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TRC: Share Price Represents Substantial Discount to Value of the Company’s Real Estate Assets


By M. Marin



Housing Shortage Underscores Need for Environmentally Responsible Development

Tejon Ranch Company (NYSE:TRC) is a real estate-development company that targets maximizing shareholder value through the monetization of its land-based assets. TRC’s principal asset is its extensive land holding located approximately 60 miles north of Los Angeles and 25 miles south of Bakersfield, California. It is roughly an hour by car from Santa Clarita. Reflecting proximity to these major cities and to nearby highways – Interstate 5, for instance – it takes about 75 minutes to travel from the Tejon Ranch Commerce Centre (TRCC) to Los Angeles’ Union Station.

There is a shortage of housing in the greater Los Angeles metropolitan region. By historical measures, new and used house inventory is virtually non-existent. Housing prices continue to increase. TRC is the only major area close to Los Angeles where infrastructure is possible and one of the few real estate development companies with scale.

Moreover, other nearby areas such as the Bakersfield metropolitan region and Antelope Valley (which extends from northern Los Angeles County to the southeast portion of Kern County, California,) also lack available and affordable houses. The housing shortage is highlighted in recent proposed legislation in front of the California regulators. Senate Bill-50 notes that the “lack of housing, including emergency shelters, is a critical problem that threatens the economic, environmental, and social quality of life in California.” TRC is the only major area close to Los Angeles where infrastructure is possible and one of the few real estate development companies with sufficient land and scale to help address the state’s housing shortage in any meaningful way.

Potential capital funding sources for development include possible joint ventures with financial partners, debt financing and/or the sale of rights, among other sources. Moreover, TRC’s agribusiness and commerce business units are operational and generate recurring revenue. At the end of 3Q 2020, TRC had cash and securities aggregating about $50.4 million, with an additional $35.0 million available on its line of credit. TRC has also implemented cost containment efforts to offset the impact of COVID-19 on its revenue.

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