Tejon Ranch in No Hurry to Develop Land : Real estate: As neighboring property owners rush to create residential projects, managers of the 270,000 acres north of Los Angeles are cautiously waiting for just the right plan.
Fifteen miles east of Bakersfield is the northern tip of the vast Tejon Ranch. The ranch spreads over the flatlands of the San Joaquin Valley, runs up and over the Tehachapi Mountains, on west to the Golden State Freeway and its southern border reaches to the western edge of the Mojave Desert some 30 miles from Lancaster.
In all, the Tejon Ranch Co.’s spread covers 270,000 acres--one-third the size of Rhode Island--but no more than 120 people live there. The land draws poachers who climb through the barbed-wire fences in search of doves, quail and turkeys, but the packs of deer roaming the mountains far outnumber both trespassers and residents.
The ranch grows grapes, almonds, pistachios and walnuts, it raises cattle and horses, and oil and minerals are mined there. Tejon also leases a couple truck stops along the freeway. Overall it’s a modest business: Through nine months of 1990, Tejon Ranch’s revenues were $7.8 million and its profit hit $1.1 million.
But those who buy Tejon Ranch’s stock don’t care about grapes or cows. They figure after the recession is over Los Angeles’ growth will eventually push housing and commercial real estate projects out to the Tejon property.
(Times Mirror Co., publisher of the Los Angeles Times, controls about 32% of Tejon Ranch’s stock.)
Granted, it’s a 70-mile drive from the San Fernando Valley to Tejon’s headquarters in Lebec, 3,300 feet up in the Tehachapi Mountains, high enough that the clouds run into the peaks and the freeway signs on the way up advise “Watch For Snow Slippery.”
Despite the ranch’s remoteness, John Nelson, who manages $1.8 billion in assets for the State of Wisconsin Investment Board, owns about 6% of Tejon’s stock. He’s held onto it even though the stock has nose-dived from $49 per share last year to $22.875 at Monday’s close as part of the overall decline in real estate stocks. Nelson toured the Tejon Ranch a couple years ago and he remains a believer, expecting the earthmovers to start working Tejon’s land within a decade. “We think the property values are substantial,” he said.
But two rival developers see the same potential and have recently assembled large parcels in Tejon’s neighborhood and may well beat Tejon to the housing market.
Across the Golden State Freeway from the Tejon Ranch is the 114,000-acre San Emidio Ranch owned by Dale Poe Development Corp. Poe has a separate residential development under way in the Santa Clarita area just north of the San Fernando Valley. Poe’s vice president, Jeff Stevenson, said the company is working on a land-use plan for 10,000 acres of its San Emidio Ranch. “The growth pattern seems to be heading in this direction,” he said.
The other project is the 9,600-acre California Springs property west of Lancaster, owned by three investors including developer Ray Watt, who has put up 100,000 homes, plus hotels and office buildings, in Southern California. Craig Yoder, general manager of California Springs, hopes that construction of its first homes will begin by 1993.
William Fulton, publisher of California Planning & Development Report, a Ventura-based newsletter, is upbeat about Tejon Ranch’s chances for eventual success as a developer, but he concedes that, “in a business where nobody is conservative, Tejon is really conservative.”
Robert Wilke, vice chairman of Newhall Land & Farming Co., knows something about home building and wonders if Tejon Ranch’s management is too cautious for its own good. Newhall Land owns 37,000 acres in the heart of the Santa Clarita Valley and has spent the past 25 years developing it; today about 30,000 people live on 5,000 acres. Newhall’s property is about 45 highway miles south of Tejon Ranch and Wilke said that if Watt, Poe and Tejon all go ahead with big real estate projects, “I just do not think it’s that big a market to satisfy three developers.”
Tejon Ranch President Jack Hunt, however, gives every impression of not being in a race. “This property will be developed someday,” he said. “I don’t know what the timing will be. The company is going to be very prudent about how we do it.”
Hunt, who ran a farm in Amarillo, Tex., before joining Tejon, calls himself an “old cowboy roughneck” and he dresses like one, in a plaid shirt, work pants and scuffed boots. Hunt talks in general terms about building homes one day along the Golden State Freeway corridor and perhaps in the south near Lancaster. Maybe a destination resort will be built on the ranch with a tennis or golf club, he said, or equestrian estates. Possibly Tejon will try and lure a major employer to set up shop.
But why not build a few houses now and test the market? Hunt argued that it wouldn’t make sense because the planning commissions will “ask you what you plan to do in the next 10 years. We’re not ready to make commitments.”
One problem Tejon will face is that it doesn’t have the capital to develop its land--Newhall Land has spent $1 billion over the past 25 years on infrastructure, housing and so on--and Hunt concedes that Tejon will need some kind of partnership deal. At least Hunt doesn’t have to worry about paying interest costs on Tejon’s land. The property, assembled in the 19th Century, is carried on the company’s books at a paltry $2.6 million, less than $10 an acre. By comparison, the Watt group paid about $5,500 an acre for its land.
Hunt takes a visitor in a jeep over gutted dirt roads, past oaks and pine trees and into the high wilderness of the ranch where he passes a flock of deer that ignores the intruders. He stops on a plateau with a view that extends to the Sierras.
One lure for future residents, Hunt said, is the “four-season climate.” Snow closes the Golden State Freeway near the Grapevine a few times each winter, while summertime high temperatures reach only the mid-80s, and air-conditioning is rarely needed. Another plus is that the smog ends at about 1,000 feet. “Almost all the ranch is above that elevation,” Hunt said. “In some areas you’d think you were in a Northern California pine forest.”
Certainly Greater Los Angeles has yet to stop pushing out from its center. In the 1930s when Clark Gable wanted a quiet spot, he bought a 20-acre horse-and-citrus ranch in Encino just off Ventura Boulevard. Gable’s land has been subdivided into multimillion-dollar homes (ex-junk bond king Michael Milken lives there), and as the rest of the San Fernando Valley filled in, the growth pushed north over the Santa Susana Mountains into the Santa Clarita Valley and to the northeast into the Antelope Valley--including the desert cities of Palmdale and Lancaster, which were among the state’s fastest-growing cities in the 1980s.
Newsletter publisher Fulton pointed out that some of Tejon’s land “is no further away from Los Angeles than Lancaster is. Certainly we saw in the 1980s a willingness by home buyers to live that far away,” in exchange for modest housing prices.
Shelly Weinstein, a stockbroker with the San Francisco firm of Volpe, Welty & Co., argued that Tejon’s property offers “better transportation” into Los Angeles than does the Palmdale-Lancaster area. Already there are rush-hour traffic jams on the Antelope Valley Freeway as the Palmdale-Lancaster traffic empties into the Los Angeles Basin while, as Weinstein pointed out, from Tejon Ranch the Golden State Freeway is four and five lanes wide and relatively empty.
One wild card in Tejon’s future is whether a high-speed train is built. Last summer, Caltrans rejected a high-speed train proposal to link Los Angeles International Airport and Palmdale, but there is some talk about a privately funded train. Newhall’s Wilke said a high-speed train “will make Tejon a success in a short period of time” because it should assure the exodus of businesses into the desert. But Fulton doesn’t expect mass transit to make any significant difference in Southern California for “at least a generation.”
While the company decides what to do, Tejon Ranch has been paying up to $500,000 a year for double the water entitlements it needs for agriculture so it will have an ample water supply for its first projects.
In the meantime, Hunt looks forward to a bit of offbeat advertising in the form of an art project planned by Bulgarian-born artist Christo, noted for his vast, temporary artworks erected in natural landscapes. In the past, Christo has ringed Miami islands in pink plastic and wrapped the oldest bridge in Paris. This October, if all goes well, Christo’s team will erect an 18-milelong series of 20-foot-tall working yellow umbrellas, much of it on Tejon’s property, and at the same time another series of blue umbrellas will be set up in Japan. Christo’s project will be visible from the freeway and Hunt expects more than 1 million people to drive by it during the three weeks the umbrellas are up.
Hunt plans to install extra signs so passersby will know where they are. “One day when we’re in the development business it’d be nice for (people) . . . to say, ‘Hey I remember that. It’s a pretty spot,’ ” Hunt said.
Certainly by the time Hunt, now 45, has retired in 20 years, a housing development will have taken root on Tejon Ranch. Right? “I’d hope something like that is going on here. But I don’t know that,” he said.
The Tejon Ranch: The Tejon Ranch Co. is one of the biggest private landowners in the state. Its ranch covers 270,000 acres in Kern and Los Angeles counties. The land is currently used primarily for agriculture, but one day the company hopes to develop the land for residential and commerical uses.
