Milking Farmland to Satisfy Shareholders

In northern Los Angeles County, where carrots and onions grow and cattle graze, a new cash crop is taking root.

Last week, the Tejon Ranch Co., owner of the largest contiguous stretch of private land in California, announced plans to work with three top developers to help 4,000 acres of its land in north L.A. County sprout homes and businesses. The company plans to create the region’s newest master-planned community near the junction of the Golden State Freeway and California 138, overlooking Quail Lake.

It will be the company’s first major residential/commercial development.

So after more than a century of working the land, the company, founded in 1843, now wants the land to work harder to produce more green for shareholders.

In making the announcement, the company joins such outfits as Newhall Land & Farming in betting that there’s more green in growing communities than in crops or cattle grazing. Tejon Ranch officials acknowledge that on the horizon, they see more of their 270,000 acres in Los Angeles and Kern counties devoted to development. (The proposed development would be entirely in Los Angeles County.)

“Long term, this is what we need to be doing--finding ways to increase the value of our land for our shareholders,” said Allen Lyda, chief financial officer of the company, which still receives roughly 80% of its revenue from agribusiness, including crops and cattle.

“And that’s the way it will be done, through real estate.”

Northern Los Angeles County, with its bucolic settings and sweeping vistas, is particularly well-suited to help Tejon and Newhall Land shed at least part of their agrarian past and branch out anew.

The population of Los Angeles County is expected to reach 12.25 million by 2020, and the north county region (including Santa Clarita) is expected to swell to 1.21 million, up from the current estimate of more than 500,000.

The existence of Interstate 5, a sleek ribbon of asphalt through the area connecting Los Angeles with parts north, means developers will not have to drop major bucks to invest in highway infrastructure.

The development may seem to some to be in the middle of nowhere. But Tejon Ranch officials point out that it’s about 30 miles from Santa Clarita--itself a maturing community--and represents about the same commute to downtown Los Angeles as a trek from the Antelope Valley.

‘Thousand Oaks of the Future’

With high-tech concerns popping up almost daily in the tech-coast stretch that runs through the San Fernando Valley, north county could well become what urban policy advisor Joel Kotkin calls a “Nerdistan,” a suburban community perfect for a “programmer or engineer at some telecom company.”

“These are the Thousand Oaks of the future, aren’t they?” wondered Kotkin, a senior fellow at the Pepperdine Institute of Public Policy and a research fellow in urban policy at the Reason Public Policy Institute.

“As long as the more urban areas have either not the land, or not the appeal to a certain kind of person, [developments in the north county] are going to continue to grow . . . until you get to the national forest.

“They want big houses with modern wiring,” said Kotkin. “What the city has to offer, and even what the Valley has to offer, is not particularly interesting to them.”

What exactly the new, yet-to-be-named Tejon community will have to offer is yet to be determined.

Douglas M. Ford, senior vice president in charge of real estate operations for the Tejon Ranch Co., said the project team, including real estate planners, engineers and environmental consultants, is still developing ideas for what the project might be.

But it is anticipated, he said, that it would have commercial and industrial development “and a full range of housing options from estate homes through single-family and apartments,” Ford said. Officials have not yet determined how many homes or units will be included in the development plan.

The company has formed a partnership with Pardee Construction Co., Lewis Investment Co., and Standard Pacific Corp. to develop the community. (Standard Pacific replaced W.L. Homes, which decided not to proceed with the project “for their own business reasons,” Ford said.)

“As the world evolves, there will be, over the next 20 years, growth in the Southern California area, and we’re in the path of that growth,” said Ford, explaining the company’s increased focus on development. “We’re working with these very strong building developers to develop a master-planned community that addresses that growth.”

Some of the buyers of those new homes, Ford predicted, will commute to jobs in Santa Clarita, about 30 minutes to the south.

So in a sense, Santa Clarita--the suburb begat by the San Fernando Valley--is growing its own suburb.

Each Ranch Was Owned by 1 Family

The similarities between Newhall Land, which created the communities within Santa Clarita out of its vast land holdings, and Tejon Ranch are striking.

With a market cap of $867.8 million, Newhall Land is considerably larger.

By comparison, Tejon Ranch has a market cap of $282.5 million, and had $1.12 million in earnings last year compared with $90.4 million for Newhall. Shares in Tejon closed Monday at $22, down 37.5 cents.

But both began as huge ranchos owned by a single family wedded to working the land. And both now see a future that includes more construction and less crop rotation.

The switch came for Newhall Land back in the 1960s, when a change in the way its property was assessed pushed the company into development, said spokeswoman Marlee Lauffer.

In 1998, only a fraction of Newhall’s income (2% or $2.2 million) came from agriculture.

“Once we got into real estate, it quickly switched to where most of the revenue came from real estate,” said Lauffer. “Before that we were farmers.”

Tejon is now “very similar to where we were a number of years ago,” said Lauffer, whose company is now planning to build Newhall Ranch, Los Angeles County’s single largest housing project.

“When you look at L.A. County and you try to determine where the growth [will be], it’s evident that a large percentage of that growth will occur in northern Los Angeles County,” said Lauffer.

Tejon’s Lyda said his company’s five-year plan calls for real estate revenue to grow to 40%, double the current 20%. But the company is still waiting for the strategy to bear fruit--attributing much of its nearly $2-million drop in 1999 earnings to costs associated with real estate development. At the same time, a bumper crop of almonds among growers statewide weighted down the price, reducing the company’s revenue from farming.

Today, the company is moving forward with development of its 350-acre Tejon Industrial Complex (sort of a way station complete with restaurants, stores and truck service facilities), and with planning for the master-planned community,

And while it’s not yet ready to completely heave the hoe, the company is clearly trying to cultivate a new revenue stream.

“We kind of describe ourselves as basically a diversified real estate development and agribusiness company,” said Lyda, who has been with the company for 10 years. “We put real estate development first because that’s what we want to begin changing to and to start emphasizing to people.”

Effects on Valley Debated

For the San Fernando Valley, it could mean increased clout, as the center of the business universe heads northbound from downtown Los Angeles.

Or, said Kotkin, if the north county becomes a haven for “disgruntled Valleyites,” it could further sap the economic energy from a Valley in transition.

“The Valley could go either way,” said Kotkin, a not-so-disgruntled Valleyite. “So far, the Valley, economically, is resisting pretty well.”

Valley@Work runs each Tuesday. Karen Robinson-Jacobs can be reached at Karen.Robinson@latimes.com.