My Thoughts on David Winters’ Letter to CTO’s Board

David Winters, CEO of Wintergreen Advisers, has now written two letters in the past six weeks to Consolidated-Tomoka’s board of directors. The first letter was relatively tame and requested a shareholder vote at the 2016 annual meeting to put the company up for sale. Winters feels the market is not accurately valuing CTO (spoiler alert: I agree) and some combination of a sale and/or liquidation would maximize shareholder value. Winters’ second letter to the board made some serious claims: “we believe that CTO management, led by John Albright, is actively trying to deceive shareholders with filings, investor presentations and disclosures that obfuscate, confuse and hide what is really going on at CTO.” Not surprisingly, the stock dropped around 10% that day and has since recovered about half that. I want to go through that second letter point by point and give my opinions on the issues it brings to light.
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A Unique Win-Win Scenario for Investors

My original write-up on Consolidated-Tomoka (CTO) was titled “No Downside, Unknown Upside.” The situation has improved dramatically since then, we have a better sense of what NAV may be (that unknown upside is becoming more known), and yet the stock is only up 5.3% since my first post (now trading at $56.08). I have been adding to my position as of late. If you’re not familiar with the CTO story, I recommend reading my initial write-up prior to the below update.
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Consolidated-Tomoka: No Downside, Unknown Upside

Consolidated-Tomoka (CTO, $53.25) is a diversified real estate company based in Daytona Beach, FL where most of its operations are. CTO owns quite a few different assets which I’ll get into below, but their two main assets are 10,500 acres of raw land in Daytona Beach and 43 income-producing properties (mostly single-tenant retail buildings and multi-tenant office buildings). Management’s stated goal is to sell off the 10,500 acres of land and use the proceeds to purchase more income-producing properties. It is extremely difficult as an outside investor (especially one who hasn’t been to Daytona in years) to accurately estimate what their land is worth, but even the most conservative assumptions put the value of the company above what the market is valuing it at today.
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