Good morning, and welcome to the Consolidated-Tomoka Q4 2018 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 Mr. John Albright. 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 for the quarter and year ended December 31, 2018. My name is John Albright, President and CEO of the Company. On the call with me is; Mark Patten, our CFO; and Dan Smith, our General Counsel and Corporate Secretary. 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 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 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. Also we filed our year end 2018 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. With that, I'll turn it back over to John.

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

We will now begin the question-and-answer session. [Operator Instructions] Our first question today comes from Craig Kucera with B. Riley FBR. Please go ahead.

Hey, good morning guys. I just wanted to start out talking about the contract with Minto that fell out of the sales pipeline late last week. Can you give some additional color on kind of what happened there?

Sure. So when Minto -- we first bought Phase 1, the impact fees per home and traffic concurrency were fairly benign. Since their extraordinary success, selling 500 homes a year, already sold 600 homes all of a sudden, the traffic concerns really got amplified locally. So the pending on swung too hard to the other side of the equation and their impact fees and traffic costs basically more than doubled and perhaps even tripled. And that probably would not be a final blow to their -- the way they look at the economics of the deal. But the bigger issue is that, they don't need this land for four more years, even though they have great pace is before years until I get to this land. So they're more concerned is, what will impact fees, traffic costs be in four years, and it was something that they obviously cannot underwrite given that in the short time from Phase 1 to Phase 2 that jump so abruptly. So they're just concerned about what's going to look like when they finally get to the Phase 2 land. And then remember, they're building an affordable product, the age restricted community. So they cannot really pass through to their customers beyond a certain amount that they -- that the -- their core customer can afford. So with all that together, they just thought there is too much risk and they terminated the contract. And we'll see whether they continue to work on those factors or go away completely. As you know probably know, St. Joe has got a deal with Latitude Margaritaville and Minto to provide them with a 175,000 units in the Panhandle. And that equation to them is probably pretty attractive because that St. Joe is contributing the land into the JV. So it's really an asset-light type of development structure for them. So it's probably -- pretty appealing probably to the family, rather than putting out $26.5 million on 1,600 acres that they don't need for four years. So having said all that, that market's still strong here and we have -- we have gotten some inbound interest in that property. So we'll see what happens.

Got it. So if they wait for a while, I guess, with the natural user then be another sort of active adult developer or would it be any sort of tranche of single family?

Yeah, it could be a master plan community that is then have to be age restricted, it could be first time home buyers move ups, with that large of attractive land you can really have three or four different product lines going at the same time. So we don't have to be an active adult, but most likely, there will be an active adult component at some point, there is a restriction on that, on that property until Minto's 50% is sold out. Well, the good news is that's not going to be too long until their 50% is sold out. So that's not going to be an issue with other groups perhaps being attracted to it.

Got it. And refreshing my memory. But when you're structuring these contracts, is there any significant earnest money deposit that is loss that the transaction isn't consummated?

They basically -- when they -- when we did the extension the first time, the 90-day extension, they didn't have for the money, it went hard and then their of course terminated for the money went hard. Really the significant cost that they incurred which is valuable for us. So now we have 1,600 acres of entitled land for over 3,200 units and 200,000 square feet of commercial, and that's why we're getting inbound inquiries on it, because that has a lot of value to the land and they spent probably between $1 million and $2 million with that kind of pursuit cost to get it entitled.

Got it, okay. I want to move to your sort of 2019 expectations, with the sale falling out, it looks like you've got a lower percentage of sort of your single-tenant assets that you expected back in October, and it's gone from maybe 85% to 74%, you maybe got some fewer multi-tenant sales optically. Can you walk me through the shift and just sort of give me some color, are you seeing, just maybe a slower pace in 2019 and maybe you were thinking back in fourth quarter?

Craig, do you mean on the land sale side or on the acquisition side?

On -- well on both, I mean, I understand that the Minto fell out was expected. But on the acquisitions, I think last quarter you -- your target was to get to about 85% single-tenant in this quarter that's closer to 74% and it looks like kind of your competition of multi-tenant is a little bit higher. And just wanted some color on kind of what you're expecting this year maybe what's changed?

Yeah. So we do have a couple of the multi-tenanted properties in the market and we do expect those to transact this year. And so on the -- going to 74% certainly the Minto portion of that had happened and would have been put in the period of triple-net. That would help skew the single-tenant up. But it's really the -- it's basically getting the pace of the multi-tenanted transactions to really match up with the single-tenant acquisitions. We're pursuing quite a bit of opportunity, but we're -- we don't want to oversell the multi-tenanted and not have room to place that capital in the single-tenant side. So it's -- we're just trying to be a little bit conservative on what we can -- accomplish this year.

Okay. Given your commentary, I know you haven't made a decision about becoming a REIT, but I think earlier, late last year you had sort of stated you had a target date maybe of 2020 if you were to become a REIT, you had to go through the process. Just given that you've had a few land sales fall out over the last six months. Does that target still seemed likely if you do decide to become a REIT or is that maybe shifted?

I think it still has the -- has a shot for sure. But it really is dependent on what these larger land transactions look like given the -- this environment. I mean, we're hopeful that things come together here. But -- so that can still be a target that we perhaps couldn't make. But as you mentioned, we'll take a shareholder vote and so forth. But that -- there is still a possibility, but obviously the chances of that getting shifted out are enhanced because of the land sale transaction.

Right. And just bigger picture, it optically looks like this year it might actually be a bit of a delevering -- a deleveraging year, because you're not having that much net property growth in your guidance. And yet you still have maybe $50 million to $70 million of land sales. Is that fair to think about it that way?

Yeah. So as we bolt up on acquisitions with the expectations of that Minto would have transacted and so forth, the leverage will come down as we have had some more land sales come through and some multi-tenanted properties. So.

Yeah. And Craig, that's also and sort of to your point, as we execute a few of the transactions that we would reverse into the fourth quarter 2018 acquisitions, that's kind of the delever trigger as opposed to deploying that it's actually reversing into the transactions back in the fourth quarter.

Okay, got it. With the golf course, I think we're losing about 900,000 this year. I know you mentioned, you've got a broker out marketing it, but who is the natural buyer for that? Would that be a large-scale national golf course operator or sort of what are you seeing I guess as they're in the marketplace?

Yes, it's actually probably, the interest is higher on the high net worth market. Foreign buyers -- buyers from other states that there's obviously a preference in the golf course side for owning properties in Florida, given obviously the weather and the -- just population migration. So, even though you look at the economics of the golf and say, who the heck would step into that, there's actually a fair amount that are very interested in the club. So we'll hopefully see something happen this year on that. So, but I wouldn't say it's more the -- there are golf course operators who are -- who were looking at it, but I would say that's not as strong case as maybe the high net worth side.

Got it. Moving back to the land sales. You go back six months ago, I think your pipeline was about $180 million, since then you've had two of the three largest transaction fallout with O'Connor and Minto. I guess, first of all, have you seen any additional interest with the industrial piece at this point in time?

There are couple of requirements out from Jacksonville to Orlando, that companies are -- know about our land with regards to large distribution needs. There -- the industrial market will tell you that Orlando's pretty much out of land for large-scale industrial. There was a report out about Miami from JLL industrial site and they think that Miami only have five years to six years left of land supply for industrial. Now there's plenty of opportunity or not plenty of opportunity, there are still some opportunity in Jacksonville. But, so the good news for us is, you're seeing limited supply and the cost escalate in the primary markets. So our Daytona position becomes more and more viable. So there are people know about the opportunity, there is demand in the market, but it looks a little early.

Got it. And with the O'Connor land size that's currently under contracts. Can you handicap kind of when you think that's going to close? I know you expected to close in two tranches. But are you expecting sort of $29 million this year and the rest next year or kind of how are you thinking about that?

Yeah, I would -- it's -- I would give it maybe just to be conservative, a little bit less on the first tranche perhaps 75 acres, that they would close call it, maybe in late second quarter or early third quarter is kind of what the timeline looks like right now. But that all could slide because of entitlements. I mean they're -- it looks like they're on a good path right now for that timing of the work and they have tenant demand for that first tranche closing. And so that would be a fair expectation.

Got it. And just so I understand your guidance, one more from me. You have $6.75 to $7.50 and then you have an incremental EPS from dispositions. Is that included in that $6.75 to $7.50 and that sort of what may or may not happen if the asset sale happens or can you just kind of give me a little bit more clarity on that?

Yes, sir. We went back and forth, that basically would be an additive to the EPS guidance on the first line. So, if we were to successfully execute the dispositions we're thinking we can achieve, it would add somewhere between $2.25 to $2.75 to the EPS guidance.

And so, would that be based on, I think you guys are anticipating maybe closing on $69.5 million. Is that land sales on top of that $69.5 million or is that sort of baked into that $69.5 million, a fall that occurs?

Yeah, sorry actually. So the $2.25 to $2.75 would be the multi-tenant, golf, et cetera dispositions, not land sales. Land sales are the $69.5 million in land sales is in the $6.75 to $7.50.

Okay. Okay. So it's the sales of kind of which you are expecting in the multi-tenanted...

And the gold and/or some aspect of the subsurface.

Okay. I got it. All right, thanks. I appreciate it, guys.

Thank you.

Thanks, Craig.

[Operator Instructions] At this time, there are no further questions in the question queue. And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. John Albright for any closing remarks.

Thank you very much for attending our quarterly conference call and please call if you have any follow-up questions. Thank you.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.