By M. Marin
NYSE: TRC
READ THE FULL TRC RESEARCH REPORT
Issues facing gubernatorial candidates underscore California’s acute housing shortage
We met recently with Tejon Ranch Company (NYSE: TRC) virtually and present our takeaways from the meeting, as well as from the company’s Annual Shareholders Meeting, in this report. As Tejon Ranch moves ahead with its industrial and residential development plans, we believe California’s acute housing shortage, a growing issue, is highlighted in the California gubernatorial race as all candidates confront questions about measures to improve the situation. The Building an Affordable California Act is one such measure. TRC indicated that it helped author the act, which is intended to update California’s approval process to enable construction of essential projects more economically and quickly. Specifically, the act aims to streamline reviews and eliminate delays, reduce frivolous lawsuits that block essential projects, while concurrently protecting California's environmental, worker and tribal cultural standards.
TRC noted this act at its Annual Shareholders Meeting last month as the company updated shareholders on its planned path to produce shareholder value by advancing its planned MPCs (master-planned communities): Mountain Village, Grapevine and Centennial at Tejon Ranch. As TRC hopes to obtain entitlement for Centennial, it believes the act and growing need for new housing stock could be catalysts. The company’s primary goal going forward is to convert higher percentages of its land assets into recurring EBITDA and cash flow, which includes advancing the planned MPCs.
At the annual meeting, management emphasized three main points:
- It is taking advantage of market trends, including growing populations in nearby communities served by TRCC
- The company has a clear plan for delivering shareholder value (and providing transparency to shareholders as it pursues the plan)
- TRC is making progress to improve and grow free cash flow
In terms of taking advantage of market trends, this includes meeting the needs and benefitting from growing populations in Kern County and nearby communities served by TRCC. Population growth and job creation in Kern County are among the highest in the state.
TRC also reiterated that its approach would continue to leverage a JV model to balance its upfront capital requirements and retain exposure to development return on investment.
This is also the approach TRC took regarding Building 1B, on which it recently began construction through a joint venture with Dedeaux Properties, adding 510,500 square feet of Class A space to an industrial portfolio that remains nearly fully leased. The commercial and retail portfolio was 95% leased as of the end of 1Q26 and the company indicated that the industrial portfolio was fully leased as of last month.
The company believes that its approach draws on aspects taken by multiple land companies it cites as successful that deploy capital efficiently and TRC expects to follow suit.
On the residential side, Terra Vista has delivered 228 units and ended 1Q26 71% leased. TRC believes it is on track for Terra Vista to reach a stabilized level shortly. If/when Terra Vista reaches stabilized occupancy, recurring monthly leasing revenue to help offset fluctuations in the farming and mineral segments.
Management believes the opening of the nearby Hard Rock Casino Tejon has had a positive impact in terms of boosting traffic past the Tejon Ranch Commerce Center (TRCC) and contributing to fuel and food revenue increases at the TRCC TA Petro Travel Center and retail sales at the Outlets at Tejon. In 1Q26, outlet traffic increased roughly 22% year-over-year and outlet sales per square foot increased 12%. Elevated activity also reflects leasing of Terra Vista units. The company anticipates that the casino and Terra Vista will continue to drive increased traffic and commercial activity across the TRCC.
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