Tejon Ranch Co.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 14:28
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements, including without limitation statements regarding strategic alliances, the almond, pistachio, olives and grape industries, the future plantings of permanent crops, future yields, prices and water availability for the Company's crops and real estate operations, future prices, production and demand for oil and other minerals, future development of the Company's property, future revenue and income of its jointly-owned travel plaza and other joint venture operations, the adequacy of future cash flows to fund our operations, future revenue and income residential leasing, the adequacy of current assets and contracts to meet our water and other commitments, market value risks associated with investment and risk management activities and with respect to inventory and accounts receivable, our outstanding indebtedness, ongoing negotiations and other future events and conditions. In some cases, these statements are identifiable through use of words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "target," "can," "could," "may," "will," "should," "would," "likely," and similar expressions such as "in the process" and "well-positioned." In addition, any statements that refer to projections of our future financial performance, our anticipated growth, and trends in our business and other characterizations of future events or circumstances are forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. These forward-looking statements are not a guarantee of future performance, are subject to assumptions and involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance, or achievement implied by such forward-looking statements. These risks, uncertainties and important factors include, but are not limited to, weather, market, geopolitical and economic forces, availability of financing for land development activities, and competition and success in obtaining various governmental approvals and entitlements for land development activities. No assurance can be given that the actual future results will not differ materially from the forward-looking statements that we make for several reasons, including those described above and in the section entitled "Risk Factors" in our most recent Annual Report on Form 10-K.
OVERVIEW
We are a diversified real estate development and agribusiness company committed to creating value for our shareholders by responsibly using our land and resources to meet the housing, employment, and lifestyle needs of Californians. In support of these objectives, we have been investing in land planning and entitlement activities for new commercial/industrial and resort/residential land developments and in infrastructure improvements within our active industrial development. Our prime asset is approximately 270,000 acres of contiguous, largely undeveloped land that, at its most southerly border, is 60 miles north of Los Angeles and, at its most northerly border, is 15 miles east of Bakersfield.
Business Objectives and Strategies
Our primary business objective is to maximize long-term shareholder value through the strategic improvement and monetization of our land-based assets. A key element of our strategy is the entitlement and development of large-scale mixed-use master planned residential and commercial/industrial real estate projects that address the evolving housing and infrastructure needs of Southern and Central California. Our long-term development track record, combined with deliberate capital allocation and stakeholder engagement, positions us to unlock the full potential of these unique assets. An active example of this strategy is the TRCC master planned community, which was entitled and prevailed in litigation in 2007, and has been under continuous development since, with ongoing efforts to enhance its role as a long-term driver of operating income.
Our future master planned communities include up to 35,278 housing units, and more than 35 million square feet of commercial space in aggregate. Two of our master planned communities have already obtained their entitlements and have successfully defended litigation. First, we have obtained entitlements on MV and prevailed in litigation in 2012, and subsequently received the first approved final map for the project consisting of 401 residential lots and parcels for hospitality, amenities, and public uses. Second, Grapevine at Tejon Ranch, or Grapevine, was reapproved unanimously by the Kern County Board of Supervisors in 2019 and prevailed in litigation in 2021.
Centennial at Tejon Ranch, or Centennial, had entitlements approved in 2019 by the Los Angeles County Board of Supervisors. These approvals were litigated in two lawsuits filed in Los Angeles County Superior Court in May 2019 and we have since worked on defending and addressing the ongoing litigation, including considering all options to address the Superior Court's January 2022 decision and the Superior Court's March 22, 2023 final judgment. On May 26, 2023, we filed a Notice of Appeal, thereby appealing the Superior Court's decision to the Second District of the California Court of Appeal. On June 27, 2023, CBD/CNPS cross-appealed the Superior Court's ruling. The Court of Appeal held a hearing on April 3, 2025 for this matter. On June 26, 2025, the Court of Appeal issued a written decision affirming the Superior Court's decision in full. In doing so, the Court of Appeal upheld the Superior Court determinations that the Centennial Approvals be rescinded and Centennial EIR decertified pending correction of the EIR for the issues described above.
The Company is in the process of working with LA County to advance the Centennial project, which will include preparing supplemental environmental documentation and analysis for the Centennial project to address the Superior Court's final judgment and the Court of Appeals decision, and do so in a way that benefits the housing and economic development needs of the region and delivers value for our shareholders. See Note 11 (Commitments and Contingencies) of the Notes to Unaudited Consolidated Financial Statements for additional information regarding the Centennial litigation.
At our fully operational mixed-use master planned community, TRCC, we are currently executing on value creation as we are actively engaged in construction, commercial sales, and leasing. In the second quarter of 2025, our real estate operations expanded to include residential leasing with the launch of Terra Vista at Tejon, our multi-family project that began development in 2024. Leasing commenced in May and welcomed its first residents, marking a key milestone in diversifying our portfolio and enhancing long-term recurring revenue streams.
All of these efforts are supported by diverse revenue streams generated from other operations, including: farming, mineral resources, ranch operations, and our various joint ventures.
Our Business
We currently operate in five reporting segments: commercial/industrial real estate development; resort/residential real estate development; mineral resources; farming; and ranch operations.
Activities within the commercial/industrial real estate development segment include planning and permitting of land for development; construction of infrastructure; construction of pre-leased buildings; construction of buildings to be leased or sold; and the sale of land to third-parties for their own development. The commercial/industrial real estate development segment also includes activities related to the power plant lease and communications leases.
At the heart of the commercial/industrial real estate development segment is TRCC, a 20 million square foot mixed-use development on Interstate 5 just north of the Los Angeles basin. TRCC continues to serve as a model for long-term value creation, having generated more than $110 million in cumulative cash flow from commercial and industrial development since 2000. With the launch of Terra Vista at Tejon, TRCC is now evolving into a vibrant residential and employment hub, enhancing the interconnectivity of our mixed-use master planned community strategy. Over eight million square feet of industrial, commercial and retail space has already been developed or is under development, including distribution centers for IKEA, Caterpillar, Nestlé, Famous Footwear, L'Oreal, Camping World, Sunrise Brands, Dollar General and RectorSeal. TRCC sits on both sides of Interstate 5, giving distributors immediate access to the West Coast's principal north-south goods movement corridor.
We are also involved in multiple joint ventures within TRCC with several partners that help us expand our commercial/industrial business activities:
•A joint venture with TravelCenters of America that owns and operates two travel and truck stop facilities, comprised of five separate gas stations with convenience stores and fast-food restaurants within TRCC-West and TRCC-East.
•A joint venture, TRCC/Rock Outlet Center LLC, with Rockefeller Group Development Corporation, or Rockefeller which operates the Outlets at Tejon, a net leasable 326,000 square foot shopping experience in TRCC-East.
•Five joint ventures with Majestic Realty Co., or Majestic, to develop, manage, and operate five industrial buildings comprising of 2.8 million square feet of industrial space all within TRCC and all fully leased.
•On October 4, 2024, we entered into a joint venture with Dedeaux Properties to develop, manage, and operate an industrial building of 510,385 square feet of space.
The resort/residential real estate development segment is actively involved in the land entitlement and development process internally and through a joint venture. Our active developments within this segment are MV, Centennial, and Grapevine, with Grapevine North representing a fourth opportunity in this segment. Our master planned communities represent long-term value drivers for the Company. By leveraging a strong track record of obtaining and defending entitlements in California's complex regulatory environment, we are building the foundation for future recurring revenue generation while preserving optionality across our land portfolio.
•MV encompasses a total of 26,417 acres, of which 5,082 acres are approved to be used for a master planned community development that will include housing, retail, and commercial components. MV is entitled for 3,450 homes, 160,000 square feet of commercial development, 750 hotel keys, and more than 21,335 acres of open space;
•The Centennial development is a master planned community development encompassing 12,323 acres of our land within Los Angeles County. Upon completion of Centennial, it is estimated that the community will include approximately 19,333 homes and 10.1 million square feet of commercial development, including nearly 3,500 affordable units. See Note 11 (Commitments and Contingencies) of the Notes to Unaudited Consolidated Financial Statements for additional information related to current litigation;
•Grapevine is an 8,010-acre development area located on the San Joaquin Valley floor area of our lands, adjacent to TRCC. Upon completion of Grapevine, this master planned community is expected to include 12,000 homes, 5.1 million square feet of commercial development, and more than 3,367 acres of open space and parks; and
•Immediately northeast of Grapevine is Grapevine North, a 7,655-acre development area, which is currently used for agricultural purposes. Identified as a development area in the RWA, Grapevine North presents a significant opportunity for future development. Grapevine North may feature mixed-use community development similar to Grapevine at Tejon Ranch, or other development uses as appropriate based upon market conditions at the time. The Company is not currently pursuing entitlements for Grapevine North.
Please refer to our Annual Report on Form 10-K for the year ended December 31, 2024, for a more detailed description of our active developments within the resort/residential real estate development segment.
Our mineral resources segment generates revenues from oil and gas royalty leases, rock and aggregate mining leases, a lease with National Cement Company of California Inc., and water sales.
The farming segment produces revenues from the sale of wine grapes, almonds, and pistachios. As part of our crop segmentation strategy within the farming division, we have initiated the planting of an olive orchard to diversify our commodity portfolio and better position the Company for shifts in market conditions.
Lastly, the ranch operations segment consists of game management revenues and ancillary land uses such as grazing leases and filming.
Summary of Third Quarter and YTD 2025 Performance
For the three months ended September 30, 2025, we had a net income attributable to common stockholders of $1,670,000 compared to a net loss attributable to common stockholders of $1,836,000 for the three months ended September 30, 2024. The primary drivers of this $3,506,000 increase in net income were higher farming revenues of $1,093,000, lower farming expenses of $890,000, and an income tax benefit of $972,000 compared to a tax provision of $1,832,000 in the prior period, partially offset by a $774,000 decrease in equity in earnings of unconsolidated joint ventures.
For the nine months ended September 30, 2025, we had a net loss attributable to common stockholders of $1,506,000 compared to a net loss attributable to common stockholders of $1,793,000 for the same period in 2024. The $287,000 improvement in net loss was primarily driven by the recognition of $595,000 of additional gross margin following the fulfillment of the performance obligation associated with Nestlé land sale that occurred in 2022. Net increases in our agricultural operations also contributed to this improvement, with almond and wine grape revenues increasing by $1,169,000 and $1,147,000, respectively. Additionally, expenses in the Real Estate - Resort/Residential segment decreased by $1,308,000, which was primarily attributable to additional expenses of $1,250,000 in 2024 related to professional service fees and planning costs related to capital efforts tied to the Company's master planned communities. These positive effects were partially offset by decreased revenues from the mineral resources segment totaling $410,000, as well as $3,399,000 of additional expenses related to contested board election and proxy defense efforts during the nine months ended September 30, 2025.
This Management's Discussion and Analysis of Financial Condition and Results of Operations provides a narrative discussion of our results of operations. It contains the results of operations for each reporting segment of the business and is followed by a discussion of our financial position. It is useful to read the reporting segment information in conjunction with Note 13 (Reporting Segments and Related Information) of the Notes to Unaudited Consolidated Financial Statements.
Critical Accounting Estimates
The preparation of our interim financial statements in accordance with GAAP requires us to make estimates and judgments that affect the reported amounts for assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimates that are likely to occur from period to period, use of different estimates that we reasonably could have used in the current period, or would have a material impact on our financial condition or results of operations. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, impairment of long-lived assets, capitalization of costs, allocation of costs related to land sales and leases, stock compensation, and our future ability to utilize deferred tax assets. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
During the nine months ended September 30, 2025, our critical accounting policies have not changed since the filing of our Annual Report on Form 10-K for the year ended December 31, 2024. Please refer to that filing for a description of our critical accounting policies. Please also refer to Note 1 (Basis of Presentation) in the Notes to Unaudited Consolidated Financial Statements in this report for a discussion regarding newly adopted accounting principles.
Results of Operations by Segment
We evaluate the performance of our reporting segments separately, to monitor the different factors affecting financial results. Each reporting segment is subject to review and evaluation, as we monitor current market conditions, market opportunities, and available resources. The performance of each reporting segment is discussed below:
Real Estate - Commercial/Industrial:
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Commercial/industrial revenues | |||||||||||||||||||||||
| Pastoria Energy Facility | $ | 1,209 | $ | 1,435 | $ | (226) | (16) | % | |||||||||||||||
| TRCC Leasing | 677 | 446 | 231 | 52 | % | ||||||||||||||||||
| TRCC management fees and reimbursements | 282 | 246 | 36 | 15 | % | ||||||||||||||||||
| Commercial leases | 162 | 167 | (5) | (3) | % | ||||||||||||||||||
| Communication leases | 332 | 270 | 62 | 23 | % | ||||||||||||||||||
| Landscaping and other services | 462 | 438 | 24 | 5 | % | ||||||||||||||||||
| Total commercial/industrial revenues | $ | 3,124 | $ | 3,002 | $ | 122 | 4 | % | |||||||||||||||
| Operating expenses | 923 | 858 | 65 | 8 | % | ||||||||||||||||||
| Selling, general and administrative expenses | 837 | 1,125 | (288) | (26) | % | ||||||||||||||||||
| Depreciation and amortization | 388 | 105 | 283 | 270 | % | ||||||||||||||||||
| Total commercial/industrial expenses | $ | 2,148 | $ | 2,088 | $ | 60 | 3 | % | |||||||||||||||
| Operating income from commercial/industrial | $ | 976 | $ | 914 | $ | 62 | 7 | % | |||||||||||||||
•Commercial/industrial real estate development segment revenues were $3,124,000 for the three months ended September 30, 2025, an increase of $122,000, or 4%, from $3,002,000 for the three months ended September 30, 2024. The increase was primarily attributable to higher lease revenues from the Terra Vista properties and additional communication leases primarily related to easements, partially offset by lower revenues from the Pastoria Energy Facility due to cooler summer temperatures in 2025 compared to 2024.
•Commercial/industrial real estate development segment expenses were $2,148,000 for the three months ended September 30, 2025, an increase of $60,000, or 3%, from $2,088,000 for the three months ended September 30, 2024. The increase was primarily attributable to depreciation from buildings being placed into service at Terra Vista and related operating expenses, offset by a reduction in selling, general and administrative expenses.
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Commercial/industrial revenues | |||||||||||||||||||||||
| Pastoria Energy Facility | $ | 3,441 | $ | 3,631 | $ | (190) | (5) | % | |||||||||||||||
| TRCC Leasing | 1,582 | 1,334 | 248 | 19 | % | ||||||||||||||||||
| TRCC management fees and reimbursements | 733 | 768 | (35) | (5) | % | ||||||||||||||||||
| Commercial leases | 492 | 496 | (4) | (1) | % | ||||||||||||||||||
| Communication leases | 975 | 792 | 183 | 23 | % | ||||||||||||||||||
| Landscaping and other services | 1,389 | 1,476 | (87) | (6) | % | ||||||||||||||||||
| Land sale | 2,373 | - | 2,373 | 100 | % | ||||||||||||||||||
| Total commercial/industrial revenues | $ | 10,985 | $ | 8,497 | $ | 2,488 | 29 | % | |||||||||||||||
| Cost of sales of land | 1,778 | - | 1,778 | 100 | % | ||||||||||||||||||
| Operating expenses | 2,187 | 2,372 | (185) | (8) | % | ||||||||||||||||||
| Selling, general and administrative expenses | 2,826 | 3,314 | (488) | (15) | % | ||||||||||||||||||
| Depreciation and amortization | 740 | 319 | 421 | 132 | % | ||||||||||||||||||
| Total commercial/industrial expenses | $ | 7,531 | $ | 6,005 | $ | 1,526 | 25 | % | |||||||||||||||
| Operating income from commercial/industrial | $ | 3,454 | $ | 2,492 | $ | 962 | 39 | % | |||||||||||||||
•Commercial/industrial real estate development segment revenues were $10,985,000 for the nine months ended September 30, 2025, an increase of $2,488,000, or 29%, from $8,497,000 for the nine months ended September 30, 2024. The primary driver of this increase was the recognition of $2,373,000 in land sales revenue, following the Company's fulfillment of the performance obligation associated with a land sale that occurred in 2022.
•Commercial/industrial real estate development segment expenses were $7,531,000 for the nine months ended September 30, 2025, an increase of $1,526,000, or 25%, from $6,005,000 for the nine months ended September 30, 2024. The increase was primarily attributable to the recognition of $1,778,000in cost of land sales, incurred to satisfy the performance obligation associated with Nestlé land sale transaction executed in 2022. Additionally, this segment incurred lower selling, general and administrative costs of $488,000, partially offset by an increase in depreciation expenses of $421,000 driven by Terra Vista assets being placed in service starting in the second quarter.
The logistics operators currently located at TRCC have proven effective in serving customers throughout California and the broader western United States, and their success is prominently featured in our marketing efforts. We plan to continue focusing our marketing strategy for TRCC on the site's strategic labor and logistics advantages, the pro-business environment of Kern County, and the demonstrated success of existing tenants and property owners within the development. Our location fits within the logistics model that many companies are using, which favors large, centralized distribution facilities which have been strategically located to maximize the balance of inbound and outbound efficiencies, rather than many decentralized smaller distribution centers. The world-class logistics operators located within TRCC have demonstrated success through utilization of this model. With access to markets of over 40 million people for next-day delivery service, they are also demonstrating success with e-commerce fulfillment.
Our FTZ designation allows businesses to secure the many benefits and cost reductions associated with streamlined movement of goods in and out of the trade zone. This FTZ designation is further supplemented by the AKIP adopted by the Kern County Board of Supervisors. AKIP aims to expand and enhance Kern County's competitiveness by taking affirmative steps to attract new businesses and to encourage the growth and resilience of existing businesses. AKIP provides incentives, such as assistance in obtaining tax incentives, building supporting infrastructure, and workforce development.
We believe the FTZ and AKIP, along with our ability to provide fully entitled, shovel-ready land parcels to support buildings of any size, including buildings one million square feet or larger, provide us with a marketing advantage. Our marketing efforts target the Inland Empire region of Southern California, the Santa Clarita Valley of northern Los Angeles County, the northern part of the San Fernando Valley (due to the limited availability of new product and high real estate costs in these locations), and the San Joaquin Valley of California. We continue to analyze the market and evaluate expansions of industrial buildings for lease either on our own or in partnerships, as we have done with the buildings developed within our joint ventures.
A potential disadvantage to our development strategy is our distance from the ports of Los Angeles and Long Beach in comparison to the warehouse/distribution centers located in the Inland Empire, a large industrial area located east of Los Angeles, which continues its expansion eastward beyond Riverside and San Bernardino, to include Perris, Moreno Valley, and Beaumont. As development in the Inland Empire continues to move east and farther away from the ports, the potential disadvantage of our distance from the ports is being mitigated.
During the quarter ended September 30, 2025, vacancy rates in the Inland Empire climbed by 70 basis points to 7.5% as net absorption remains in the negative at approximately 22,000 square feet. Average monthly asking rents continued to decline to $1.05. The San Fernando Valley and Ventura County industrial markets continued to experience tight conditions as demand remained positive. Vacancy rose 130 basis points to 3.5% in San Fernando Valley and rose 60 basis points to 3.1% in Ventura County. Average asking rent edged up in the third quarter in the San Fernando Valley, increasing $0.01 to $1.48, while Ventura posted an increase to $1.32.
See below for the vacancy rates and average asking rent of Inland Empire, San Fernando Valley and Ventura County.
|
Vacancy Rates
|
Average Monthly Asking Rent | ||||||||||||||||||||||||||||||||||
| September 30, 2025 | December 31, 2024 | September 30, 2024 | September 30, 2025 | December 31, 2024 | September 30, 2024 | ||||||||||||||||||||||||||||||
| Inland Empire | 7.5% | 6.8% | 6.7% | $1.05 | $1.15 | $1.22 | |||||||||||||||||||||||||||||
| San Fernando Valley and Ventura County | 3.3% | 2.4% | 2.0% | $1.43 | $1.42 | $1.45 | |||||||||||||||||||||||||||||
Industrial users seeking larger spaces are continuing to go further north into neighboring Kern County, and particularly, TRCC, which has attracted increased attention as market conditions continue to tighten. Additionally, TRCC is in a position to capture tenant awareness due to our ability to provide a competitive alternative for users in the Inland Empire and the Santa Clarita Valley.
We expect our commercial/industrial real estate development segment to continue to experience costs, net of amounts capitalized, primarily related to professional service fees, marketing costs, planning costs, and staffing costs, as we continue to pursue development opportunities. From a macroeconomic perspective, the tightening of capital markets may cause a near-term slowdown in new commercial real estate developments.
The actual timing and completion of development is difficult to predict, due to the uncertainties of the market. Infrastructure development and marketing activities and costs could continue to increase over several years, as we develop our land holdings. We will also continue to evaluate land resources to determine the highest and best uses for our land holdings. Future land sales are dependent on market circumstances and specific opportunities. Our goal in the future is to increase land value and create future revenue growth through planning and development of commercial and industrial properties. Industrial land prices have increased at TRCC since 2000 from $0.57 per square foot to $9.00 per square foot which is a 1,479% increase, demonstrating the consistent increase in demand and maturation of TRCC. Industrial rents have increased 249% over the past eight-year period starting at $0.25 per square foot in 2017.
Real Estate - Resort/Residential:
We are in the preliminary stages of property development; hence, no revenues or profits are attributed to this segment.
Resort/residential real estate development segment expenses were $318,000 for the three months ended September 30, 2025, a decrease of $10,000 from $328,000 for the three months ended September 30, 2024 with no significant fluctuations across expenses categories.
Resort/residential real estate development segment expenses were $1,008,000 for the nine months of 2025, a decrease of $1,308,000, or 56%, from $2,316,000 for the nine months of 2024. The decrease was primarily attributable to additional expenses of $1,250,000 in 2024 related to professional service fees and planning costs related to capital efforts tied to the Company's master planned communities.
Our long-term business strategy to develop the master-planned communities of MV, Centennial, and Grapevine remains unchanged. We believe that the long-term macroeconomic fundamentals, particularly California's large population base and continued household formation as well as the demographic migration to the suburban and exurban periphery of Los Angeles and Kern Counties, will support sustained housing demand in our region. Additionally, California's well-documented housing shortage reinforces the need for thoughtfully planned residential development, and we believe our communities are well-positioned to help address this shortfall. Accordingly, the majority of expenditures and capital investments within our resort/residential real estate segment are expected to remain focused on these three communities.
As we move forward with our master planned communities, we expect to explore funding opportunities for the future development of our projects. Such funding opportunities could come from a variety of sources, such as joint ventures with financial partners, debt financing, and/or our issuance of additional common stock.
Mineral Resources:
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Mineral resources revenues | |||||||||||||||||||||||
| Oil and gas | $ | 138 | $ | 185 | $ | (47) | (25) | % | |||||||||||||||
| Cement | 610 | 736 | (126) | (17) | % | ||||||||||||||||||
| Rock aggregate | 738 | 645 | 93 | 14 | % | ||||||||||||||||||
| Exploration leases | - | - | - | - | % | ||||||||||||||||||
| Water sales | 1,688 | 1,600 | 88 | 6 | % | ||||||||||||||||||
| Reimbursables and other | (2) | - | (2) | 100 | % | ||||||||||||||||||
| Total mineral resources revenues | $ | 3,172 | $ | 3,166 | $ | 6 | - | % | |||||||||||||||
| Cost of sales of water | 1,366 | 1,249 | 117 | 9 | % | ||||||||||||||||||
| Operating expenses | 264 | (22) | 286 | (1,300) | % | ||||||||||||||||||
| Selling, general and administrative expenses | 147 | 240 | (93) | (39) | % | ||||||||||||||||||
| Depreciation and amortization | 344 | 345 | (1) | - | % | ||||||||||||||||||
| Total mineral resources expenses | $ | 2,121 | $ | 1,812 | $ | 309 | 17 | % | |||||||||||||||
| Operating income from mineral resources | $ | 1,051 | $ | 1,354 | $ | (303) | (22) | % | |||||||||||||||
•Mineral resources segment revenues were $3,172,000 for the three months ended September 30, 2025, representing an increase of $6,000, compared to $3,166,000 for the three months ended September 30, 2024, remaining relatively unchanged. Oil and gas revenues were lower due to lower production levels and lower pricing, and cement revenues were also lower due to lower production levels offset by a slight improvement in pricing. These decreases were offset by increased rock aggregate revenues due to higher production levels and additional water sales.
•Mineral resources segment expenses were $2,121,000 for the three months ended September 30, 2025, an increase of $309,000, or 17%, from $1,812,000 for the three months ended September 30, 2024. The increase was primarily due to higher operating expenses of $286,000, driven by increased property taxes of $272,000 due to a property tax refund in 2024 and higher costs of transmitting water of $71,000 in cost of sales.
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Mineral resources revenues | |||||||||||||||||||||||
| Oil and gas | $ | 518 | $ | 664 | $ | (146) | (22) | % | |||||||||||||||
| Cement | 1,747 | 2,085 | (338) | (16) | % | ||||||||||||||||||
| Rock aggregate | 1,594 | 1,541 | 53 | 3 | % | ||||||||||||||||||
| Exploration leases | - | 1 | (1) | (100) | % | ||||||||||||||||||
| Water Sales | 3,156 | 3,260 | (104) | (3) | % | ||||||||||||||||||
| Reimbursables and other | 262 | 136 | 126 | 93 | % | ||||||||||||||||||
| Total mineral resources revenues | $ | 7,277 | $ | 7,687 | $ | (410) | (5) | % | |||||||||||||||
| Cost of sales of water | 2,548 | 2,664 | (116) | (4) | % | ||||||||||||||||||
| Operating expenses | 841 | 644 | 197 | 31 | % | ||||||||||||||||||
| Selling, general and administrative expenses | 576 | 704 | (128) | (18) | % | ||||||||||||||||||
| Depreciation and amortization | 1,031 | 1,031 | - | - | % | ||||||||||||||||||
| Total mineral resources expenses | $ | 4,996 | $ | 5,043 | $ | (47) | (1) | % | |||||||||||||||
| Operating income from mineral resources | $ | 2,281 | $ | 2,644 | $ | (363) | (14) | % | |||||||||||||||
•Mineral resources segment revenues were $7,277,000 for the first nine months of 2025, a decrease of $410,000, or 5%, from $7,687,000 for the first nine months of 2024. The decrease in revenues was primarily attributable to a decline in oil and gas due to lower production levels and lower pricing and cement sales due to lower production levels despite a slight improvement in pricing.
•Mineral resources segment expenses were $4,996,000 for the first nine months of 2025, a decrease of $47,000, or 1%, when compared to the same period in 2024 reflecting consistent performance year over year.
As anticipated regulatory changes related to groundwater management in California emerge, such as potential limits on groundwater pumping, we believe our water assets will become increasingly important and valuable. These assets include our water banking operations, groundwater recharge programs, and access to water supply contracts, such as those we have acquired in prior periods. We expect these resources will continue to play a critical role in supporting our development projects and may also present opportunities for water sales to third parties.
All SWP water contracts require annual payments related to the fixed and variable costs of the SWP and each water district, whether or not water is used or available. In addition to surface water supplies, the Company has access to adjudicated groundwater rights, including an annual allocation of 1,634 acre-feet in the Antelope Valley Basin. Portions of our property also have available groundwater, which the Company believes are sufficient to support its commercial development plans along the Interstate 5 corridor and its ongoing agricultural operations.
In Kern County, the Company's lands span three groundwater basins governed by the Sustainable Groundwater Management Act (SGMA): the Kern Subbasin, the White Wolf Subbasin, and the Castac Basin. Approximately 9% of the Company's Kern County land is within the Kern Subbasin and is primarily used for grazing with minimal water use. In contrast, the White Wolf Subbasin is being sustainably managed, with an approved GSP requiring only minor corrections, while the Castac Basin is a low-priority basin with no anticipated restrictions. The Company believes its diverse mix of surface water supplies, adjudicated groundwater rights, and banked water positions the Company well to navigate evolving regulatory frameworks and meet future water needs.
Prices for oil and natural gas fluctuate in response to relatively minor changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control, such as: changes in domestic and global supply and demand, domestic and global inventory levels, political and regulatory conditions in California, and international disputes. Production has seen an overall decline in California as a result of regulatory conditions.
Farming:
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Farming revenues | |||||||||||||||||||||||
| Almonds | $ | 1,515 | $ | 1,503 | $ | 12 | 1 | % | |||||||||||||||
| Pistachios | - | 22 | (22) | (100) | % | ||||||||||||||||||
| Wine grapes | 2,451 | 1,304 | 1,147 | 88 | % | ||||||||||||||||||
| Other | 369 | 413 | (44) | (11) | % | ||||||||||||||||||
| Total farming revenues | $ | 4,335 | $ | 3,242 | $ | 1,093 | 34 | % | |||||||||||||||
| Cost of sales | 3,726 | 4,478 | (752) | (17) | % | ||||||||||||||||||
| Fixed water obligations | 656 | 606 | 50 | 8 | % | ||||||||||||||||||
| Selling, general and administrative expenses | 212 | 595 | (383) | (64) | % | ||||||||||||||||||
| Depreciation and amortization | 768 | 573 | 195 | 34 | % | ||||||||||||||||||
| Total farming expenses | $ | 5,362 | $ | 6,252 | $ | (890) | (14) | % | |||||||||||||||
| Operating loss from farming | $ | (1,027) | $ | (3,010) | $ | 1,983 | (66) | % | |||||||||||||||
•Farming segment revenues totaled $4,335,000 for the three months ended September 30, 2025, an increase of $1,093,000, or 34%, compared to $3,242,000 for the same period in 2024. The increase was primarily attributable to higher wine grape sales resulting from increased production volumes for wine grapes harvested during the period ended September, 30 2025.
•Farming segment expenses were $5,362,000 for the three months ended September 30, 2025, a decrease of $890,000, or 14%, from $6,252,000 during the same period in 2024. This decrease was primarily attributable to lower costs of sales of $752,000 driven by lower costs in pruning, and irrigation, in addition to lower selling, general and administrative expenses of $383,000 driven by lower fixed water obligations partially offset by an increase in depreciation expenses of $195,000.
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Farming revenues | |||||||||||||||||||||||
| Almonds | $ | 3,412 | $ | 2,243 | $ | 1,169 | 52 | % | |||||||||||||||
| Pistachios | (10) | 22 | (32) | (145) | % | ||||||||||||||||||
| Wine grapes | 2,451 | 1,304 | 1,147 | 88 | % | ||||||||||||||||||
| Hay | - | 66 | (66) | (100) | % | ||||||||||||||||||
| Other | 645 | 614 | 31 | 5 | % | ||||||||||||||||||
| Total farming revenues | $ | 6,498 | $ | 4,249 | $ | 2,249 | 53 | % | |||||||||||||||
| Cost of sales | 5,433 | 5,435 | (2) | - | % | ||||||||||||||||||
| Fixed water obligations | 2,172 | 2,159 | 13 | 1 | % | ||||||||||||||||||
| Selling, general and administrative expenses | 355 | 597 | (242) | (41) | % | ||||||||||||||||||
| Depreciation and amortization | 1,447 | 1,215 | 232 | 19 | % | ||||||||||||||||||
| Total farming expenses | $ | 9,407 | $ | 9,406 | $ | 1 | - | % | |||||||||||||||
| Operating loss from farming | $ | (2,909) | $ | (5,157) | $ | 2,248 | (44) | % | |||||||||||||||
•Farming segment revenues were $6,498,000 for the first nine months of 2025, an increase of $2,249,000, or 53%, from $4,249,000 during the same period in 2024. The increase was primarily attributed to an increase of$1,169,000 in almond crop revenues in the current period and higher wine grape yields, which contributed an additional $1,147,000 in sales. Approximately 1,310,000 pounds of almonds were sold during the nine months ended September 30, 2025, compared to 1,045,000 pounds during the same period in 2024.
•Farming segment expenses were $9,407,000 for the first nine months of 2025, an increase of $1,000, from $9,406,000 compared to the same period in 2024, remaining relatively consistent.
Our almond, pistachio, and wine grape crop sales are subject to significant seasonality, with the majority of sales typically occurring during the third and fourth quarters of the year. Almonds and pistachios are generally sold at prevailing market prices, while wine grapes are sold under contracted pricing arrangements with wineries. In 2025, the Company's crop segmentation in its farming division will include the planting of an olive orchard, diversifying the Company's commodity products and best positioning the Company for market changes.
Weather conditions can significantly affect the number of chill hours and chill portions accumulated during dormancy, both of which are critical to tree and vine development. In early 2025, California experienced an unusually warm winter, resulting in insufficient chill accumulation across major agricultural regions. Pistachio orchards were particularly impacted, and this deficiency contributed to slightly reduced yields. Additionally, late winter and early spring rainstorms disrupted standard field operations, including the timely application of pesticides and dormancy-breaking treatments. These weather-related delays did not have an effect on crop management schedules and overall productivity.
Labor costs, both internal and through labor contractors, continue to increase and the Company expects this trend to continue over the near future. The Company utilizes external labor contractors, as necessary, for large projects, such as pruning and harvesting, as a way to manage our labor needs. From a broader inflationary standpoint, the Company continues to expect an increase in production costs, most notably chemicals such as herbicides and pesticides, and fuel costs.
Lastly, the impact of state ground water management laws on new plantings and continuing crop production remains unknown. Water delivery and water availability continues to be a long-term concern within California. Any limitation of delivery of SWP water, and the absence of available alternatives during drought periods, could potentially cause permanent damage to orchards and vineyards throughout California. While this could impact us, we believe we have sufficient water resources available to meet our requirements for the next crop year.
Ranch Operations:
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Ranch operations revenues | |||||||||||||||||||||||
|
Game management and other 1
|
$ | 800 | $ | 825 | $ | (25) | (3) | % | |||||||||||||||
| Grazing | 538 | 621 | (83) | (13) | % | ||||||||||||||||||
| Total ranch operations revenues | $ | 1,338 | $ | 1,446 | $ | (108) | (7) | % | |||||||||||||||
| Operating expenses | 960 | 946 | 14 | 1 | % | ||||||||||||||||||
| Selling, general and administrative expenses | 122 | 179 | (57) | (32) | % | ||||||||||||||||||
| Depreciation and amortization | 94 | 98 | (4) | (4) | % | ||||||||||||||||||
| Total ranch operations expenses | $ | 1,176 | $ | 1,223 | $ | (47) | (4) | % | |||||||||||||||
| Operating loss from ranch operations | $ | 162 | $ | 223 | $ | (61) | 27 | % | |||||||||||||||
|
1Game management and other revenues consist of revenues from hunting, filming, High Desert Hunt Club (a premier upland bird hunting club), and other ancillary activities.
|
|||||||||||||||||||||||
•Ranch operations revenues totaled $1,338,000 for the three months ended September 30, 2025, representing a decrease of $108,000, or 7%, compared to $1,446,000 for the same period in 2024. The decrease was primarily driven by a $83,000 decrease in rent range revenues due to decrease cattle and a $25,000 decrease in game management and other revenues, largely attributable to timing of guided hunt revenues.
•Ranch operations expenses were $1,176,000 for the three months ended September 30, 2025, a decrease of $47,000, or 4%, from $1,223,000 for the same period in 2024. The decrease was primarily attributable to lower selling, general and administrative expenses of $57,000 mostly related to lower overhead costs across various categories.
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Ranch operations revenues | |||||||||||||||||||||||
|
Game management and other 1
|
$ | 2,050 | $ | 1,808 | $ | 242 | 13 | % | |||||||||||||||
| Grazing | 1,675 | 1,710 | (35) | (2) | % | ||||||||||||||||||
| Total ranch operations revenues | $ | 3,725 | $ | 3,518 | $ | 207 | 6 | % | |||||||||||||||
| Operating expenses | 3,033 | 2,913 | 120 | 4 | % | ||||||||||||||||||
| Selling, general and administrative expenses | 464 | 512 | (48) | (9) | % | ||||||||||||||||||
| Depreciation and amortization | 287 | 286 | 1 | - | % | ||||||||||||||||||
| Total ranch operations expenses | $ | 3,784 | $ | 3,711 | $ | 73 | 2 | % | |||||||||||||||
| Operating loss from ranch operations | $ | (59) | $ | (193) | $ | 134 | 69 | % | |||||||||||||||
|
1Game management and other revenues consist of revenues from hunting, filming, high desert hunt club (a premier upland bird hunting club), and other ancillary activities.
|
|||||||||||||||||||||||
•Ranch operations revenues totaled $3,725,000 for the first nine months of 2025, an increase of $207,000, or 6%, compared to $3,518,000 for the same period in 2024. The increase was primarily attributable to an increase in game management and other revenue of $242,000, primarily attributed to higher guided hunt revenues and increased revenue recognized from the High Desert Hunt Club.
•Ranch operations expenses were $3,784,000 for the first nine months of 2025, an increase of $73,000, or 2%, from $3,711,000 for the same period in 2024. This increase was primarily attributable to higher operating expenses of $120,000mainly associated with additional repairs and maintenance expenses of $74,000 and higher property taxes of $53,000 partially offset by lower selling, general and administrative expenses of $48,000 across various categories.
Corporate and Other:
Corporate general and administrative costs were $2,868,000 for the three months ended September 30, 2025, a decrease of $77,000, from $2,945,000 for the same period in 2024. Although overall expenses remained relatively consistent between periods, the current period included a decrease of $1,244,000 in stock-based compensation, offset by an increase of $867,000 in professional service fees.
Corporate general and administrative costs were $12,004,000 for the first nine months of 2025, an increase of $3,210,000, or 37%, from $8,794,000 for the same period in 2024. The increase was primarily due to the $3,399,000 incurred for the proxy defense expenses related to contested board election during the nine months ended September 30, 2025. The main components of the 2025 corporate expenses included operating costs of $4,627,000 and selling, general and administrative expenses of $7,110,000 and depreciation expense of $267,000.
Total other income was $168,000 for the three months ended September 30, 2025, a decrease of $291,000 from $459,000 for the same period in 2024, primarily due to lower investment income as a result of a decrease in marketable securities balance.
Total other income was $660,000 for the nine months ended September 30, 2025, a decrease of $973,000, from $1,633,000 for the same period in 2024. The decrease was primarily attributable to lower investment income driven by a decrease in marketable securities balance.
Joint Ventures:
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Equity in earnings (loss) | |||||||||||||||||||||||
| Petro Travel Plaza Holdings, LLC | $ | 1,933 | $ | 2,785 | $ | (852) | (31) | % | |||||||||||||||
| TRCC/Rock Outlet Center LLC | (323) | (497) | 174 | 35 | % | ||||||||||||||||||
| TRC-MRC 1, LLC | 217 | 224 | (7) | (3) | % | ||||||||||||||||||
| TRC-MRC 2, LLC | 488 | 555 | (67) | (12) | % | ||||||||||||||||||
| TRC-MRC 3, LLC | 89 | 107 | (18) | (17) | % | ||||||||||||||||||
| TRC-MRC 4, LLC | 88 | 93 | (5) | (5) | % | ||||||||||||||||||
| TRC-MRC 5, LLC | 63 | 62 | 1 | 2 | % | ||||||||||||||||||
| Total equity in earnings | $ | 2,555 | $ | 3,329 | $ | (774) | (23) | % | |||||||||||||||
•Equity in earnings was $2,555,000 for the three months ended September 30, 2025, a decrease of $774,000, from $3,329,000 during the same period in 2024. The decrease was primarily attributable to a decrease in equity in earnings recorded for the TA/Petro joint venture of approximately $852,000 driven by a 5.5% decline in fuel gross margin, a 8.8% decline in nonfuel gross margin, an 8% increase in labor expenses and a 5.9% increase in operating expense compared to the same period in 2024. Equity in loss from TRCC/Rock Outlet Center LLC joint venture decreased by $174,000 compared to the prior period, primarily due to the recognition of a property tax refund of $200,000 in the three months ended September 30, 2025. Equity in earnings for all other joint ventures with Majestic Realty Co. remained relatively consistent.
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Equity in earnings (loss) | |||||||||||||||||||||||
| Petro Travel Plaza Holdings, LLC | $ | 4,557 | $ | 6,004 | $ | (1,447) | (24) | % | |||||||||||||||
| TRCC/Rock Outlet Center LLC | (1,191) | (1,130) | (61) | (5) | % | ||||||||||||||||||
| TRC-MRC 1, LLC | 680 | 375 | 305 | 81 | % | ||||||||||||||||||
| TRC-MRC 2, LLC | 1,510 | 1,443 | 67 | 5 | % | ||||||||||||||||||
| TRC-MRC 3, LLC | 333 | 321 | 12 | 4 | % | ||||||||||||||||||
| TRC-MRC 4, LLC | 265 | 414 | (149) | (36) | % | ||||||||||||||||||
| TRC-MRC 5, LLC | 114 | 184 | (70) | (38) | % | ||||||||||||||||||
| Total equity in earnings | $ | 6,268 | $ | 7,611 | $ | (1,343) | (18) | % | |||||||||||||||
•Equity in earnings was $6,268,000 for the nine months ended September 30, 2025, a decrease of $1,343,000, or 18%, from $7,611,000 during the same period in 2024. The decrease was primarily attributable to a decrease in equity in earnings recorded for the TA/Petro joint venture of approximately $1,447,000 driven by a 8.4% decline in nonfuel gross margins and a 8.2% increase in operating expense compared to the same period in 2024. Equity in loss from TRCC/Rock Outlet Center LLC joint venture increased by $61,000 compared to the prior period, due to a decrease in contingent rental income resulting from reduced consumer traffic in the first half of 2025, relative to the same period in 2024. Equity in earnings for TRC-MRC 1, LLC increased due to higher revenue recognized from the lease with a new tenant at a higher lease rate beginning May 2024. Equity in earnings for TRC-MRC 4, LLC decreased as a result of an insurance reimbursement in prior year which did not reoccur in 2025, and for TRC-MRC 5, LLC decreased due to higher property taxes compared with the prior year period.
Please refer to "Non-GAAP Financial Measures" for further financial discussion of the results of our joint ventures.
General Outlook
Our operations are seasonal and future results of operations cannot reliably be predicted based on quarterly results. Historically, our largest percentage of farming revenues are recognized during the third and fourth quarters of the fiscal year. Real estate activity and leasing activities are dependent on market circumstances and specific opportunities and therefore are difficult to predict from period to period.
For further discussion of the risks and uncertainties that could potentially adversely affect us, please refer to Part I, Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, or Annual Report, and to Part I, Item 1A - "Risk Factors" of our Annual Report. For further discussion, please refer to Note 11 (Commitments and Contingencies) of the Notes to Unaudited Consolidated Financial Statements in this report.
Income Taxes
For the nine months ended September 30, 2025, we had an income tax benefit of $1,809,000 compared to $286,000 for the nine months ended September 30, 2024. The effective tax rates approximated 55% and 14% for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, the Company had income taxes receivable of $3,458,000. We classify interest and penalties incurred on tax payments as income tax expenses. Our effective tax rates differ from statutory rates primarily because of permanent differences related to Internal Revenue Code Section 162(m). The Internal Revenue Code Section 162(m) compensation deduction limitations occurred due to changes in tax law arising from the 2017 Tax Cuts and Jobs Act.
Cash Flow and Liquidity
Our financial position allows us to pursue our strategies of continued development of TRCC, funding of operating activities, land entitlement, development, and conservation. Accordingly, we have established well-defined priorities for our available cash, including investing in core operating segments to achieve profitable future growth. We have historically funded our operations with cash flows from operating activities, investment proceeds, and short-term borrowings from our bank credit facilities. In the past, we have also issued common stock and used the proceeds for capital investment activities.
To enhance long-term shareholder value, we expect to continue allocating capital toward vertical development within our active commercial and industrial portfolio, including construction on Terra Vista at Tejon, our new multi-family apartment community located immediately adjacent to the Outlets at Tejon. The majority of our capital investment is expected to remain concentrated at TRCC, where we are expanding the footprint of our commercial and industrial operations through vertical development, infrastructure improvements, and the construction of assets intended for lease.
We will also invest, as needed, across our real estate segments to secure land entitlement approvals, ensure access to adequate water supplies, and support general land development activities. In our farming segment, we plan to invest selectively in operational improvements and capacity enhancements when supported by market conditions and expected profitability.
Our cash, cash equivalents and marketable securities totaled approximately $21,044,000 as of September 30, 2025, a decrease of $32,664,000 from $53,708,000 as of December 31, 2024, due primarily to funding of construction on the Terra Vista at Tejon multi-family apartment community.
The following table shows our cash flow activities for the nine months ended September 30,
| (in thousands) | 2025 | 2024 | |||||||||
| Operating activities | $ | (4,106) | $ | 1,045 | |||||||
| Investing activities | $ | (56,100) | $ | (17,377) | |||||||
| Financing activities | $ | 24,510 | $ | 11,794 | |||||||
Operating Activities
During the first nine months of 2025, our operations used $4,106,000, largely attributable to cash used to settle our current liabilities balance including liability related to stock compensation awards of $1,831,000.
During the first nine months of 2024, our operations provided $1,045,000 primarily related to cash generated by a change in our operating assets. Collection of accounts receivables provided $5,200,000 of cash, which was partially offset by cash used in growing our crop inventories of $3,365,000.
Investing Activities
During the first nine months of 2025, investing activities used $56,100,000. The increase in investing activities is primarily related to the construction of Terra Vista at Tejon for the first phase of this multi-family project.
We made capital expenditures, inclusive of capitalized interest and payroll (exclusive of stock compensation), of $49,393,000 for real estate development, reflected as follows: At TRCC, we spent $25,291,000 of construction cost on Terra Visa at Tejon and $6,014,000 on infrastructure improvements at TRCC-East. We also spent $2,194,000 and $1,652,000 on permitting efforts for MV and Grapevine, respectively, and $2,554,000 on litigation defense for Centennial. Within our farming segment, we spent $3,752,000, which included cultural costs for orchards currently classified as under development and replacement of machinery and equipment. Additionally, we used $8,926,000 to acquire water assets. We had marketable securities of $29,508,000 that matured, and we reinvested $32,387,000. Lastly, we received proceeds of $773,000 from joint venture distributions.
During the first nine months of 2024, investing activities used $17,377,000. The increase in investing activities is related to the construction of the Terra Vista and TRCC infrastructure.
We made capital expenditures, inclusive of capitalized interest and payroll (exclusive of stock compensation), of $40,995,000, which included predevelopment activities for our master planned communities; $2,088,000 consisting of permitting efforts for MV; $1,014,000 consisting of permitting efforts for Grapevine; and costs related to litigation defense for Centennial of $3,110,000. At TRCC, we spent $16,750,000 of construction cost on Terra Visa at Tejon and $12,341,000 on infrastructure improvements at TRCC-East. Within our farming segment, we spent $4,531,000, which included cultural costs for orchards currently classified as under development and replacement of machinery and equipment. Additionally, we used $4,616,000 to acquire water assets. We had marketable securities of $85,769,000 that matured, and we reinvested $66,640,000. Lastly, we received proceeds of $5,783,000 from joint venture distributions and reimbursements of $3,309,000 from a Community Facilities District.
As we move forward, we anticipate we will continue to use cash from operations, proceeds from the maturity of securities, and anticipated distributions from joint ventures to fund real estate project investments, including the investments summarized below.
Our estimated capital investment, inclusive of capitalized interest and payroll, for the remainder of 2025 is primarily related to our real estate projects. These estimated investments include approximately $4,366,000 of construction costs for the Terra Vista at Tejon multi-family project phase 1 development and $4,649,000 of infrastructure development at TRCC-East to support the continued commercial retail and industrial development, water treatment system improvements, and expansion of the wastewater treatment plant for future anticipated absorption. We also expect to invest up to $2,191,000 for land planning, litigation/appeals, federal and state agency permitting activities, and development activities at MV, Centennial, and Grapevine during the remainder of 2025.
We capitalize interest cost as a cost of the project only during the period for which activities necessary to prepare an asset for its intended use are ongoing, provided expenditures for the asset have been made and interest cost has been incurred. Capitalized interest for the nine months ended September 30, 2025 and 2024, was $3,529,000 and $3,175,000, respectively, and is classified within real estate development. We also capitalized payroll costs related to development, pre-construction, and construction projects, which aggregated $1,666,000 and $2,179,000 for the nine months ended September 30, 2025 and 2024, respectively. Expenditures for repairs and maintenance are expensed as incurred.
Financing Activities
During the first nine months of 2025, financing activities provided $24,510,000, which was attributable to borrowings on the line of credit of $25,000,000 to fund construction projects and other ongoing development such as Terra Vista and TRCC infrastructure, partially offset by the tax payments on vested share grants of $490,000.
During the first nine months of 2024, financing activities provided $11,794,000, which was attributable to borrowings on the line of credit of $12,000,000 to fund construction projects and other ongoing development such as Terra Vista and TRCC infrastructure, partially offset by the tax payments on vested share grants of $206,000.
It is difficult to accurately predict cash flows due to the nature of our businesses and fluctuating economic conditions. Our earnings and cash flows will be affected from period to period by the commodity nature of our farming and mineral operations, the timing of sales and leases of property within our development projects, and the beginning of development within our residential projects. The timing of sales and leases within our development projects is difficult to predict due to the time necessary to complete the development process and negotiate sales or lease contracts. Often, the timing aspect of land development can lead to particular years or periods having more or less earnings than comparable periods. Based on our experience, we believe we will have adequate cash flows, cash balances, and availability on our line of credit over the next twelve months to fund internal operations. As we move forward with the completion of the litigation, permitting and engineering design for our master planned communities and prepare to move into the development stage, we may need to secure additional funding in the long-term through either the issuance of equity and/or by securing other forms of financing such as joint venture equity and debt financing.
We regularly evaluate our short-term and long-term capital investment needs. Based on the timing of capital investments, we may supplement our current cash, marketable securities, and operational funding sources through the sale of common stock and/or the incurrence of additional debt.
Capital Structure and Financial Condition
At September 30, 2025, total capitalization at book value was $580,532,000, consisting of $91,942,000 of debt and $488,590,000 of equity, resulting in a debt-to-total-capitalization ratio of approximately 15.8%.
On November 17, 2023, we entered into a Credit Agreement with AgWest Farm Credit, PCA, as administrative agent and letter of credit intermediary (Administrative Agent), and certain other lenders, collectively, the Revolving Credit Facility. The Revolving Credit Facility provides TRC with (i) a revolving credit line (RCL) in the amount of $160,000,000 and (ii) the option for TRC to utilize a letter of credit sub-facility in the amount of $15,000,000 (LOC Sub-Facility). The LOC Sub-Facility is part of, and not in addition to, the RCL. As further summarized below, the RCL requires interest only payments and has a maturity date of January 1, 2029.
Upon closing of the Revolving Credit Facility, funds from the RCL were used to pay off and close out the existing Bank of America, N.A. Term Note (the Bank of America Term Note) and Revolving Line of Credit Note. The amount of this pay off was $47,078,564 plus accrued interest and fees on the Bank of America Term Note. We evaluated the debt exchange under Accounting Standards Codification (ASC) 470 and determined that the exchange should be treated as a debt extinguishment. Future borrowings under the Revolving Credit Facility will be used for ongoing working capital requirements, including to fund future construction projects, farming and ranching operations, and other general corporate purposes.
To maintain availability of funds, undrawn amounts under the RCL will accrue an unused fee of 15 basis points per annum except that, for the LOC Sub-Facility, TRC will incur a fee of 2.00% per annum for each letter of credit issued to TRC. TRC's ability to borrow/draw additional funds is subject to compliance with certain financial and other covenants, some of which are further described below, and the continuing accuracy of certain representations and warranties contained in the Revolving Credit Facility.
The interest rate per annum applicable to the Revolving Credit Facility is one-month term SOFR plus an interest rate spread that is based on TRC's consolidated net liabilities to equity ratio (NLER). The interest rate spread for the NLER has three tiers: (1) 2.75% if the NLER is 55% or more; (2) 2.5% if the NLER is between 35% and less than 55%; and (3) 2.25% if the NLER is less than 35%. The interest rate spread in the previous sentence may effectively be reduced by applying a patronage credit for TRC's participation in the farm credit program, which patronage credit historically has been (for reference and information purposes only and not as a guarantee of future patronage credit) between 100-125 basis points. The Administrative Agent pays the patronage credit annually in the form of a dividend. As of September 30, 2025, the Company's NLER was in tier 3, or less than 35%, and the applicable interest rate spread was 2.25%. We received partial patronage credit in February 2025 of $420,000 which represents 125 basis points from the primary lender and we received the remaining patronage credit in March 2025 for $202,000 which represents 100 basis point from the other participating lenders.
The Revolving Credit Facility requires the payment of interest only during the term, at which point the full drawn amount, plus accrued interest, must be repaid by the maturity date, if TRC has not earlier repaid the borrowed amount or extended the maturity date. The RCL may be repaid in part, or in full, by TRC at any time during the term without penalty. Certain events of default (as described in the Revolving Credit Facility) allow acceleration of repayment of borrowed funds, interest and other fees. The Revolving Credit Facility is unsecured, but the agreement provides the Administrative Agent a springing lien on TRC's wholly owned, unencumbered assets, exclusive of assets subject to negative pledge, if one or more covenants is breached.
The Revolving Credit Facility requires compliance with three financial covenants: (a) total liabilities divided by tangible net worth not greater than 0.55 to 1.00 at each year end; (b) a debt service coverage ratio not less than 1.50 to 1.00 as of each year end on a rolling four quarter basis; and (c) a liquidity ratio not less than 2.00 to 1.00 at each year end.
The Revolving Credit Facility also contains customary negative covenants that limit our ability to, among other things, make capital expenditures, incur indebtedness and issue guaranties, consummate certain asset sales, acquisitions or mergers, make investments, pay dividends or repurchase stock, make a change in capital ownership, or incur liens on any assets.
The Revolving Credit Facility contains customary events of default, including: failure to make required payments; failure to comply with terms of the Credit Facility; bankruptcy and insolvency. The Credit Facility contains other customary terms and conditions, including representations and warranties, which are typical for credit facilities of this type.
At September 30, 2025 and December 31, 2024, we were in compliance with all financial covenants.
We expect that current and future capital resource requirements will be provided primarily from current cash and marketable securities, cash flow from ongoing operations, distributions from joint ventures, proceeds from the sale of developed and undeveloped land parcels, potential sales of assets, additional use of debt or drawdowns against our line of credit, proceeds from the reimbursement of public infrastructure costs through CFD bond debt (described below under "Off-Balance Sheet Arrangements"), and/or issuance of additional common stock.
In May 2025, we filed an updated shelf registration statement on Form S-3 that went effective in May 2025. Under the shelf registration statement, we may offer and sell in the future through one or more offerings not to exceed $200,000,000 of common stock, preferred stock, debt securities, warrants or any combination of the foregoing. The shelf registration allows for efficient and timely access to capital markets and, when combined with our other potential funding sources just noted, provides us with a variety of capital funding options that can then be used and appropriately matched to our funding needs.
We had a strong liquidity position at September 30, 2025 with $21,044,000 in cash and securities and $68,058,000 available on our RLC to meet any short-term liquidity needs. See Note 3 (Marketable Securities) and Note 7 (Line of Credit and Long-Term Debt) of the Notes to Unaudited Consolidated Financial Statements for more information.
We continue to expect that substantial investments will be required to develop our land assets. To meet these capital requirements, we may need to secure additional debt financing and continue to renew our existing credit facilities. In addition to debt financing, we can use other capital alternatives, such as joint ventures with financial partners, sales of assets, and/or the issuance of common stock. We will use a combination of the above funding sources to properly match funding requirements with the assets or development project being funded. There is no assurance that we can obtain financing or that we can obtain financing at favorable terms. We believe we have adequate capital resources to fund our cash needs and our capital investment requirements in the near term as described earlier in the cash flow and liquidity discussions.
Contractual Cash Obligations
The following table summarizes our contractual cash obligations and commercial commitments as of September 30, 2025, to be paid over the next five years and thereafter:
| Payments Due by Period | ||||||||||||||||||||||||||||||||
| (In thousands) | Total | One Year or Less | Years 2-3 | Years 4-5 | Thereafter | |||||||||||||||||||||||||||
| Contractual Obligations: | ||||||||||||||||||||||||||||||||
| Estimated water payments | 1,458,839 | 672 | 29,828 | 31,646 | 1,396,693 | 2 | ||||||||||||||||||||||||||
| Revolving line-of-credit | 91,942 | - | - | 91,942 | - | |||||||||||||||||||||||||||
| Cash contract commitments | 11,041 | 9,452 | 1 | 518 | - | 1,071 | ||||||||||||||||||||||||||
| Defined Benefit Plan | 5,490 | 484 | 1,000 | 995 | 3,011 | |||||||||||||||||||||||||||
| SERP | 5,247 | 580 | 1,134 | 1,090 | 2,443 | |||||||||||||||||||||||||||
| Total contractual obligations | $ | 1,572,559 | $ | 11,188 | $ | 32,480 | $ | 125,673 | $ | 1,403,218 | ||||||||||||||||||||||
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1Amount primarily represents our contractual commitments related to our multifamily development.
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2Amount represents Nickel Family water contract payments through 2044 and SWP contract payments through 2085, assuming 3% of escalation on payment each year. For the most significant component, the WRMWSD contract payment, we used an average of the actual water payments for the past five years (2020-2024) as base year, or $5.42 million, escalating 3% each year, to derive at the number disclosed.
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The table above includes only those contracts that include fixed or minimum obligations. It does not include normal purchases that are made in the ordinary course of business.
Estimated water payments include the Nickel Family, LLC water contract, which obligates us to purchase 6,693 acre-feet of water annually through 2044 and SWP contracts with WRMWSD, TCWD, Tulare Lake Basin Water Storage District, and Dudley-Ridge Water Storage District. These contracts for the supply of future water run through 2085. Please refer to Note 5 (Long-Term Water Assets) of the Notes to Consolidated Financial Statements for additional information regarding water assets.
Our cash contract commitments consist of contracts in various stages of completion related to infrastructure development within our industrial and multi-family developments and entitlement costs related to our industrial and residential development projects. Also, included in the cash contract commitments are estimated fees earned in 2014 by a consultant, related to the entitlement of the Grapevine Development Area. We exited a consulting contract in 2014 related to the Grapevine Development and are obligated to pay an earned incentive fee at the time of successful receipt of all project permits and entitlements and at a value measurement date five-years after project permits have been achieved for Grapevine. The final amount of the incentive fees will not be finalized until the future payment dates. We believe that net savings from exiting the contract over this future time period will more than offset the incentive payment costs.
As discussed in Note 12 (Retirement Plans) of the Notes to Unaudited Consolidated Financial Statements, we have long-term liabilities for deferred employee compensation, including pension and supplemental retirement plans. Payments in the above table reflect estimates of future defined benefit plan contributions from us to the plan trust, estimates of payments to employees from the plan trust, and estimates of future payments to employees from us that are in the SERP program. We don't expect to make contributions in 2025.
Off-Balance Sheet Arrangements
The TRPFFA is a joint powers authority formed by Kern County and TCWD to finance public infrastructure within our Kern County developments. TRPFFA created two CFD's, the West CFD and the East CFD. The West CFD has placed liens on 420 acres of land to secure payment of special taxes related to $19,540,000 of outstanding bond debt sold by TRPFFA for TRCC-West. The East CFD has placed liens on 1,931 acres of our land to secure payments of special taxes related to $95,660,000 of outstanding bond debt sold by TRPFFA for TRCC-East. At TRCC-West, the West CFD has no additional bond debt approved for issuance. On July 25, 2024, TRPFFA sold bonds which will provide approximately $25,000,000 of improvement funds for the reimbursement of public infrastructure costs at TRCC-East. At TRCC-East, the East CFD has approximately $18,605,000 of additional bond debt authorized by TRPFFA.
As of September 30, 2025, aggregate outstanding debt of unconsolidated joint ventures was $217,569,000; $20,271,000 of this debt was attributable to the loan for TRCC/Rock Outlet Center LLC joint venture. This loan was 100% guaranteed at September 30, 2025. All other outstanding debt attributed to our joint ventures have met their respective debt covenants, and hence were not subject to an effective guarantee at September 30, 2025. We do not provide a guarantee on the $11,221,000 of debt related to our joint venture with TA/Petro.
Non-GAAP Financial Measures
EBITDA represents earnings before interest, taxes, depreciation, and amortization, a non-GAAP financial measure, and is used by us and others as a supplemental measure of performance. We use Adjusted EBITDA to assess the performance of our core operations, for financial and operational decision making, and as a supplemental or additional means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as EBITDA, excluding stock compensation expense. We believe Adjusted EBITDA provides investors relevant and useful information because it permits investors to view income from our operations on an unleveraged basis, before the effects of taxes, depreciation and amortization, and stock compensation expense and other items impacting comparability. By excluding interest expense and income, EBITDA and Adjusted EBITDA allow investors to measure our performance independent of our capital structure and indebtedness and, therefore, allow for a more meaningful comparison of our performance to that of other companies, both in the real estate industry and in other industries. We believe that excluding charges related to share-based compensation facilitates a comparison of our operations across periods and among other companies without the variances caused by different valuation methodologies, the volatility of the expense (which depends on market forces outside our control), and the assumptions and the variety of award types that a company can use. In addition, the Company excludes other items impacting comparability to provide a clearer understanding of its core operating performance. EBITDA and Adjusted EBITDA have limitations as measures of our performance. EBITDA and Adjusted EBITDA do not reflect our historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. While EBITDA and Adjusted EBITDA are relevant and widely used measures of performance, they do not represent net (loss) income or cash flows from operations as defined by GAAP. Further, our computation of EBITDA and Adjusted EBITDA may not be comparable to similar measures reported by other companies.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Net income (loss) | $ | 1,671 | $ | (1,836) | $ | (1,508) | $ | (1,794) | |||||||||||||||
| Net income (loss) attributable to non-controlling interest | 1 | - | (2) | (1) | |||||||||||||||||||
| Interest, net | |||||||||||||||||||||||
| Consolidated | (177) | (528) | (749) | (1,843) | |||||||||||||||||||
| Our share of interest expense from unconsolidated joint ventures | 1,539 | 1,532 | 4,473 | 4,625 | |||||||||||||||||||
| Total interest, net | 1,362 | 1,004 | 3,724 | 2,782 | |||||||||||||||||||
| Income tax (benefit) provision | (972) | 1,832 | (1,809) | (286) | |||||||||||||||||||
| Depreciation and amortization: | |||||||||||||||||||||||
| Consolidated | 1,690 | 1,216 | 3,800 | 3,137 | |||||||||||||||||||
| Our share of depreciation and amortization from unconsolidated joint ventures | 1,666 | 1,695 | 5,098 | 4,989 | |||||||||||||||||||
| Total depreciation and amortization | 3,356 | 2,911 | 8,898 | 8,126 | |||||||||||||||||||
| EBITDA | 5,416 | 3,911 | 9,307 | 8,829 | |||||||||||||||||||
| Stock compensation expense | (133) | 1,732 | 1,157 | 4,086 | |||||||||||||||||||
| Items impacting comparability: | |||||||||||||||||||||||
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Shareholder activism expense 1
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- | - | 3,399 | - | |||||||||||||||||||
| Adjusted EBITDA | $ | 5,283 | $ | 5,643 | $ | 13,863 | $ | 12,915 | |||||||||||||||
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1Represents advisory fees related to the contested board election and proxy defense.
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NOI is a non-GAAP financial measure calculated as operating income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding general and administrative expenses, interest expense, depreciation and amortization, and gain or loss on sales of real estate. We believe NOI provides useful information to investors regarding our financial condition and results of operations because it primarily reflects those income and expense items that are incurred at the property level. Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Commercial/Industrial operating income | $ | 976 | $ | 914 | $ | 3,454 | $ | 2,492 | |||||||||||||||
| Plus: Commercial/Industrial depreciation and amortization | 388 | 105 | 740 | 319 | |||||||||||||||||||
| Plus: General, administrative, cost of sales and other expenses | 1,413 | 1,835 | 5,962 | 5,197 | |||||||||||||||||||
| Less: Other revenues including land sales | (696) | (629) | (4,359) | (2,115) | |||||||||||||||||||
| Total Commercial/Industrial net operating income | $ | 2,081 | $ | 2,225 | $ | 5,797 | $ | 5,893 | |||||||||||||||
| ($ in thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| Net operating income | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Pastoria Energy Facility | $ | 1,256 | $ | 1,491 | $ | 3,582 | $ | 3,763 | |||||||||||||||
| TRCC | 335 | 331 | 856 | 998 | |||||||||||||||||||
| Communication leases | 331 | 270 | 963 | 782 | |||||||||||||||||||
| Other commercial leases | 159 | 133 | 396 | 350 | |||||||||||||||||||
| Total Commercial/Industrial net operating income | $ | 2,081 | $ | 2,225 | $ | 5,797 | $ | 5,893 | |||||||||||||||
We utilize NOI of unconsolidated joint ventures as a measure of financial or operating performance that is not specifically defined by GAAP. We believe NOI of unconsolidated joint ventures provides investors with additional information concerning operating performance of our unconsolidated joint ventures. We also use this measure internally to monitor the operating performance of our unconsolidated joint ventures. Our computation of this non-GAAP measure may not be the same as similar measures reported by other companies. This non-GAAP financial measure should not be considered as an alternative to net income as a measure of the operating performance of our unconsolidated joint ventures or to cash flows computed in accordance with GAAP as a measure of liquidity nor are they indicative of cash flows from operating and financial activities of our unconsolidated joint ventures.
The following schedule reconciles net income of unconsolidated joint ventures to NOI of unconsolidated joint ventures. Please refer to Note 14 (Investment in Unconsolidated and Consolidated Joint Ventures) of the Notes to Unaudited Consolidated Financial Statements for further discussion on joint ventures.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Earnings of unconsolidated joint ventures | $ | 4,465 | $ | 5,729 | $ | 11,016 | $ | 13,221 | |||||||||||||||
| Interest expense of unconsolidated joint ventures | 3,030 | 3,029 | 8,826 | 9,131 | |||||||||||||||||||
| Operating income of unconsolidated joint ventures | 7,495 | 8,758 | 19,842 | 22,352 | |||||||||||||||||||
| Depreciation and amortization of unconsolidated joint ventures | 3,168 | 3,235 | 9,702 | 9,522 | |||||||||||||||||||
| Net operating income of unconsolidated joint ventures | $ | 10,663 | $ | 11,993 | $ | 29,544 | $ | 31,874 | |||||||||||||||
Tejon Ranch Co. published this content on November 06, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 06, 2025 at 20:28 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]