TRC: Believe Expanded JV Validates Development Strategy & Enhances Value of TRC's Real Estate Assets

By M. Marin

NYSE:TRC

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Tejon Ranch Company TRC announced yesterday it has started construction of an industrial building at the Tejon Ranch Commercial Center (TRCC) that is planned to be roughly 630,000-square-feet. TRC is a real estate-development company that aims to monetize its land-based assets, In addition to three planned master developments and other real estate projects, the company currently derives revenue from the TRCC and farming and ranching, among other activities. Management believes that its development plans fulfill important needs, including addressing the need for more housing in California, creating much needed jobs and providing responsible development that is coordinated with conservationist goals.

The company is developing this latest project with joint venture partner, Los Angeles-headquartered Majestic Realty. Majestic is one of the country's largest privately-held industrial developers, according to National Real Estate Investor magazine.

We view it as a positive that this project represents an expansion of an existing relationship between TRC and Majestic, which would seem to underscore Majestic's positive view of the TRCC's development prospects. The project represents the third new building and fourth JV partnership agreement TRC has entered into with Majestic over the past five years. Their initial partnership agreement was formed in 2016 to jointly purchase, own and manage an existing, fully leased, 651,909- square-foot building. The two JV partners then added two additional new build partnerships for speculative buildings that each generated strong pre-lease activity and remain fully leased.

Proximity & Access to I-5 / Rail Make TRCC Attractive & Convenient

Proximity to nearby cities makes the TRCC an attractive location. The site of the planned new building is roughly 39-acres fronting the I-5 (interstate 5) highway, one of the busiest land-based transportation routes for passengers and cargo.

Separately, TRC also recently received approval to develop multi-family apartments within the Tejon Ranch Commerce Center (TRCC). Recently granted Kern County approvals authorize TRC to develop up to 495 multi-family residences in thirteen apartment buildings just north of the Outlets at Tejon.

As noted, the company expects its development efforts to create both permanent and development-related jobs. Kern county unemployment, at 10.1% in May 2021, was significantly above the national level of 5.8%. One TRC project, Centennial, for instance, is expected to create more than 23,000 permanent jobs on site and nearly 25,000 construction jobs. TRC also expects its master planned mixed-use residential communities to include measures to conserve water and minimize carbon footprints.

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