CTO - Earnings call transcript Q3 2017 | CTO Realty Growth, Inc.

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Operator

Good morning and welcome to the Consolidated-Tomoka Land Company Third Quarter Earnings Call. All participants will be in 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. CEO. and President ahead. Please go

John Albright

My operator call good Land to you, company. XX, and for and Albright, CEO of morning review the conference the XXXX. September to ended Consolidated-Tomoka third today’s is operating John the President Thank quarter welcome name results Company’s of

results On third review Counsel a Chief Secretary. and in Officer, the Mark is quarter the Dan and and our with Patten, me will details Corporate our of Smith, financial call I Mark Financial our moment. General

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

Mark Patten

Thanks, John. morning, Good everyone.

securities changes differ forward-looking statements, During matters make be revisions actual statements our last these Factors to may significantly to disclosed discussed to today, reflect were forward-looking detail from actual in that may we that time and expectations filings the in in certain to release to we’ll future results in from SEC materially results The could these from laws. statements earnings our are company’s time with under greater made. from the may risks and company’s be release not call federal and differ the night. considered after forward-looking statements the statements cause

night, deck addition, now In second our available let me note which is last our filed XXXX investor that quarter we on website.

back find to you and With reference information investor we may I'll this useful that, John. deck over additional provides it Our call. during that turn may

John Albright

Thanks Mark.

XX,XXX five term with of to approximately contracts a proceeds potential X,XXX land busy quarter acres a our The of sale land sheet the for we was third added of contracts, quarter pipeline of our representing in total our approximately than XX% is average more acre. potential approximately a proceeds self of our AX.X price over million of $XXX land per an holdings representing at million, now in pipeline

beach in Included contract largest half XX is ICI the XXXX. state Homes, XXX cap. our with more approximately builder of same XXXX acres which side acquired is home our of on That who acres of our is land market the holdings perspective amount the new parcels. is pipeline of some road [indiscernible] almost than remaining contracts in For the our on the

In did during project the sub-surface A of sale addition, purchaser we’ve the put of a million the representing acres We breaker will under a sub-surface a national on that iXX acres approximately approximately X.X iXX closed Bucky’s Williamson sale approximately side with of million. of Road developer. This on $XXX,XXX. contract third generate has transaction accounting in this off-field that quarter. retail close of XX,XXX interest contract. XXX between price of We our under contract is site in east price proceeds a approximately surrounds transaction a XX.X

their has lease restricted the center accounting not lease. is latitude X,XXX construction homes Their quarter I’ll their their Jimmy this CL but model [indiscernible] of not with on exploration project. our $X.XX a of are is tax. well does year $XXX,XXX that development approximately sale of opened. Also of per oil in of share themed by or first for sub-service recognized first received Our County on history regards Buffet acres another Their sale the to X.XX into Hindry under Cargen homes. with yet briefly note after gain have of a way XXXX. expected the Minto age The community delivery phase under complete the residential exploration. interest million from it in of approximately XX,XXX we’ve We oil

lastly foot residential into power vertical estimated X,XXX-square has square VanTrust B-bon distribution with Mosaic. their now of well X,XXX of is its ground development approximately the foot and project is development an on their Homes the broken American called of X,XXX center. North facility ICI addition, for In homes

a in to regarding development available our calls tremendous of amount additional of level we’re our a interest pipeline the strengthening land. seen participate our neighborhood inbound seems undeveloped in has getting So, and evident that by growth

the activities in income discuss loan results. I’ll review and to to back portfolio portfolio, over it I our Before our property operating Mark turn

Mark Patten

Thanks John.

As per capacity unsecured based share, greatly assets new our also essentially base $XXX that a million million refinancing facility on were a our is measurably, Park, year which Grove based the months in million. the contribution nine have land Revenues months we’re we increased from per strong increased which Winter evaluations position acquired John million, due quarter quarter modified the some now X.X of capacity million. nine for assets total in for for new late $X.XX to borrowing current $X.XX borrowing increase was assets was result for for The favorably. by Net to by our increases was the guidance was share. Winter liquidity $XX of us our us $XX increase pleased covenants capacity million, properties the the the We and borrowing included to have the credit which mentioned, year we as $XX.X revenue approximately outpacing half approximately our the per income well updated of as facility our our relatively $X.X the up quarter of $X.XX available We XXXX of for approximately on the enhanced results approximately and very as which rate the is share was which Florida with and while first borrowing $XX approximately the base from sales Park, last decreased interest leased. facility. majority from XX by revenue income was The for million revenues our income of with the the the property quarter, at an in properties our multi-tenant last renovated pleased full top-end a we’d in finished and up for properties we flat borrowing increased the the of our the increased XX% quarter

quarter end also Our cash transactions. million exchange million XXXX XX of includes which in cash, our approximately $X.X related liquidity nearly to restricted at included

Our end at compares quarter, our to leverage guidance XX% of the flat stayed of enterprise of to were total level favorably which we XX% the total second where value, relatively relative approximately value. to our enterprise leverage of

we the to end of earnings top the indicated acquisition would million. we with pacific we in in share the contract for to You exceed North guidance $XX property of will our West our that year note the guidance our have the of per through end under we release expect be also expect and

ENT Lastly, the estate provided our I earnings company, of estimated range a evaluation is part trust. our our a of which release will that real investment mention accumulated profits of potential to last or historical and on-going night conversion of initial

the the of determination a of required historical is part of million as that is we're the current a study would shareholders company most to indicating a the to know of to tax EMP of E&P As with the a of you a one possible pursuant consultant estimate company’s distribute steps REIT, The valuation key $XX to conducting company’s range conversion. the E&P accumulated million. the be because the of in third-party assistance $XX of potential to

our customary the to EMP XX% XX, drilling and be of last for the as revenue paid equivalent the common as estimated land mentioned of to significant to is the September the the can process. issuance of difference company's amount With satisfied We to were most of E&P EMP step night, distributed. utilizing and are and structure the potential of be executed as that seek the As the the cash. distribution internal up that next service estimated income retained earnings the evaluation gains XX% we reconversion our required not remaining shares company and tax of to regard obtain the that REIT release property sales through after firm with ruling the is XXXX number between XXXX part in and from our those in to included stock plan as me of gains company’s of amount

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

John Albright

city to in regarding our Daytona to last portfolio, be XX shores, land last borrower develop Beachfront million as beach of a years. we in the we the quarter, the originated to July residential Beach first parcel in in secured back the loan I our discussed probably Thanks intends $X built want as which comments Mark. condominium the few on a by first make mortgage loan,

believe land now, Daytona because made a to the didn’t provides capital the stated we this economic additional since felt earns interest because this we develop further any that will a simply XX% we While [lessons] rate this have add fixed in for well-regarded it also in short duration holdings. we loan while or portfolio, growth not further but potential value it of of our to further enhance which plan

be that that development expect our the level financing will will reached and to are necessary borrower in they We off pre-sales which with achieving secure of the connection paid once very close loan financing. they likely

office our North in X.X shares replacement better. our In to addition, potential during of million, a remaining loans tenant an our investment acquisition property investment regards investment million XX,XXX secured disposition we We major quarter $XX half rate to we announced our capital in This two grade cost. than and the for $XX.XX for loan to we acquisition total Atlanta. quarter use that repurchased to to hired approximately two next below that down with the could activity more With in a $XX by share. our average par approximately properties will expect turn days. contract our under XX close lease the guidance during stock we market years our nearly pay XX% million and of that leased are plan the broker approximately to end purchase per principal, hotel line. the These in we as portfolio, we for mezzanine at national high returning Dallas have loans tenant in of quarter our the last of market end night, approximately or a were of shareholders, that single this of acquire portfolio, proceeds fourth specific to to with With regard representing price an credit eight [indiscernible] West complete income to property

$X.X of we average price repurchased us a leaves $XX XXX,XXX shares year. an this we For in the million initiated in remaining year X.X or March That approximately program $XX.XX. than for more have approximately buyback of million million

by more follow-up that emphasize a to we elects conversion shareholders. approval as potential a final and a of anticipate As pursue to I been Director has requires on the point, the decision REIT, company’s of a making It’s to the wanted made Mark’s majority E&P to company’s XXXX. do of the important REIT. discussion a prior importantly decision and to to study potential a conversion not determination final No Board any

Lastly, is time, policy we’ll tax impacted that another being our point up open to current of for changes the questions. possible concludes in That Operator? to consider possible a a corporate, conversion watched administration our by REIT by Congress. and the prepared could to remarks. be are this discussed evaluation and that At

Operator

We the question-and-answer session. [Operator now will begin Instructions].

first Please go from [Matt FBR]. Boon comes ahead. with question Our

Unidentified Analyst

would are My conversion, could conversion. process through that the timeline as the me what the associated and looking that walk REIT well as exact first the of for question, guys steps cost whole kind potential with be the just would what be at you

John Albright

Sure, question. and the for thanks

at been So seek which basically, a private in after E&P IRS our distribute to months really determination the lead up alluded little otherwise, has what the to of ability E&P letter advisors. we’ve stock. would longer on time, to we it’s one four that of by ruling of in based is or to the us step bit give sort That would probably kind XX% we the parallel a from six told

with of the pieces a into might be be merging would pretty days. would have and XX the key registration lastly, we’re then And we’ve Seacor the puzzle that are would approving XXX which conversion. SEC two REIT experienced efficient so that we'd shareholder other the the hopefully but process to be a really of proxy to The we run, the filers an SX an vote shareholder lead a have meeting process that maybe where

the probably standpoint probably normal So, that’s before probably days you SEC $XXX have which the in from for proxy it a is a I of and you’re terms XX proxy, we something proxy doing but have may when XX, the and a it’s votes. and north cost, probably process of said about think solicitation advisors lawyers filings think tax of when help

but $X of would think it’s south XXX probably I So, million. of probably north

Unidentified Analyst

that’s the explain conversion you what hurdles think the or would what biggest helpful. Can it? be possibly also Okay, you delay could for

John Albright

we think done close good over property but really think it's is pipeline you the the never and very transactions as of it's think be side the and just that moving we know, income properties that get income may know, once on these of much got and to that, evident so that pretty be move. I next over so getting I becomes pretty converted you through obviously to it a side, and I some feel bit move healthy the would pipeline and land

the here So, then, with if everything pipeline. our timeline goes pretty think can you see land well I

Unidentified Analyst

stock. out guys XX% and know I ruling Okay turning thanks, light, said perusing and that issue then distribution, you're that E&P that of the to you

So, to that portion distribution? would how the for you issue that you finance XX% in cash, the of expect do

John Albright

the look as think mean loans of I if very on are to financeable is that’s our said discussion we I point, some range be basically sold. you in and

a we it thought big might where be. given not versus down came it's to the component what E&P So,

Unidentified Analyst

for had Okay and then good like you putting looks land under a contract. quarter it pretty guys

you sheet changes plan the selling early going just and JV in the any to and that With have extra with the the land process. on the cheese can term how timeline up the is conversion bank, mitigation the partner partner what some be with does exact

John Albright

lot fast we're mitigation bank of necessary studies timeline, hopeful imagine the let's at permitting you that many and Sure, both federal basically as process first credits we're both find the a will through yield the and basically go can bank, and at that things federal going just the doing the given just state how don’t process to those quarter state and out say mediation with then to portion of be XX million basically And at XXXX so second quarter to you we kind next you process the into credits that year a that have of the that be then then if it works. land in will, sell and to work how next will JV could would JV producing income sale year properties. venture would and the able that’s JV

process effect that in would as goes quarter in if planned. structure basically sale really that So JV of second first be the or land next year permitting

partner with any operating or you And question to regards way would sure reconversion but Okay institutional we that’s be bank venture. not the the other investor more the coloration meant the the to, I'm process. less mitigation for that in have doesn’t our

Unidentified Analyst

regard that with the exactly sense so the a that negotiated the where us from to you, what led in XX contracts, new as those us to thank renegotiation sales acres the quarter, amendment, were give can you Okay located. excluded got to you acres [indiscernible] solid better where and that are really

John Albright

management so with had with I this previous a of I which but in about we restoration do areas. before So regards too it [indiscernible] publicly, conversion the EPA into where much settled that the it with renegotiating, think we [non-core] won’t to out lot to a talked go company’s

that So, there we to first during they when we a put with wetlands on thought that Mento, and restore they back had land they land are contract. less areas the more to to needed develop had and contract so

reach with small that line land And have that is would rather yield. to the wetland when roads a lost less stood to EPA to had we component development Mento very that had because reduction Mento build to whole -- of with very determination boundary on they lots the go project. based we having there we then land needed western X clearly, development a and some So acres than X XX do good a so price process, the where through

laying contract are of were developer. those out further So, a for lot and the it contract, development needs lot and work a moving didn’t engineering would plants they so that stuff make roads lot work, do do a for could it of lots parts sense development of developers engineering to refined lot a when and basically plans, the it's just and then of environmental under civil they land utilities the basically could address work, putting

Unidentified Analyst

one believe have those to market buyers? potential with the those what that under previously renegotiation, sense you. you guess a I pay have thank the the so at willing potential can acres us still prior Okay, more agreement, guys roughly as would I were give you just for you XX,XXX have regarding be had better priced or to or any acres for today any land suiters question

John Albright

Mento You X the mean for parcel?

Unidentified Analyst

they I’m going were XX just go? to where trying are figure excluded. that The to acres out

John Albright

into went the really on be the acres investor mitigation slide and combination X partially X. our acres parcel-X XXXX XX be presentation on a would bank which the Yeah, parcel which of would into

have of with other or So, felt go get that had know words that acreage Mento to, the parcel those were been had to bank in that X. go in that part would to you difficult wetlands could would some uplands mitigation

So that’s a kind combination. of

Operator

Steve from Graff comes question next Please ahead. with Wintergreen. Our go

Steven Graff

Hi good morning.

to the to still of conversion just that of wanted activity helpful. the still for helped not and have that all and of overhangs accruing investor that the strategies the all, and company large land was the been it of up. possible deck conclusion is investment the noting the describe was the wanted seems addition at strategic we amount slides be at the end bubble to REIT the of to with found in shareholders in company now cleared particular the seems of one review contract to ask last we network looking to addition that the the just the left sheet, in sales is time, of at First the of addition same properties the that But value that and perceived note that the

John Albright

thank Alright, you.

for on always shareholders. process is if a that strategic going of there is no some proposal there is now. there What right great said So, out sort we’ve that’s consistently our

basically about all then works bringing the to bringing the shareholders. discussing Board to that and are We that if and

the we’re assume where these what be and job presentations, I on producing So, open to monetization deals those everyone given future look pipeline get discussions always our think take and in land closed a that the becomes present we the it perhaps would closed, of if get company now type this pace income is right those is definitively the is kind kind of that of and in as we but really as valuation the to at. moved evident it kind something we of properties

Steven Graff

So aside guess from narrow better say, just to is the the other plan the margins a I than REIT, discount to to other there presentations? way any

John Albright

We’ve and to stock, to that NAV accretive obviously buying back been feel the like our active we very is shareholders.

business are the as we've think best dividend, a price strategy defined obviously and shareholders. better all cleaned capital components for of would a that shares shareholders, buying returning promote we very possible a having couple basically there and of share try would been of our as we to increased execute back the to and I So,

Steven Graff

final that one firm disclose is analysis? impact doing the re-tax the who's question, you just And could

John Albright

mean audit I it’s a national tax and firm.

Steven Graff

you can't give the name You name? give the or won't

John Albright

I happy will point be to four letter it some to so Candidly engagement national I in time firms, but give to there at down. share. the our is if only the we probably gives would name important could super ability will and the And disclose narrow is or it you assume shareholders remember we name look don’t the five us

Operator

next comes question Investor. Private Olsen go from Our ahead. a Steve Please

Steve Olsen

partner the interest the correct? be on joint north would the question something a would valuation sure for million Quick XX% about just million of I that be that JV of correctly, XX is XX that value understand contributing venture so bank make to mitigation

John Albright

this, of math, very time agreement want kind a JV clear, are we pick contributions other correct you what in sheet be was the their In the pretty basically negotiating because comes we're that That’s bank, here around on get to evaluation, move the this but of the you is that we term and a the look term detailed you would get they sheet, out. depending I disclose credit to it. we've XX% the mitigation agencies and XX%, had until on know depending but could never words, where yield at felt

and I it that flux to will change. could in this [indiscernible] just So, of be so that’s what kind and be know that the from could we deal want

Steve Olsen

company's XX the both And initial include properties? trying and that’s does the that liquidity, million the I just the to understand borrowing eligible available,

John Albright

sorry Steve you part that could I'm again? say last

Steve Olsen

just properties the size I sure all think which XXX referenced loan make the maybe are that million, and up of borrowing million determining I in of know I agreement and the want guess to you initial it to in gets base. eligible XX current the those assets included properties

John Albright

a financing. for thanks borrowing all assets are that secured income so not question. base are otherwise properties Actually, the The that of aren’t on

Steve Olsen

calculate Okay, parcel correct? what Is properties, I’m million mortgage a not oceanfront the three or properties and the as fitness, to. income acquisitions, not basis. almost and that’s my getting borrowing that understanding the XX the do recent LA are there have part about I of the grove being the

John Albright

You’re in pretty range. a good

Steve Olsen

Okay.

John Albright

Maybe kind in and so there a give grove lease restaurants granular obviously beachfront are the in up [indiscernible] just bit is little of you to development. Steve, more

on go them income capacity. need on don’t producing the because when the the the So, those the are really things on need so we then maybe not put line fit It's we like does not we they don’t even line the line until capacity, process. further really and along

Steve Olsen

gains appreciate earnings into update profits. understand on properly XXXX didn’t the guess the I figure REIT the how status, I and I

how is So, re-taxable from more taxes that when If a If subject I eliminate guess those view a period, GAAP a the if intend a I deferred those a does converts RIS maybe does REIT technical those to technical, correct, to C-Corp? and solely taxes? income kind holding to after not period, you sold certain are of a you have hold properties company it to deferred for C-Corp the few years. five allow questions is the

John Albright

if going but effectively the kind to a limit of allows the GAAP the So, will tax period, take replacement liability that follows long for hold that issue that so position. is just period are as of the the a issue tax position fact than you tax deferred to a requisite way GAAP a a tax and ad assets you you IRS you it actually sustain conversion by more

that eliminate you So, tax. GAAP that that them But you would follows take assets it's really XXXX deferred by a transaction. way the tax that sell position those the and replacement wouldn’t subsequently not you basically

Steve Olsen

Right, if it but if did it holding you eliminated the have REIT successfully a will did you after period, liability. a corporate tax

distributed. gets it Assuming

John Albright

me I the you think transaction. like Mark sure not Steve, through it's get I’m correct wrong, up but stepped if basis REIT I’m

So, tax you if your basis have will. still you

you your need at deferred we because REIT in you do go sheet a So, XXXX liabilities your tax or in XX even that and that the do point balance special exchange do years sell dividend. can assets you to off but still can

Steve Olsen

I Right, to low that understand convert and of of level that special your so you tax. and you if planned do sale then did therefore dividend, And a basis not the you kind REIT. once corporate incur

sell volatile taxes, levels that a that without re-taxable then REIT that of has two conversion basis I would referred income still you to properties, corporate those if you gains basis at think could a not land, period and if you do after the to want you taxes producing if incur continue the similar to holding income only but land sell XXXX, be low unrealized proceeds, a as is to distributed that low base. having

that You question? follow

John Albright

you structure. tax I REIT, think REIT thereafter you become in a whenever is so, transact once basically

still XXXX land. the can You

incorporated gains income, evaluation You it, you taxable can in your XXXX, of instead test. up income XXXX, the get the straight the be calculation in for question, XXXX it still your or if not XX% of taxable of by just the But purpose REIT. sold included way would into your

Steve Olsen

been I it’s but years is I be and properties, that sale end, like But have or taxes also gets taxes a longer REIT much the there they XXXX, to increasing conversation imagine the for structure more have income, at corporate don’t level cash you view tax date the more net date is past a on but it corporate not. the my relatively the we to was want cash might maybe to level Okay of reed conversation producing to become income if unrealized meaningful and continue efficient efficient a a thought term couple tax structure taxes structure. what land low the the the been fortunate of company tax, also very into operating more the of efficient for get just will eliminate income the producing to seems realized

John Albright

been granularity on and agreeable think we're so the why more properties more the process getting I we're lands producing the and income the that’s obviously E&P once and lands forth.

kind we’re So, of that heading direction. in

Steve Olsen

My is liquidity, in companies many last E&P about my portion do to distribution going the but on, comment understand with point back company I I E&P a think earlier XX-XX that the should pay XXX% cash. of

the with may the you can be monetize pipeline just XX to in liquidity even a opposition have sales strong very very think shareholder strong properties income it some buyback purchased upon due its borrow that and very percentage. that on very type can cash their XXXX. may now, of investments, you consider like increasing ownership be income basis. and funds, producing the our of into properties, and looking similar investment a converted just against are mortgage in but I an depending take can maintain proceeds, to us the producing of have dilutive to of the to land that it with buy shares be their think to which additional has would taxable issuing I shares using Other a buyback. ownership as without view additional opportunity the being NAV our reduce same us effect REIT the You to less million actually than investors move any per I stock share friendly you

John Albright

kind of and determination that first couple will definitely a with of and a is we be things, from down way in shareholders dialogue away road. so clearly, So, this way long that’s the

sort shareholders appreciate giving we're but on it's based splitting our like stock It's we'll of the thoughts your so will almost points really up isn’t now definitely existing some with share like sort have and call. going I this that regards basically shares take your of is like dilution your appreciate there we but more and distribution and So, ownership, opportunity and remember information on some their to dilution. to

Operator

like the back for This John session. turn I’d concludes our & any to conference Mark closing remarks. question-and-answer over to

John Albright

Thank your appreciate and participation. you very much

Operator

today’s conference now is concluded. Thank disconnect. attending for This may now you you presentation,

CTO Realty Growth (CTO) 19 Oct 172017 Q3 Earnings call transcript