Good morning, everyone, and welcome to the CTO Realty Growth Q3 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] We also note today's event is being recorded. At this time, I'd like to turn the conference call over to John Albright. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us today for the CTO Realty Growth third quarter 2020 operating results conference call. I am pleased to have Matt Partridge, our new Chief Financial Officer joining me this morning. Matt, welcome to the team. Before we begin, I'll turn it over to Matt to provide the customary disclosures regarding today's call. Matt?

Thanks, John. I'd like to remind everyone that many of our comments today are considered 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 undertake no duty to update these statements. 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 Form 10-K, Form 10-Q and other SEC filings. You can find our SEC reports and our earnings release on our website at ctorealtygrowth.com. With that, I'll turn the call back over to John.

Thanks, Matt. We had an extremely productive third quarter as we accomplished a number of key milestones for the company, including making continued progress towards our conversion to a REIT and working with our board to cement our investment strategy that will propel us into the next phase of the company's evolution. In July, we announced that our Board of Directors approved the pursuit of a REIT conversion, which we considered a beneficial next step for the shareholders of CTO, particularly now that the majority of our assets are income producing. As part of this conversion, we are scheduled to have a special shareholder meeting on November 9, to approve a merger with a wholly-owned subsidiary that will allow us to reincorporate in Maryland and ensure the standard REIT ownership limitations and transfer restrictions apply to our stock. Following a positive outcome from this meeting, we will be required to declare and pay a special distribution to shareholders of record to ensure that we have distributed our previously undistributed earnings and profits related to the prior taxable periods. We estimate that the aggregate amount of the one-time special distribution will be between $52 million and $56 million. Matt will explain the mechanics in more detail later in our prepared remarks. But I know I speak for everyone here at CTO when I say we are excited about this transition and look forward to delivering an increased, dependable cash dividend as part of the REIT conversion. As we turn to transactions in the quarter, I am happy to report we were very active on all fronts, including land sales from our land joint venture, income property sales and income property acquisitions. Within the third quarter, we sold approximately 3,300 acres or two-thirds of the remaining land joint venture portfolio for $46…

Thanks, John. The company experienced solid rent collection results during the third quarter, collecting an average of 91% of contractual base rent. These rent collection efforts, combined with the sale of non-income producing assets and subsequent reinvestments into income producing properties allowed the company to report total revenues of $14.6 million during the third quarter, a more than 28% increase over the third quarter of 2019. Year-to-date through the end of the third quarter, total revenues for the company are up nearly 23% to $40.4 million. I'll remind everyone that the 91% collection rate for the third quarter represents rents that were contractually due in each respective month and includes the effects of rent deferrals or abatements agreed to prior to the rent payment date. For October, as John highlighted, we are encouraged by the progress we are making with our tenants and expect to resolve a large portion of these outstanding balances before year-end. General and administrative expenses in the third quarter totaled $3.3 million, which included $1.1 million of one-time expenses related to the company's REIT conversion. When adjusted to remove these non-recurring expenses, the company's general and administrative expenses were nearly flat year-over-year, which is notable when considering the company is now managing an additional company with its management of Alpine Income Property Trust. To this point, when the general and administrative costs are further reduced for the $631,000 management fee revenue coming from Alpine in the quarter, the company's year-over-year G&A for the quarter declined by more than 27%, representing excellent economies of scale and profitability related to CTO's management fee business. For the third quarter of 2020, CTO reported a net loss of $0.33 per share. Comparatively, the company reported net income of $0.31 per share for the third quarter of 2019, with the largest…

Thanks, Matt. I want to thank all of our investors and partners for their continued support. And I want to say congratulations to our team on a great quarter. At this time, we'll now open it up for questions. Operator?

[Operator Instructions] Our first question today comes from Rob Stevenson from Janney. Please go ahead with your question.

Good morning, guys. John, with the stock in the low 40s, how are you thinking about funding the next batch of acquisitions? Is it just via dispositions in the near term, thinking about maybe doing preferred post-REIT conversion? Other options? Can you give us some insight as to how you guys are thinking about that?

Yes. Sure. Thanks, Rob. So I mean, look, we did almost the same amount of acquisitions this year as our market cap. So I feel like we basically front-loaded a lot of acquisitions. But there'll be, as you can see on our lineup of single-tenant properties, they'll be properties that we will recirculate into multi-tenanted properties over time. And so I would say that that would kind of more morph in kind of the first quarter, second quarter, where we'd be active again, where we do expect to see a lot more opportunities actually in the first quarter, second quarter. After talking to investment sales brokers around the country, they're doing a lot of BOVs and people are deciding to hold off until next year to sell property. So should be good timing for us. So most of it will be just recirculating the capital base.

Okay. And then with some of the single-tenant assets, how are the sort of negotiations with Alpine there? I mean, how has pricing been in the market versus what essentially Alpine would have been willing to pay? And did any of them come close to going into Alpine?

Yes. So the ones like Wawa and CVS and things like that were way too low of a cap rate for Alpine, given Alpine's guidance. There are some assets that we have at CTO that there'll be enough time that passes by that Alpine most likely will want to purchase at the first quarter of next year. So and the time had passed by for our 1031 needs at CTO. So the ones that we've sold at CTO this last year were way below the target cap rates for Pine, but there are some that will fit very nicely, we think, in Alpine.

Okay. And then assuming the shareholder vote goes as you expect on November 9, what does the time frame look like for the disgorgement payment, the actual REIT conversion and any other sort of major benchmarks as you go forward to sort of completing the REIT conversion.

Hey Rob, it’s Matt. The vote will be on the 9, and then the Board of Directors will meet directly after that, assuming it goes through, to set the E&P payment as well as the timing associated with that, for both the shareholder record date and the payment date. So it'll be set following the vote.

And is there any benefits, drawbacks, to doing that sooner rather than later? Or does it just basically need to be done by December 31?

I can't speak to whether there's benefits or drawbacks, and we're somewhat limited on what we can say. Obviously, everything that we can say and want to say is in the S4 that we filed. But right now we're following the procedural time line that we've outlined.

Okay. And then one last one for me, Matt. The dividend increase here, is this what you think you would need to pay out as a REIT or is this just like a best guess and that there's likely to be another upward adjustment at some point in 2021, assuming REIT conversation? Like how much of a triangulation and sort of ratcheting down is this versus basically just what CTO can afford to pay and what your best guess is at this point as to what they'll need to pay?

Yes. So the $4 annualized dividend, the $1 that we declared for Q4 is more in line with what we expect to pay as a REIT. The dividend and providing shareholder returns via the dividend is a big part of our mission as a company. And so as the company grows and recycles capital, as John talked about, the board will evaluate the divided quarter-by-quarter, and if we need to grow into it further, we will.

Okay. All right, thanks guys. Appreciate it.

Thank you.

Thanks.

[Operator Instructions] Our next question comes from Craig Kucera from Riley Securities. Please go ahead with your question.

Thanks, good morning guys. I want to talk about your real estate operations line items with quarter. I think in the first quarter you had some mitigation credits that were sold that had to be expensed that led to a fairly large loss in that quarter. Can you give us some color on what's happened this quarter?

Yes. So, Craig, the mitigation joint venture that we have, our joint venture partner has the ability to put some of those credits back to us each quarter. And so we did expense some of those credits put back to us this quarter and they're held on the balance sheet as an asset.

Okay. So is that, I guess when we think about sort of the recurring nature of that, it doesn't sound like that's a recurring event for you, that's going to be more sort of on a one-off basis going forward?

It's kind of a one-off basis, most likely going forward when we have these credits on our balance sheet, we'll actually be selling them for cash to real estate developers. But in some cases, we basically contributed like we did earlier in the year, as you mentioned, on some land and basically have a higher land sale and it's just because of the complications of the land parcels. Most of the transactions we have on the land side, though, the developers will be buying from us the credits for cash.

Okay. Got it. And I know you said that you're not going to be active, certainly in the acquisition side for the rest of the year, guidance was unchanged. But are you tilting towards retail or office at this point? I know you did by the Tampa office building here in the third quarter, but also have mostly done retail year-to-date. I guess kind of your latest thoughts on mix going forward.

Yes. I mean, we obviously keep an open lens to both segments and see where the best risk-adjusted opportunities are. I would say that we're seeing equal opportunity on both sides. But I think the retail has been more interesting to us as far as what we've seen. Also the last acquisition in Miami, we really liked it a lot because we have a grocery-anchored, credit grocery-anchored center plus a developer paying us rent. So we love those kind of situations. So we're keeping the lens open, but I'd say, in general, we're seeing more in the retail side than office.

Got it. And just circling back to 24-Hour Fitness, I know that's been out there for a couple of quarters. Do you expect that at this point to be reaffirmed or are you thinking that it's going to be a new tenant? I know it's fairly low rent relative to market, correct?

Yes. We expect them to retain that site for sure. It's very important for them. It's one of their top-performing gyms in the nation. So we fully expect them to retain that.

Got it. And just circling back to some of the repositioning and rebranding in Atlanta. At Perimeter Place, for example, do you expect you're going to need to do any additional sort of recycling of tenants there or are the tenants that you have in place there performing pretty well?

Yes. I mean some of the smaller tenants are kind of recycling out and we're – which has been – we thought that even pre-pandemic that over time we'll be able to upgrade some of the tenancy there. I will say that one of the key locations in the center is a tenant we thought would be transitioning out because of the struggles of the pandemic, but, to our satisfaction, they basically have shown all the strength and willingness to stay in the center and keep operating because it's very important to them. So to answer your question, there are going to be some opportunities for us to retenant and bring in more current type of tenants that should add to the vibrancy. And with the food hall lease being executed, that's going to drive a lot of energy to the center and really will help fill in some of the spots there.

Got it. And just one more for me. As far as the special dividend goes, I know you've come out and said that it's going to be at least 10% cash, I think it can range from may 10% to 20%. Do you have a sense of where the board is thinking in that regard? Or is that still TBD?

It's still TBD and we really can't comment on it until after the special vote.

Okay. Thanks guys.

Thank you.

Thanks, Craig.

Ladies and gentlemen, with that, we'll conclude today's question-and-answer session. I'd like to turn the conference call back over to John Albright for any closing remarks.

Thank you for attending the call, and we look forward to talking with you soon.

Ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.