Good day, and welcome to the Consolidated-Tomoka fourth-quarter 2019 earnings call and webcast. [Operator instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Mr. John Albright, President and CEO. Please go ahead, sir..

Thank you, operator. Good morning and welcome to today's conference call to review the operating results of Consolidated-Tomoka Land Company for the fourth quarter ended December 31st, 2019. 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. .

Good morning. 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.

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 filed our fourth-quarter 2019 investor presentation last night, which is now available on our website. Our investor presentation provides additional information you may find useful, and we may refer to during this call. With that, I'll turn it back over to John. .

Thanks, Mark. At this time, we'll open it up for questions.

Operator?.

[Operator Instructions] And our first question will come from Craig Kucera of B. Riley FBR. Please go ahead..

Hey, good morning, guys. I want to start out talking about your land sales pipeline. I think you noted in your press release that 4,400 of the total 5,300 acres are under contract for $106 million.

Is there a chance that that CTO will see any incremental distributions from those sales in 2020 from the JV? Or is that likely a later event?.

Yeah. I mean, that would be really great, if everything went according to plan that would definitely be a possibility. But, you know, we're factoring that it would be, you know, more likely in 2021 or 2022.

Just as you know, Craig, you know, from our history of land sales, there's always been delays, whether it's entitlement delays or army corp delays and things are busy in the city, in the county, and that hasn't changed, and maybe it's even worse.

But you know, if everything went according to plan and everyone closed like they're supposed to close, then we could see some money in the latter half of this year, but most likely, its two to three years off. .

OK. Great. And just want to pivot to guidance, particularly the acquisition cap rates. Given that the range that you outlined in the press release is significantly below what you purchased since closing the Magnetar, Alpine sales.

Can you talk about the types of assets that you're kind of considering to buy here throughout 2020?.

Yeah. So you saw our last two transactions about the strand in Jacksonville and Crossroads outside of Phoenix. And those sorts of cap rates there were north of seven.

And you could assume that those are the type of cap rates that we're looking at where not only are they kind of in the seven cap-type range, but they might have some growth potential, yield potential beyond that, whether there's some vacancy to lease-up. Or there are tenants with below-market leases that you have an opportunity to take to market.

So something that starts at around the seven range, but something you can build upon from there. .

OK Great. And also just thinking about guidance. I noticed that you didn't make any commentary regarding potential commercial loans that the focus was on income-producing properties.

Are you just looking at those loans as more opportunistic types of investments? Or are you possibly stepping back from that at this point in time?.

Yeah. We're not actively out there pursuing new loans but as people come to us with very interesting risk-reward type scenario, short duration, we don't mind doing more of them. Now that we have the land JV done. We can actually do loans on our land that would be very high coupon, low-risk type of loans to accommodate sales.

So that could be a possibility. But I don't I don't see there being a net growth over the next 12 months beyond what we have. So given that we have such short duration on our loans, they'll probably burn off and maybe it'll be replaced by a new loan, but not a lot of growth in that segment. .

OK. Got it. And as far as the remaining potential 2020 transactional activity.

Have you soft circled the assets you're looking to sell? Or are you kind of going through that process now?.

You know, there are definitely some assets that are high in the queue, and that would be assets that would trade at very low cap rates, sub-5% cap rate type assets. And so we will start working on those really after we satisfied the last remaining 1031 cash that we have from the Alpine sale of assets.

So once we have that acquisition accomplished, we'll move on to recycling the low cap rate properties we have into the higher cap rate acquisitions..

Got it. So positive out there..

Correct..

As far as the potential recent conversion, you did make some commentary.

Is that something that's going to be brought at the shareholder, this meeting in April or is that still TBD?.

Yes. So if we were deciding the board -- if the board decides to pursue that avenue, it would probably be later in the year, where we go to the shareholders. Now that we're settling on all the transactions we've done, we'll start doing that evaluation for the board.

And so you could assume that to be later in the year if the board decides to move forward and we go to the shareholders for a vote..

Okay. I just want to talk about capital allocation in 2020. Share repurchases were a big part of last year.

Just given where the stock is trading and sort of the intrinsic value of the assets, can you talk about where you are in that process? Are you looking to reup a buyback plan? Or are you guys pretty much full at this point?.

Yes. You probably saw in the -- I know it's a long earnings release, but in the earnings release and in the investor presentation, we mentioned that the Board approved a new $10 million stock repurchase program.

And so we'll look to deploy that opportunistically or in the market where there's a great opportunity to buy back stock, so we've replenished the $10 million program with another one. .

Got it. And one more for me. Just talking about the dividend.

Obviously, a substantial increase from where it was to a dollar annually, but it's still a relatively small fraction of operating cash flow, as you guys projected this year, I think you said north of $3, can you give us some insight on how the board is thinking about a payout ratio looking forward and longer-term and kind of how they arrived at that number?.

Yeah. So obviously, we doubled the -- basically doubled the dividend. So we knew that would be a big jump to show to the market that we have a lot of free cash flow growth in the company.

And as we deploy the remaining 1031 proceeds and that cash flow builds throughout the year, I think the board wants to set a base of a dividend that's something that we can build off of versus overpromising. And so you can see that we want to have this really nice growth trajectory there and the dividend.

So it's probably safe to say that the payout ratio is much below 50% on our projections for this year. So there's a lot of room for growth. So very -- you know, trying to be very kind of conservative, but obviously, show the market and return capital to shareholders through a dividend hike as well as the buyback program..

[Operator instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Mr. John Albright for any closing remarks. Please go ahead. .

Thank you for joining the call, and I appreciate your attendance. .

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