Tejon Ranch Co. (TRC): Business Model Canvas [11-2024 Updated]

Discover the intricate business model of Tejon Ranch Co. (TRC), a unique player in the real estate and agriculture sectors. This comprehensive canvas reveals how TRC leverages strategic partnerships, diverse revenue streams, and sustainable practices to thrive in a competitive landscape. From their extensive land holdings to their innovative joint ventures, explore the key elements that drive their success and how they cater to various customer segments.

Tejon Ranch Co. (TRC) - Business Model: Key Partnerships

Joint ventures with Majestic Realty Co.

Tejon Ranch Co. has established joint ventures with Majestic Realty Co. to enhance its real estate development efforts. One notable joint venture is TRC-MRC 2, LLC, which focuses on acquiring, leasing, and maintaining a fully occupied warehouse at TRCC-West. The partnership acquired the 651,909 square foot building for $24,773,000, primarily financed through a promissory note that had an outstanding principal balance of $21,414,000 as of September 30, 2024.

Collaboration with TRI Pointe Homes for land development

Tejon Ranch Co. collaborates with TRI Pointe Homes through Centennial Founders, LLC, focusing on the entitlement and development of land in Los Angeles County. As of September 30, 2024, TRC owned 93.62% of Centennial Founders.

Partnerships with local government for water management

Tejon Ranch Co. has secured various water contracts essential for its operations. The company has obligations totaling $288,905,000 for future water payments, with the Nickel water contract running until 2044. The current purchase cost of water in 2024 is $957 per acre-foot. Water revenues for the nine months ended September 30, 2024, were $3,260,000, a decrease from $6,615,000 in the same period in 2023.

Relationships with agricultural contractors for farming operations

Tejon Ranch Co. engages agricultural contractors to support its farming operations. The farming segment reported revenues of $4,249,000 for the nine months ended September 30, 2024, down from $4,852,000 during the same period in 2023. The segment incurred expenses of $9,406,000, resulting in an operating loss of $5,157,000.

Partnership Type	Details	Financial Impact
Joint Ventures	TRC-MRC 2, LLC with Majestic Realty Co.	Acquired warehouse for $24,773,000; outstanding debt $21,414,000
Collaboration	Centennial Founders, LLC with TRI Pointe Homes	TRC owns 93.62% of CFL
Water Management	Water contracts for resource management	$288,905,000 future obligations; $957 per acre-foot in 2024
Agricultural Contractors	Support for farming operations	Farming revenues $4,249,000; expenses $9,406,000

Tejon Ranch Co. (TRC) - Business Model: Key Activities

Real estate development and land entitlement processes

Tejon Ranch Co. (TRC) is significantly involved in real estate development, focusing on master-planned communities such as Grapevine, Centennial, and Mountain Village. The company capitalized $3,175,000 in interest costs related to real estate development for the nine months ended September 30, 2024. Additionally, payroll costs associated with development projects amounted to $2,179,000 during the same period.

The anticipated capital investments for real estate projects include approximately $11,488,000 for the Terra Vista multi-family project and $4,016,000 for infrastructure development at TRCC-East. As of September 30, 2024, total capitalization at book value stood at $543,625,000, with a debt-to-total-capitalization ratio of approximately 11.0%.

Farming operations for almonds, pistachios, and grapes

Farming revenues for the first nine months of 2024 totaled $4,249,000, which represents a 12% decrease from $4,852,000 in the same period in 2023. The breakdown of farming revenues is as follows:

Crop Type	2024 Revenue ($)	2023 Revenue ($)	Change ($)	Percentage Change (%)
Almonds	2,243,000	2,153,000	90,000	4
Pistachios	22,000	(4,000)	26,000	650
Wine Grapes	1,304,000	1,924,000	(620,000)	(32)
Hay	66,000	190,000	(124,000)	(65)
Other	614,000	589,000	25,000	4

Farming expenses for the first nine months of 2024 were $9,406,000, an increase of 67% from $5,644,000 in the same period of 2023. The operating loss from farming operations was $5,157,000, up from a loss of $792,000 in the prior year. Labor costs, including internal and contracted labor, are expected to continue increasing due to inflation.

Mineral resource extraction and management

The mineral resources segment generated revenues of $7,687,000 for the first nine months of 2024, a decrease of 34% from $11,630,000 in the same period in 2023. The breakdown of mineral resources revenues is as follows:

Resource Type	2024 Revenue ($)	2023 Revenue ($)	Change ($)	Percentage Change (%)
Oil and Gas	664,000	760,000	(96,000)	(13)
Cement	2,085,000	1,870,000	215,000	11
Rock Aggregate	1,541,000	1,457,000	84,000	6
Water Sales	3,260,000	6,615,000	(3,355,000)	(51)
Exploration Leases	1,000	26,000	(25,000)	(96)

Operating income from mineral resources was $2,644,000, a decrease of 43% from $4,639,000 in the prior year. The decrease was primarily due to a significant decline in water sales, attributed to above-average rainfall limiting sales opportunities.

Ranch operations including game management and grazing leases

Ranch operations revenues reached $3,518,000 for the first nine months of 2024, an increase of 4% from $3,384,000 in the same period of 2023. The details of ranch operations revenues are as follows:

Revenue Type	2024 Revenue ($)	2023 Revenue ($)	Change ($)	Percentage Change (%)
Game Management and Other	1,808,000	2,096,000	(288,000)	(14)
Grazing	1,710,000	1,288,000	422,000	33

Operating income from ranch operations was a loss of $193,000 for the first nine months of 2024, an improvement from a loss of $480,000 in the same period in 2023. The increase in grazing lease revenues contributed significantly to this improvement.

Tejon Ranch Co. (TRC) - Business Model: Key Resources

Extensive land holdings in California

Tejon Ranch Co. owns approximately 270,000 acres of land in California, making it one of the largest private landowners in the state. This land is strategically located near major highways and urban centers, enhancing its value for future development and agricultural use. The company is focused on developing this land for commercial and residential purposes, including the ongoing development of the Tejon Ranch Commerce Center (TRCC).

Water rights and contracts for agricultural use

Tejon Ranch holds significant water rights, with contractual obligations for future water payments amounting to $288,905,000 as of September 30, 2024. The company has secured water contracts that support agricultural activities and are critical for its farming operations. As of the same date, the company paid $12,495,000 towards these water contracts, which include State Water Project (SWP) contracts that run through 2035 and the Nickel water contract that extends to 2044, with an option for a 35-year extension.

Joint ventures with various partners for development

Tejon Ranch engages in multiple joint ventures to enhance its development capabilities. For instance, its joint ventures include:

Joint Venture	Equity in Earnings (Loss) Q3 2024	Equity in Earnings (Loss) Q3 2023	Change ($)
Petro Travel Plaza Holdings, LLC	$2,785,000	$1,041,000	$1,744,000
TRCC/Rock Outlet Center, LLC	($497,000)	($376,000)	($121,000)
TRC-MRC 1, LLC	$224,000	$187,000	$37,000
TRC-MRC 2, LLC	$555,000	$341,000	$214,000
TRC-MRC 3, LLC	$107,000	$33,000	$74,000

Skilled workforce for farming and development activities

Tejon Ranch employs a skilled workforce that is essential for its agricultural and development operations. As of September 30, 2024, the company reported total employee stock compensation costs of $4,706,000, indicating investment in human resources to enhance operational efficiency. The workforce is involved in various activities, including farming of almonds, pistachios, and wine grapes, which generated revenues of $1,503,000 from almonds and $1,304,000 from wine grapes for the three months ended September 30, 2024.

Tejon Ranch Co. (TRC) - Business Model: Value Propositions

Diverse revenue streams from real estate, farming, and minerals

Tejon Ranch Co. (TRC) generates a variety of revenues from its diversified business segments. For the nine months ended September 30, 2024, total revenues were approximately $23,951,000, compared to $28,572,000 for the same period in 2023. The breakdown of revenue by segment is as follows:

Segment	Revenues (2024)	Revenues (2023)	Change (%)
Real Estate - Commercial/Industrial	$8,497,000	$8,706,000	-2%
Mineral Resources	$7,687,000	$11,630,000	-34%
Farming	$4,249,000	$4,852,000	-12%
Ranch Operations	$3,518,000	$3,384,000	4%

Strategic location near major transport routes for commercial activities

Tejon Ranch is strategically located near major highways, including Interstate 5, enhancing its appeal for logistics and commercial activities. This location provides access to markets with over 40 million people for next-day delivery services, which is attractive for logistics operators. The Tejon Ranch Commerce Center (TRCC) is designed to leverage this strategic positioning, catering to businesses that require efficient distribution capabilities.

Commitment to sustainable land and resource management

TRC emphasizes sustainable practices in its land and resource management strategies. As of September 30, 2024, the company reported capital expenditures of approximately $40,995,000, which includes investments in sustainable practices across its operations. This commitment is evident in their water banking operations and groundwater recharge programs, which are becoming increasingly valuable as California faces stricter groundwater management regulations.

Development of master-planned communities to meet housing demand

TRC is actively involved in developing master-planned communities to address housing shortages in California. The Grapevine development area, comprising 8,010 acres, is poised to include 12,000 homes and 5.1 million square feet of commercial space, along with extensive open spaces. The anticipated infrastructure investments for the Grapevine project are part of the company's efforts to meet current and future housing demands effectively.

Development Area	Size (Acres)	Planned Homes	Commercial Space (sq ft)
Grapevine	8,010	12,000	5.1 million
Grapevine North	7,655	To be determined	To be determined

Tejon Ranch Co. (TRC) - Business Model: Customer Relationships

Engagement with local communities for development feedback

Tejon Ranch Co. actively engages with local communities as part of its development strategy. This engagement includes public meetings and forums designed to solicit feedback on proposed projects. In 2024, TRC held multiple community outreach events, resulting in an average attendance of approximately 150 local residents per event. Feedback from these engagements has been instrumental in shaping project designs and community integration efforts.

Long-term contracts with agricultural buyers and leasing agreements

TRC has established long-term contracts with agricultural buyers, ensuring stable revenue streams. As of September 30, 2024, the company reported agricultural revenues of $4,249,000, with a significant portion derived from long-term almond and pistachio contracts. The total acreage leased for agricultural purposes stands at 7,500 acres, with annual lease agreements contributing approximately $1,710,000 in grazing lease revenues, reflecting a 33% increase from the previous year.

Customer service for commercial tenants within developed properties

Tejon Ranch Co. places a strong emphasis on customer service for its commercial tenants. The company generated commercial revenues of $8,497,000 for the nine months ended September 30, 2024, a slight decrease of 2% compared to the previous year. Services provided to tenants include maintenance support, infrastructure improvements, and responsive communication channels. The occupancy rate in TRC's commercial properties remains robust at over 90%.

Participation in local events to build community relations

TRC is committed to fostering community relations through participation in local events. In 2024, the company sponsored and participated in over 10 community events, including agricultural fairs and environmental initiatives, engaging with approximately 5,000 community members. This involvement has enhanced TRC's visibility and strengthened its reputation within the Kern County area.

Customer Interaction Type	Details	Impact Measurement
Community Engagement Events	Public meetings and forums	Avg. attendance: 150 residents/event
Agricultural Contracts	Long-term contracts with buyers	Ag revenues: $4,249,000 (2024)
Commercial Tenant Service	Maintenance and support	Commercial revenues: $8,497,000 (2024)
Local Event Participation	Sponsorships and community events	Engagement: 5,000 community members

Tejon Ranch Co. (TRC) - Business Model: Channels

Direct sales to agricultural processors and retailers

Tejon Ranch Co. (TRC) engages in direct sales to agricultural processors and retailers, generating significant revenue through its farming segment. For the nine months ended September 30, 2024, the farming segment revenues totaled $4,249,000, reflecting sales primarily of almonds, pistachios, and wine grapes.

Real estate sales and leasing through commercial brokers

In the real estate sector, TRC utilizes commercial brokers to facilitate property sales and leasing. The commercial/industrial real estate development segment reported revenues of $8,497,000 for the nine months ended September 30, 2024, a slight decrease from $8,706,000 in the same period of 2023. This segment includes income from leases of land and buildings to tenants and payments from easement leases.

Online platforms for marketing properties and developments

TRC employs online platforms to market its properties and developments effectively. The company has established a strong online presence to showcase its real estate offerings, particularly in its resort/residential segments, which are in the process of pursuing land entitlements and development.

Local government and community engagement initiatives

TRC actively engages with local governments and communities to promote its developments. The company’s long-term projects, including the mixed-use master planned communities of Centennial and Grapevine, benefit from community engagement initiatives that foster local support and collaboration.

Channel	Revenue (2024)	Revenue (2023)	Change (%)
Farming Segment	$4,249,000	$4,852,000	-12.4%
Commercial/Industrial Real Estate	$8,497,000	$8,706,000	-2.4%
Ranch Operations	$3,518,000	$3,384,000	4.0%

Tejon Ranch Co. (TRC) - Business Model: Customer Segments

Agricultural companies purchasing crops and products

Agricultural companies are significant customers for Tejon Ranch Co., particularly in the sale of almonds, pistachios, and wine grapes. In the first nine months of 2024, the farming revenues totaled $4,249,000, a decrease from $4,852,000 in the same period in 2023. The breakdown of farming revenues is as follows:

Product	2024 Revenue ($ in thousands)	2023 Revenue ($ in thousands)	Change (%)
Almonds	2,243	2,153	4%
Pistachios	22	(4)	650%
Wine grapes	1,304	1,924	(32%)
Hay	66	190	(65%)
Other	614	589	4%

Despite the challenges, agricultural companies remain a core customer segment, with almond sales showing resilience.

Real estate developers and homebuyers

Tejon Ranch Co. actively engages with real estate developers, particularly in its mixed-use master-planned communities like Grapevine, which is projected to include 12,000 homes and 5.1 million square feet of commercial development. As of September 30, 2024, total capital investments for real estate projects were estimated at approximately $11,488,000 for construction costs related to the Terra Vista at Tejon multi-family project. The ongoing housing demand in California, driven by a significant housing shortage, supports the company's residential development initiatives.

Businesses seeking commercial or industrial space

Tejon Ranch Co. offers commercial and industrial spaces through its TRCC (Tejon Ranch Commerce Center). For the nine months ended September 30, 2024, commercial/industrial revenues totaled $8,497,000, a slight decrease from $8,706,000 in 2023. The following table highlights the revenue sources:

Revenue Source	2024 Revenue ($ in thousands)	2023 Revenue ($ in thousands)	Change (%)
Pastoria Energy Facility	3,631	3,895	(7%)
TRCC Leasing	1,334	1,265	5%
TRCC Management Fees	768	842	(9%)
Commercial Leases	496	495	0%
Communication Leases	792	782	1%

This customer segment is crucial for the company's revenue, particularly as logistics operators have shown success in the region, leveraging the commerce center's strategic location for distribution.

Investors interested in mineral resource developments

Tejon Ranch Co. also serves investors through its mineral resources segment, which generated revenues of $7,687,000 in the first nine months of 2024, down from $11,630,000 in the same period in 2023. The following table summarizes mineral resources revenues:

Resource Type	2024 Revenue ($ in thousands)	2023 Revenue ($ in thousands)	Change (%)
Oil and Gas	664	760	(13%)
Cement	2,085	1,870	11%
Rock Aggregate	1,541	1,457	6%
Exploration Leases	1	26	(96%)
Water Sales	3,260	6,615	(51%)

Investors are drawn to the mineral resources segment due to its potential for long-term growth, particularly in light of fluctuating commodity prices and regulatory conditions.

Tejon Ranch Co. (TRC) - Business Model: Cost Structure

Significant expenses related to land development and infrastructure

The expenses for land development and infrastructure at Tejon Ranch Co. are substantial, reflecting the ongoing investment in real estate projects. For the first nine months of 2024, the company reported capital expenditures, inclusive of capitalized interest and payroll, totaling $40,995,000. This includes approximately $16,750,000 allocated to the construction cost of the Terra Vista project and $12,341,000 for infrastructure improvements at TRCC-East.

Operational costs for farming, including labor and equipment

Operational costs in the farming segment have seen significant increases. For the nine months ended September 30, 2024, total farming expenses amounted to $9,406,000, reflecting a 67% increase from $5,644,000 in the same period in 2023. This surge in costs is attributed to higher costs of production including labor and equipment, as well as increased cultural costs associated with almond, pistachio, and grape crops.

Maintenance costs for mineral resource extraction

Tejon Ranch Co. incurs maintenance costs associated with its mineral resource extraction operations. For the first nine months of 2024, total mineral resources expenses were reported at $5,043,000, a decrease of 28% from $6,991,000 in the same period in 2023. The reduction in expenses was primarily due to lower water costs of sales recognized during this period.

Administrative costs for managing joint ventures and corporate operations

Administrative costs have also increased significantly. For the first nine months of 2024, corporate general and administrative costs were reported at $8,794,000, which is a 29% increase from $6,824,000 during the same period in 2023. This increase was largely due to a rise in stock compensation expenses.

Expense Type	2024 Amount ($)	2023 Amount ($)	Change (%)
Land Development & Infrastructure	40,995,000	13,513,000	203.1
Farming Operations	9,406,000	5,644,000	66.5
Mineral Resources Maintenance	5,043,000	6,991,000	-27.9
Administrative Costs	8,794,000	6,824,000	28.8

Tejon Ranch Co. (TRC) - Business Model: Revenue Streams

Sales from farming operations, particularly almonds and pistachios

Farming revenues for Tejon Ranch Co. totaled $3,242,000 for the three months ended September 30, 2024, reflecting a 23% increase from $2,642,000 during the same period in 2023. The breakdown of farming revenues is as follows:

Crop Type	Q3 2024 Revenue ($)	Q3 2023 Revenue ($)	Change ($)	Change (%)
Almonds	1,503,000	581,000	922,000	159%
Pistachios	22,000	0	22,000	100%
Wine Grapes	1,304,000	1,885,000	(581,000)	(31%)
Hay	0	15,000	(15,000)	(100%)
Other	413,000	161,000	252,000	157%
Total Farming Revenues	3,242,000	2,642,000	600,000	23%

For the nine months ended September 30, 2024, total farming revenues were $4,249,000, a decrease of 12% compared to $4,852,000 for the same period in 2023, primarily due to a decrease in wine grape sales revenue.

Rental income from commercial and industrial properties

Tejon Ranch Co. generated $8,497,000 in commercial/industrial real estate development segment revenues for the nine months ended September 30, 2024, a slight decrease of 2% from $8,706,000 for the same period in 2023. The revenue sources include:

• Pastoria Energy Facility: $3,631,000 (9M 2024) vs. $3,895,000 (9M 2023)
• TRCC Leasing: $1,334,000 (9M 2024) vs. $1,265,000 (9M 2023)
• TRCC management fees and reimbursements: $768,000 (9M 2024) vs. $842,000 (9M 2023)
• Commercial leases: $496,000 (9M 2024) vs. $495,000 (9M 2023)
• Communication leases: $792,000 (9M 2024) vs. $782,000 (9M 2023)
• Landscaping services and other services: $1,476,000 (9M 2024) vs. $1,427,000 (9M 2023)

Total commercial expenses for the nine months ended September 30, 2024, were $6,005,000, reflecting a 9% increase from $5,517,000 for the same period in 2023.

Royalties from mineral resource extraction and sales

Tejon Ranch Co. reported mineral resources revenues of $7,687,000 for the nine months ended September 30, 2024, a decrease of 34% from $11,630,000 for the same period in 2023. The revenue components included:

Mineral Resource Type	9M 2024 Revenue ($)	9M 2023 Revenue ($)	Change ($)	Change (%)
Oil and Gas	664,000	760,000	(96,000)	(13%)
Cement	2,085,000	1,870,000	215,000	11%
Rock Aggregate	1,541,000	1,457,000	84,000	6%
Water Sales	3,260,000	6,615,000	(3,355,000)	(51%)
Total Mineral Resources Revenues	7,687,000	11,630,000	(3,943,000)	(34%)

Operating income from mineral resources for the nine months ended September 30, 2024, was $2,644,000, a decrease of 43% compared to $4,639,000 for the same period in 2023.

Revenue from joint ventures in real estate and development

Tejon Ranch Co. reported equity in earnings from joint ventures of $6,004,000 for the nine months ended September 30, 2024, an increase of 45% from $4,128,000 for the same period in 2023. The earnings from major joint ventures include:

Joint Venture	9M 2024 Earnings ($)	9M 2023 Earnings ($)	Change ($)	Change (%)
Petro Travel Plaza Holdings, LLC	6,004,000	4,128,000	1,876,000	45%
TRCC/Rock Outlet Center, LLC	(1,130,000)	(1,256,000)	126,000	10%
TRC-MRC 1, LLC	375,000	413,000	(38,000)	(9%)
TRC-MRC 2, LLC	1,443,000	1,042,000	401,000	38%
Total Equity in Earnings	3,329,000	1,161,000	2,168,000	187%

Updated on 16 Nov 2024

Resources:

1. Tejon Ranch Co. (TRC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Tejon Ranch Co. (TRC)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Tejon Ranch Co. (TRC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.