Initiates Dialogue with Wintergreen Fund’s
Board of Directors Regarding Conduct of Wintergreen
Advisers
Demands Withdrawal of Nominations and
Shareholder Proposal
Consolidated-Tomoka Land Co. (NYSE American: CTO) (the “Company”
or “CTO”) today responded to both a notice of intent to nominate
three candidates for election to CTO’s board of directors (the
“Board”), dated November 24, 2017, and a shareholder proposal dated
November 13, 2017 (collectively, the “Wintergreen Materials”),
received from Wintergreen Partners Fund, LP and Wintergreen
Advisers, LLC, the advisor to the Wintergreen Fund, Inc. (NASDAQ:
WGRNX and NASDAQ: WGRIX) (the “Fund” and collectively
“Wintergreen”).
The Chairman of the Company, Laura M. Franklin, delivered a
letter dated December 1, 2017, to Mr. David Winters of Wintergreen
and to Mr. Bradden Backer, Mr. Nathan Adler, Mr. Joseph Bree, Mr.
John Keffer, and Mr. John Wakely, the board of directors of the
Fund, regarding the Wintergreen Materials. The full text of the
letter follows:
Mr. Bradden Backer, ChairmanMr. Nathan Adler, DirectorMr. Joseph
Bree, DirectorMr. John Keffer, DirectorMr. John Wakely,
DirectorWintergreen Fund, Inc.333 Route 46 West, Suite
204Mountain Lakes, NJ 07046Mr. David WintersWintergreen
Advisers, LLCWintergreen Partners Fund, LP333 Route 46
West, Suite 204Mountain Lakes, NJ 07046
RE: Consolidated-Tomoka Land Co. 2018
Annual Meeting of Shareholders
Gentlemen:
As Chairman of the Board of Consolidated-Tomoka Land Co. (the
“Company” or “CTO”), I am writing to you in response to the
submission to CTO of a notice of intention to nominate three
directors (“Nomination Notice”) to the CTO Board of Directors (the
“Board”) and a shareholder proposal calling for a strategic review
process (the “Wintergreen Proposal”), each having been submitted in
November 2017, by Wintergreen Partners Fund, LP and Wintergreen
Advisers, LLC, on behalf of its clients, including the Wintergreen
Fund, Inc. (the “Fund” and collectively, “Wintergreen”).
The Board believes that the Nomination Notice and Wintergreen
Proposal are calculated efforts by Wintergreen to deal with the
Fund’s own apparent problems and are not in the best interests of
all of CTO’s shareholders. We also firmly believe that it is in the
best interests of all CTO shareholders to allow the Company to
continue executing its business plan without the unwarranted
distraction and cost of a second strategic review process since
mid-2016, or another protracted and costly proxy fight.
We want to remind you that, as principals and directors of the
Fund, you are bound by your fiduciary duties to your own investors.
Consistent with these duties, we trust that you will carefully
consider the contents of this letter and promptly withdraw the
Nomination Notice and Wintergreen Proposal.
The Nomination Notice
We believe that a substantial majority of CTO’s shareholders
continue to recognize that Wintergreen has engaged in activities
intended to push the Company to pursue actions that promote
outcomes that would disproportionately benefit Wintergreen without
regard to the damage that might be caused to the Company and all
our other shareholders. Such actions, which have persisted for more
than two years, include a pattern of asserting baseless allegations
against the Board and our senior management team, factual
inaccuracies about the Company, and apparent violations of U.S.
securities laws.
Consider that at the 2017 Annual Meeting of Shareholders (the
“2017 Annual Meeting”), outside of Wintergreen’s own vote, less
than 500,000 shares (or approximately 8% of CTO’s outstanding
shares) were voted in support of the four Wintergreen nominees,
three of whom Wintergreen has now re-nominated. Indeed, it seems
worthwhile to also note that of the 45 independent institutional
investors and mutual funds, other than Wintergreen, whose votes
were tracked by ProxyInsight.com, not a single one voted for even
one of Wintergreen’s nominees. In fact, the Fund’s CEO and
Portfolio Manager, Mr. Winters, received the fewest votes of the
eleven nominees. Both Institutional Shareholder Services and Glass
Lewis backed the Company’s full slate of nominees and roundly
rejected Wintergreen’s criticisms of the Company and its assessment
of our execution of the Company’s business plan. We believe the
voting results from the 2017 Annual Meeting (i) reflected the
support of the substantial majority of our shareholders for the
results being achieved by the Company; and (ii) indicated that a
majority of our shareholders rejected Wintergreen’s nominees and
their intentions.
We therefore do not see a reason to believe that another costly
proxy contest associated with the 2018 Annual Meeting of
Shareholders will result in a different outcome with regard to the
election of Wintergreen’s candidates – as all three are the same
nominees rejected by our shareholders last year. Instead, another
proxy contest will require the Company to incur what will likely be
very substantial expense and effort for the second year in a row.
It is also likely to adversely impact the Company’s ability to
execute its business plan, particularly the closing of certain
transactions in the Land Pipeline (defined below) and the potential
execution of additional land transaction contracts. Further, the
ongoing public conflict with the Company’s largest shareholder will
likely impact the market value of our shares.
Another proxy contest would ultimately harm the interests of all
CTO shareholders, including the Fund, and the Fund’s investors, to
whom you are the fiduciaries. Wintergreen seeks to bolster its
claim that a change at the Board is appropriate by including in its
Nomination Notice unsupported claims of additional “hidden value”
that would somehow materialize for CTO shareholders were the
Wintergreen nominees to be elected and were CTO to be sold or
liquidated. We invite you to share with your investors and us what
this hidden value represents and how it is derived. This type of
baseless speculation seems to us to be extremely irresponsible for
a large shareholder and member of the institutional investment
community, and is yet another indication of Wintergreen’s
disruptive behavior.
The Wintergreen Proposal
The Wintergreen Proposal requests that the Board again hire an
independent financial advisor to evaluate ways to maximize
shareholder value, including through a sale or liquidation of the
Company. The Wintergreen Proposal is nearly identical to a proposal
that was submitted by Wintergreen in November 2015. In response to
the proposal from Wintergreen in 2015, an independent committee of
the Board, working with Deutsche Bank as its independent financial
advisor, completed a strategic alternatives review process (the
“2016 Strategic Review”) in July 2016, which was deliberate and
comprehensive, and included a full and objective evaluation of
potential alternatives for maximizing shareholder value, including
through a sale of the Company or a sale of some or all of our
assets.
As part of the 2016 Strategic Review, the Company received two
all-stock merger offers at a valuation of approximately $50 per
share, which clearly did not adequately reflect the appropriate
value of our business. At the conclusion of the 2016 Strategic
Review, less than 18 months ago, the Board determined that
continuing to execute CTO’s business plan was the best way to
maximize value for all of our shareholders. The Board continues to
believe that the continued execution of our business plan is the
best way to maximize value for our shareholders, and that the
re-election of our directors by a substantial majority of our
shareholders at the 2017 Annual Meeting and overwhelming rejection
of Wintergreen’s nominees was a clear indication that our
shareholders agree with this conclusion.
CTO is successfully executing its business plan, most notably
the monetization of our land holdings, in a tax efficient manner.
This progress is evidenced by a number of objective measures
including CTO’s pipeline of potential land transactions (under
contract or letter of intent) which totals approximately 5,900
acres, or 73% of our total land holdings, with potential proceeds
of approximately $153 million (the “Land Pipeline”). In addition,
CTO has sold over 2,600 acres of land for approximately $88.5
million since John Albright became CEO in late 2011. It’s important
to note, however, that while the majority of the transactions in
our Land Pipeline are expected to close in 2018 and 2019, those
transactions have not yet closed, and are subject to execution
risk. It is misguided to believe that another strategic
alternatives review process will yield a result different from the
2016 Strategic Review solely because a large amount of CTO’s land
holdings has been added to the Land Pipeline.
Given the status of the Company’s Land Pipeline, it seems
reasonable to ask why Wintergreen would seek to have the Company
incur significant expense and distract management from the critical
task of closing the transactions in the Land Pipeline, by
conducting another strategic alternative process. It does not seem
to me or my fellow directors that Wintergreen’s behavior is that of
a shareholder that is seeking to maximize the value of CTO, which
raises the question of Wintergreen’s true motives. To be clear, the
market is well aware that this Board and management team remain
open to any transaction that is in the best interest of all of
CTO’s shareholders. If Wintergreen believes that a potential buyer
for the Company was not contacted during the 2016 Strategic Review,
we welcome Wintergreen to make that introduction.
The fact that the Wintergreen Proposal again suggests that a
liquidation of the Company’s assets is a reasonable alternative for
maximizing shareholder value is a startling demonstration that
Wintergreen, in our view, does not understand the serious adverse
tax implications of that alternative, and further demonstrates that
Wintergreen’s aim is solely to serve its own needs. Wintergreen’s
lack of understanding of the adverse tax implications of a
liquidation of CTO is sufficiently surprising that we would suggest
that you hire a financial advisor who specializes in the
disposition and liquidation of real estate assets to assist you in
your assessment of Wintergreen’s request.
Wintergreen’s Concentration Issue
The market is well aware of the fact that the manager of the
Fund, Wintergreen Advisers, has accumulated an overly concentrated
position in an illiquid stock for a mutual fund that must be in a
position to provide liquidity to its own investors on a daily
basis. Based on its most recent SEC filings, at 17%, the Fund’s
position in CTO stock is its second-largest investment. This
concentration is, in part, the result of the Fund’s total asset
value declining from approximately $776 million as of September 30,
2015 to just $418 million (approximately) as of September 30, 2017,
a decrease of approximately 46% in only two years. Because the
Fund’s ownership of CTO shares is so great in relation to CTO’s
trading volume, the divestiture of this position could not be
completed through ordinary market transactions within a reasonable
period of time, and the probable daily trading volumes would put
substantial downward pressure on the market price of CTO’s stock.
This would likely cause the Fund, and CTO’s other shareholders, to
sustain losses. A reasonable investor could take the position that
this dynamic represents an “overhang” in CTO’s stock price and is a
possible reason CTO’s shares trade at a substantial discount to the
net asset value estimated by the equity research analyst covering
CTO. The Fund’s concentration issue is likely exacerbated by the
upcoming effectiveness of new SEC regulations, which take effect in
18 months, which will require disclosures regarding illiquid
positions of the Fund.
New disclosures by the Fund regarding the illiquidity of its
position in CTO stock could call into question the Fund’s prior
statements that it holds no illiquid securities. This could also
cause the Fund to reduce the value it attributes to its CTO shares,
an adjustment that would make it clear that Fund investors that had
already redeemed their investment in the Fund had been favored over
those that remain invested.
This analysis is what leads us to believe that Wintergreen’s
apparent strategy for dealing with its own challenges is to force
CTO to be sold or liquidated as soon as possible, without concern
for whether such a sale would maximize value for CTO.
In Summary
The Company continues to perform and achieve strong results by
most objective operating and financial measures. The management
team is far along in the process of successfully monetizing the
undeveloped land holdings in Daytona Beach and other assets such as
our subsurface interests, in a tax efficient manner, and converting
the proceeds into a high-quality portfolio of income-producing
properties in major markets and growth markets across the country.
Our cash flow has increased substantially and we have a more
diverse, attractive set of real estate holdings. Our shareholders
have also done well, realizing a 90%+ total return on their
investment in CTO over the last five years and nearly 30% since the
conclusion of the 2016 Strategic Review.
Our Board has evolved too, with increased diversity both in
experience and background and more recently with significant
shareholder representation. Just last month, we invited a principal
from Carlson Capital, one of our largest institutional investors
and 5th largest shareholder, to join the Board. Now, two of our
largest shareholders (including our CEO, John Albright) are
represented on the Board. And, it should be noted, Wintergreen
itself was instrumental in selecting and nominating three of our
six incumbent independent Board members.
Please know, as well, that as a Board we have a duty to
safeguard the best interests of all CTO shareholders. We therefore
remain prepared to take all available steps to protect our
shareholders’ interests, including defending against any harm
caused by Wintergreen’s repetitive activist campaigns and baseless
attacks on the directors and senior management of the Company.
The Board remains open, at all times, to discuss ways in which
CTO can assist the Fund with its issues, including by having the
Company repurchase, at an appropriate price, all or a significant
portion of the CTO shares held by the Fund and the other investment
vehicles managed by Wintergreen Advisers.
Our efforts of outreach with the principals at Wintergreen have
thus far proved to have limited benefit and generally only resulted
in the Board and senior management being publicly and privately
berated by Wintergreen Advisers. In the coming weeks, we will
contact you to schedule a time to meet and discuss these matters,
as we hope to open a productive dialogue with the Board of
Directors of the Fund.
Sincerely,
/s/ Laura M. FranklinLaura M.
FranklinChairman of the BoardConsolidated-Tomoka Land Co.
cc: Edward Horton (Seward & Kissel LLP)
______________________________________________________________________________
The Company encourages all CTO shareholders to carefully read
the proxy materials and other disclosures related to the upcoming
2018 Annual Meeting, which will be made available to all
shareholders entitled to vote at the meeting.
About Consolidated-Tomoka Land Co.
Consolidated-Tomoka Land Co. is a Florida-based publicly traded
real estate company, which owns a portfolio of income investments
in diversified markets in the United States including over 2.1
million square feet of income properties, as well as approximately
8,100 acres of land in the Daytona Beach area. Visit our website at
www.ctlc.com.
We encourage you to review our most recent investor
presentations for the quarter ended September 30, 2017 and the
presentation for the NAREIT conference, both are available on our
website at www.ctlc.com.
SAFE HARBOR
Certain statements contained in this press release (other than
statements of historical fact) are forward-looking statements.
Words such as “believe,” “estimate,” “expect,” “intend,”
“anticipate,” “will,” “could,” “may,” “should,” “plan,”
“potential,” “predict,” “forecast,” “project,” and similar
expressions and variations thereof are intended to identify certain
of such forward-looking statements, which speak only as of the
dates on which they were made, although not all forward-looking
statements contain such words. Although forward-looking statements
are made based upon management’s expectations and beliefs
concerning future developments and their potential effect upon the
Company, a number of factors could cause the Company’s actual
results to differ materially from those set forth in the
forward-looking statements. Such factors may include the completion
of 1031 exchange transactions, the availability of investment
properties that meet the Company’s investment goals and criteria,
the modification of terms of certain land sales agreements,
uncertainties associated with obtaining required governmental
permits and satisfying other closing conditions for planned
acquisitions and sales, as well as the uncertainties and risk
factors discussed in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2016 as filed with the Securities and
Exchange Commission. There can be no assurance that future
developments will be in accordance with management’s expectations
or that the effect of future developments on the Company will be
those anticipated by management. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date of this release.
IMPORTANT ADDITIONAL INFORMATION AND WHERE
TO FIND IT
The Company, its directors and certain of its executive officers
may be deemed to be participants in the solicitation of proxies
from the Company’s shareholders in connection with the Company’s
2018 Annual Meeting of Shareholders (the “2018 Annual Meeting”), to
be held at such time and place to be announced by the Board. The
Company intends to file a proxy statement and related proxy
materials with the U.S. Securities and Exchange Commission (the
“SEC”) in connection with any solicitation of proxies from the
Company’s shareholders in connection with the 2018 Annual Meeting.
SHAREHOLDERS OF THE COMPANY ARE STRONGLY ENCOURAGED TO READ SUCH
PROXY STATEMENT AND ALL OTHER RELATED MATERIALS FILED WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE, AS THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE 2018 ANNUAL MEETING.
Updated information regarding the identity of potential
participants in the solicitation of proxies in connection with the
2018 Annual Meeting, and their direct or indirect interests, by
security holdings or otherwise, will be set forth in such
definitive proxy statement and other materials to be filed with
the. Shareholders may obtain the Proxy Statement, any amendments or
supplements to the Proxy Statement and other materials filed by the
Company with the SEC for no charge at the SEC’s website at
www.sec.gov. Copies will also be available at no charge at the
Investor Relations section of our corporate website at
www.ctlc.com.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171204005280/en/
Consolidated-Tomoka Land Co.Mark E. Patten, 386-944-5643Sr. Vice
President & Chief Financial Officermpatten@ctlc.comFacsimile:
386-274-1223
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