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. President and CEO. Please go ahead.

Thank you, operator good morning and welcome to today’s conference call to review the operating results of Consolidated-Tomoka Land Company’s for the third quarter ended September 30, 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 third quarter 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 from last night.

In addition, let me note that we filed our second quarter 2017 investor deck last night, which is now available on our website.

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

Thanks Mark.

The third quarter was a busy quarter for land contracts, we added five contracts in a term sheet to our pipeline representing the potential sale of approximately 3,770 acres of our land with proceeds of approximately A1.2 million, in total our pipeline is now over 70% of our land holdings representing potential self proceeds of more than a $146 million at an average price of approximately 25,000 per acre.

For some perspective the amount of our pipeline is almost half of our market cap. Included in the new contracts is approximately 1000 acres on state road 40 on the [indiscernible] beach side of our holdings which is the largest of our remaining land parcels. That contract is with ICI Homes, the same home builder who acquired more than 600 acres in 2016.

In addition, we’ve put under contract the 123 acres between i95 in Williamson Road on the east side of i95 that surrounds a site that Bucky’s has under contract. This transaction will generate proceeds of approximately 29.3 million representing a price breaker of approximately $238,000. A contract purchaser of this project is a national retail developer. We did close a sub-surface transaction during the third quarter. We closed on sale approximately 38,750 acres of our sub-surface interest in off-field accounting with a sale price of approximately 2.1 million.

Our CL accounting by the way does not have a history of oil exploration. We recognized a gain on this sale of approximately 2.08 million or $0.23 per share after tax. Also with regards to our sub-service interest we’ve received $850,000 from Cargen for another year on their lease of 15,000 acres in Hindry County under their oil exploration lease. I’ll briefly note that Minto is well into the development of the first phase of their latitude [indiscernible] project. The Jimmy Buffet themed age restricted residential community of approximately 3,400 homes. Their sale center is complete but it has not yet opened. Their model homes are under construction with delivery expected in the first quarter of 2018.

In addition, ICI Homes is well into the development of their residential project of an estimated 1,000 homes called Mosaic. VanTrust is vertical with their development of the 4,000-square foot distribution facility for B-bon and lastly North American has now broken ground on its approximately 5,000 square foot power center.

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

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

Thanks John.

As John mentioned, we’re pleased with our results for the quarter, while total revenue was relatively flat for the quarter our revenue from our income properties was up approximately 1.9 million, an increase of approximately 32 the majority of which was due to the properties we acquired late last year in the first half of 2017 as well as the increase in contribution from The Grove at Winter Park, our renovated multi-tenant property Winter Park, Florida which is now approximately 60% leased. Revenues for the nine months increased $30.5 million which included increased land sales of $24 million, approximately and revenues from our income properties up approximately $4.1 million. Net income for the quarter was $0.18 per share and for the nine months was $3.13 per share, outpacing the top-end of our full year guidance that we’d updated last quarter by $0.03 per share. We finished the quarter in a very strong liquidity position which was greatly enhanced by the refinancing of our unsecured credit facility. The new facility increased our borrowing capacity by $25 million to $100 million and as a result the current capacity available to us based on the assets we have on a borrowing base is $59 million. We were also pleased with the new facility decreased our interest rate measurably, increased evaluations for our borrowing based assets which essentially increases the borrowing capacity for the assets we have in the borrowing base and modified some of the covenants for us favorably.

Our liquidity at quarter end also included nearly 12 million in cash, which includes approximately $5.5 million of restricted cash related to our 1031 exchange transactions.

Our level of leverage stayed relatively flat to where we were at the end of the second quarter, approximately 33% relative to our total enterprise value, which compares favorably to our leverage guidance of 40% of total enterprise value.

You will note in our release we indicated that we expect to exceed our guidance for earnings per share through the end of the year and with the property we have under contract in the pacific North West we would also expect to be the top end of our acquisition guidance of $70 million.

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

As most of you know that determination of the company’s historical accumulated E&P is one of the key steps in the valuation of a possible to a REIT, because the company would be required to distribute E&P to the company’s shareholders as part of a potential conversion. The current estimate of the EMP pursuant to the study we're conducting with the assistance of a third-party tax consultant is indicating a range of $30 million to $45 million.

As we mentioned in our release last night, the most significant difference between the estimated E&P and the company's retained earnings as of September 30, 2017 is the amount of after tax gains from land and income property sales that were executed utilizing 1031 structure as those gains are not included and the amount required to be distributed. With regard to the distribution of EMP as part of our potential reconversion is customary for the company to obtain and firm the drilling to me internal revenue service that up to 80% of the estimated EMP can be satisfied through the issuance of the equivalent number of shares of the company’s common stock with the remaining 20% paid in cash. We plan to seek that ruling as our next step and REIT evaluation process.

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

Thanks Mark. I want to make a few comments regarding our loan portfolio, as we discussed in our last quarter, we originated back in July $3 million first mortgage loan, secured by a parcel Beachfront land in the city of Daytona Beach shores, which the borrower intends to develop as the first residential condominium to be built on the beach in probably the last 10 years.

While we have stated for a while now, that we didn’t plan to add any additional [lessons] in this portfolio, we felt this short duration loan made since not simply because it earns a fixed interest rate of 11% but because it also provides the capital to well-regarded further develop or this further economic growth in Daytona which we believe will further enhance the value potential of our land holdings.

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

In addition, we announced last night, that we have hired a national broker to market our two mezzanine loans that are secured by hotel properties in Dallas and Atlanta. These two loans total approximately $15 million in principal, to more than 50% of our loan investment portfolio, we expect that we will complete this disposition during the fourth quarter for approximately par or better. We plan to use the proceeds to pay down our credit line. With regard to our acquisition activity with our income property portfolio, at quarter end we were under contract to acquire single tenant office property with the remaining lease turn of eight years in a major market in that specific North West as leased to an investment grade tenant for approximately $40 million representing half rate of the high end of our investment guidance and a [indiscernible] below replacement cost. This potential acquisition could close in the next 30 days. With regards to returning capital to our shareholders, during the quarter we repurchased nearly 30,000 shares of our stock for approximately 1.6 million, an average purchase price of $54.21 per share.

For the year we have repurchased more than 134,000 shares for approximately $7.1 million or an average price of $53.24. That leaves us approximately 5.5 million remaining in a $10 million buyback program we initiated in March of this year.

As a final point, I wanted to follow-up on Mark’s discussion of the E&P study and more importantly a potential conversion to a REIT. It’s important to emphasize that as the company’s Board of Director elects to pursue a potential conversion to a REIT, the final determination requires approval by a majority of the company’s shareholders. No decision has been made and we do not anticipate making any decision prior to 2018.

Lastly, another point to consider is that our evaluation of a possible conversion to a REIT could be impacted by the possible changes to corporate, tax policy that are being discussed and watched in by the current administration and Congress. 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].

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

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

Sure, and thanks for the question.

So basically, we sort of alluded to at the E&P determination is really kind of step one in parallel or otherwise, after that we would seek a private letter ruling from the IRS which would give us the ability to distribute up to 80% of the E&P in stock. That has a little bit longer lead time, it’s probably four to six months based on what we’ve been told by our advisors.

The other two key pieces of the puzzle are an S4 registration process which would really be the merging of the Seacor into the REIT and that might be we’re pretty experienced filers with the SEC so hopefully that would be an efficient process but maybe 90 to 120 days. And then lastly, we’ve run, we'd have a proxy that would lead to a shareholder meeting where we have a shareholder vote approving the conversion.

So, in terms of a proxy that’s probably a normal proxy process which is probably 30, 45 days and I think from a standpoint of cost, we may have said it before but it’s probably something north of $500 when you think about tax advisors and lawyers for the SEC filings and the proxy, probably have solicitation help when you’re doing the votes.

So, it’s probably north of 500 but I would think south of probably $1 million.

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

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

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

Okay thanks, and then turning to the E&P distribution, I know you guys said that you're perusing that ruling out light, issue 80% of that and stock.

So, for the 20% that you would issue in cash, how do you expect to finance that portion of the distribution?

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

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

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

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

Sure, basically the process with just let's just say the mediation bank, we're basically doing a lot of the studies necessary to find out how many credits both state and federal at the mitigation bank will yield and going through the permitting process both state and federal and given that timeline, those things don’t go fast as you can imagine we're hopeful that at first quarter next year could be second quarter next year and then at that process you would have a land sale to the JV if you will, we will then be able to 1031 that JV portion of the 15 million into income producing properties. And then basically the JV would work to sell credits in that venture and so that’s kind of how it works.

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

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

Okay thank you, so with regard to the negotiated sales contracts, [indiscernible] that you got us really solid in the quarter, can you give us a better sense as to what led to that renegotiation and where exactly the 72 acres that were excluded from the new amendment, where those acres are located.

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

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

So clearly, they lost lots so we had to do a price reduction based on having a less development yield. And then the 72 acres when we -- through that whole EPA process, we had very good determination where wetland stood and there is some land that needed to go with the western boundary land rather than with the Mento 2 line because Mento 2 would have to build roads to reach a very small component of that development project.

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

Okay, thank you. I have one more question just regarding that renegotiation, so previously those acres were priced at roughly 18,600 under the prior agreement, can you give us a better sense as to what you believe the market would be willing to pay for those acres today or have you guys had any potential suiters for the land or I guess still have with any potential buyers?

You mean for the Mento 2 parcel?

The 72 acres that were excluded. I’m just trying to figure out where they are going to go?

Yeah, the 72 acres really went into a combination of the 1000 acres which on our investor presentation on slide 7 would be parcel-1 and partially into the mitigation bank which would be parcel 3.

So, in other words you know part of those acreage that Mento had could have been wetlands that felt would go with the mitigation bank or had some uplands that were difficult to get to, that would go in to parcel 1.

So that’s kind of a combination.

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

Hi good morning.

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

Alright, thank you.

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

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

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

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

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

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

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

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

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

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

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

Quick question on the mitigation bank just to make sure I understand that valuation correctly, that joint venture partner would be contributing 15 million for a 70% interest so the value of the JV would be about something north of 21 million is that correct?

That’s the correct math, I want to basically pick the time here to kind of be very clear, this is a term sheet, we felt that because of term sheet was pretty detailed and we're negotiating a JV agreement that we would disclose this, but the 70%, 30% could move around depending on contributions and depending on where the credit yield comes out. In other words, we've had the agencies look at the mitigation bank, they are in their evaluation, but you never know what you get until you get it.

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

And I just trying to understand the company's liquidity, the 59 million that’s available, does that include the borrowing both the initial and eligible properties?

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

I think the loan agreement referenced initial properties and eligible properties and I just want to make sure that in determining the 59 million which I guess gets it up to maybe the current size of 100 million, you know all of those assets are included in the borrowing base.

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

Okay, and that’s what I’m getting to. I calculate there are about three properties, the LA fitness, the recent almost 15 million acquisitions, the grove and the oceanfront parcel as being the income properties that do not have a mortgage or not part of the borrowing basis. Is my understanding correct?

You’re in a pretty good range.

Okay.

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

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

I appreciate the update on the REIT status, I guess I didn’t properly understand how the 1031 gains figure into earnings and profits.

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

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

So, it's really a tax position you take that the GAAP follows that you would eliminate that deferred tax. But by the way those replacement assets basically you wouldn’t sell them subsequently and not 1031 that transaction.

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

Assuming it gets distributed.

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

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

So, your deferred tax liabilities go off the balance sheet but even in 15 years we sell that assets and you still need to do 1031 in exchange or you can do because your REIT at that point you can do a special dividend.

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

I think you would still want to continue to 1031, those proceeds, but if after a holding period similar to the income producing properties, if you sell low basis land, do you not incur the corporate taxes and that only is a REIT volatile referred to as a re-taxable income that that could then be distributed without having two levels of taxes, if you sell low basis land that has unrealized gains at conversion base.

You follow that question?

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

You can still 1031 the land.

You can get still 1031, by the way 1031 gains or not included in your taxable income calculation for the purpose of your 90% test. But in your question, if instead of 1031, you just straight up sold it, it would be incorporated into the taxable income, evaluation of the REIT.

Okay I thought there might also be a corporate level tax, if what you realized was unrealized that conversation date but maybe not. But at the end, my view is the conversation of reed REIT gets the company to a much more tax efficient structure and we have been fortunate the cash taxes to date have been relatively low the past couple of years but is increasing net operating income, I imagine the cash taxes will become more meaningful and also on the income producing to eliminate the corporate level taxes longer term to get into a more tax efficient structure for the land or for the sale of income producing properties, they don’t want to continue 1031, it just seems like it’s a very efficient structure.

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

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

My last point is on, I understand with E&P distribution many companies do the 80-20 but going back to my earlier comment about liquidity, I think the company should pay a 100% of that E&P portion in cash.

You have very strong liquidity now, you are looking to monetize the mortgage investments, you have a strong pipeline of land sales that can be converted into income producing properties, you can borrow against even with the 75 million due in 2020. I just think its very shareholder friendly move that with less than any opposition to the REIT and I actually consider very similar to a stock buyback in that some of us may take the cash proceeds, it would be taxable to us but buy additional shares which has the effect of increasing our ownership without using additional funds, like the buyback. Other investors may view as an opportunity to reduce their investment and maintain their same ownership percentage. I just think issuing shares and depending upon the type of income producing properties being purchased it can be very dilutive to our NAV on a per share basis.

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

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

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

Thank you very much and appreciate your participation.

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