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

David Corak - B. Riley FBR, Inc. Steven Graff - Wintergreen Advisors.

Thank you, operator. Good morning and welcome to today’s conference call to review the operating results of Consolidated-Tomoka Land Company for the quarter and year ended December 31, 2017. 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. Mark and I will review the details of our fourth quarter and year-end financial results in a moment.

First, I’ll turn it over to Mark to provide you with customary disclosures regarding our comments on this call today and a few points regarding the format of our call..

Thanks, John. Good morning, everyone. During our call today, we’ll 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 earnings release issued last night. Let me note that we filed our 2017 year-end investor presentation last night, which is now available on our website.

Our investor presentation provides additional information you may find useful and that we may reference during this call.

On another note, the company, its directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from the company’s shareholders in connection with the company’s 2018 Annual Meeting of Shareholders, which is scheduled for Wednesday, April 25.

The company intends to file a proxy statement and related proxy materials with the SEC in connection with any solicitation of such proxies.

Shareholders of the company are strongly encouraged to read the proxy statement and all other related materials filed with the SEC carefully and in their entirety when they become available, as they will contain important information about the 2018 Annual Meeting.

Lastly, as many of you likely know, in connection with our upcoming 2018 Annual Meeting, we have received a shareholder proposal and a nomination of three Director candidates for Wintergreen Advisers, on behalf of Wintergreen and the funds that they serve as financial advisor, collectively our largest shareholder.

We respectfully request and will require that during the Q&A this morning, which will hold at the end of our prepared remarks.

Those of you wishing to ask a question should ensure that your question pertain solely to the results for the quarter and for year and as applicable to the transactions that have occurred during those periods or to the information contained in our investor presentation.

We want to ensure the call today is appropriately focused on our fourth quarter and year-end results, which we believe is the primary interest of the attendees on the call. We very much appreciate your cooperation to this request. With that, I will turn the call back over to John..

Thanks, Mark. The fourth quarter was another busy quarter for us. During the fourth quarter, we added seven contracts to our pipeline, representing the addition of a potential sales of approximately 1,255 acres of our land with proceeds of nearly $34 million.

This includes the contract we executed recently for approximately 22 acres for prospective multi-family project at a price of nearly $4.3 million, or 193,000 per acre.

So as of today, our pipeline represents potential sale of more than 6,000 acres, or approximately 74% of our remaining land holdings, with total proceeds of $151 million, reflecting an average price per acre of approximately $25,000 per acre.

We did have one contract that was recently terminated by the buyer, which was for $4.8 million on the 21 acres at Williamson Crossing, which is around the newly opened RaceTrac convenience store at the Southeast corner of LPGA Boulevard and Williamson Boulevard.

While we are disappointed that the purchaser decided to terminate this contract, we believe that interest from retailers remain strong for the development of this property. So we’re looking at a number of options, including new interest from other developers and possibly completing a portion of the development ourselves.

At the end of the year, we also closed the fourth transaction with North American Development Group, representing just over 27 acres that they had remaining under their contract at a price of $6.2 million, or approximately 230,000 per acre.

This included nearly 600,000 in additional reimbursements of the costs we incurred to build out the infrastructure at Tomoka Town Center. As for an update on some of our pipeline contracts, Bucky seems to be on track for a site plan approval in March, which should allow for closing shortly there.

The Specialty Grocer has gone hard on a portion of their contract deposit, we now expect to close no later than the fourth quarter of 2018. Minto is progressing with their entitlement discussions with the city on the 1,600 acre parcel that they have on their contract.

And O’Connor Capital is working on the site plan and traffic studies for the 123 acres they have under contract with us near the Bucky site. I’m going to turn it over to Mark to highlight some of the development activities in our area and review our operating results.

Before I discuss the activities in our loan portfolio and our income property portfolio, as well as some other matters..

Thanks, John. We thought it would be productive for everyone if we provided some highlights of the development activities in our neighborhood. On land, we’ve sold over the past few years to help you all appreciate the breadth of the investment activity and the momentum of economic development in our area.

The first phase of the 3,400-home age-restricted master-planned community, Latitude Margaritaville, being built by Minto Communities opened its first phase of approximately 400 homes for sale. And as we understand it, as of December 31, 2017, they have contracts on more than half the available inventory.

And those contracts have delivery dates beginning to occur as early as the second quarter of 2018. The 400,000 square-foot distribution facility for BBraun, built by VanTrust, is due to open in the first quarter of 2018.

North American has broken ground and begun vertical development of its approximately 400,000 square-foot retail power center at Tomoka Town Center with announced tenants, including Ross, Hobby Lobby, Dave & Busters, TJ Maxx, Academy Sports and Outdoors, Designer Shoe Warehouse, Ulta Beauty, and Burlington Coat Factory.

In addition, most recently, North American announced their partnership with Eastwind Development on a 276 unit luxury rental apartment project, which starts construction in March of this year on 17-plus acres they acquired from us in December of last year.

In addition, ICI Homes is well into the development of their 1,000-home residential project called Mosaic. So our neighborhood is in the midst of a tremendous level of growth in terms of both development activity and job creation. As John mentioned, we were pleased with our results for the quarter and our results for the full-year.

While our earnings release provided the operating highlights for the fourth quarter results, my remarks this morning will largely focus on the full-year results and our guidance for 2018.

Our full-year revenues, net income and earnings per share clearly demonstrate the results from successfully executing our strategy of converting our land into income. Our revenues increased by approximately $20 million to more than $91 million, a record level of revenue for our company and an increase of nearly 29% over 2016.

Our net income and basic earnings per share were approximately $41.7 million and $7.53 per share, respectively. Included our net income and our resulting earnings per share was a benefit to our tax expense of approximately $22.2 million, or $4.02 per share to adjust our net deferred tax liability down to the new federal income tax rate of 21%.

Excluding this adjustment, which I’ll discuss further in a moment, the non-cash impact of our buyout of the land lease on the golf property back in the first quarter, our net income and earnings per share were more than $17 million and $3.27 per share, respectively. So first I’ll highlight our monetization of land during 2017.

We sold approximately 1,701 acres, representing more than 17% of our total acres at the beginning of the year, with an aggregate sales price of approximately $47 million, or approximately $28,000 per acre and resulting in net gains of approximately $31.8 million, or approximately $3.53 per share after-tax.

Including the sale of Subsurface interest back in the third quarter, the total dispositions in 2017 totaled $49.1 million, which was effectively the top end of our guidance for the year.

Deploying those proceeds for the land sales through the 1031 like-kind exchange structure, we acquired six income properties for an aggregate purchase price of approximately $79.8 million, at a weighted average investment and cap rate of approximately 7.4%, well above our guidance for 2017 in terms of acquisitions and above the midpoint of the range of our cap rate guidance of 6% to 8%.

As a result, the acquisitions in 2017 and the contribution of the full quarter results from our acquisitions in late 2016 provided increases of approximately $5.8 million in revenues and approximately $4.6 million in operating income.

As I mentioned, our fourth quarter and full-year results in 2017 benefited for the new federal tax law, specifically the reduction of the federal income tax rate from 35% to 21%. As you know, we have a large and net deferred tax liability, primarily related to the deferred gains on our land sales utilizing the 1031 like-kind exchange structure.

As a result of the reduced federal rate, we reduced the net deferred tax liabilities by approximately $22.2 million, as I mentioned earlier, which is about a 34% decrease in that deferred tax liability. And as I noted earlier, our full-year net income benefit from that reduced liability to the tune of $4.02 per share.

For those of you wondering, the change in the federal tax rate had no substantive impact on our current estimate of the earnings and profits that would be distributed, where we’re to pursue a potential reconversion.

We finished the year in a strong liquidity position, enhanced by the cash generated by our operations and the available borrowing capacity on our expanded unsecured credit facility.

Our liquidity at the end of the year also included nearly $12.1 million of cash, including approximately $5.6 million of restricted cash related to our 1031 exchange transactions.

Our level of leverage stayed relatively flat at approximately 33% relative to our total enterprise value, which compares favorably to our leverage guidance of 40% of total enterprise value.

I’ll also mention that just after year-end, we expanded the commitment level of the new facility to $130 million, utilizing a portion of the $50 million accordion feature.

The expanded commitment under the credit facility is supported by the borrowing base assets and will help us to achieve our acquisition goals in advance of utilizing the 1031 restricted cash to pay down the line when that cash becomes unrestricted upon the completion of 1031 transactions throughout the year.

Lastly, our release last night provided guidance for the income property acquisitions and dispositions, land sales, leverage, and earnings per share for fiscal 2018. You likely have noticed the guidance for earnings per share, which was an estimated range of $7.25 to $8.25 per share net of tax.

This level of earnings is heavily dependent upon closing the land transactions, we believe will close this year and closing those transactions is significantly dependant on the approvals, permits and other activities, driven by governmental authorities that are largely out of our control.

Now, I’ll turn it back over to John to discuss activities in our loan portfolio and income property portfolio and some closing comments..

Thanks, Mark. As you know, back in October, we sold our two mezzanine loan investments with an aggregate principal balance of $15 million. We sold those loans as slight premium to par, and we’re pleased to have achieved a combined unleveraged IRR approximately 9.75% on those two loans, which were both acquired back in 2014.

That leaves our loan investment portfolio at year-end with two loans totaling approximately $12 million in outstanding principal, both of these two loans mature this year.

With regards to the acquisition activity in our income property portfolio, as we announced back in October, we acquired a single tenant office property in Hillsboro, Oregon just outside of Portland, that leads to Wells Fargo and has remaining lease term of eight years.

We bought this property, which Wells Fargo has occupied for more than 20 years for just under $40 million at a cap rate that’s at the high-end of our investment guidance, and bases that’s well below replacement costs.

We also increased our income property portfolio in January of 2018 with a grand opening of two restaurant properties on the previously vacant beach parcel in Daytona Beach.

The early results are encouraging for the nearly 6,300 square foot LandShark Bar & Grill restaurant and they’re approximately 5,800 square foot Cocina 214 Restaurant now open on our six-acre oceanfront property. These two restaurants provide a new beginning for Daytona survival on the beach side.

We have been embraced enthusiastically by the local community. As a final point, in our continued commitment to good corporate governance and the continuous efforts to refresh our Board, we welcome Chris Haga as our new Director for the company back in November.

Chris has wealth of knowledge and investment experience, and importantly, his perspective as a partner at Carlson Capital is a welcomed addition to our Board and will bring a fresh and diverse perspective to governing our company. That concludes our prepared remarks. At this time, we’ll open up for questions.

Operator?.

We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from David Corak from B. Riley FBR. Please go ahead..

Hey, good morning, guys. Looking at the acquisitions guidance, can you give us a sense as to kind of what you’re looking to acquire single tenant multi-retail office, et cetera? And then the disposition guidance seems to be pretty precise.

Do you have assets identified at all, or maybe just some color would be helpful there?.

No. Thanks, David. So on the acquisition side, we’re – given that the low volatility in the markets, we’re seeing little bit more retail opportunity. As we discussed in the past, we’re right now, we have a balance of office in retail, and last year we certainly saw more opportunity on the office side.

But now we’re seeing a little bit more on the retail opportunity. So that’s kind of what we’re seeing in front of us now. And so hopefully, we can kind of be able to acquire on the retail side as we try to kind of have that more balanced on the retail side rather than office.

But – so we’re looking at various different opportunities, seeing a little bit more retail now. On the disposition side, we do plan on take a look at some of our multi-tenanted properties, as we sharpen the focus on the single tenant side.

So looking at – taking the opportunity to perhaps sell some multi-tenanted properties and move that capital into the single tenant focus. And not to say that, there might not be a single tenant property here or there that we’re looking to recap – move that capital back into more core type single tenant property.

So you could see something like that, but mainly it’s on the multi-tenanted properties..

Okay, fair enough.

And then what kind of leverage should we be expecting on those acquisitions? You mentioned kind of a market leverage target, but in terms of and LTV on those, what are you guys thinking?.

Yes. So we’re kind of trying to shy away from the secured debt side, and lastly and obviously, for instance, the Wells Fargo building that we bought in Riley with a very long-term lease. We felt like that made a lot more sense to kind of lock in and do a secured leverage there.

But in general, we’ll still want to utilize our line to keep max flexibility. So we – as you know, we buy these properties in advance of these land sales. And then as land sales come through, that goes to deleverage that acquisition that perhaps was used with leverage to take down in events of the land sale.

So we’re really still targeting that below 40% total enterprise leverage as kind of the governor rev and looking to do secured lending..

Do you have a more permanent debt kind of option in mind as we go through the course of the year, or is that just kind of fluid?.

No. Yes, that’s – there’s no -- nothing right now that we want to say, we want to go put CMBS debt on something. I think, the line gives us lots of flexibility that, for instance, if somebody comes up and wants to acquire a property from us, that we think it makes sense.

Having most of our assets on the line allows us to transact, and this really comes out of the experience on the portfolio that we sold in Southern California, where we had the CMBS debt and somebody would had to assume it and it took extraordinarily long time to get through the service there on the assumption.

So if we encumber the properties with secured debt, it just limits our flexibility and nimbleness..

Okay, fair enough. Can you give us an update on the Winter Park project in terms of an occupancy time line? I know you updated it in the slide deck.

But I see there is a near-term goal of kind of 72% occupancy, but how do you take that to 100%? And then how are you thinking about that asset longer-term?.

Sure. Yes. So right now the properties in the low-60s percent occupancy, we have a lot of LLIs and lease negotiations going on right now with the expectation that it wouldn’t be too difficult to get this thing into the 80s by the end of the year.

And at that point, we may look at monetizing it, because it’s – let’s just say the performance has been better than expected and there has been a lot of interest in the asset. So we’ll try to kind of take advantage of still the low-hanging fruit that we have in front of us.

I will just say that, we’ve had a – lot of tenants have been delayed in opening their stores because of the counting has been inundated on the permanent side. And they – so it’s – we’ve had a lot of delays, really the tenants have had delays getting their stores open. So I suspect by spring, we’ll have more store openings.

We’ll have some more tenants leases done, and then the momentum will really kind of take off. And we hope that Walmart starts on their site here in late spring, which they’ve indicated that that’s their timeline..

Okay. And then just flipping over to the land side, the industrial parcel that was put under contract, I realize that was kind of the lowest value to industrial lot per acre of the three you have, but the pricing on that maybe were still a little bit below what I was thinking.

Do you have an update or maybe a read-through on the other two industrial parcels? How should we be thinking about those? Is $30,000 to $50,000 per acre still achievable on the 850 acres lot?.

Yes. So on the property that we put under contract, that property has a tremendous amount of wetlands, I would say, maybe in the 70%, 80% range of that parcel. That parcel is a little different. On the 850 acres, we’re still comfortable in that range, for instance, you saw that we sold a smaller parcel in the $60,000, $70,000 per acre range.

So, we’re focusing more on that 850 acre parcel right now. We’re looking for users that can kind of take down the larger chunks of it rather than kind of a 5 or 10 acre piece. So we still feel good about that.

That project is just that the land that you’re talking about that we just put under contract was between US 92 and I-4, and it was heavily wetland composition..

Okay.

So the bigger lot is substantially less wetland and better look at it?.

Yes, I mean, there’s roads in there, there are other users in there. So it’s more established and the other properties are just kind of one-off..

Okay, all right. And then kind of bigger picture question on the land valuations in Daytona Beach in general.

I mean, how do you think the – how has the recovery been in value since kind of the last cycle, or the last kind of prior peak overall?.

Yes, it’s kind of interesting. Even though we’re we’re seeing more activity on the land and ever in the company’s history, the land values are still, at least, 20% to 30% below peak, some instances would be more of a discount off-peak. And I think that really triangulates into that – the last peak was really – had heavy speculation and leverage.

What we’re seeing is, people interested in our parcels are all users, whether it’s the developer with an intended use, or a tenant with an intended use, we have not experienced any speculation as far as acquisition activity on the land. So that’s kind of a missing component from the last peak..

Okay, fair enough. And then last one for me another kind of bigger picture.

Just on the company in general, I mean, what you guys – what do you see this company to be in two years? What do you want to be in two years? Assuming the company isn’t acquired, if you had your rudders, what do you think is the highest value? What does this company look like towards the end of 2019?.

Yes. So I think, as we’ve discussed in some of the presentations before that makes sense for the company, as we’ve gone into the single tenant space that we make sense as a single tenant REIT – net lease REIT at some point.

And that would have been dependent on some land sales and having even a larger composition of income property versus land and given the pipeline and how strong it is on the land side, you know it’s not too far away for – to make that transition, it’s not something that you know the Board has made a decision on, but certainly makes the most sense for us to become a relevant company in the market since we are public that you know we have the single tenant strategy, it’s an efficient strategy for us on the G&A side, we’re able to add income assets without adding a lot of G&A, and it allows us to geographically disperse our investments and so we think that makes a lot of sense and we think it makes a lot of sense to be in that net lease REIT category..

All right. Okay. Thanks, guys..

Thanks, David..

The next question comes from Steven Graff with Wintergreen. Please go ahead..

Hi, good morning. I’d just like to discuss the buybacks or the lack thereof in the quarter, in particular since we saw a big increase in trading volume in the quarter which has historically been the company’s explanation for not being able to buy back shares.

Could you explain to shareholders in detail the criteria for the company’s buyback program?.

So we have a buyback program obviously and it’s something that the Board determines the price and really the volume of the buyback is dependent on the market regarding volume at the particular price that the Board sets, so it’s a policy that the Board reviews quarterly and as we’ve said in the past, we are – we opportunistically look to buy back stock not to just buyback stock as a course of business.

So in other words we look at where we can really get very large discounts in the buyback activity, so in the last quarter obviously the stock has strong run and so you could probably determine that the stock price went above what the Board set as a buyback situation..

So, thank you for that, but you know the company’s published NAV from last night and previously shows a discount to the share price of 30% to 45%, you know it seem that you’d be interested in buying back as much shares as possible for that – it realizes that that type of a return.

Yeah, I think you have to understand from a shareholder perspective that this looks terrible, we see the company effectively stepping away from your buyback and then management selling stock, it just prevents – it’s presents that management doesn’t have confidence in the company?.

So we have bought back, what, $22 million of stock in the last five years and last year we bought more than we ever have in a single year over $7 million, so I think the tempo has been very strong, but a lot of the land sales as we have discussed before are contingent on lots of you know permitting and so forth and so we don’t like to spend the money before it is in the bank and so as land sales come through we’re not shy about buying back stock which we’ve done in the last four years or so..

So did you step aside in particular so that new shareholders could build a position with the increased volume?.

I don’t understand that, I’m not sure, do you want to ask that again?.

Sure, sure, I mean so obviously there was a couple new shareholders and a lot of volume in the quarter, did the company step back so that you weren’t competing with those new shareholders for positions?.

That’s kind of ridiculous question..

It don’t happen that way though..

Did you stop buying shares so Wintergreen’s overall position didn’t increase you know especially in light of an upcoming proxy battle?.

So, you’ve seen what we bought last year when we had a – you’re running your proxy contests so we weren’t shy about buying back shares last year, so I don’t think that’s probably the right conclusion for you to make..

Okay and then just looking at your presentation again, it looks like you have $5 million in unrestricted stock, so it looks like there is plenty of room to a $5 million in unrestricted cash rather, so it looks like there is plenty of room if you had wanted to wrap up the buyback in the fourth quarter?.

So I think I just addressed it earlier in the question that there is, you know basically the Board makes quarterly determinations on the price that we’re interested in buying back stock, so I think we answered that in completeness for you..

Okay, so maybe if we could jump over to the – your comments on the REIT.

Has the company reevaluated its position on the REIT specifically in light of the reduction in the corporate tax rate to 21%?.

So we obviously looked at the, I would say, the reduction in the corporate tax rate is obviously a great thing as you can see from our earnings announcements and certainly that helps a ton, but it still would make sense for the company at a certain point in time to be in the REIT strategy with regards to a complete zero corporate tax rate, so going from 21% to zero is always a good thing so I think that still makes a lot of sense for the company..

For the company, but if you look at it from a shareholder’s perspective as we’ve tried to point out, I mean shareholders do have to pay a 20% capital gains tax on the E&P that’s distributed, that’s worth evaluating as well as the shareholders will own a lot of stock..

Yeah and as you know it takes a shareholder vote, so once we get, if we get to that moment and time I’m sure there will be a lots of discussion and valuation of that..

Well, thank you very much..

Thanks Steven..

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

Thank you very much for attending the call..

The conference is now concluded, thank you for attending today’s presentation, you may now disconnect..