Filing Details

Consolidated-Tomoka Land Co.

(Name of Issuer)

Common Stock, par value $1.00 per share

(Title of Class of Securities)

210226106

(CUSIP Number)

David J. Winters c/o Wintergreen Advisers, LLC 333 Route 46 West, Suite 204 Mountain Lakes, New Jersey 07046 (973) 263 - 2600

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

April 7, 2016

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.240.13D-1(e), 240.13d‑1(f) or 240.13d-1(g), check the following box [X].

Note:  Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits.  See Rule 13d-7 for other parties to whom copies are to be sent.

*   The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

CUSIP No.

210226106

 

The Reporting Persons acquired the Shares for investment purposes in the course of the Reporting Persons' investing activities, and will review their investment in the Issuer on a regular basis.  On Thursday, April 7, 2016, the Reporting Persons sent an open letter, published on the internet, and attached hereto as Exhibit B, stating how they intend to vote with respect to certain items in the Issuer's 2016 Definitive Proxy Statement.  Specifically, the Reporting Persons intend to vote (i) against the re-election of all 7 directors; (ii) against the ratification of the appointment of Grant Thornton as auditor; (iii) against the approval of executive compensation; (iv) for the hiring of an independent advisor to evaluate ways to maximize shareholder value; and (v) against the issuance of additional shares.  As described in the open letter, with respect to the Issuer's proposal to authorize the issuance of additional shares, the Reporting Persons believe this issuance, if fully exercised, could dilute existing Issuer shareholders to the tune of more than 23%.  Accordingly, the Reporting Persons believe that this proposal is destructive to the interests of the Issuer's shareholders and they plan on voting no to Item 5.

 

 

 

Wintergreen Advisers has the sole power to vote or direct the vote of 0 Shares; has the shared power to vote or direct the vote of 1,543,075 Shares; has the sole power to dispose or direct the disposition of 0 Shares; and has the shared power to dispose or direct the disposition of 1,543,075 Shares.

 

Wintergreen Fund has the sole power to vote or direct the vote of 0 Shares; has the shared power to vote or direct the vote of 1,232,334 Shares; has the sole power to dispose or direct the disposition of 0 Shares; and has the shared power to dispose or direct the disposition of 1,232,334 Shares.

 

The trading date, number of Shares purchased or sold and the price per share for all transactions in the Shares during the past 60 days by the Reporting Persons are set forth in Exhibit C.

The Reporting Persons do not have any contract, arrangement, understanding or relationship with any person with respect to the Shares.

 

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Attention:  Intentional misstatements or omissions of fact constitute Federal criminal violations (see 18 U.S.C. 1001).

Exhibit A

The undersigned agree that this Schedule 13D, amendment number 3, dated April 7, 2016, relating to the Common Stock, par value $1.00 per share, of Consolidated-Tomoka Land Co. shall be filed on behalf of the undersigned.

Exhibit B

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Against the issuance of additional shares of CTO

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Against the re-election of each director

-

Against the ratification of the appointment of Grant Thornton, LLP as auditor

-

Against the advisory vote to approve executive compensation

As outlined in detail below, we believe these items are not in the best interest of CTO shareholders, and that shareholders deserve better than this.

Item 1.  We intend to vote against the re-election of all 7 directors.

We believe that the Board has failed to look out for the best interests of CTO shareholders.  The Board's latest transgression is a proxy statement that includes a proposal to issue more than 1.3 million shares, which could by our calculations, result in dilution of over 23% for existing shareholders.  We do not believe there is a beneficial reason to shareholders for this issuance and think that better financing options are clearly available.  Additionally, we view the proposal to increase compensation for what we believe to be a failed management team is egregious and another indication that the Board needs to be replaced.

Further, we have reached out to the Board on multiple occasions in an attempt to work with the Board on the issues that we have identified, but we have not received a satisfactory response.  In our view the Board has expressed an interest to rubber stamp management's actions and is no longer focused on its true role – to look after the interests of CTO shareholders.

Item 2.  We intend to vote against the ratification of the appointment of Grant Thornton as auditor.

In a series of letters to the Board², we have identified what we believe to be deficiencies in CTO's publicly filed reports.  We also find it alarming that over a two-year period, Grant Thornton's audit fees have doubled without a clear explanation to CTO shareholders as to why this has occurred.  We believe that the engagement of a new audit firm that can undertake a thorough review of CTO's financial statements and disclosures would benefit all shareholders.

Item 3.  We intend to vote against the approval of executive compensation.

We think increasing John Albright's total compensation (including stock and option awards) by over five times his 2015 compensation is reckless, destructive, and undeserved.  We believe CTO's recent share price performance has been abysmal.  Its -5.5% performance in 2015 fell well behind both the overall S&P 500's return of +1.4% and the REIT Index's return of +1.4%³.  With the rebound in local real estate prices, and the low interest rate environment, we believe management's actions have detracted from share performance and absolutely no increase in compensation is warranted.   We also find it very curious that CTO has shifted the membership of its peer group twice in the last three years, and also uses a different listing of "peers" in CTO's investor presentations than what is contained in CTO's annual report.  We think this constant shifting and misdirection has become all too commonplace for this management team and shareholders should not reward this type of behavior.

 

 

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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.

 

 

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Item 5.  We will vote against the issuance of additional shares.

The Company's current obligation to bond holders is significant, approximately $75 million.  To meet its payment obligations without issuing additional shares and diluting shareholders potentially by over 23%, the Company has available to it:

1.       The Raleigh, North Carolina office complex, purchased in November 2015 for $42.3m⁶

2.       The Commercial Loan Portfolio of approximately $38.3m⁷

3.       The land pipeline sales of approximately $56m⁸ that will be closing in the coming years

4.       The approximately $8.7 million in treasury stock (subject to CTO's share price)

We believe the Company could liquidate (or, in the case of the treasury stock, sell) these assets to raise much needed cash.  We believe the Company should use any excess proceeds to repay debt and begin the process of deleveraging the Company.  The proceeds of the sale of the investment portfolio, which was recently liquidated at a substantial loss⁹, should also be used to reduce debt in preparation for the upcoming need for cash.  Between now and the bonds' 2020 conversion date, we believe there is ample opportunity for the Board to responsibly meet bond holder obligations while also addressing shareholder concerns.  Wintergreen believes that potentially diluting shareholders to the tune of 23% (if the additional shares are fully issued) is NOT the preferred method for CTO to meet its obligations to bond holders.

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Item 1:  Against each of the seven directors nominated for one year terms

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Item 2:  Against the ratification of the appointment of Grant Thornton, LLP as auditor

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Item 3:  Against the advisory vote to approve executive compensation

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Item 5:  Against the issuance of additional shares of CTO

Wintergreen intends to vote "FOR"

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Item 4:  For the hiring of an independent advisor to evaluate ways to maximize shareholder value

Liz Cohernour, COO

David J. Winters, CEO

                                                                                                                

 

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Exhibit C

Transactions in the Shares by Entities Advised by Wintergreen Advisors