I think the argument you make regarding compensation applies to nearly all management of public companies. The vast majority are overpaid. The company is certainly benefiting from the recovery. I am not saying management adds nothing, but the stock options that a given away like free samples are a bit obscene.
The company has always sold investment properties as their leases ran down and re-invested in properties with longer leases. I have no problem with selling properties that have appreciated nicely and re-investing in properties that are not as richly valued.
You make a good point. A buyback would have been a much better use of capital than buying an equity position in a REIT. I agree.
There is a huge problem with a mixture of options for the proceeds of land or income property sales. Taxes! The value of these proceeds are immediately worth 40% less because they have no basis in mos of the land sales. If they distribute it to shareholders take another 15 to 23% off. A sale with 10 million in proceeds is far better being used to make a $10 million income property investment throwing off $500k per year than distributing $6 million to shareholders that will pay another $1.2 million in taxes. Each $10 million is sale proceeds can buy $10 million in income producing property or generate $4.8 to $5.0 million in after tax dividends. The $10 million 1031 investment is easily the better option.
Winters does not have a majority of the economic interest (although he may have close to a majority vote based on proxy voting rate). You cite a majority of unhappy shareholders. My guess is that that is just speculation based on your own sentiments. How many unhappy shareholders do you know of?
I am all for the company leveraging assets in a moderate fashion to boost income. It is prudent and an effective using of assets. The company did not have the option to sell land during the downturn.
What does how long Winter's has owned share have to do with the company's strategy or maximizing value? I fail to see where you are going with this?
I certainly support what has been their strategy for the past 20 years. It is an excellent strategy. I don't understand your my way or the highway approach? They just sold their equity investment due to shareholder pressure. You say a good number of shareholders are uncomfortable. I know about ten and none of them are uncomfortable. How many are uncomfortable?
Why would you want a company that are experts at selling land and making income property investments to diversify? That does not make any sense to me.
Management is running the company as they best see fit to maximize shareholder value in my opinion. That is exactly what they should be doing.
I second that. Wintergreen is acting like an anchor on the share price in my opinion. Why they appear to be working against their own best interest at this point is puzzling.
And that in a nutshell is why markets behave the way they do. You want a sale...I want to maximize the value of the company by selling land over time. Shareholders have different reasons for owning a company. Management can't please them all. I have no problem with the company soliciting bids. I also have no confidence that any bid would value the company at anything close to FMV.. Maybe I will be proven wrong. I am not willing to take a discount to cash out what will be a very lucrative position at some point.
Management has been creating value. Selling income properties for more than they paid for them, selling the mineral rights, making the golf course slightly profitable, etc. Creating value has no direct relationship to the share price rising. This is especially true now that we have the Wintergreen discount built in. Winters should reach an understanding with management and sign a standstill agreement. My guess is shares would rise 20% or more. (This would not create any shareholder value.)
Any offer would not be take it or leave it for Winters. It will be take it or leave it for the remaining shareholders. Once a number of shareholders see a price that is any material amount higher than the current price they will vote yes whether the offer is any good or not. I have seen it repeatedly over time.
Forget the offers and keep selling the land at $200+k per acre. It may take some time , but the share price will eventually reflect the value, it always does.
Both part of the story have been in place for many years. I agree that the selling the company is always an option. It is an option that will likely cost me money in the long run so without a huge offer I have no interest.
Yes I am in favor of maximizing the sale proceeds of the land and like kind exchanging all of the proceeds because that will maximize value. Which is exactly what has been going on. The sale of the mineral rights and the package of properties that the recently signed a contract on is just a nice bonus
I agree, it looks like Winters is in a hurry. I am not a big fan of the convertible either and I did vote against authorizing the shares. The company is in line to raise over $100 million by the end of the year. Cash is not going to be an issue.
I have no problem with the loans as long as they are limited to maybe no more than 5% of equity. I like the fact that management is taking on a bit of risk. It shows good stewardship of shareholders investment.
The sale of the properties is fascinating. They are making a nice gain on some properties that they have not owned for that long. Are we going to see some large property purchases like the N.C. property. They certainly are going to have the money to do it.
I am not sure what makes the option on the NADG makes it feel like a fire sale? I think it is just a reality of such a large project.
I am still befuddled that with all of the good news that the share price has not moved into the $60s. Maybe it is the "Winters discount" for all of the uncertainty he has created surrounding a forced sale that may occur at a fire sale price.
If you invested in CTO for the land holdings in Daytona and not for real estate deals all over the country and you invested in CTO after the early 1990's you invested in CTO for the wrong reasons. Using IRC Section 1031 has been a longstanding part of the company's operating strategy.
Wanting the cash back is the wrong strategy and runs counter to the long term operation of the company. For example you do not invest in Google and then complain they do not pay a dividend. That is a known fact that exists prior to when you invest. I would estimate that the vast majority of CO investors have no expectation of receiving large cash distributions in line with the company's stated business model.
If the company were to pay out large amounts of cash the value of the business would be undermined. Failing to use Section 1031 would verge on being a failure of the boards fiduciary responsibilities. Paying out large amounts of cash would be taxed at 40% at the company level and then another approximately 25% to 40% at the individual level. That would be lunacy when they can defer the taxes on the property sales indefinitely.
If an investor wants cash back they can sell shares. In the case of Wintergreen they own too many shares to sell them on the open market without cratering the price. This is not problem that should be solved on the backs of the other shareholders. To sell the company provides a solution for one that would involve destroying value for all of the others. I have no interest in serving Wintergreen's desires to the harm of my own best interest.
Your expectations are out of line if you expect that the company was not always heading towards becoming a REIT.
I find it hard to believe that Wintergreen thinks that it is in the best interest of shareholders to sell the company. Management seems to be doing a pretty good job monetizing the land. I intend to wait it out and am against the fire sale option that Winters has created. I still find his tactics puzzling and that alone was good enough to cause me to vote against his proposal. At this point it is sure appears he is trying to solve his fund's problems on the back of the CTO shareholders.
The company never buys back shares. They have an aversion to share repurchases or paying dividends. The best use of cash has always been pouring it back in to the business. The results speak for themselves. Now the cash flow stream is much larger, the company is still spilling huge amounts into R&D (&E), but now the shares are such a compelling value that even the company can't pass them up. This is a pretty big change from the past. The current share price certainly warrants this change in tactics.
A number of shareholders pushed this issue pretty hard on the last earnings call. The company is flexible and receptive to shareholder's interests.
I have no idea why shares are this low. I do agree with several of the institutional shareholders that the price is ridiculously low. Now it looks like management and the board jumped on the same bandwagon. I think it is a great use of cash. It would be better if shares keep dropping a bit longer. If shares fell to $25 for no apparent reason maybe they can get down to $22 for the buyback. If shares do happen to drop this low I am sure we will have plenty of sellers. Maybe we can avoid the drama and do a tender for all who would get flushed out at $22 and avoid all the drama of working down to that level. Any takers? (I never thought we would have any at $25 so who knows, why not $22...what do I know?)
This has been a long grind, but thing appear to finally be coming together. The royalty story only gets better over the next few years. The dividend keeps things interesting until the myricom gig kicks into gear and the managed services pick up.
The company is certainly a buy at these levels. This is not the first time the shares have done this. The drop in price is a bit difficult to reconcile with reality, but that is the stock market especially when computers are making the decisions.