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TRC: Court Ruling Facilitates Company’s Opportunity

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Court Rule in Favor of TRC & Kern County Mitigates Stumbling Block to Grapevine Development

California has a severe shortage of available housing; Tejon Ranch Company (NYSE:TRC) is one of the few California real estate development companies with sufficient land and scale to help address the state’s housing shortfall in a meaningful way. Despite the need for new homes, the company has received opposition from several environmental groups over the years against its plans to develop a portion of its land holdings. Nevertheless, the reality is that the shortage of homes is growing and management has an environmentally responsible approach to development.

In fact, TRC entered into an agreement with key environmental groups in 2008 to ensure that its development plans would be carried out in a way to mitigate the impact on the environment, creating the Tejon Ranch Conservation and Land Use Agreement. The agreement mandates that 90% of the ranch will be conserved as undeveloped land permanently.

The company generally has been able to address issues raised by external conservation groups. For instance, objections raised in a lawsuit filed by the Tucson, Arizona-based Center for Biological Diversity (CBD) challenging Kern County’s December 2019 re-approval for TRC to develop Grapevine at Tejon Ranch were rejected on January 22, 2021, with the court ruling in TRC and Kern County’s favor.

Grapevine Master Plan

Planned to include green energy supply

Grapevine is a master planned mixed use residential community that is contemplated to hold 12,000 residential units and 5.1 mm sq. ft. of commercial development; with an additional 7,000 acres available for entitlement. Importantly, at least 50% of Grapevine’s energy supply is expected to be produced on site by renewable sources.

The Kern County Board of Supervisors unanimously approved Grapevine in 2016. CBD sued in 2017 to thwart the advancement of the project. Of the seven issues it raised regarding the sufficiency of the project’s environmental impact report, only one issue led the court to request additional data. The court ordered Kern County to submit a revised environmental impact report incorporating additional work and information regarding the internal capture rate used in the traffic study. This type of study attempts to determine if and how much traffic to and from the vicinity will change and whether trips within the development, as commercial amenities expand, can offset some of the increased traffic to get to and leave the development. Such studies can provide important tools for developers such as Tejon Ranch, land use planners, and transportation agencies to improve decisions about how to minimize disruption to existing traffic patterns and provide transportation that is appropriate for the planned community.

The court upheld the remainder of the environmental impact report and the county provided the information that the court had requested in a revised report that was then presented for a public review and comment process. The updated report received unanimous re-approval by the Kern County Planning Commission and Board of Supervisors in 2019. However, CBD challenged the county’s approval again. In fact, since 2003 CBD has filed 12 legal actions against Tejon Ranch and its development plans. CBD has taken steps to delay other Tejon Ranch development plans, including the Centennial and Mountain Village (MV) master-planned communities. In December 2020, CBD lost another lawsuit challenging Tejon Ranch’s MV development plans.

In the latest ruling, the court rejected CBD’s attempt to re-litigate issues it had raised previously. The court also determined that Kern County’s revised environmental impact report, which includes the supplemental analysis of the internal capture rate, was complete and in full compliance with the court’s earlier ruling.

Kern County Housing Shortage

In the aggregate, the three Tejon Ranch projects – Grapevine, MV and Centennial – are contemplated to add 35,000 much needed new homes. Similar to other parts of California, Kern County is experiencing a housing shortage, including of apartment units. Compared to many other areas within the state, construction of new units has lagged and the slow pace of development continues to exacerbate the housing shortage problem. Moreover, a majority of California land is zoned for single-family or commercial use, while private home owners often oppose nearby construction of apartments. In 2019, a report from the California Housing Partnership estimated that Kern County needed an additional 26,200+ affordable rental units to meet its housing shortage.

The state’s housing shortage is highlighted in recent proposed legislation in front of the California regulators. Senate Bill-50 notes that the “lack of housing, including emergency shelters, is a critical problem that threatens the economic, environmental, and social quality of life in California.” TRC is the only nearby land area with sufficient land and scale to help address the state’s housing shortage in any meaningful way, as noted.

In the greater Los Angeles metropolitan region, just as in the state generally, there is a shortage of housing. By historical measures, new and used house inventory is virtually non-existent. Reflecting the imbalance between supply (inventory) and demand, housing prices continue to increase. TRC is the only major area close to Los Angeles where infrastructure is possible and one of the few real estate development companies with scale.

Proximity To Nearby Metropolitan Areas Makes Grapevine Convenient

Proximity to nearby cities makes the Tejon land area an attractive location for the construction of new housing stock. TRC’s extensive land holding is located approximately 60 miles north of Los Angeles and 25 miles south of Bakersfield, California. Reflecting proximity to these major cities and to nearby highways – Interstate 5, for instance – it is fairly easy to travel from Tejon Ranch to major cities such as Los Angeles, Bakersfield and Santa Clarita.

The anticipated continued development of the California High-Speed Rail is also expected to facilitate commuting between Tejon Ranch and these and other nearby cities. The California High-Speed Rail Authority has nearly 120 miles under construction, with more construction extensions anticipated. The Authority plans “a state-wide rail modernization” program that will help traverse one of the country’s largest states, mitigating automobile congestion and pollution. The Authority recently completed five high-speed rail structures throughout Madera, Fresno, and Kern counties.

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