Tejon Ranch Co. Stock

Greetings, and welcome to the Tejon Ranch Company Second Quarter 2026 Earnings Call.

[Operator Instructions]

Please note, this conference is being recorded.

I will now turn the conference over to your host, Nick Ortiz. Please go ahead.

Good afternoon. Welcome to Tejon Ranch Company's second quarter 2026 earnings call. My name is Nick Ortiz.

Joining me today are Matthew Walker, President and CEO; and Robert Velasquez, Senior Vice President and Chief Financial Officer.

Today's press release, 10-Q, and the webcast are available on our investor relations website. A replay will be posted after we conclude. That site is ir.tejonranch.com. Today's remarks, including responses to questions, include forward-looking statements. These statements are made under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Key factors are detailed in our SEC filings, including our most recent forms 10-Q and 10-K. We assume no obligation to update any forward-looking statements. We also reference non-GAAP measures. These measures should be considered in addition to, not as a substitute for, GAAP results.

Reconciliations to the most directly comparable GAAP measures and reasons why we use non-GAAP measures are included in today's filings and are posted on our IR website. Again, ir.tejonranch.com. After prepared remarks, we'll address questions. Shareholders were invited to submit questions by email in advance.

I'll now turn the call over to our CEO, Matthew Walker.

Thank you, Nickn and good afternoon, everyone. Let me start off by saying we had a good quarter. Revenues were up across all segments. Adjusted EBITDA grew approximately 47% year-over-year, and we delivered net income of $2.6 million against a loss a year ago. Corporate expenses were down significantly. More than half of that reduction reflects the absence of last year's non-recurring costs. But setting those aside, core corporate expenses are still down 18% for the first 6 months of the year, highlighting the cost savings measures that we've put in place. This quarter's revenue growth was led by the Dedeaux Properties 1B land sale, which contributed $6.9 million in revenues. That transaction reinforces our commitment to Tejon Ranch Commerce Center as our nucleus of growth. With it, we are moving forward on our joint venture with Dedeaux on a 510,000 square foot Class A industrial building.

Walls are being tilted up this week. It's a good illustration of our land monetization model, which is contributing our land to a joint venture, retaining an ongoing economic interest, and growing our income-producing portfolio with minimal net capital outlay. It's also worth noting that we committed to the project while much of the industrial market was sitting on the sidelines. The fundamentals in Southern California are now improving as we anticipated, positioning us well for an early 2027 delivery. We are also continuing to see traffic and sales increase at our outlets and revenues increase at our travel centers, due in part to the halo effect from the Hard Rock Casino Tejon. In addition, July produced the strongest new leasing performance in 9 months at our Terra Vista apartments. With that, I'm going to turn it over to Robert to walk through the financials, and then I'll offer my thoughts on some important topics.

Thank you, Matt. Net income attributable to common stockholders was $2.6 million, or $0.10 per share, versus a loss of $1.7 million a year ago, a $4.3 million improvement. The 10-Q provides details by segment. I'll focus on what the tables don't say: earnings quality, costs, and overall balance sheet. First, earnings quality. As Matt described, the company contributed land with a fair market value of $9.9 million to the Dedeaux Properties joint venture. As a result, we recognized $6.9 million of revenue and $2 million of profit during the quarter. The remaining $3 million of profit was deferred because it relates to our retained ownership interest in the joint venture. The recurring business performed as well. Multifamily swung to positive net operating income, with leasing at Terra Vista crossing 80% this month.

Joint venture equity earnings rose 21% to $3.1 million, led by TA/Petro, improved results at the outlets, and steady contributions from our fully leased industrial portfolio. Second, costs. Excluding cost and sales on land and water, which fluctuate with transaction activity, expenses declined nearly 18% year-to-date. Outside of corporate and new Terra Vista operations, segment expenses were down roughly 8%. The discipline is evident across our operating segments. One 10-Q note, we now present farming before and after fixed water obligation, assessments we incur regardless of activity. Farming was profitable before those fixed costs this quarter. Third, the balance sheet. We ended the quarter with approximately $79 million of liquidity and debt to capital ratio of 16.3%. Let me close with the metric I watch most closely, trailing 12-months adjusted EBITDA of $29.8 million, up 21% from a year-ago.

While land sales can significantly influence any single quarter, the trailing 12-month view provides a better measure of our underlying performance, and that performance continues to strengthen.

I'll hand it back to Matt for some additional remarks.

Thanks, Robert. I now want to take a step back and talk about 3 things that are on my mind. The first is about AI and how it's impacting our company. This spring, after evaluating several different options, we implemented a cost-effective rollout of a leading enterprise AI platform across the company. We started with a small group, not knowing exactly what the results would be. However, it became immediately clear to us that the combination of the AI technology overlaid on the accumulated knowledge base of a 183-year-old ranch could be incredibly powerful. This led us to extend AI to every desktop user, and we are now seeing meaningful improvements in performance and efficiency in multiple areas of the business. Each month seems to be a step function up in utilization and new use cases.

We believe AI allows a relatively small company like ours to better compete in the marketplace, quickly testing new ideas, and researching new revenue opportunities, as well as automating manual processes to better focus on improving performance. AI is by no means perfect or the panacea to every challenge we face. It often gets you about 90% there, and you then have to constantly fact-check the conclusions. I want our shareholders to know that we're using every available tool to drive shareholder value. Next, I'd like to talk about water. I am pushing our management team to take a fresh look at every part of our business. That includes our fairly complex water story. In addition to the surface water and groundwater that comes from the ranch, we have multiple water contracts which provide for our current and future anticipated needs.

The output from many of these contracts varies depending on how much water is available from the California State Water Project. We also bank excess water in one of two water banks. As I noted in May, too much of our balance sheet is generating too little of our bottom line. As it relates to water, we're working to change that. Water can't be a dormant asset for us. We have recently generated some opportunistic sales of our excess water to drive a higher current return on this valuable asset. We will continue to pursue both strategic and opportunistic water sales as market conditions permit. You will also notice that we have enhanced our water disclosures in this quarter's financials to more clearly tell our water story.

Thinking more long term, we are looking at infrastructure investments that would make our considerable water assets even more liquid than they already are, and ways to do this which minimize capital outlays. Finally, I'd like to explain how we're looking at the future. Given our 183-year history, we often take a long-term outlook. As we survey our many opportunities and consider what to do next, I want you, the shareholder, to understand the rational process we are using to evaluate facts and make measured decisions. I've talked before about our investment criteria and hurdle rates. We look at our enterprise over multiple time horizons because many of our initiatives incubate over several years. Sometimes we use net present value as an evaluation tool, but NPV doesn't address the timing component or the realities that we face as a public company to deliver value sooner.

What we're finding is a more valuable tool, particularly when you roll everything up to an entity level, is projected total shareholder return. TSR incorporates the entirety of our capital allocation strategy. As we compare different scenarios, we can see the compounding impact over both the near term and the long term. It's clear that we need to drive earnings commensurate with comparable companies. We need to return those earnings to our shareholders within a reasonable timeframe. We believe we have a sound process in place to get us there. Our intention is to make rational decisions that are in our shareholders' best interests. I look forward to sharing more as this process unfolds. In closing, overall, it was a good quarter. Our plan continues to show positive results. We're just getting started. We have a long way to go. We're optimistic about the future. We'll keep reporting our progress each quarter.

We'll now turn to questions that were submitted. Please give us a moment to pull those up.

All right. Matt, we received questions and comments from 4 investors via email, I'll start with the first one from Mr. Paul Ross. TRC stock is selling at its lowest price since it went public 40 years ago. Employees, which are too many, directors, which are also too many, get paid in dollars free stock are dedicated to destroying value. TRC did not have enough land that they deluded shareholders twice to buy the remainder of the mountain village for $70 million in 2014 and $20 million up front plus $5 million annually for the water in 2013. Sadly, the winners are D&D and the Nicol family, plus the short sellers, 1 million shares Management, which does not buy or own any share stock. My question is, when will this destruction of shareholder value stop?

Hi, Paul. I'll respond to that in a couple of different ways. I'm going to be straightforward about the stock price. It's painful. I watch it. The board watches it. No one is satisfied. I'm not going to insult you by trying to explain it away. Here's what I do know. We've improved results for 2 consecutive quarters now. We're moving ahead, as I just mentioned a few minutes ago, on a joint venture industrial building, which is an area where many investors say we should focus. We've expanded our disclosures, including on water. We're communicating with shareholders more than we ever have. The business is getting better, and I think it's getting easier to see from an investor standpoint, and that's what we can control. We have a long way to go, please don't think that I'm okay with where we're at today.

Next, you mentioned that we have too many employees and too many directors. That's something that we've been addressing. Last year, as you know, we completed a 20% reduction in force in our employee count. I believe we're right-sized for the business that we have today. We've gone from 13 directors to 10 directors, to 9 directors as of this past May, and as of next May, we'll be at 7 directors. We're heading in the right direction there. Our stock compensation for both employees and directors is market-based. On the employee side, as I've mentioned a couple times, we've made a number of different changes to our executive compensation plan beginning in January 1 of this year. Those changes increase the performance component of our compensation so that we're more aligned with shareholders like you and the share price appreciation.

Again, I agree with you, the stock performance over the long term is simply just not acceptable. On your question of when will the destruction of shareholder value stop, you mentioned a JV partner buyout in 2014. You also mentioned the acquisition of a water contract, which was necessary for the approval of our Grapevine Master Plan community back in 2013. Those transactions occurred 12 and 13 years ago. On the Nickel Water contract, as I mentioned earlier on this call, we're actively pursuing opportunistic water sales so that we can better monetize our water assets. There are many features of the Nickel Water contract in particular that make it attractive to other potential users. I'll say again what I've told you in the past, what I've mentioned a couple of minutes ago in my opening remarks, I'm completely committed to driving shareholder value.

To do that, we need to generate earnings per share on par with other similar companies, as I mentioned before, and shareholders need to receive the value of those earnings. To generate more earnings, we need to do more of the things which make money and less of the things which don't. I have a plan to get us there, I've got a process in place, we will be reporting on our progress as we execute it. I wish everything could go faster, I certainly have a sense of urgency. I know that you won't be satisfied until you see results, that's exactly how it should be.

All right. Our next question is from David Ross. Without the land sale this quarter to Dedeaux, TRC is still losing money. Cash is down sequentially, and debt has increased correspondingly. The problem is obvious. The farm operation and the ranching operations do not provide a positive return on investment. Water and corporate expenses further dilute returns. What is the plan to fix this, and when can we expect it to improve? Given the amount of recurring passive revenue, we cannot build shareholder value while continuing the non-income producing costs that are tied to the ranch, the farm, and Mountain Village and Centennial development. These assets generate no income and will require hundreds of millions of future capital investment to eventually generate income. Developing these assets will prevent the company from being able to return capital back to shareholders for at least another decade.

If we are focused on shareholder value and long-term share price appreciation, how can you justify holding onto these assets and pursuing the same failed strategy? I think we can agree that the strategy has not worked for the last 30 years. Perhaps it is time to separate the real estate assets from the commercial assets since we agree the value of the commercial assets greatly exceed the value of the stock. Who on the board is against strategic review to improve value for the shareholders, and why hasn't it been explored?

There's a lot in here, David, and honestly, a fair amount that I agree with. Let me try to take it in a couple different pieces. First, let me correct what you said about the quarter. Even if we set aside the $2 million of profit that we recognized on the Dedeaux land sale, we were still profitable. The income-producing components of our business, that includes our industrial joint ventures, the travel centers, the outlets, and our apartments, all those carried their weight this quarter. Second, on the farm and the ranch, you're right. They haven't earned an adequate return. I'm not pretending otherwise. We've changed our disclosure, as I mentioned before, this quarter to show farming results before and after fixed water obligations. That's a non-controllable infrastructure financing cost, and that's incurred regardless of whether we do any farming activity.

Because those aren't tied to operating performance, we believe that that measure provides a clearer picture of the underlying profitability and cash flow potential of the farming business. Using that measure, farming was profitable before those fixed costs this quarter. You also mentioned a strategic review. You know, I would characterize my first 18 months as CEO as an ongoing strategic review of the company. Coming in, there was a lot to learn, and my thought process is constantly evolving. I've taken a systematic approach to examining each of our existing business lines, and I've been reporting to our board where and how management believes we need to change the status quo. There's been no resistance from the board. On the contrary, I've received strong support.

I've got a plan in place to get us where we need to go. I will be sharing aspects of that plan as I'm able to communicate them. Make no mistake, we're making decisions based on reality and facts and an objective view on creating shareholder value. That's it.

Our next question is from Steven Chess. What are the impediments to development of Centennial, what is the potential timeline to the resolution of these impediments? An estimate of a potential start date to begin construction with a partner.

Thanks, Steven. It's a fair question. I'll give you the real answer, which has a part that I can date and a part that I can't. Here's where we are. Following the appellate court's ruling back in June of last year, we've been collaboratively working with L.A. County to refine Centennial's environmental analysis and the re-entitlement of the project. The recirculated partial draft EIR, I know that's a mouthful, is now out for public comment. Our objective is to bring Centennial back in front of the L.A. County Planning Commission, then onto the Board of Supervisors before the end of this year. That's the part of the schedule that I can quantify. We're driving squarely towards it. The honest part about what comes after, the impediments to Centennial aren't a mystery. They're a standard development gauntlet. We've been navigating this for several years.

Here are some of the key steps. One, as I just described, we need to complete the environmental process and secure reapproval through the county. Two, there's a possibility of renewed litigation. This is California. Large projects like Centennial attract challenges. We prevailed on most of the substance before. We're building a record that we think is designed to prevail again. Three, once those entitlements are secured and defended, the real work on a new community begins. The mapping, the infrastructure design, the financing, finally, the implementation. It's that second step in the legal that's so uncertain and difficult to quantify. In terms of a construction start date, any date that I give you today would just be a guess. What I can commit to you instead is this, you will know the milestones when we hit them, starting with the hearings this year.

When Centennial does move forward, it's likely going to proceed in the same way that our industrial parcel 1B did just a few months ago. That will be under a joint venture structure which leverages the value that we've created in the land, and our partner's new capital funding. That's the short answer.

We received 3 questions from Richard Rushley. They're all on separate subjects. I'm going to take them one at a time. First, we were pleased to see the announced JV with Dedeaux Properties, and we're glad it was a 60-40 rather than 50-50. Should we expect to see the company continuing to go in the direction of increased ownership of its projects?

Hi, Richard. It's a good question. We're going to take things on a case-by-case basis. With Dedeaux, it was a unique opportunity and one where the numbers made sense. With the increased investment, given our contributed land price, we could go up to 60% ownership without making any additional net cash investment. We found that pretty attractive. It's industrial development, so the building goes up quickly, and we believe that the short timeframe from capital deployment to lease-up and then cash flow production, that provides for a good risk-adjusted return in an asset class that we believe in. We're squarely focused also on ROIC. That's something that we need to keep in mind in general as we think about our level of capital investment.

Okay. Next question is, has the company had any discussions about the locating of a data center at Tejon Ranch?

Let me answer that by saying that we look at many different types of uses for our land. If you've imagined it, we've probably considered it. More generally, we evaluate every credible source of demand for our land and our infrastructure on an ongoing basis. That's literally the job. The analysis is typically the same, which is, how can we most efficiently convert our land into long-term, durable cash flow streams, and what are the risks and what are the returns? We're going to update you when we have new things to report on that.

Final question. Can you confirm that Mr. Bielli's consulting contract is now over, and that it is not in Q2 results?

Yes, the contract was ended, and there's no related expense in the second quarter results.

Okay. Thanks. Nick. It sounds like those were all the questions that we have for this quarter. Thank you to those who reached out, and we look forward to next quarter's earnings call. Thank you all very much. Have a good afternoon.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Good afternoon, ladies and gentlemen, and welcome to the Tejon Ranch Company First Quarter 2026 Earnings Call. [Operator Instructions] Please note that this event is being recorded. I will now hand you over to Nick Ortiz. Please go ahead.

Good afternoon, and welcome to the Tejon Ranch Company's First Quarter 2026 Earnings Call. My name is Nick Ortiz. Joining me today are Matt Walker, President and CEO; and Robert Velasquez, Senior Vice President and Chief Financial Officer. Today's press release, 10-Q and this webcast are available on our Investor Relations website. A replay will be posted after we conclude. That site is ir.tejonranch.com. Today's remarks may include forward-looking statements.

These statements are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. These factors are detailed in our SEC filings, including our most recent Forms 10-Q and 10-K. We assume no obligation to update any forward-looking statements. We may reference non-GAAP measures. These measures should be considered in addition to, not as a substitute for GAAP results. Reconciliations to the most directly comparable GAAP measures and reasons why we use non-GAAP are included in today's filings and are posted on our website, again, ir.tejonranch.com. After prepared remarks, we'll address questions. Shareholders were invited to submit questions by e-mail in advance. Now I'll turn the call over to Matt Walker.

Thank you, Nick. Good afternoon, and thank you all for joining us. Today, I'm going to share my perspective on recent performance, then turn it over to our CFO, Robert Velasquez, who will cover our financials, and then we will answer questions from shareholders. Let me start off by saying we had a good first quarter. Revenues were up 16% from the first quarter of 2025, while operating costs were down 14%, including a $2.4 million reduction in corporate costs. As a result, net income was up $1.6 million and adjusted EBITDA was up $3.1 million with a 12-month trailing adjusted EBITDA of $27.2 million. Looking at adjusted EBITDA by segment on a 12-month trailing basis, Commercial real estate contributed $7.5 million, reflecting steady performance from our income-producing portfolio. Mineral Resources delivered $4.8 million, supported by the strength in water sales and farming contributed $2.2 million. Branch operations added approximately $1 million, benefiting from the increased membership activity. The headline number there is the $2.4 million reduction in corporate expenses, driven by lower headcount and the absence of proxy defense costs.

Our first quarter results demonstrate our continued progress against our strategic goals over the past year, in particular, driving stronger cash flows. At the Tejon Ranch Commerce Center, we are especially pleased to report the groundbreaking of a new 510,000 square foot Class A industrial facility developed in partnership with Dedeaux Properties. TRCC is the nucleus of our growth, so we are excited to be moving forward, leveraging our land and our balance sheet to develop an income-producing property, which we expect to complete in the first quarter of next year. With our 2.8 million square foot TRCC industrial portfolio 100% leased, this project further capitalizes on the demand we continue to see along the I-5 corridor. In addition, as of the end of the quarter, our commercial and retail portfolio was 95% leased and the outlet to Tejon was 92% occupied. Terra Vista with 228 units now delivered, ended the quarter 71% leased and is on track for Phase 1 to be stabilized this summer. TRCC's momentum is accelerating. Outlet traffic was up 22% and sales were up nearly 12% in the first quarter compared to last year, with similar gains at our TA Petro Travel Center. We're seeing that the lease-up of Terra Vista and the opening of Hard Rock Casino Tejon are driving greater commercial activity across the center.

As we approach our annual meeting next week, I'm looking forward to opening our dates to you and sharing more about the progress we've made and where we're headed. The meeting will be held on site at the ranch with options for virtual attendance. Registration details are in the proxy statement. We hope to see you there. I also want to thank our shareholders for their continued engagement and our Board for their leadership over the past year. With that, I'll turn the call over to our Chief Financial Officer, Robert Velasquez, to walk through the financials. Robert?

Thank you, Matt, and good afternoon, everyone. I will begin with a review of our first quarter results, provide some additional detail on segment performance and then summarize our current liquidity. For the first quarter of 2026, revenues and other income, including equity and earnings from unconsolidated joint ventures increased 13% to $10.8 million compared to $9.6 million in the same quarter last year. Turning to segment performance. Commercial and industrial real estate generated $2.8 million in revenue for the quarter, in line with the prior year period. Operationally, the portfolio remains strong. Equity and earnings from unconsolidated joint ventures totaled $1.3 million in the first quarter compared to $1.2 million in the prior year period, reflecting continued earnings growth despite diesel fuel margin pressure within our TA Petro joint venture. Farming segment revenues were approximately $900,000 in the first quarter of 2026 compared to $1.6 million in the same quarter last year. The year-over-year decline was due to lower carryover crop available for sale as we strategically accelerate sales of carryover inventory last quarter to capitalize on stronger-than-anticipated pricing.

In addition, we planted 150 new acres of wins in April on top of the 150 acres planted in 2025 as part of our ongoing crop diversification strategy. Mineral resource revenues increased 36% to $3.5 million in the first quarter of 2026, with segment operating profit more than doubling to $1 million. Year-over-year improvement was driven primarily by opportunistic water sales executed during the quarter. Underlying royalty streams across rock and aggregate, cement and oil and gas continued to contribute stable cash flows during the quarter.

Turning to liquidity. I'll look at the balance sheet. As of March 31, 2026, cash and marketable securities totaled approximately $19.4 million. Available capacity on our revolving credit facility was approximately $64.6 million. Total liquidity was therefore approximately $86 million. We believe our liquidity position provides sufficient flexibility to continue advancing development initiatives while maintaining balance sheet discipline. With that overview, I'll turn it back to Matt.

Thanks, Robert. In summary, the first quarter marked a solid start to the year for us. We returned to profitability, demonstrated the value of our diversified business model and continued executing on our long-term strategic initiatives. Looking ahead, we remain focused on several key priorities, including the successful lease-up of Terra Vista, maintaining momentum at TRCC as a premier logistics and distribution hub and leveraging our diversified revenue base to deliver consistent results.

With that, we will now respond to the questions that have been submitted. Please just give us a moment to get those pulled up.

We have received questions from shareholders. I'll start by reading the person who submitted the question and the question itself before turning it over to Matt. So our first question comes from Justin Levo. Matt, thank you for this call, and we greatly appreciate your efforts to date. In prior calls and presentations, the company cited Five Point Holdings as a positive example of the long-term master planned community entitlement and development strategy. As I am sure you know, it took five years to get their Valencia MPC across the line. Valencia has been selling lots for a few years now, yet Five Point stock is significantly lower than it was prior to Valencia's development. Overall, Five Point has been a terrible long-term investment for shareholders, and they've developed some of their NPC projects using the JV structure touted by management. Five Point stock is down 60% over the past 10 years. Howard Hughes is another publicly traded NPC developer, which has also been a terrible long-term investment for shareholders. Their stock is down 35% over the past 10 years. How are these two examples not indictment on the publicly traded master planned community development model? And how can you expect shareholders to buy into the idea of continuing to pursue Mountain Village and Centennial and continue to absorb the millions of costs related to these assets? -- knowing that even if we are able to get these assets across the finish line, the market will not reward this business model or the future cash flows generated by these assets of the question.

Justin, thanks for your question. This is a humbling job. I thought a lot about some of the comments that I made during last quarter's call with respect to the public master planned community companies. And I'd like to refine my thoughts to some extent. You're right in a lot of what you said in as much as the fact of the fact in terms of investment returns. I don't believe that a joint venture structure is what's driving the other companies' poor performances. For us, I do believe that JVs are a positive tool because they allow us to monetize our land by contributing it to a joint venture while leveraging our partners' capital so that we can preserve cash. And that applies to our strategy on income-producing properties such as the new industrial building that we've just taken underway or for our MPCs. There are many lessons to be learned from looking at other companies, including things that we would do differently. What I can tell you is that I'm very much aware of the issues related to master planned community development, such as the lengthy duration and the capital requirements and the capital reinvestment on top of market cyclicality. But I also see the opportunity with the MOIC and with recurring cash flow. So for me, the takeaway is if we're going to pursue master planned community development as a public company, we need to do it in certain ways that might be different than how a private developer would approach.

Our next question is from David Spear. Matt, thank you for this call and your continued efforts. According to the trailing 12-month EBITDA table in the release, the company's JV investments, commercial real estate operations and Mineral Resource segment generate $33 million of EBITDA and $26 million of cash flow. These are passive investments in operations that investors typically ascribe immense value to as they can be managed at low costs while generating high returns on invested capital. Companies with similar passive operations such as Landbridge and Texas Pacific Land Trust trade at EV/EBITDA multiples over 30x and have multiple billion-dollar market caps. Companies with smaller market caps such as Aztec Land Company and [indiscernible] Land Association trade at even higher multiples. These have also been highly successful investments for shareholders.

Applying 25x to 30x EBITDA multiple would result in a valuation between $800 million to $1 billion for just our income-producing assets. How can we justify pursuing master planned development projects when one could argue that selling them and focusing on our more highly valued assets and operations would result in a stock price that is 3 to 4x the current price? How can we ignore this passive capital-light option, especially considering the real estate development model has historically been punished by the stock market?

That's the end of the question.

Okay. Thanks.

Thanks, David. Good comments. You cited some great companies with good business models, and they performed really well in the market. I was planning to cover some of your topics at next week's Annual Shareholder Meeting, but let me give it a shot right now. You're right. Tejon Ranch Company has several business lines and segments that generate significant EBITDA through passive investments. And those businesses share many similarities with the companies that you've mentioned, all of which we've looked at to try to better understand. I should also note that there are certain characteristics of our land that are different than the land owned by the companies that you mentioned. but we also have plenty of opportunity as well. And I'm focused on growing this asset-light part of the business, as you mentioned. I'd rather place an aspirational multiple on some more conservative assumptions, but I think I understand your math. I might also add that our new industrial building is entirely consistent with the strategy that you're advocating and specifically that our JV structure allows us to earn an extremely high MOIC, especially when you look on our multiple on net invested cash. Nonetheless, we continue to believe that there's an immense amount of value to be earned from placing our master planned community project in development. And as I've reported before, this requires external capital, which I committed to shareholders last November that I would seek out, and we're going through that process over the next several quarters.

Our next question is from David Ross. We applaud the considerable improvements in the cost structure of the company and this effort is appreciated. Yet even with these changes, the company generated just $200,000 or $0.01 per share of earnings. If you add back the interest expense that the company continues to capitalize, GRC is still losing money each quarter and generating negative free cash flow. Given the amount of recurring passive income, we cannot build shareholder value while continuing the non-income-producing costs that are tied to the Mountain Village and Centennial development. These assets generate no income and will require hundreds of millions of future capital investment to eventually generate income. Developing these assets will prevent the company from being able to return capital back to shareholders for at least another decade.

If we are focused on shareholder value and long-term share price appreciation, how can you justify holding on to these assets and pursuing the same build strategy? I think we can agree that the strategy has not worked for the last 30 years. On an adjusted basis, farming EBITDA was $185,000. But every year, the company continues to invest in CapEx towards the farming operation. While we understand the nature of fixed water obligations, this is still a cash expense. The farming operation continues to cost shareholders millions per year while factoring in PP&E CapEx and water. Why would we continue to accept these losses? Is there no better alternative for shareholders? The two questions point to the issue of capital allocation. We have been subsidizing these dream projects for decades. At what point does the leadership at TRC consider shareholder return on capital?

So David, there's a lot there to consider. You've seen me present an economic case for farming in which we back out the cost of water, which we think is the right way to look at the business given our water contracts, which will ultimately support our residential and commercial development. And if you look at the remaining adjusted EBITDA, excluding the water holding cost, the picture for farming is more positive. There are also a lot of ancillary benefits that the company receives from our farming, water is part of it, access to debt capital is another. With that said, we're taking an objective look at our farming business and its ongoing capital allocation. With respect to your other comments and questions, I tried to provide an explanation of that when I was addressing Justin and David's earlier questions on the same topic.

Right now, we're continuing to pursue our business plan, as I've discussed, but we will consider all alternatives and look to remain flexible going forward. Nick, do you have any other questions?

That concludes our questions.

Great. Thanks.

All right. Thank you very much for joining us. Operator, you can conclude the call.

Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines.

Greetings, and welcome to the Tejon Ranch Company Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Nick Ortiz, Senior Vice President of Corporate Communications.

Good afternoon, and welcome to Tejon Ranch Company's Fourth Quarter 2025 Earnings Call. My name is Nick Ortiz. Joining me today are Matt Walker, President and CEO; and Robert Velasquez, Senior Vice President and Chief Financial Officer. Today's press release, 10-K and this webcast are available on our Investor Relations website. A replay will be posted after we conclude. That site is ir.tejonranch.com.

Today's remarks may include forward-looking statements. These statements are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Key factors are detailed in our SEC filings, including our most recent Forms 10-Q and 10-K. We assume no obligation to update any forward-looking statements. We may reference non-GAAP measures. These measures should be considered in addition to, not as a substitute for GAAP results.

Reconciliations to the most directly comparable GAAP measures and reasons why we use non-GAAP are included in today's filings and are posted on our website, again, ir.tejonranch.com. After prepared remarks, we'll address questions. Shareholders were invited to submit questions by e-mail in advance. With that, I'll turn the call over to Matt.

Good afternoon. I'm Matt Walker, President and CEO of Tejon Ranch Company. Thank you for joining us. For this, our second earnings call, we'll be using the same format as last November. I'll share my perspective and turn it over to our CFO, Robert Velasquez, who will cover our financials, and then we'll answer questions. As we did last quarter, will be answering each shareholder question that is asked.

So moving on to this quarter, I'd like to talk about where we've been and where we're headed. For the quarter, our operating income was up compared to the fourth quarter of 2024, while our net income was down. Our net income reflects onetime proxy defense cost, but our overall operating performance was strong. which will explain as we go through our segments.

For the year, our $49.6 million in revenue and $24.2 million (sic) [ $25.3 million ] in adjusted EBITDA, both improved over 2024. Our company's economic driver remains our commercial real estate business. Commercial revenue was up $1 million for the quarter and $3.5 million for the year, led by 2 land sales 1 of which was a hotel site and the second, a back-end payment on our Nestle transaction from 2025.

In farming, we had 1 of the stronger years in recent memory, and this was supported by an on bearing year for pistachios. Farming revenue was up 20% over the same quarter last year and up nearly 26% annually. I'm pleased to report that our farming revenues were the highest in a decade.

Income from our joint ventures was down for the quarter and down for the year. While our industrial real estate JVs performed well, our travel center JV with TA/Petro was impacted by reduced car and truck traffic on Interstate 5. This led to lower fuel sales and fuel margins as well as lower sales in our travel centers and restaurants.

On the positive side, we have seen encouraging signs from the outlets Tejon with December generating the highest retail sales of any month since we opened in 2014. There are many factors in play, but among them is the positive impact of the new Hard Rock Tejon Casino, which opened in November. So far, the casino's impact has been extremely encouraging, and we look forward to further positive benefits from the casino in 2026.

Last fall, I talked about commitments made by the Board with respect to corporate governance. Today, I'm pleased to report that our Board is delivering on those commitments. First, as I hope you saw this morning, we filed an 8-K announcing a proposal to provide shareholders with the right to call special meetings. We are proposing that our shareholders or groups of shareholders owning at least 25% of the outstanding shares can call for a special meeting.

Our proposal is consistent with the majority of public companies and we think it better aligns us with our shareholders. Shareholders will be able to have a vote on this proposal as part of their proxy ballot prior to the annual meeting in May.

Second, I have spoken in the past about our Board size and composition. We filed an 8-K earlier this month announcing the decision by our Board to reduce in size from 10 to 9. Also, the Board decided that 2 Board members in the event if they are elected this May, would stepped down by May 2027, which would bring our Board size down to 7. In addition, as part of our Board size reduction, the Board voted to eliminate our executive committee. These changes reinforce that our Board is committed to positive governance change.

Next, we will be holding our annual meeting on site at the Ranch on May 13. We invite each of our shareholders to attend. We'll also provide an opportunity for our shareholders to attend virtually, it will be a good opportunity to see our assets up close and also a chance to spend time with our management team and Board. Following the annual meeting, we'll be hosting tours of the Ranch, including the Tejon Ranch Commerce Center the Terra Vista apartment community and a Hard Rock Tejon Casino, we hope you can join us. Registration information will be provided with their proxy statement.

Last year, we completed a number of cost-saving measures. Looking ahead, I want to communicate that we're not done yet. We're continuing to streamline our operations and have targeted an additional $1 million of overhead savings by the end of 2027. When you add all of this up, our operating business is showing signs of positive momentum. However, I want to emphasize that cost improvement alone is not our only goal. As a company, we must put more of our assets to work, generating higher cash flow, producing more earnings and increasing value for our shareholders.

I've described my first year at the company is setting the table. This consisted of taking a close look at all aspects of the business, formulating a strategy and then communicating that strategy to the market. This year, we are working on activating those plans. Right now is an exciting time for the company as we look to grow our revenue base to realize the benefits of our cost savings to drive more earnings growth. With all this as a backdrop, I would like to turn over the mic to our Chief Financial Officer, Robert Velasquez, so that he can go through the quarterly financials. Robert?

Thank you, Matt, and good afternoon, everyone. I'll focus my remarks on our fourth quarter results, provide some additional detail on segment performance and then briefly discuss liquidity. For the fourth quarter of net income attributable to common stockholders was $1.6 million or $0.06 per diluted share compared to $4.5 million or $0.17 per diluted share in the fourth quarter of 2024. Revenues and other income, including equity and earnings from unconsolidated joint ventures, increased 8% to $23.3 million compared to $21.6 million in the same quarter last year. Adjusted EBITDA for the quarter was $11.4 million, an increase of 9% compared to $10.5 million in the prior period.

Turning briefly to segment performance. Commercial and Industrial Real Estate generated $4.2 million in revenue for the quarter compared to $4.1 million in the prior year period. Operationally, the portfolio remains strong with the industrial portfolio fully leased, the commercial portfolio of approximately 98% leased, which includes the outlet at Tejon at 93% occupancy at year-end.

Equity and earnings from unconsolidated joint ventures totaled $2.1 million in the fourth quarter compared to $3.3 million in the prior year period, reflecting lower earnings from the travel center joint venture.

Farming revenues for the quarter were $12.2 million, an increase of 26% compared to $9.7 million in the fourth quarter of 2024, reflecting the impact of the pistachio harvest on, unbearing year cycle as well as improved performance across other permanent crops.

Adjusted farming EBITDA before fixed water obligation, increased to $4.4 million in the fourth quarter from $3.4 million in the same quarter last year, with margins improving modestly as higher crop production drove operating leverage. Minimal resources revenue totaled $2.4 million for the quarter compared to $2.5 million in the prior year period, reflecting lower oil and natural gas production volumes and pricing.

I'm pleased to introduce a new reporting segment and a milestone for the company. For the first time, we are reporting a segment dedicated to our multifamily revenues and expenses, as lease-up activity at Terra Vista Tejon gained momentum, we evaluated whether the business warranted its own segment and concluded that it did. Here's where things stand.

During the quarter, the company recognized $536,000 of multifamily revenue, reflecting leasing activity at Terra Vista at Tejon, which commenced leasing early in 2025. Phase 1 of the project consisting of 228 units was completed during the year and the property continues to progress through a lease up phase.

Turning briefly to our balance sheet. As of December 31, 2025, cash and marketable securities totaled approximately $24.9 million. Available capacity on our revolving line credit facility was approximately $66.1 million. Total liquidity was therefore approximately $91 million. We believe our liquidity position provides sufficient flexibility to continue advancing development initiatives while maintaining balance sheet discipline. With that overview, I will turn it back to Matt.

Thanks, Robert. To close, our direction is clear. We're strengthening our core business, tightening our cost structure and concentrating on leveraging our assets to generate recurring cash flow. At the same time, our Board has made significant progress in governance and shareholder alignment. We remain committed to providing you, our shareholders with clear communication and accountability. So with that, we will now respond to the questions that have been submitted. So please just give us a moment to get those pulled up.

All right. Thank you, Matt. We received 11 questions from investors before the deadline. We'll read each 1 as submitted as we did last quarter and identified a submitter. Before we begin, I just want to thank all of our investors who submitted questions for their engagement.

Our first question. When will TRC management and its self-serving Board finally respect and benefit all the shareholders as its prime goal rather than the selfish history of self-enrichment, when will management stop being a disgrace and finally unlock the assets of this company for the benefit of its owners, not its management who for decades, only sought the benefits for themselves. The question is from Samuel Konik.

Okay. I understand the question, Samuel, and I understand the sentiment and the frustration behind it. I've been with the company for just over a year now. And in that time, I had scrutinized our operations, looking for opportunities to grow our revenue base and reduce our cost. We've been able to reduce our workforce by 20%. We've cut millions from our overhead. We've also taken a much more proactive approach with our shareholders.

We've held an Investor Day last October. We're now hosting earnings calls like the 1 we're having right now. And those include a format where individual shareholders like yourself can engage in a direct dialogue with management. We provided additional financial disclosures like the ones that Robert just mentioned, plus investment scorecards and hurdle metrics to better explain our business to shareholders. These are all examples of the company's new approach. You alluded to accountability with executive compensation.

Right now, we're in the process of finalizing our proxy statement, when it's released, I think you'll see how our existing compensation structure is responsive to the company's financial performance and how it addresses the accountability issue in a meaningful way. And in addition, we've been working on a revised compensation plan, which will be covered in the upcoming proxy that further aligns us with shareholders and increasingly ties our performance to share price improvement. Moreover, I personally made adjustments to my comp to further align myself with shareholders.

Furthermore, a few weeks ago, as we discussed just a few seconds ago, our Board shared its plan for governance reform. We reduced the Board size. We limited the executive committee. Today, we announced the proposal for a shareholder meeting, right. Our Board is on top of that, we had increased representation from our shareholder base compared to where we were a few years ago. I think you should know that our Board isn't monolithic and our Board members have diverse opinions and they aren't afraid to share them. So these are just a few of the things that we're working on between management and the Board to enact change for the better.

Taken in aggregate, we've made a positive difference in the last year. I can't speak to all the things that you mentioned before I joined the company, but what I can tell you in the answer to your question is I do think that we're on our way to demonstrating accountability and creating value for our shareholders. Next question.

Next question, as California continues to tighten regulations on traditional rodenticides, including the 2021 restrictions on second-generation anticoagulants, how is Tejon Ranch approaching wildlife-friendly or nonlethal rodent control methods across its almond, pistachio and cattle operations. And is this an area where you see potential for innovation or outside partnership as proof of your broader sustainability and environmental stewardship commitments. The question is from Eli Simo.

So 1 of the things that I've grown to appreciate on the Ranch in my first year here is how interconnected the various businesses are and how important it is to take a long-term view of the Ranch and its stewardship. The Ranch really is a special place that requires active management. Our team has been doing this for nearly 200 years. The vast majority of the Ranch is also part of the Tejon Ranch conservancy and that means we've got numerous rules and restrictions that are designed to protect the Ranch and the wildlife that calls the Ranch home. And I can see some of that wildlife outside of my window as we speak.

Your question gets to how we balance our farming business with our game management business. We take our responsibility to grow crops seriously and to do so in a sustainable manner, just as we're committed to safely operate a high-quality hunting program and 1 that respects the stewardship of our wildlife resources.

We approach pesticide and wildlife management with an integrated framework. We emphasize prevention and habitat management over reliance on any single tour chemical approach, and all of that -- so if the regulatory environment evolves, we're then well positioned to adapt because that philosophy is already embedded in how we operate in everything that we do here.

We have 2 questions from the same investor. I'm going to read them both before you respond, Matt. The first question is this. As of year-end, we have roughly $300 million of invested capital in Mountain Village and Centennial combined. These assets generate no income and between the associated water costs, land management and continual development planning, they continue to impede our ability to generate acceptable returns on invested capital. How are you going to grow returns on invested capital to an acceptable level over the next few years while we continue to hold on to these assets? Even with no additional investment, these projects would need to go from generating losses to contributing over $20 million of annual income simply to earn a minimal ROIC.

This is the next question. We would greatly appreciate hearing how the company will be able to significantly increase ROIC, returns on invested capital and earnings over the next 5 years, while we continue to have $300 million of capital tied up in these projects. Both questions are from Justin Lugo.

Thanks for your questions, Justin. As Nick said, let me take those together. They're important topics, and I want to recognize that there are varying opinions on this. Let me share our perspective and build on what I've said and what I've written in the past. Our master plan communities have been an important component of our overall business plan for several decades, you're right, it required a significant capital investment. My goal is to move our communities into active implementation so that they can begin to generate cash flow and a return on our invested capital, as you noted.

The reality is that this is going to take a few more years. There are many examples of public companies who are operating in this master planned community space from Florida to Texas to right here in California. Each of them has had to go through some degree of upfront effort to complete their approvals, to complete their design, and to finish their infrastructure before they can start producing revenue. And all of that takes time and capital.

We're no different, and we've consistently communicated that to the market. Fortunately, we have other businesses that also generate cash, and we hope to increase that while our community development ramps up. When you look at the other companies developing MPCs, you can see that there's a significant cash flow that's generated, which achieves an attractive ROIC. And we'd expect that our master plan communities can generate significantly more than the $20 million of annual income that you mentioned.

Also, our business plan is to utilize third-party joint venture equity, so that should help a little bit, too. On Mountain Village, we started the capital raising process. And on Centennial, first and foremost, our approach is to complete a reentitlement effort, which will result in significant value creation and preserve the value of our investment to date, as we mentioned in our press release, that project is advancing through the reentitlement process, and we'll soon be entering a more public stage, and we expect to be in front of Los Angeles County later this year.

Your next question. Have there ever been any outbound efforts or inbound inquiries to monetize the Mountain Village, Centennial or the land held under the conservation agreement? What is the status and what you're thinking about this? This is a question from David Ross.

Thanks, David. As we mentioned before and in my answer to the previous question, there have been outbound capital raising efforts in the past related to Mountain Village, as I've mentioned in my letter last fall and in my previous remarks today, we're in the process right now of capital raising for that project. As it relates to inbound inquiries, we're always happy to chat with anyone who has an interest in our business, including our land.

And as I just previously mentioned, Centennial is in a little bit different position given its ongoing reentitlement status of that project.

All right. Our next question is, given the large amount of investments the company has made in the Mountain and Centennial over the last 30 years, wouldn't the highest and best use of capital be to monetize these assets and focus on the Grapevine and TRCC, how do you justify the alternative? This is a question from Paul Ross.

Paul, I don't look at Mountain Village and Centennial as being mutually exclusive with Grapevine and TRCC. The Commerce Center is already a huge focus for us. And I think you can see from our notable investment at Terra Vista, we're committed economically and strategically to TRCC. We're also committed to expanding and developing out TRCC and we plan to do so. The same goes with Grapevine. I've tried to state the case for Mountain Village and Centennial, what I would add is that with respect to any of the company's assets, the ones I've spoken about or the ones I haven't, we need to maintain so that we can adapt to market conditions and any opportunities that might arise so that we're deploying our capital on a go-forward basis in the most advantageous way possible. I've tried to be clear that capital allocation is one of the most important things that we do here at Tejon Ranch Company.

All right. Are you satisfied with the pacing and absorption of the apartments, will you expand into Phase 2 or bring in a partner? This is a question from Stuart Ross.

Stuart, I appreciate the question. Yes, we are pleased with our current lease-up at Terra Vista, and I'm happy to say that we are now 70% leased. We're approaching our 1-year anniversary, which is exciting. We brought on Greystar to manage the apartment. So we're benefiting from the horsepower of the nation's largest multifamily owner and manager. So they're leveraging their platform in L.A. and Northern L.A. County to expand into Kern County.

We've also done a good job with programming and events and things like that. And our tenants really enjoy living there, and we hope to have them for years to come. On Phase 2, yes, the plan is to expand into our second phase. It really for us comes down to a capital allocation and prioritization decision. There are a number of ways that we can proceed. Fortunately, the amenity complex from Phase 1 is already in place. So there are efficiencies that would come in developing that second phase.

Your next question, as of the end of this year, the company is close to $600 million of invested capital on its own balance sheet. While our joint ventures fully owned commercial real estate assets and mineral rights segments generate roughly $20 million of annual recurring profits, our total annual net operating profit after taxes has never exceeded $3.5 million in any of the past 3 years. To achieve a sustainable return on invested capital just 5%, a reasonably low expectation for a shareholder. You would need to either grow total net operating profit to over $30 million per year or remove a substantial amount of capital for the business, how will you be able to achieve this over the next few years? This is a question from David Spear.

Thanks, David. Let me see if I can provide some additional thoughts on top of what I already said earlier on this topic. You're absolutely right. Big picture, we need to take more of our company's balance sheet, and we need to convert those assets into cash flow production. And this needs to happen as quickly as possible and believe me, I feel the urgency. Beyond our master planned communities, and I think this is what you were getting at, is we need to increase our cash flow from all of our non-NPC assets as well. So there are a number of ways that we can address this.

First, we need to drive bottom line improvements across our existing operating assets through active asset management. We're doing all sorts of things. We're renegotiating contracts. We're looking for lower-cost alternatives. We're finding better ways to be more efficient across our different segments.

Second, we need to continue to advance our business plan, as I mentioned before, particularly at TRCC, where we've got a consistent track record high-yielding commercial real estate assets, particularly in the industrial sector. This is a priority for us, and we are working hard to move forward, and it's critical that we do this, and it's a critical way for us to increase our cash flow.

Third, we need to think outside of our commercial real estate box, and we need to leverage our key differentiating asset, and that's our 270,000 acres of land, and we need to monetize that land. So our team's hustling. You'd be surprised at who's interested in utilizing our land. So Overall, it's a balanced approach, and it's going to take a combination of singles and doubles and more than that to move the cash flow needle to where it needs to be, whether you're talking about EBITDA or NOPAT or net income. Okay.

Our next question. Given that the Tejon Ranch property is in proximity to Los Angeles, will the company consider holding an Investor Day at the company headquarters rather than in New York as was done previously. This question is from Richard Regglie.

Good question, Richard. I think you're on to something. I've got some good news to report on this front which we talked about a little bit before. There really isn't any substitute to seeing Tejon Ranch firsthand. There's a lot to see and even for the people who have toured over the past couple of years with us, I think there's reason to come out. As I mentioned earlier, we're pleased to share that our upcoming annual meeting will be on May 13. It's going to be right here at the Ranch. It will be a hybrid format, so shareholders can participate in person or remotely.

We're going to have a lot of the same components that we did for last October's Investor Day in New York. So we'll be giving a presentation about the company. We'll take your questions just we did in New York. But since we're on site, we'll also be hosting property tours of the Ranch. Our goal is to make it immersive and informative and it would be a great way for shareholders to interface with our management team while also getting a close up look at some of our recent additions. These would include our Terra Vista apartments and our new neighbors at the Hard Rock Tejon Casino, which ought to be packed no matter when it is that we happen to go. Good for them, as I've mentioned before.

We're going to be sending out details on the event shortly. So we'll be taking reservations for our tours, so stay tuned. And then as you're -- as it applies to a dedicated Investor Day, we'll start planning for that after our annual meeting. So your feedback, Richard, is noted and appreciated.

So how much -- sorry, next question, how much is estimated to be needed to fund the development of Centennial as well as separately to Home Mountain Village. And will a shareholder rights offering be considered as a way to fund some of this so as to limit dilution of future profits. This is a question from Bob Edwards.

Thanks, Bob. We have not disclosed publicly the future all-in development cost of Mountain Village or Centennial. While I can appreciate the desire for you to see that something that we would intend to share closer to groundbreaking. As with any large-scale master planned community, construction is phased, and we recycle the cash flow on the front end to minimize how much equity is required. And as I noted earlier in the call, we would plan to use third-party joint venture equity as opposed to a rights offering to avoid dilution of our shareholders.

Okay. Sure. 11th and final question. What level of confidence do you have that Los Angeles County will approve the Centennial development? And what time line do you project for potential approval? This is a question from Stephen Chess.

Stephen, good question. I've touched on Centennial some already, but let me answer your question with in more detail. First off, we're not going to prejudge any regulatory outcome, and we want to be respectful of the process before it proceeds, but we'll say this. Our confidence in advancing Centennial to approval is high. It's important to note that our relationship with L.A. County remains genuinely strong throughout this entire process.

We've built a long-standing partnership with the county, which has been extremely productive, the challenge at this stage isn't really the county. It's the pace of any legal process that may unfold. And that's a distinction that's worth noting. So as it relates to Centennial, we've been working hard to prepare a comprehensive plan, which we believe addresses the court's previously identified issues. What's encouraging is that the list of open issues continues to narrow. We've been through a lot on project, it includes the Antelope Valley regional area planning process, which identified the site for economic development and growth.

We worked on the general plan. There's been new case law on fire protections, you name it. We've consistently taken the approach that we should show up engage and then move through the process. Just like we've successfully done at TRCC, at Mountain Village and at Grapevine, which are all today fully entitled and fully litigated.

This year at Centennial, we'll be moving to a more public phase of environmental review. And as I mentioned before, we hope to be in front of LA County and the Board of Supervisors later this year. Centennial does shine a spotlight on something broader, and that's California's need to modernize its environmental review framework. We're active in those conversations at the state level, and we think there's real momentum at last to enact positive reform. But we're not waiting for a policy miracle, we've demonstrated that we know how to get through a [ CEPA ] processes. We've done it a handful -- multiple times, and we are confident that we will get Centennial approved.

So if that's all, I'd like to thank everyone for providing your questions. As I mentioned earlier, we also look forward to our upcoming annual meeting in May, right here at the Ranch and we hope you will join us here. So thank you very much, and have a good day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.

Good afternoon, ladies and gentlemen, and welcome to the Tejon Ranch Company's Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I will now hand you over to Nick Ortiz. Please go ahead, sir.

Good afternoon, and welcome to Tejon Ranch Company's Third Quarter 2025 Earnings Call. My name is Nick Ortiz. Joining me today are Matthew Walker, President and CEO; and Robert Velasquez, Senior Vice President and Chief Financial Officer. Today's press release, 10-Q and this webcast are available on our Investor Relations website. A replay will be posted after we conclude. That site is ir.tejonranch.com.

Today's remarks may include forward-looking statements. These statements are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Key factors are detailed in our SEC filings, including our most recent Forms 10-Q and 10-K.

We assume no obligation to update any forward-looking statements. We may reference non-GAAP measures. These measures should be considered in addition to, not as a substitute for GAAP results. Reconciliations to the most directly comparable GAAP measure and reasons why we use non-GAAP are included in today's filings and are posted on our IR website. Again, it is ir.tejonranch.com. After prepared remarks, we'll address questions. Shareholders were invited to submit questions by e-mail in advance.

With that, I'll turn the call over to Matt.

Good afternoon. I'm Matt Walker, President and CEO of Tejon Ranch Company. I'd like to thank you for joining us on our earnings call for the third quarter of 2025. Before we get started, I want to mark this milestone and explain today's format.

This is the first quarterly earnings call that Tejon Ranch has ever hosted. With it, we joined the 97% of companies listed on the New York Stock Exchange that communicate with investors in this way. Over the past 9 months, we've made it a priority to be more transparent, more consistent and more direct. With today's earnings call and next week's Investor Engagement Day in New York, we're building better ways to connect with our shareholders and talk about the business.

Our call today follows the format used by many public companies, but with a few variations. About 3/4 of companies limit live questions to sell-side analysts and only a very small percentage open questions to all investors. We're providing every shareholder with the opportunity to submit questions via e-mail, and we'll be answering those live during the Q&A session. Please know that this is a work in process, and we will continue to refine and improve our format from here.

Now let's talk about the quarter. We were encouraged by our farming operations, which delivered strong year-over-year improvement last quarter. Revenues increased by more than 50% and our farming segment bottom line in GAAP terms improved by $2 million as we held expenses flat and capitalized on higher production. Our farming business remains a foundational part of Tejon Ranch. It's a cash generator whose adjusted EBITDA has been positive in 11 out of the last 12 years.

Farming also provides several strategic advantages. It helps us manage our water rights. It supports access to low-cost debt through our AgWest credit facility, and it produces solid returns with reasonable capital investment. We'll be talking more about our farming economic story next week.

At the Tejon Ranch Commerce Center, we continue to see the power of the TRCC platform, even in a challenging market for industrial and commercial real estate. Our industrial portfolio remains 100% leased. Our commercial portfolio is 95% leased, while the outlets at Tejon maintain a 90% occupancy.

Our joint ventures play a major role in driving organic growth at TRCC with our 5 industrial JVs with Majestic Realty contributing stable cash flow. TRCC as a whole remains fully leased, and our weighted average rent levels continue to climb. We're also maintaining about a 40% cost advantage to the Inland Empire West, which makes TRCC an attractive logistics solution for tenants.

The TA/Petro joint venture continues to be our highest performing profit center. While reduced car and truck traffic impacted our sales last quarter, the opening of the new $600 million Hard Rock Tejon Casino in just a few days will be a real game changer. The casino should increase traffic to TRCC, benefiting all of our retail assets, including the TA Travel Centers, our retail and the outlets at Tejon.

We're also expanding the TRCC platform, adding new projects that deepen its ecosystem. Terra Vista at Tejon, our first multifamily community, is heading on track towards stabilization and is now more than halfway leased. It's a milestone for the company and a key part of our long-term strategy to build a residential community around our commercial center. This starts with Terra Vista and will continue in the future with our fully entitled Grapevine master planned community, which is currently advancing through design.

With that, our CFO, Robert Velasquez, will walk you through the quarter financials in more detail, and then I'll provide some additional remarks before we open it up for questions.

Thank you, Matt, and good afternoon, everyone. I'll start with a summary of the quarter's results, then walk through performance by segment and finish with a brief update on liquidity and the balance sheet.

For the third quarter ended September 30, Tejon Ranch reported net income of $1.7 million or $0.06 per basic and diluted shares compared with a net loss of $1.8 million or $0.07 per share in the same period last year.

Total revenues were $12 million, up 10% year-over-year, while total costs and expenses declined by nearly 5%. As Matt mentioned, the improvement in quarterly profitability was driven primarily by strong farming results, stable commercial and industrial leasing and steady performance from our mineral resources and joint venture operations.

I'll turn to the performance of our individual segments, starting with real estate, commercial and industrial. In this sector, revenues increased 4% to $3.1 million, reflecting income from the continued leasing up of Terra Vista as well as additional revenues from communication leases. Those increases were partially offset by slightly lower revenue from 1967083865 due to milder summer temperatures. Operating income for this segment rose 7% to $976,000.

Within our unconsolidated joint ventures, equity in earnings totaled $2.6 million. The TA/Petro partnership remains our largest single earnings contributor, generating $1.9 million in the quarter. Our 5 industrial joint ventures with Majestic Realty contributed $945,000 of earnings in the quarter, reflecting a 24% margin across the MRC buildings.

Turning to mineral resources. This segment produced operating income of $1.1 million on revenues of $3.2 million, which was stable year-over-year. The business continues to require minimal capital expenditures outside of water operations. After adjusting for costs, water sales contributed $322,000 to the minerals segment's operating profit for the quarter.

In farming, revenues improved by more than 50% compared to last year, while GAAP operating losses, which includes water holding costs, were reduced by 40%. The segment's rebound reflects both improved production and the advantages of how we manage our cultural costs and water resources.

Last year's results were hurt by weather challenges. And with the pistachios, lack of chill hours, coupled with it being a down-bearing year, yielded no pistachios crop, but this season yields normalized across all major crops. Our integrated approach to water gives us significant flexibility. When allocations from the state water projects are high, we benefit from lower farming costs. When they're low, we're positioned to monetize our stored and contracted supplies.

Moving on to ranch operations. That segment delivered consistent results with total revenues of $1.3 million and positive operating income, supported by stable [ grazing ] and gain management activities. At the corporate level, general and administrative costs declined slightly from the prior year to $2.9 million in the quarter.

Consolidated operating income improved by 37% year-over-year to $3.4 million across our operating segments. Depreciation and amortization totaled $3.8 million and adjusted EBITDA for the year-to-date period was $13.9 million, up 7.3% from the same period last year.

As of September 30, total assets were $630 million, up from $608 million at year-end. We ended the quarter with $21 million in cash and marketable securities and $68 million of availability under our AgWest revolving credit facility. Our total debt stood at $91.9 million, resulting in a debt to total capitalization ratio of roughly 16%.

Year-to-date capital investment was $49.9 million, primarily tied to construction of Terra Vista, infrastructure at TRCC east and legal and permitting work across our master planned communities. Reimbursement proceeds from the Community Facilities District amounted to $5.6 million, offsetting the capital investments made during the year. We continue to manage capital allocation carefully, focusing on projects that enhance cash generation.

In summary, the quarter reflected solid improvement in profitability, steady contributions from our recurring revenue businesses and disciplined cost control. We believe that the combination of resilient operating assets, growing rental income and the strength of our joint venture partnerships positions Tejon Ranch well as we move into 2026.

I'll stop there and turn it back to Matt.

Thanks, Robert. While the quarter was positive, I'd like to make something clear, Tejon Ranch is not yet where it needs to be, and we have a lot more to do to get it there.

Accordingly, we've been focused intently on cost discipline to improve our operating margins. We've been scrutinizing every contract, looking for efficiencies and lower cost solutions. We've identified savings today, which will result in a far more efficient operation in the future. Additionally, our largest overhead cost is staffing.

As part of our G&A review, we recently completed a workforce reduction that will save more than $2 million per year. This reduction impacted employees at all levels of the organization and lowered our headcount by 20%. It wasn't an easy decision, but it was a necessary one. These expense reductions represent a down payment on change. They demonstrate our intent to operate with discipline, accountability and a clear eye on the bottom line.

In closing, we had a good quarter, but we still have a long ways to go, and we're not done yet. We look forward to sharing more of how we are positioning the company for success in the quarters and years to come.

That concludes our prepared remarks. We would now like to respond to the questions that were submitted by shareholders. Please give us a minute while we pull those up.

Thanks, Matt. We received 20 questions via e-mail. We'll read and respond to the questions in the order that they were received.

Our first question today is from [ Larry Zicklin ]. His question is, after all these years of failure, don't you think you should just sell as much land as you can and buy back stock so as to realize the maximum amounts for shareholders?

Thanks for the question, Larry. Let me first emphasize that my one and only goal for our master planned communities is to create long-term shareholder value, however we get there. I do believe that a successfully implemented master planned community can generate decades of significant cash flow. You can see this with other public companies that are in our space.

With that said, I understand your concern and that of other shareholders. I want to reiterate that everything is on the table. So if there is a compelling opportunity to monetize a portion of our land holdings, as you've suggested, we will evaluate it.

However, for right now, I believe that with Grapevine, pursuing an implementation plan, which builds on the significant growth that we're having at TRCC makes a lot of sense. On Mountain Village, I'd like to embark on a capital raising effort to identify a joint venture partner who would contribute equity and avoid dilution to our shareholders.

And on Centennial, completing a re-entitlement is the most prudent approach at this point to preserve our investment in that asset. Let me add that I will be discussing all of this in greater detail at our Investor Engagement Event next week. I know there are strong opinions about what we should do, and I would like to more fully explain our rationale to you all then. Nick?

Thanks, Matt. We received a series of questions from [ George Apostelkis ]. The first question is, what is the company's policy regarding the disclosure of more detailed cost information on items such as the TRCC cost to complete and the estimated costs of the first phases of planned community development.

Thanks for your question, George. Let me see if I can answer it. We provide information for all of our material cash requirements. That includes capital expenditures, and we do that at the end of the latest fiscal period as we're required to do by the SEC. We also disclose our material cash requirements from our known contractual obligations. It's also worth noting that every year, we do disclose in our Annual Report our estimated cost to complete of the horizontal infrastructure for TRCC.

George's next question is, has the company estimated the overall capital cost of the first phases of planned community development? And will it disclose the scope, cost and related capital funding sources as well as whether or not this development might require third-party investment or purchase commitments?

Okay. I've covered some of that, but let me expand on other portions of your question. So similar to my previous answer, we do provide information in our most recent SEC filings on our material cash requirements, and that includes our CapEx, as I mentioned before.

We haven't yet disclosed specific capital cost estimates or project budgets for the initial development phases of any of our MPCs. Those depend on several ongoing factors, including the final design or market conditions at the time that we intend to launch them and the final infrastructure scope and cost.

As it relates to the funding sources that you mentioned, the plan for all of our master planned communities, as I mentioned in the previous question, we intend to capitalize those with a third-party joint venture partner who would contribute the new equity, and we would contribute the land to that venture. And this strategy would avoid dilution to our shareholders' projects. They'd also include a capitalization with construction financing at the venture level.

Okay. Next question. Will the company disclose its detailed accounting policies regarding allocation of basis on the first phase of community development?

Okay. So accounting for construction cost in our community development is completed in accordance with GAAP. This means that project costs like land acquisition costs or development costs, construction costs, interest, real estate taxes, certain direct overhead, things like that, those are all capitalized while those activities are in progress. Those costs are then accumulated by phase, again, in accordance with GAAP. In our Annual Report, we do have a section called the allocation of cost that provides some additional detail on that.

All right. Next question. Have you estimated the level of end-user absorption necessary to commence the first phases of development for the planned communities? And if so, will you disclose that estimate?

So we definitely consider absorption when we're talking about proceeding with development. But more generally, we look at the entire investment holistically. So typically, absorption is slower at the beginning of a project and then it ramps up to a stabilized level over time.

Each project is expected to have a joint venture partner. So that JV partner is going to be looking for an expected market rate return that they would need in order to proceed with the project. So we would expect that the equity would end up driving that return decision to proceed. We also have an internal hurdle rate to return so that we're generating a sufficient return for our shareholders. So that's how we approach the investment criteria that's necessary in order to move ahead with the project.

Final question from George. Based on your most up-to-date estimates and the status of negotiations with builders, will the sale of land in Phase 1 result in a book profit or book loss?

Let's see, not knowing which project you're speaking about, let me speak to this more generally. I think I can cover the question. For any given master planned community, there is expected to be a material book profit for the entire project, and that would be consistent with achieving the hurdle rates that I just mentioned in your previous question. So I think you'd have a book profit for the entire project.

For the first phase of development for any of our master planned communities, that phase is likely going to have a significant amount of upfront infrastructure. So the initial phase is not likely to include a book profit. I can't speak to other companies and their master planned communities, but what I just said isn't unique to Tejon Ranch. That's typical of many master planned communities where you have a multi-phase MPC. The return of capital typically occurs beyond that initial phase.

All right. Thanks, Matt.

From [ David Spier with Nitor Capital ], we received the following questions.

First question, the $2 million expense reduction is welcomed and appreciated. However, based on management's stated value of TRCC, the book value of our MPC assets and the estimated value of our cash flowing land leases and royalties, Tejon arguably has a net asset value that is north of $40 per share.

Following the expense reduction and the implementation of your plan, what will our annual per share cash earnings power be? Public markets do not value non-cash flow producing assets nor assets that are not being actively monetized. So if your plan will not lead to near-term earnings power north of $2 per share, and we are not going to monetize our MPC assets in the near term, how will we make money as public shareholders?

David, thanks for your question. Appreciate it. First off, we agree with you that the company is undervalued. A critical part of that value is the expectation of future returns. That future earnings potential comes in a couple of different areas. It will come from the build-out of the 11 million square feet of TRCC over time and as the market permits. We're also working to identify new revenue sources that take advantage of the unique attributes of the ranch. So there will be value, we hope that's created there.

We expect that value will come from the ongoing cash flow from our existing portfolio of income-producing assets. And then -- and we're looking to find ways to increase that over time. And it will come from the development of master planned communities. Those master planned communities have the potential to generate earnings, which are in order of magnitude greater than what the company is producing today and to do that over a sustained period of time. So I believe that the combination of all of those assets will result in a material earnings per share growth.

Okay. One final question from David Spier. How much additional capital and how much time will it take before Mountain Village or Centennial are generating profits, returns for shareholders?

Okay. I'm going to cover this in more detail next week, but let me answer it for you today in this way. On Mountain Village, as I mentioned in previous answers, I'm going to be focused on a capital raising effort in the near term over the next year or so. So the capital allocation for that will be rather modest, and it will be sized just to complete that capital raising effort.

I've previously mentioned also that we're going to go out and look for a joint venture equity partner who will provide the additional equity so that we don't dilute our shareholders. That JV between Tejon and the equity partner would then complete the construction documents that would probably take 18 to 24 months.

And then we break ground on the initial phase of horizontal infrastructure, and that would take 24 months or so. And then at that point, you would be initiating home site sales to builders and to custom lot buyers. At that point, there would be ongoing revenue generation. So that's a quick breakdown of -- in rough terms of the timetable for Mountain Village.

You also mentioned Centennial. So on Centennial, our first step is to re-entitle the project through Los Angeles County. That would include us updating our environmental documentation. This would take, we would think, until sometime near the end of next year, plus or minus. That process of going through the county would take a couple of months after that as well. At that point, I think a lot depends on our ability to move more immediately into a mapping process and that mapping process would take a couple of years.

And then with our construction documents in hand after we completed the mapping, we'd be able to commence construction, and similar to what I just described on Mountain Village, then start with the installation of the horizontal infrastructure. Given that we do have a re-entitlement effort, it's harder to estimate the outer time frames given some uncertainty to complete the entitlement process.

And then that implementation phase, once we completed the entitlement, would also be done under a joint venture similar to the ones that I've described before. Hope that helps. And again, I'll be able to talk more about that next week with a little more time.

Thanks, Matt. From [ Justin Libos ], we received the following question.

Mountain Village and Centennial have a combined book value of more than $290 million, but produce no income and consume capital. Are they worth book value or more? If so, why not sell them to unlock more than 60% of market cap, leaving Grapevine and TRCC, already valued by management above our market cap. No other lever matches this shareholder value. Why not put them up for sale?

Justin, thanks for the question. So we agree with you that Mountain Village and Centennial are worth more than their book value. One comment I'd make on your net asset value. So when we were looking at that range of net asset values for TRCC and you noted that it's in excess of our current market cap. I just want you to know that, that -- when we did that exercise, that didn't include the Grapevine master planned community. It was just for the commercial assets that are part of TRCC.

As I mentioned in my answer to some of the previous questions, we believe that Mountain Village and Centennial both provide significant long-term cash flow generating potential. I'll be talking, like I said before, more about that next week. And I again, just want to say that the company is always keeping its options open and evaluating all approaches to maximizing asset value. And that goes for our master planned communities or any other asset on the ranch.

All right. We have 6 questions from [ David Roth ].

The first one is the release says Terra Vista will increase to 228 units. Are you committed to that?

Yes. Thanks for the question, David. We worked on that wording a little bit. Let me try to explain that a little bit to you. At the end of the third quarter, we had completed and delivered 180 units. Since the end of the quarter, we've now completed and delivered all 228 units, and we've now signed leases on more than half of the 228. So it was really just a timing difference on how we reported the third quarter. But to be clear, we have completed construction on the first phase of Terra Vista, which is a good accomplishment, and we're pleased.

The next question is, the release says you are committed to the MPCs, but you have half of TRCC available that is 100% unencumbered today. Why not focus on that TRCC, which you can control?

I couldn't agree with you more. So TRCC remains our focus. I think if you've looked at how we've deployed capital over the last 5 years, the majority of it has gone to TRCC. We continue to see the value of the future there. The flywheel effect that I've talked about between our industrial and our outlets and our retail and our travel and the hotel and all the residential uses feeding off each other, that's real.

The casino is only going to add to that. And the advantage of the casino is we're leveraging the $600 million that the tribe is spending to -- and that's going to help bring traffic into TRCC, which should just continue that flywheel. So I agree, I call TRCC the nucleus of our activity from which all of our growth should emanate.

Next question. Farming and ranch operations do not provide consistent returns. Why not lease out these assets for an annuity to the owners?

It's a good, fair question. We tried to cover it in the press release. I covered it in my earlier remarks. I'll talk about it again some more next week, but let me just again answer it for you here.

Taking a step back, I've heard from a lot of shareholders, many of you who have submitted questions that the focus that we should have is on generating cash flow. We agree with that. So what that means with respect to farming, we should be looking at farming through a cash flow lens, not necessarily an earnings lens.

And the measure that in my effort to try to better tell the story of the company, we've mentioned in the press release our concept of an adjusted EBITDA figure. And we think that's the right way to look at the farming business. So adjusted EBITDA, as we're measuring it, it backs out non-cash expenses like depreciation, and it also accounts for the water holding costs that we're going to have to spend whether we farm the property or not.

And if you do all of that and you look at farming on an adjusted EBITDA basis, as I mentioned in my earlier remarks and Robert did as well, we've generated positive cash flow from farming, and it's something like 23 out of the last 24 years. Again, I'll go through this more next week. But I do believe there is a more favorable story to tell about farming and we would be happy to have the dialogue.

Next question. The share price is at a 52-year low. There has never been a return of capital to owners of the company. We have assets with a lot of value and $50 million per year in cash flow. When do the owners get paid?

David, I understand your frustration. The lack of share price appreciation over 52 years, it's unacceptable. I mean, what can I say? I've been here for 8 months, and I intend to change that. It's not going to happen overnight, but I want to see the share price move. And I intend to implement a plan that will achieve that. So you know we have in the past, paid a dividend, but it has been a while.

So my intention is to implement a plan. It will leverage our existing balance sheet. It will utilize capital from third parties to help start growing our cash flow producing asset base. The goal of all of this is to create share price appreciation, and it's also to create cash flow so that we can ultimately allow for things like the payment of dividends again or share repurchases. So that is the end goal, and we need to find a way to get there, and I intend to do that.

Why do you need such a big Board of Directors? What evidence can you point to that suggests the Board has created value for shareholders? How do you calculate the returns on the MPCs after 20 years?

So on the Board, I'm going to be addressing a number of governance issues next week. So if you could wait until next week, you should expect that I'll cover that topic then. I'd prefer to cover all of the governance topics at once.

On the MPCs, so we look at value a couple of different ways. We do believe that given the fact that we're bringing in a third-party investor, we look at the value relative to our book value and the appreciation on that land, and we need to produce an acceptable hurdle on our cost to date. So I'll again be talking more about that next week.

How do you define fiduciary responsibility? And have the leadership been good stewards of our capital? Example, spending $3.5 million on a wasted proxy fight, we did not benefit.

Let's see. So I define fiduciary responsibility as putting shareholders first. I'm here to create shareholder value. The management team, all of us, we're here to create value for the shareholders. And that's how I and we would like to be judged.

There are many areas that I think we have been good stewards of the company's capital. I believe the significant investment that the company made in our Terra Vista apartments. I believe that, that will prove to be a very important catalyst for creating value all throughout TRCC, particularly when we look back at that in 5, 10, 15 years from now.

I'd also like to be clear, I'm not afraid to admit my mistakes. There are definitely things that I would do differently. I put the contested election last spring in that category. Certainly, when you look at the results, it's hard to conclude anything else. You're right that capital could have been deployed into things which create economic value. I'll leave it at that.

We'll move on to questions from Richard Rudgley and Grover Wickersham from Glenbrook Capital.

The first question is, given the 49.84% that voted in favor of the PFS Trust proposal to allow shareholders to call a special meeting, will this be approved by the Board of Directors as was recommended by ISS? We would appreciate a response to this question. We have previously asked it in a public letter to the Board, which letter was ignored.

Thank you, Richard, and Grover for that question. So like some of the other governance topics, I don't want to be evasive, but I would like to cover governance all together. And I'd like to talk about the subject of a special meeting next week. And I'll make sure that I communicate more broadly in the event that you are able to join us so that all shareholders understand where we are headed on issues of governance. So you'll be receiving an answer to that question next week.

Next question is, can you please give more color on this part of the press release? Equity and earnings of unconsolidated joint ventures decreased by $1.3 million compared with the prior year period, mainly attributed to the reduction in equity and earnings recorded for the TA/Petro joint venture.

Yes. That's a -- I can see the confusion with that. As Robert and I mentioned in our remarks, the earnings from our joint venture with TA/Petro, and we're a 60% partner of that. So those are driven by 3 different things.

First, our fuel sales, that's both diesel, gas -- diesel and gasoline. Second, our convenience store and travel store sales. Third would be the related commercial real estate, that's mostly fast food restaurants.

So there was less traffic on Interstate 5 last quarter. There's really been less traffic on the 5 for the entire year. There are any number of reasons for that and reduced port shipments has something to do with it. There's less local travel from traffic counts that we get.

So all of that, when you have fewer cars getting off the freeway, whether they're cars or trucks that come into TRCC, that's going to have a cascading effect on the equity in earnings for the assets that are part of our joint venture with TA/Petro. So hopefully, that explains the nature of the reduction of our joint venture there. Unlike our Majestic industrial joint ventures where you've got a lease that from quarter-to-quarter should be constant, the TA/Petro varies according to demand.

Please describe the economics of the joint venture relationships in the Grapevine location and discuss what management intentions are for taking greater TRC control of the development and reducing or eliminating the joint venture split of economics.

Okay. I've talked a couple of times about joint ventures. Let me summarize all of them all at once. So again, we've got 5 joint ventures with Majestic Realty on 5 different industrial buildings. Each of those is a 50-50 joint venture. The outlets at Tejon, that's also a 50-50 joint venture, and we have that with Rockefeller. And then I just mentioned the 60-40 joint venture that we've got with TA/Petro. We've got good joint venture partners.

Going forward, as we look at the remaining 11.1 million square feet left to develop, I would expect us to develop more real estate at TRCC on our own balance sheet. But given that, I do want to be clear, we look at each opportunity individually. So it's based on a whole bunch of different factors. But I do understand the question, capturing 100% of the revenue as part of our asset base is helpful for the long-term growth of our cash flow in the future.

Great. Final question for this portion. Given the apparent success of the apartment development near Grapevine and the potential demand from Hard Rock Casino employees, is management contemplating either additional apartments or townhouses?

So that's a good question. The short answer is yes. I mean we definitely have plans to build more residential at TRCC, and that includes multifamily housing. It also includes the single-family homes in the Grapevine master planned community. So we've now -- as I mentioned before, we've completed 228 units in our first phase at Terra Vista. The second phase is entitled for an additional -- it's like 170 units.

So as you mentioned in your question, we have, in fact, seen demand for our apartments for the casino employees. We've been working pretty closely with Hard Rock to encourage their employees to consider us. It's been a good partnership, and they haven't yet even opened their doors. So those are capital allocation decisions and return hurdle decisions that we are exploring every single day on where to deploy our capital. But the short answer is, yes, we expect to develop more residential around TRCC.

And then we have 2 questions from [ John Christensen ]. The first question is, if a buyer would put in a formal written bid to buy Mountain Village at the current book value, would the company sell it?

Good question, John. Thanks for asking. A couple of things. As I previously noted, I'll say all options are on the table. So if a reputable party made a substantive offer, I would be obligated to bring that offer to the Board to consider.

With that said, as I noted before, we believe that the property is worth more than book. So I'll just leave it at that. But we're flexible, and we're looking at alternatives, but we have a plan in place.

The company cut $2 million from overhead. Was $1 million of that, the consulting cost being paid to the previous CEO?

No. So the $2 million of savings came entirely from the reduction of staffing costs from our existing staff that's been on hand from the time that I took over as CEO, not from other -- any other savings would be in addition or separate from that.

And with that, Matt, that is the last question.

Great. Well, thank you all very much.

All right. That concludes Tejon Ranch Company's third quarter 2025 earnings call. On behalf of the management team here, thank you for joining us. For a recording of today's call or more information, please visit ir.tejonranch.com. Goodbye.

Thank you. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines.