Page 10 of 13 – SEC Filing Additionally, in our view, Mr. Albright has demonstrated a pattern of taking on dangerous amounts of leverage, both with regards to CTO and his personal dealings. As detailed in the 2016 proxy, Mr. Albright beneficially owns 109,4464 shares of CTO. However, footnote 7, in much smaller print, reveals that Mr. Albright has pledged most of these shares in a margin trading account and as security for a line of credit. We think leveraging his CTO shares is risky and if CTO’s market value declines, Mr. Albright could be subject to a margin call that may force him to liquidate his CTO shares. Under Mr. Albright’s leadership, CTO has also taken on what we believe to be a dangerous amount of leverage which could lead to disastrous results for CTO shareholders. As recently as 2010, the Company wrote of the risks of leverage, writing to shareholders that “…The real estate market has always been cyclical. In down markets, significant debt can severely weaken a real estate company by forcing it to sell off valuable assets at a discount…”5 Given CTO’s recent use of leverage, it seems to us that the lessons of the past have been forgotten. Wintergreen will not support a plan to increase the compensation of Mr. Albright by more than five times his prior year’s pay. Nothing we have seen from Mr. Albright justifies this increase. Item 4. We will vote for the hiring of an independent advisor to evaluate ways to maximize shareholder value. We are pleased that Deutsche Bank was hired to pursue the directive of our proxy proposal: to explore strategic alternatives to enhance shareholder value, including the possible liquidation of assets or the sale of the company. This is a good first step. At this point, we cannot tell precisely what instructions have been given to Deutsche Bank as investment banker advisor, nor can we know how vigorously it will be permitted by the Board to explore all meaningful strategic paths for maximizing shareholder value. That said, we believe CTO is trading at a massive discount to the value of its underlying assets and that if Deutsche Bank acts in accordance with our proposal, we think it will uncover numerous opportunities to unlock shareholder value. We question the Company’s motives for not supporting the Wintergreen Proposal. We do not believe that the continued pursuit of the Company’s business plan is a viable option. We think it is time to initiate, expedite and ultimately finalize a sales process while interest rates remain low in order to take advantage of the ongoing real estate market recovery. We have heard from many other CTO shareholders who support our proposal. We believe prior and current CTO management alike has failed to enhance shareholder value beyond a slight reflection of the recovery of the real estate market and a potential sale could be the best way to unlock CTO’s value.
4 Consolidated-Tomoka Land Co: Definitive Proxy, March 15, 2016, page 18. 5 Consolidated-Tomoka Land Co: 10-K, 2010. Follow Cto Realty Growth Inc. (NYSE:CTO)
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Additionally, in our view, Mr. Albright has demonstrated a pattern of taking on dangerous amounts of leverage, both with regards to CTO and his personal dealings. As detailed in the 2016 proxy, Mr. Albright beneficially owns 109,4464 shares of CTO. However, footnote 7, in much smaller print, reveals that Mr. Albright has pledged most of these shares in a margin trading account and as security for a line of credit. We think leveraging his CTO shares is risky and if CTO’s market value declines, Mr. Albright could be subject to a margin call that may force him to liquidate his CTO shares. Under Mr. Albright’s leadership, CTO has also taken on what we believe to be a dangerous amount of leverage which could lead to disastrous results for CTO shareholders. As recently as 2010, the Company wrote of the risks of leverage, writing to shareholders that “…The real estate market has always been cyclical. In down markets, significant debt can severely weaken a real estate company by forcing it to sell off valuable assets at a discount…”5 Given CTO’s recent use of leverage, it seems to us that the lessons of the past have been forgotten.
Wintergreen will not support a plan to increase the compensation of Mr. Albright by more than five times his prior year’s pay. Nothing we have seen from Mr. Albright justifies this increase.
Item 4. We will vote for the hiring of an independent advisor to evaluate ways to maximize shareholder value.
We are pleased that Deutsche Bank was hired to pursue the directive of our proxy proposal: to explore strategic alternatives to enhance shareholder value, including the possible liquidation of assets or the sale of the company. This is a good first step. At this point, we cannot tell precisely what instructions have been given to Deutsche Bank as investment banker advisor, nor can we know how vigorously it will be permitted by the Board to explore all meaningful strategic paths for maximizing shareholder value. That said, we believe CTO is trading at a massive discount to the value of its underlying assets and that if Deutsche Bank acts in accordance with our proposal, we think it will uncover numerous opportunities to unlock shareholder value.
We question the Company’s motives for not supporting the Wintergreen Proposal. We do not believe that the continued pursuit of the Company’s business plan is a viable option. We think it is time to initiate, expedite and ultimately finalize a sales process while interest rates remain low in order to take advantage of the ongoing real estate market recovery. We have heard from many other CTO shareholders who support our proposal. We believe prior and current CTO management alike has failed to enhance shareholder value beyond a slight reflection of the recovery of the real estate market and a potential sale could be the best way to unlock CTO’s value.
4 Consolidated-Tomoka Land Co: Definitive Proxy, March 15, 2016, page 18.
5 Consolidated-Tomoka Land Co: 10-K, 2010.
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