and the fact that we had smaller balance outstanding on our credit facility which carries a lower rate.

Total revenue for the nine months ended September 30, 2016 increased approximately $20.2 million to approximately $43.4 million, as compared to approximately $23.2 million during the same period in 2015.

This increase was primarily the result of the increase in revenue from our real estate operations of approximately $15 million which reflected approximately $16.5 million in revenue from the percentage of completion revenue recognition that I noted earlier, and that final incentive payment that we received on the distribution center land sale which compared to approximately $1.9 million in land sales in the same period in 2015.

We also had an increase in revenue from our income property operations of approximately $5.1 million, which reflected approximately $4.5 million of incremental rent revenue from 245 Riverside and Wells Fargo properties, offset by a reduction of approximately $1.3 million in single-tenant rent revenue due to the recent dispositions.

Included in the increased revenue during the quarter ended September 30 -- actually the year ended September 30, 2016 is approximately $1.7 million in non-cash revenue related to the accretion of the below-market lease intangible primarily again attributable to the Wells Fargo property.

Net income for the nine months ended September 30, was approximately $11.2 million, compared to approximately $2.7 million in the same period in 2015. Net income per share for the nine months ended September 30, 2016 was $1.96 as compared to $0.46 a year ago which is an increase of $1.50 per share.

Our results in the nine months ended September 30, 2016 reflected approximately $30 million and gains from the aforementioned percentage-of-completion revenue recognition and profitability from our income property operations which increased approximately $3.6 million and we also recognized gains from the disposition of income properties during the nine months that exceeded the same period in 2015 by approximately $9.1 million.

Our increase net income was impacted by the recognition and impairment charges of approximately $2.2 million for the nine months ended September 30, relating to a charge of approximately $1.2 million in connection with the sales of income properties in Sebring, Florida and Altamonte Springs, Florida which were sold in April and September 2016, respectively, and impairment charges recognized on certain land sales contracts of approximately $1.0 million.

Further, our net income growth was impacted by an increase in general and administrative expenses of approximately $2.4 million primarily due to an increase in non-cash stock compensation expense of approximately $1.5 million, of which approximately $1.6 million is related to the acceleration of stock compensation expense in connection with the cancellation of certain grants in the first quarter.

We also had increased legal costs of approximately $1.2 million, which was primarily related to certain shareholder matters.

Finally our net income reflected an increase in depreciation and amortization of approximately $2.2 million which resulted from the growth in our income property portfolio and increase interest expense of approximately $1.9 million, which reflected our increased fixed rate debt and again a smaller balance outstanding on our credit facility.

We finish the quarter with the strong liquidity position with approximately $9 million in cash and another approximately $3.1 million in restricted cash which relates to our 1031 exchange transactions which we utilized in acquiring the 3600 Peterson property that we announced just late last week.

As John will discuss the $23.1 million of fixed rate secured debt was assumed by the buyer and our sale of the 14 income properties. Our credit facility as of September 30 provides borrowing capacity of approximately $58.8 million based on the level of borrowing base assets.

Our net debt which represents the full face value of our outstanding debt was approximately $141.3 million at quarter end, less our cash and restricted cash affiliated with 1031 transactions relative to our total enterprise values of approximately 29.7% as of September 30.

Now, I'll turn it back over to John to discuss some of the other activities from the third quarter..

Thanks Mark. As I mentioned we had a strong quarter on the acquisition front. We invested more than $37 million during the third quarter and through October 2017 at a weighted investment yield of approximately 6.14%.

Our acquisitions included properties and strong markets such as Santa Clara, Dallas, and assets in Austin, Charlottesville, and outside of Charlotte North Carolina. As Mark noted, we completed the disposition of 14 assets right at the quarter end with our last vacant income property.

The portfolio of 14 core assets sold for $51.6 million and gross proceeds was included at the buyers assumption of $23.1 million mortgage loans, the gain as a sale as Mark mentioned was approximately $11.4 million which reflects an exit cap of 4.73.

We've already utilized these sales proceeds in 1031 exchange transaction to acquire replacement assets at accretive returns. Lastly, we're pleased to welcome Laura Franklin to our board.

Laura's wealth of knowledge and expertise from her more than two decades is exactly that they have washed and [Indiscernible] will bring a fresh and diverse perspective for our board.

In addition as we disclosed in our earnings release, Chip's [Indiscernible] announces intension to not seek re-election effective as of 2017 annual meeting of shareholders. We'd like to thank Chip for his six years dedicated service and knowledge and expertise that our shareholders benefited greatly during his tenure.

As we mentioned in our second quarter 10-Q we intend to keep our board at seven, we continue to pursue additional potential board candidate to serve as an additional board member. That concludes our prepared remarks. At this time, so we’ll open it up for questions, Drew..

[Operator Instructions] Our first question comes from David Winters of WinterGreen Advisors. Please go ahead..

Good morning. This is for Mark. It's topic of transparency to the strategic alternative process and results. At this year's shareholders meeting over 70% of CTO's shareholders supported the WinterGreen's proposal to maximise shareholders values for the sales CTO for the liquidation of CTO's assets.

The company has avoided disclosing, any meaningful information and once the mandate was given to Deutsche Bank, as well as a full description of process taken, offers that were received and the full results. The process was funded by corporate assets that were to be used for the benefit of all shareholders.

We now deserve the candidate disclosure of the detail surrounding; the implementation of the WinterGreen proposal, using good corporate governing standards saying "trust us" is not an adequate response..

Was that a question?.

Yes, it is. And we deserve an answer. All the shareholders deserve an answer from you..

We – David, I appreciate the question. First and foremost we cover that topic at our first earnings call in the second quarter.

First and foremost, the process that we went through with the potential bidders required confidentiality and we had a non-disclosure arrangement, but more importantly we've disclosed what we believe is required to be disclosed regarding that process..

I think that thoroughly an adequate and quite for corporate governance..

Okay. Well, I appreciate -- comments..

It will be great if you guys were straightforward with the shareholders and treated them with respect that we all deserve..

Thank you.

Drew?.

Drew..

The next question comes from Gregg Hillman of First Wilshire Securities. Please go ahead..

Yes. Good morning, gentlemen. Little bit new story, but first of all, compared to the other triple wreaths [ph] in one of the slides in your slide deck which by the way is very informative.

How do you – your expense ratio compared to other REITs, how does that compared like some of the other ones like in that one slide and the slide deck?.

Yes. It’s very favourable and we can basically provide you with some third-party research reports that have that basically expense ratios for the competitors if you will.

And then we had a slide I think in a couple of investor decks at couple of quarters ago with ours, so you can kind of pair those together, but I think with 14 employees and the assets we have I think its – you'll find it fairly efficient, but happy to hear your thoughts on that, so we're happy to send you some third-party market research on the comp set..

Okay. And then the whole – bit about the comps for the lands, I mean there is bunch of slides in there about analysis of shares breaks for the various transactions you've done historically west and east of I-95.

It’s kind of -- I don't know, its little bit hard to me to make sets of it, do you have any like kind of simpler, you know, how would you digest all that information on the slide into like smaller something that's a smaller roll of thumb to get a handle on the value of the land based on your historical transaction..

Yes. If you look at slide 12 of the investor deck, we kind of give you the transaction that both have closed and are under contract. And then we bifurcated between east and west of I-95 and should give you kind of a flavour for where those prices are coming out per acre.

So obviously the bulk of the land that we currently have in the contract are west of I-95 which with large chunk of property obviously to mentor contract especially, so you can basically assume that those are lower price breakers, because A, they're west of I-95 and they are larger pieces. And then obviously East of I-I-95 has higher value per acre.

And then we have slide that you probably saw where we show what -- perhaps the market is trading our land debt by taking our market cap and our debt and then backing out the income properties in cash and so forth and you come down to price per acre, you take out the deferred tax liabilities basically around zero for the balance of the land is not under contract.

So, I think – so what we're trying to do is provide you probably too much information where it's kind of confusing, but enough information that kind of helps you to actually get to how we want to take a look at land values. And then some of the unsold chunks of property that's probably harder for you to get your hands around.

We've given indications on one of our slides there with regards to mitigation land that we plan on basically commencing and monetizing that way and then 1,000 acres that are on SR40, we kind of given up bandwidth and that's on page 15 of the slide deck..

Okay.

And by the way what's that sub-surface thing mean, the 500,000 acres, what does that means?.

So the company obviously over a 100 year history we used to own almost 2 million acres in the State of Florida, and the company has sold off obviously and then we're down to the last 10,500 acres, so quite of their land over the years in the 20, 30, 40s and so forth.

And so the 500,000 acres of sub-surface interest is land that the company use to own and when we sold the land we retain the mineral rights and in some cases the surface entry rights, and so the surface entry rights are basically rights that allow the owner the minerals to access the minerals.

And so you'll see over the years we've had fairly productive income stream coming from buyers of land that we no longer own, who would like us to release that right of entry and so that's been a fairly decent income stream to us.

So, the buyer of the 500,000 acres has a contract of $24 million because the Title works goes back many, many decades is fairly convoluted as in 20 counties, and so they are uncomfortable with roughly half of that 500,000 acres and we've given them, we're talking to them about giving them some more time to work through the title as we work with them on the title and seeing what will come of it..

Okay. And then, I guess one last question.

What would be like the non-boilerplate risk factors in the 10-K at this point? Like what could wrong and how could you guys mess up?.

Well, I guess what I'd say; non-boilerplate is there is the risk element to owning land and having a strategy of monetizing the land, so you are subjected to a market dynamic that’s unique to land companies.

I think maybe a risk factor that might be non-boilerplate would be our ability to deploy the capital and invest in income properties which is fundamental to our strategy, probably a dynamic around, I’ll call it environmental but it’s really permitting, which is sort of a sub risk factor to our overall land portfolio strategy..

Okay.

And is that cap rate you are getting when you say you know 6.1% you know for some of the properties you are getting -- it sounds like cash that will come back to the shareholders at 6.1% or is this some fees or something like that to clean that?.

Yeah that’s a initial cap rate. There’s you know escalation and so forth and the rent resets that will overtime go up but that’s kind of your initial going in cap rate, you know cash-on-cash unlevered..

Okay. And I know the cap rate used to be like above 7% when you know before like it’s kind of coming down right for these new properties..

Yeah, I mean we are buying quality properties. I mean the last transaction we bought though in Santa Clara was on the high end of our range, so it was well above 6% cap rate, but then we brought some ground leases and you know that have potential for redevelopment in the future that have lower cap rates, so it’s kind of a blend.

But, so we are buying a little bit stronger locations than your normal kind of 7% cap rates stuff..

Okay. And I think some of your transaction you buy land to, right in the [Indiscernible].

So the only land parcel we’ve brought is in the six acres on the beach, that we bought into a 50% interest on six acres on the beach and we are going through entitlement there as Minto gets going on their development and Tanger is opened in November 18, lot of things are happening in Daytona and we can help that process of the six acres to we feel like becoming a very profitable for the venture.

So that was kind of a unique opportunity where a fund was liquidating their fund, we bought in and we are bringing in the kind of the expertise as far as on the planning side and then it will look to you know basically put that the higher better use from a probably an outside developer at some point..

Okay. But the way the tax all works if I’m correct, you cannot put the land on your own into a property and some collecting from it you have to like sell the land..

No, that’s incorrect. We’ve done that in the past. We’ve built Cobb [ph] theatres and leased that up. We’ve built the Mason Commerce, Flex office.

We’ve built Williamson business center and leased that up, but you know what the plan is to really be development like and to bring outside parties and to buy land from us and develop in that way, people that are really focussed on development and long term ownership as we kind of redistribute our capital into different markets and diversify overtime..

Okay..

The big driver probably need to be a less somebody else then...

I appreciate you taking my time -- taking your time..

Thanks. No problem, thanks..

The next question comes from Steven Grass [ph] of Wintergreen. Please go ahead..

Hi, good morning. This is a question for Mark as well. Mark, on the one hand the company has repeatedly expressed the view that the company stock is undervalued. But then on the other, the CEOs frequent Friday afternoon announcement of selling our shares sends a conflicting message.

So really what shareholders would like to know is if the company believes the stock is so undervalued why isn’t the company buying back more shares?.

I’ll take that one. I appreciate it Steven. So as you know the Company lost the say on pay boat and ISS frowns upon directors and management having margin loans. You know when I came on board, I bought shares before this job opportunity even kind of [Indiscernible] and instead they bought more shares.

And so basically, I had a margin loan to own that larger concentration of ownership, but ISS basically frowns upon that, and we want to have the best governance as possible and so the shareholders have spoken and so they basically the board has decided that management and board members will not have marginal loans by the next annual meeting.

And so I’ve entered into a program to basically sell shares to pay off that marginal loan..

Thank you, John.

But on the other hand the [Indiscernible] that sells one half of the question, but why not buybacks, if the company believes the stock is under value then why not buy, on the other hand why not buy back more shares on the corporate level?.

Well we are very active in the buyback as you can see. So Mark, since we started the buyback programs before this $10 million we’re upto what..

Yeah, its actually up, we are up to about almost $14 million that we’ve invested since 2008, but most particularly in the last two and a half years we’ve been very active.

So you can see that Steven on slide 42, you can see that the pace has picked up quite a bit and I see [ph] the board basically sees that the value and we are active and as you know that our company has a not a lot of volumes, so there is basically restrictions on corporate buybacks of how much you can buy per day, that’s based on the volume, and so we’re somewhat you know kind of tied with regards to how much we can buy at a certain time..

Great. Thank you..

Thanks, Steven..

[Operator Instructions] This concludes our question and answer session. I would like to turn the conference back over to John Albright for any closing remarks..

Well thank you very much for our second [ph] quarterly earnings call and we look forward to talking with you again in the future and please don’t hesitate to call if you have any questions. Thank you..

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