Unlocking Value
Total Page:16
File Type:pdf, Size:1020Kb
UNLOCKING VALUE TEJON RANCH CO. ANNUAL REPORT 2016 UNLOCKING VALUE TEJON RANCH CO. 270,000 ACRES 15.1 M SQ.FT. 350,000 SQ. FT. 34,783 15.4 M SQ.FT. OF CONTIGUOUS OF MONETIZABLE OF MONETIZABLE RESIDENTIAL OF COMMERCIAL LAND INDUSTRIAL SPACE COMMERCIAL/ UNITS SPACE IN TRCC RETAIL SPACE IN MPCs IN MPCs IN TRCC to Bakersfield 223 58 99 5 TEJON RANCH COMMERCE CENTER GRAPEVINE Corporate Headquarters MOUNTAIN VILLAGE Castac Lake Kern County Los Angeles County CENTENNIAL California Aqueduct Ventura County 138 Quail Lake 5 to Los Angeles UNLOCKING VALUE Permits in thousands 1.8 Million Homes Needed by 2025 240 Single Family From 2015-2025, approximately 220 1.8 million new housing units are Multifamily (2+ units) 200 needed to meet projected popu- lation and household growth, or 180 180,000 new homes annually. The 160 2015 - 2025 California Department of Housing 140 and Community Development 120 (HCD), in consultation with the California Department of Finance, 100 Past Production determines the State’s housing 80 The annual growth in need for a 10-year period, based 60 housing units from 2000- upon Department of Finance 2015 compared to the 40 population projection and demo- current projected average graphic household formation data. 20 annual need of 180,000 0 new homes. ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 TO OUR VALUED SHAREHOLDERS Driving north on Interstate 5 from Los In 2016, each of the company’s five business 3% Angeles, the sky opens up almost imme- segments: Commercial/Industrial Real Estate, diately as you pass through the densely Resort/Residential Real Estate, Mineral 9% populated San Fernando and Santa Clarita Resources, Farming, and Ranch Operations, 22% Valleys into the mountains that make up played an integral role in driving value for 1% the Angeles National Forest. A quick half the company. The progress we are making 17% 3% hour later, the southern rim of Tejon Ranch with our large-scale master planned real begins to fill in, the highway draws near estate developments aligns with the 38% our headquarters, through the Grapevine continued traction we are experiencing at 7% and down into the San Joaquin Valley. the Tejon Ranch Commerce Center (TRCC), our 1,450-acre commercial/industrial Where Growth is Expected The distance traveled covers much of the development. The steady cash flow gen- Through 2025 Source: 2015-2025 Projected western boundary of the 270,000 acres erated from our commercial division, our New Households from HCD that make up Tejon Ranch, and the diversity mineral resources, and farming operations Analysis of State of California, Department of Finance State in landscape, commerce and community serves as a solid foundation for supporting and County Projections of Households, Household Popu- you see from the highway, parallel the the development of our real estate assets. lations, Group Quarters, and Persons per Household 2010- core assets of our company. As a diversified 2030 – Based on Baseline 2013 real estate development and agribusiness, Demand for economic development and Population Projection Series. our land is tied to how we are unlocking housing continues to rise throughout our asset value. region, and the trajectory for population Annual Report 2016 TEJON RANCH CO. 1 UNLOCKING VALUE growth is headed in our direction. California’s that puts shovels in the ground effectively. ABOVE: Interstate 5 as it winds through Grapevine population is expected to increase almost The process entails securing local entitle- Canyon. Tejon Ranch owns 16 miles of freeway frontage 30 percent to 50 million during the next ments, obtaining state and federal permits along I-5. three decades, and nearly half of those to develop the land, producing detailed residents will live in Southern California. The tract maps showing exact locations of lots challenge is where will they all live? California and systems infrastructure, which sets the is perhaps the most highly regulated state in stage to apply for permits to commence the nation and has created a series of barriers construction. that are contributing to a severe housing shortage. Tejon Ranch is answering that While none of this happens overnight, challenge through our resources, knowledge and working through regulatory require- and vast experience. ments may ultimately take a decade or more from start-to-finish before we can Solid Progress break ground on a development, each of That’s why our strategy focuses on the our residential communities – Mountain development of large scale residential and Village, Grapevine, and Centennial – is mixed use communities. We have honed well positioned and making solid progress our expertise over the years navigating toward beginning construction. California’s complex regulatory landscape, and we believe we have a formula in place 2 TEJON RANCH CO. Annual Report 2016 UNLOCKING VALUE ABOVE: Part of the devel- We are very excited about the stage we’ve is located along Interstate 5 adjacent to opment area for our master planned community of entered with Mountain Village, which is in TRCC at the base of the foothills in the Grapevine, which was approved by the Kern County the final phase of the regulatory process. San Joaquin Valley. The Kern County Board of Supervisors in The property is fully entitled and important Board of Supervisors unanimously December 2016. state and federal permits have been approved the master planned community secured. The Board of Directors has that includes 12,000 residential units and approved our business plan and tentative 5.1 million square feet of commercial tract maps have been submitted to Kern space. Local entitlement has been County. Once approved, we can move forward secured and we are now preparing the with the final steps to begin construction. necessary permit applications for submittal The community is entitled for 3,450 to the state. homes, 750 hotel keys and approximately 160,000 commercial square feet, offering Grapevine will provide housing options for owners and guests a wide variety of high the thousands of people currently employed quality and much-desired amenities, as at TRCC businesses. All of the homes and well as a robust technology infrastructure commercial buildings in the community to ensure people stay connected. will include solar panels, consistent with Tejon Ranch’s commitment to sustainable In 2016, we also made excellent progress development. Grapevine will be designed with our Grapevine development, which in a way that promotes water efficiency, Annual Report 2016 TEJON RANCH CO. 3 UNLOCKING VALUE OPPOSITE: Tejon Ranch built and opened a new multi-tenant build- ing in 2016 which houses two fast casual restaurants—Habit Burger and Baja Fresh. and that provides an extensive network of vision for Centennial includes business bike and walking trails. districts, schools, retail and entertainment centers, medical facilities and other The Ranch’s southern-most master- commercial offices, in addition to light planned development is Centennial, a Los industrial businesses that, when complete, Angeles County-based property that will would create a substantial number of jobs. help address the region’s housing needs, while also embracing economic development, Even as we work to address the need for sustainability and conservation. In 2017, more housing in the state, we have also been Los Angeles County is expected to circulate steadfast to maintain our conservation an environmental impact report and heritage. You’ll recall, in 2008 we entered process the community’s Specific Plan into a voluntary agreement with a number for county approval, a plan that includes of major environmental groups to provide for 19,333 residential units and 10.1 million significant conservation while still preserving square feet of commercial space. In 2015, the Company’s real estate development and we received approval from the Los Angeles value creation activities. As we progress in County Board of Supervisors, providing those efforts, it is particularly important to land use designations in the county’s note that this agreement and Tejon Ranch’s General Plan and zoning for the property. holistic approach is supported by key regula- In addition to much-needed housing, our tory agencies in the state. Annual Report 2016 TEJON RANCH CO. 5 UNLOCKING VALUE Strategic Development building at TRCC, the other to build a ABOVE: The continued growth at TRCC is evidence The progress we are making with our 480,000-square-foot spec industrial building of how we are successfully executing our strategy to resort and residential developments dem- on the east side of the development. unlock the value of our land. onstrates our commitment to unlocking Grading for the building is underway. value and monetizing tens of thousands of Headquartered in Southern California, acres of raw California land. Our commer- Majestic is a major force across the cial and industrial development at TRCC is nation, with a portfolio of about 78 million a key aspect of how we are executing our square feet of industrial, office and retail strategic vision as a fully integrated real space, as well as sports, entertainment estate company. and hospitality projects. Annual recurring revenues from TRCC We have three joint ventures with the have increased 47% over the last three Rockefeller Group; perhaps most visible years. A significant contributor to that from Interstate 5 is our award-winning growth: joint ventures we form with Outlets at Tejon shopping center. That’s complementary real estate developers. where you’ll find a great collection of In 2016, we signed two joint venture stores, including Polo Ralph Lauren agreements with Majestic Realty Co., the Factory Store, Pottery Barn Outlet and country’s largest privately-held industrial Coach. Additionally last year, we com- developer, one to purchase an existing pleted the sale of land for the building of 6 TEJON RANCH CO.