Good morning. And welcome to the Consolidated-Tomoka Second Quarter 2019 Earnings Conference 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 for the second quarter and six months ended June 30, 2019. My name is John Albright, President and CEO of the company. On the call with me is Mark Patten, our Chief Financial Officer; and Dan Smith, our General Counsel and Corporate Secretary. I'll turn it over to Mark to provide you with the customary disclosures regarding our comments on this call today.

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. We've also filed our second quarter 2019 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]. And our first question comes from Craig Kucera of B. Riley FBR. Please go ahead.

Just wanted to touch on a few of the moving parts during the quarter. Start with the loan origination side. I think you had your last loan origination or your last loan roll off, I think a little over a year ago. With the loans that you made kind of late in the quarter and earlier this quarter more opportunistic, do you think you’re are going to be expanding more into making those types of loans?

Thanks, Craig. Yes, they are opportunistic. The group, for instance, the industrial loan, the group came to us, actually, their broker and we knew the group that was buying the land and given that we've been in touch with developers and tenants and brokers in the industrial -- industry in Central Florida. We knew the market very well and this was one where the buyer had a short timeframe opportunity to buy at an advantageous price and came from a large REIT -- industrial REIT and saw the path to development here or just actually maybe reselling it. So it's a short durational loan, obviously bridge on high yield, but they need to go towards that could act fast and that's kind of where that transaction kind of came from. The other transaction was obviously kind of a package type of transaction in that. We were really most interested in doing the ground lease on The Carpenter Hotel in Austin, but want to provide the bridge financing for them to accomplish the full refi of the construction loan as the hotel is get seasoned. So the loan there is a short duration as well, but was able as part of the fact to get the ground lease at a good structure and price.

Got it. You closed the quarter with I think about $60 million in restricted cash. Can you talk about the size of your current acquisition pipeline, maybe the types of deals you're looking at, and kind of how you see putting that cash to work throughout the second half of the year?

I will let Mark talk about how that restricted cash has already been put to work. And then, just on a commentary on the pipeline balance, as far as acquisition balance, obviously, we've been very active here in the last several weeks and we were still pursuing acquisitions. .But I wouldn’t expect the flurry of activity here anytime soon, but we still are pursuing and intend on transacting for the balance of the year. But I'll let you kind of know where we are on our restricted cash balance after the last kind of transactions were done. Mark?

Yes, we -- the transactions we just completed were both reverses and a forward and we utilized about $38 million of that. We were at $59 million. Now we are at about $21 million as you can see from page 30 in the deck, so that's what we've got kind of in the restricted capital source bucket.

Okay. In the press release, you didn't have a disclosure regarding the Cocina214, maybe re-tenanting that. Can you discuss any sort of cash flow impacts you expect from that transaction?

Yes, I think, in terms of cash flow, when we settle out with Cocina, I think it's going to basically return some of the rents that were unpaid and then going forward the replacement tenant is really pretty close to the same rent but maybe a little bit more productive on their opportunity for upside and then our percentage rent will hopefully be reflective of that.

Okay. And I saw that the Golf Course Operations looks like they're going to close this quarter, which is great. And I'm sure you guys will be glad to have that behind you. But any update on the subsurface rights or your thoughts there?

Yes, let me give you a latest and greatest on the Golf. So the city commission -- we were expecting the city commission to act on really a amendment to the master lease, or master agreement LPGA for the new buyer last night at city commission meeting. The city commission meeting -- at the city committee meeting, I think some commissioners were confused about what was in front of them and thought they were approving the sale, which is not -- it was not the issue at all. So they basically had a continuance for three weeks. So it might delay our closing. But that's kind of update there. We fully expect transaction still to go through. But that's the update on the Golf. On the subsurface side, good news is that our oil exploration lease, they finally got their drilling permit as of a couple weeks ago. And so we should be getting an update from them here in the next couple weeks on their plans to drill on their lease.

You did have a few small deals fall out of the landfill pipeline, I think borrow pit and compensating storage. Any color on what happened there?

I think, well, I do. So it's obviously a small transaction. But just to give you a granularity of it. It's really the easement to the site, it's kind of the site is a bit difficult to get to, there's no county road or anything, and so it's just really a dirt road. And the easement was not clear with the neighboring owner of the land. And so it's just going to take some time to get that squared away. So the buyers are still interested, it's just really on us to kind of clean up the easement and then come back to them. And then more -- the other transaction that dropped was a 13 acres that was assisted living parcel. Even though, we did keep a deposit that they left behind. That group is still interested to try to get that property closed. It was just more of a timing issue with regards to when they're going to get their entitlements and when the contract called for them to purchase it. So that could come back around.

One more from me and I'll hop back in the queue. Just wanted to circle on G&A, it was down nicely year-over-year. And with a proxy battle behind you, is that a decent run rate to think about going forward? Or was that, maybe a little lighter or kind of how should you think about that?

Actually, I think that's probably a pretty good run rate. When you look at it, we don't have a lot of things that will create alterations from that. I mean, the only thing, if you're including stock comp, when you think of G&A that might be the only thing that's really kind of a variable.

Our next question comes from Brian Rohman of Boston Partners. Please go ahead.

Good morning. Frankly, Craig did such a great job. He asked my question. So, Craig, and thanks, John, and Mark.

[Operator Instructions]. And our next question will come from Steve Olson, a Private Investor. Please go ahead.

I did not notice it was disclosed the number of shares remaining on the $10 million January earlier this year the authorization on the buyback. Can you update us on that and comment on management and the Board’s thinking on a new authorization?

Thanks, Steve. By the way thanks for coming on the call. Actually, a great question. The program that was approved in January has actually been fully utilized. So that's now been wrapped up.

And then with regards to a new program or something like that, obviously, we're very active and purchased quite a bit of shares this year. So, that could be something we’d revisit in the future, but I feel like we've done a pretty good amount here in the first half of the year.

Okay. And then on The Carpenter Hotel investment, the loan, I was a little bit uncertain about the security for that. The press release mentioned, leasehold interest, that might be because it's a subject to a land lease versus being referred to as a mortgage. But is that a first priority lien or there -- is there any other debt ahead of us regarding the building and the entity that I guess is subject to the land lease?

Yes, so the leasehold loan, there's no gap in front of that loan, it's really the only thing in front of it is our ground lease.

Okay. And I guess, kind of similar to Craig's questions about the beachfront, the Cocina. Mark, I guess because you mentioned new cash flow, they spent tenant improvements, they have lower rent than the other restaurant, because I believe they spent more in tenant improvements. I assume based upon your answer to the earlier question, the company -- CTO will not be reimbursing them, is not obligated to reimbursing for that tenant improvements. Maybe they will get the other operator to reimburse or can you comment about that tenant improvement liability on the books?

Yeah Steve, this is John, maybe I'll help out with part of it. So we're in the final throes of that negotiation. But there are some improvements that the tenant does own, for instance, all the kitchen equipment and so forth. And because the new tenant would not need any TI requirement in there, it's safe to say that there could be a payment to Cocina for some of stuff that they’ve put in, that's over and beyond other costs that they did, which we will basically buy in order to facilitate the new tenant coming in a seamless transaction.

Okay. The ground lease investment in the Western Virginia investment is difference, it’s significantly different. Can you comment or what the kind of expected returns or holding periods or how you view those investments? And as you put $21 million plus other land sales to invest, where you think, or what type of investments can we expect to see in the future?

Yes, so I think, somewhere in the past we’ve disclosed that we target an 8% unleveraged total return with our investments or better. And so all of these investments have that sort of return profile in different manners. So the -- on the ground lease for instance it has a low initial going in the yield as an annual escalation. And at some point, most likely the owner of the leasehold is going to buyout that ground lease, perhaps. And so the total return metrics there fits very nicely with us. And then on the general dynamics of lease in Western, that tenant has put in a lot of capital in that building, basically almost built a new building from inside out and that area is quick rapidly improving new metro station within walking distance, is under construction. Brookfield has a massive development less than basically half a mile away from the building, where there's a new Wegmans going in. So we like that profile lot. So that's kind of the thoughts on the returns and how we look at those investments.

And final question just on the land that was under contract to O'Connor, the large 200 acres, is there any update on any potential company self-development or entering into ground leases for a portion of that parcel?

Yes. So good question. And probably definitely for the third quarter we will probably dive in and give you more color on that. We are very actively -- we've hired a leasing group, a retail leasing group. And we finally have gotten a site plan that we feel -- a couple different versions site plans that we feel work best. And so we're in active dialogue with tenants. And we’ve picked up on some of the tenants that O'Connor have been talking to or talking to others. And we're also at the same time working on the cost estimates with the civil engineers and contractors, and in getting that squared away. So long story short, there is activity and we'll have more color for you in the next quarter.

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 this call.

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