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Print | Email MAY 27, 2008 | CREJ FRONT PAGE Reprint rights

Tejon Conservation Deal Ends Years of Disagreement 240,000 acres of the ranch will be preserved through conservation easements and project open spaces By KARI HAMANAKA CREJ Staff Writer Two sides of a very public battle pitting Tejon Ranch Co. with five environmental groups led by the Natural Resources Defense Council ended May 8 with the announcement of an agreement to preserve 240,000 acres of land. "This is one of the greatest conservation achievements in California in a very long time," said Joel Reynolds, senior attorney and director of the NRDC's Program, "and it's because of the vast scale of the property, the unique convergence of ecosystems on the Tejon Ranch, the creation of a new conservancy to manage and restore the land and the commitment by all sides on significant public access to the land. Taken together, this is an extraordinary agreement with an enormous public benefit." The conservation agreement ends talks that began more than two years ago when Tejon Ranch Co. unveiled its development plans for the 270,000-acre property it owns. In a not-so-uncommon story of the somewhat antagonistic relationship between developers and environmental groups, the conservation agreement shows the challenges in reaching a compromise. Upon announcing the agreement between the two groups, Gov. Arnold Schwarzenegger referred to the deal as historic. "Environmental activists and businesses must sit down and work out their differences in the best interest of California," Schwarzenegger said in a statement. "They have done that remarkably well here at Tejon Ranch, and my administration will continue to work with them to make sure this far-sighted plan comes to fruition." Tejon Ranch, the largest contiguous space of private property in the state, incorporates the regions of the , , and Coastal Ranges. Environmental organizations have an active interest in the land because it is home to a number of rare species of animals, including the California condor and native vegetation. "On the side of the environmental groups, they were interested in really getting certainty of what property would be protected and financed," said Harry O'Brien, a partner at Coblentz, Patch, Duffy & Bass LLP in San Francisco and one of the lawyers representing Tejon Ranch Co. "And for Tejon Ranch, they wanted to make sure they got certainty of what property could be developed and how they would move forward." The NRDC, Sierra Club, Audubon California, Planning and Conservation League, and the Endangered Habitats League promised not to oppose the Centennial or Tejon Mountain Village projects under the agreement. In exchange, 178,000 acres of the ranch will be spared from development through conservation easements and designated project open spaces. The environmental groups were also given the option to purchase five parcels of land totaling 62,000 acres by Dec. 31, 2010, which Reynolds said they do intend to purchase. A Tejon Ranch Conservancy will be established to manage the conservation areas. While it's not clear how much of the conserved land will be turned into a state park, Reynolds said the proposal by the California State Parks was 49,000 acres. "The other side of the equation, the developments themselves on the remaining 10 percent of the property, still have to go through the full entitlement processes under local, state and federal laws," Reynolds said. "We have not agreed to support them; we've only agreed not to oppose them. This is just the beginning for those development projects, and there's nothing in the agreement that entitles the developments in any way."

A Clean Slate Technically, the conservation agreement is not the beginning for the two residential projects, the Centennial master-planned community and the Tejon Mountain Village luxury resort, since both projects are already in the entitlement process. The agreements only wipe the slate clean in terms of the environmental opposition that threatened to slow the projects. "With the agreement we can really move forward with the entitlement stage," said Laer Pearce, a spokesman for Tejon Ranch Co.'s Tejon Mountain Village project. "We have an open road ahead of us now to pursue entitlement." The threat of opposition has historically stalled development at Tejon beginning with the 1,450-acre Tejon Industrial Complex. The Center for Biological Diversity, Sierra Club and the Center on Race, Poverty and the Environment challenged the Tejon Industrial Complex East development's environmental-impact report, but lost the lawsuit in 2006. A separate lawsuit sought to the end the partnership between Tejon Ranch Co. and Rockefeller Group Development Corp., the two companies developing a 606,000-square-foot warehouse within the master-planned project, but that lawsuit also was struck down in 2007. A partnership of Pardee Homes, Tejon, Lewis Investment Co. and Standard Pacific Homes called Centennial Founders LLC is developing Centennial. Upon completion, the project will include 23,000 residential units, eight K-8 schools and two high schools, and 18 parks. According to John Osgood, senior vice president of community development at Pardee, an environmental-impact report is still being developed for Centennial with a public review expected in October. The only factor the conservation agreements changed was removing the opposition to the projects from the environmental groups, he said. "We're still very optimistic that this project will ultimately get approved," Osgood said. "It's a master-planned project from start to finish, and from our perspective it's a very well-planned, environmentally sensitive project." According to Osgood, Centennial Founders would like to begin construction on the project in 2011 and said the project would be built out over 20 years. The Tejon Mountain Village project is expected to move along at a faster pace with lots available for sale in either 2011 or 2012, according to Pearce. A partnership between Tejon and DMB Associates Inc. first filed a specific plan with Kern County in 2005 for Tejon Mountain Village. "We're looking at the county review taking a year to a year and a half, which means construction will start in 2010," Pearce said. Tejon Mountain Village will include more than 3,000 residential units, two golf courses, up to 750 hotel rooms, and 160,000 square feet of space dedicated to retail and community amenities. The rest of the project would be part of a gated community. Originally, Tejon Mountain Village began as a 28,000-acre project, but has since been reduced to 26,417 acres. 2 "There have been some plan changes, so amendments need to be filed," Pearce said, "but those changes have to do with the environmental sensitivity that was separate from the negotiations. With the negotiations, we've pulled development back from the ridgelines and pulled land from out of the canyons. We've also rethought development near [Interstate 5]."

Win-Win Situation? While conservation easements are nothing new, Tejon Ranch's development plans represent the dilemma some landholders may face between generating income to keep shareholders happy and upholding principles of conservation. Perhaps the most important agreed-upon provision was the promise on the part of the NRDC and the other environmental organizations not to oppose the development of Centennial or Tejon Mountain Village. "This is one of those instances where you have parties coming together at the beginning committing to work together to find an outcome that benefits everyone," said Barry Zoeller, vice president of corporate communications for Tejon Ranch Co. "And this agreement certainly benefits conservation. It benefits California, and it benefits Tejon Ranch Co. and its shareholders." Zoeller repeated the same sentiment expressed by Michael H. Winer, portfolio manager of Third Avenue Management LLC, the largest shareholder of Tejon Ranch Co., when he said the deal struck was the key to unlocking the ranch's value. Tejon Ranch Co. reported a $1.07 million loss in net income in its first-quarter 2008 report, recognizing an increase in operating expenses for commercial/industrial and resort/residential real estate expenses amid declining farm revenues and little change in revenues from commercial or industrial real estate from first-quarter 2007. The report's outlook for this year remained murky on future real estate revenues since neither of the residential projects is entitled. Despite the win for conservation and the win for shareholders, at least one group remains unsatisfied with the conservation agreement. The Center for Biological Diversity, the organization that filed the lawsuit challenging the industrial complex project on the ranch, said the 240,000-acre conservation agreement is not enough. "We're disappointed with the agreement," said Adam Keats, staff attorney, general counsel and urban wildlands program director at the Center for Biological Diversity. "We don't feel like it's a good deal for the California condor. It's not a good deal for sprawl. We're of the opinion that Centennial and Tejon Mountain Village are complete and absolute nonstarts as development projects." The Center for Biological Diversity was the sixth environmental group involved in negotiations, but the group walked away from discussions last summer, feeling that not enough was being done to protect the California condor, according to Keats. Reynolds, too, said his group, the NRDC, is not supportive of the developments. "We're a conservation organization; we're not developers," Reynolds said. "Our mission is to protect the natural resources of the planet. I do not believe that this enormous private landholding would have remained undeveloped. So what kept us at the negotiating table was the prospect of protecting as much of that ranch as possible." Keats said the Center for Biological Diversity will continue to follow the progress of developments at Tejon Ranch. "We're planning on being extremely engaged in the process that will be unfolding, and we're encouraging everyone else to [be engaged] also," he said. "This is an agreement made only among those five groups." Technically, any group that did not participate in the negotiations would still be able to challenge the developments as they go through the approval process, said William T. Hutton, a partner at Coblentz, Patch, Duffy & Bass LLP and law professor at the University of California, Hastings College of the Law. "They could certainly make some public noise," Hutton said. "Given the authority and the prestige that the nonprofits bring to the transaction, any unrelated nonprofit would have to think twice about upsetting the apple cart."

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