Cheap Land

My recommendation: TRC - is a true deep value play in every sense and is more so than anything else in the market today. In this day and age of overpriced tech stocks and 2 bedroom homes that sell for over $300,000 throughout California, what would you say to an offer for $250/acre land? You'd probably say that I was nuts, right? Well what if I told you that not only was the land being sold at a value of $250/acre, it also comes with first rights of access to the California Aqueduct and direct access onto Southern California's main Interstate artery, I-5? What if I told you that of the 270,000 contiguous acres on this property, over 136,000 are currently developable and they sit just 60 miles north of downtown Los Angeles? In fact one major project lies in LA County! What if I told you that over the last 2+ years, direct sales of land have resulted in an AVERAGE sales price of
$25,000/acre, but that there's an 11,700 acre project called Centennial that is a master-planned residential community being developed for sale at nearly $250,000/acre! It's all true and the company is Tejon Ranch (TRC - NYSE). Even if you threw in the rest of the company for FREE, the land alone is worth in excess of $3.5 billion! This means for a company currently trading for around $35/share, it should really be $250/share. Now if this company is so wonderful, how come it isn't worth that much, right now? Well mostly because Tejon Ranch doesn't market itself as a real estate developer for very obvious tax reasons. Which company do you think would pay more in taxes, a sleepy agricultural company, or a heavy hitting real estate developer with over 100,000 developable acres within commuting distance of LA? That being said ground breaking is scheduled for the Centennial project by late
2006, so I'm going to hold on to my shares until they're worth $250. At which point I recommend we sell, but until then I don't care how low they go, I won't sell because it's worth too much to do otherwise. Buy Tejon Ranch up to $41/share and don't sell until you get 6 times your money. This is not a stock to put money in that you'll need within the next 4 years, but the company's land is worth so much that it can't help but eventually reach the correct valuation.

In closing, I realize that this stock is without risks, but I believe the long term value so outweighs any risks as to make the opportunities almost too ridiculously good to pass up. I also realize that a couple years may seem like an awful long time to hold, but I promise you'll thank me later. If you've already heard of and invested in both these companies, I hope you'll realize this is a reminder to stay the course and not give up on them until they are fully valued.