Thursday, August 28, 2008

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Cold Feet? Since Development Deal was Announced, the Stock Market has not been as kind to Tejon Ranch Company





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Our Opinion, By Rex Frankel, Rare Earth News

8/28/2008 (new information added 9/1)

Three months after what was described as a “landmark” deal was unveiled to allow 30,000 more acres of urban sprawl to be paved in north L.A. County and southern Kern County, a stock tracking website has reported that mutual funds are "dumping" their holdings in Tejon Ranch stock. Tejon Ranch stock as of today is trading for $34 a share. At its high in 2005, the price was $61 a share, and the share price was around $45 when the deal with environmental groups was unveiled.

How this affects the development deal is unknown. The deal by the ranch company and 5 large environmental groups required the groups to not oppose the development of the 30,000 acres, which totals 10% of this massive ranch as long as the company agreed to not develop the other 90% of their land. Since this deal was unveiled, there has been a large drop in the share price of the ranch company; this could indicate that the deal is lot more shaky than is publicly known.

(For details of the share sell-off, see: http://www.mffais.com/trc.html “Tejon Ranch Company stock was recently dumped by 15 funds!”)

At its current price, the entire Tejon Ranch could be acquired by the State of California for between $500 and $600 million. See:

http://rare-earth-news.blogspot.com/2008/08/tejon-ranch-stock-is-at-5-year-low-is.html

One of the reasons given by the Sierra Club for their decision to cut a deal with Tejon Ranch Company was because the investors controlling the Company had a reputation for buying large ranches and then selling off pieces of the ranches to numerous people. This, we were told, has resulted in environmentalists having to fight numerous battles over the same piece of fragile wildlife habitat, rather than dealing with one owner. Given that Tejon Ranch totals 450 square miles, it is in fact composed of numerous square mile parcels that could be sold off without any review of the environmental impacts. This could, in theory, fracture this ecological gem into several hundred or a thousand mini suburban ranches and that would be an environmental disaster. This was stated as the “threat” if the deal allowing development of the most freeway-close 10% of the Tejon ranch was not approved.

Was this a realistic threat, however? Could a thousand new separate owners of the Tejon Ranch find a water supply, fight off lawsuits from wildlife-protection groups and face the other hurdles any other developer elsewhere in the state would face in developing in a wilderness? The threat made a good headline in the papers, “Developer Backs Off on Threat to Last Major Private Wilderness in Southern California”. The threat may have worked to scare some groups into cutting this deal. But was this threat merely posturing to raise the stock price of the land for the speculators who had little chance of successfully developing this land for a long time, given the currently terrible market for housing development? Judging from the firm's stock price slide since the announcement of the deal, it seems that investors may not share the dealmakers' enthusiasm for the deal.

To remind our readers of the stakes of the battle over Tejon Ranch, it is the largest single contiguous private land holding in California. Its land area is the size of the massive City of Los Angeles: 450 square miles. Located at the spot where the Sierra Nevada mountains connect to the Angeles and Los Padres National Forests, it serves as a critical wildlife habitat linkage that connects Yosemite to the Santa Monica Mountains and Malibu Beach and to Big Sur. It straddles the 5 Freeway and if built with the proposed 30,000 homes and 30 million square feet of office, retail and industrial space, would add new urban sprawl to a virtual wilderness that separates Los Angeles’ sprawl from the next concreted area to the north, Bakersfield.

The 10 percent of the land that could be developed under this plan is all next to the Freeway, Highway 5 and 138, while the other 90% that is slated to be “preserved” is mostly steep and mountainous, crossed by active earthquake faults, and is critical wildlife habitat for the endangered California Condor and home to numerous other rare species of plants and animals.

Announcement of this deal in May between the development firm, and 5 large environmental groups raised quite an outcry from the grassroots members in these groups. The local press in the community of Frazier Park just south of the Ranch has flared with front page exposes on the effects that may have been missed in the rush to “cut a deal”. Twelve Condor experts vilified the dealings of three biologists who chose to work for the developer. Critics have described this deal as giving most of the benefit to Tejon Ranch Company while, under the deal, the public has to accept a huge amount of sprawl in exchange for preservation of land that could never have been developed anyway.

And while the state has entered a severe drought, and it in fact has a law that requires all developments to have a guaranteed source of drinking water or they cannot be approved, we were told that if we didn’t go along with this deal, then speculators could cut dry mountains and desert into ranchettes. Where is the water for this threat? Unless you and I cut back and turn our yards brown, this water isn’t available.

Have some large investors figured out what a lot of us suspected: With gasoline prices surging, a development deal based on residents driving 60 to 100 miles to work each way doesn’t make a lot of sense and likely isn’t going to make sense for a long time. Is it time to rethink this deal?

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http://www.usatoday.com/news/nation/environment/2008-07-29-ecoside_N.htm
"The trade-offs affected not only the environment but hundreds of millions of dollars in future profits of Tejon Ranch Co., which trades on the New York Stock Exchange. The firm's stock value has fallen $200 million to $517 million since the deal was announced May 8. The company still must obtain local, state and federal government approval for its projects and could be sued by other groups."

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For more information, see:

http://savetejonranch.org/

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(9/1/2008--Note to readers: we reported last week in this story that, along with other large investment funds, the largest owner of Tejon's stock had sold their shares. The Tejon Ranch Company has issued a press release (http://www.marketwatch.com/news/story/tejon-ranch-co-issues-statement/story.aspx?guid=%7B7C8B0683-2070-485B-ACCA-995002023BF9%7D&dist=hppr ) saying that this is not true. This was originally reported by the website http://www.mffais.com/trc.html , which is where our information came from. The website now lists only 10, instead of 15 mutual funds as having "dumped" their holdings in Tejon Ranch Company. From what we can determine, the Ranch company's largest investor, Third Avenue Funds, owning 28% of the stock, filed a form (http://sec.gov/Archives/edgar/data/1099281/000109928108000090/tam062008.txt) with the Securities and Exchange Commission that gave the incorrect impression that the sell-off of the shares had occurred. This is because 2 columns of information were switched in Third Avenue's filing. The mffais website's "Frequently Asked Questions" page (http://www.mffais.com/faq.html#incorrect ) reports that companies often fail to follow SEC rules and sometimes switch the order of key information such as shares owned, which then leads to errors by the public in interpretting the voluminous amount of data that are in these stock ownership filings. If the mffais website changes their data again, we will post a clarification.

It remains unhallenged that other investment funds are selling off their Tejon Ranch shares.)

1 comment:

Michael Winer said...

Third Avenue has not sold its shares of Tejon Ranch common stock (as erroneously reported by the website www.mffais.com). Third Avenue's SEC Form 13F (filed on 8/14/08) clearly states that it holds 4,739,695 shares as of 6/30/08. The filing also shows that Third Avenue INCREASED its holdings during the quarter ended 6/30/08.

Furthermore, the blogger's comment that "Third Avenue had a reputation for buying large ranches and then selling off pieces of the ranches to numerous people" is totally false. Third Avenue is an investment management firm that invests primarily in publicly traded securities.

Third Avenue's website is: www.thirdavenuefunds.com