TEJON RANCH CO Q1 FY2026 earnings call

• First quarter performance: Revenues were up 16% from Q1 2025, operating costs were down 14% including a $2.4 million reduction in corporate costs. 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. - Commercial real estate: Tehillon Ranch Commerce Center saw the groundbreaking of a new 510,000 square foot Class A industrial facility. TRCC industrial portfolio is 100% leased. Commercial and retail portfolio was 95% leased and the outlet, the Tejon, was 92% occupied. - MVCs: Terra Vista with 228 units was 71% leased and on track for phase one to be stabilized in summer. TRCC's momentum is accelerating with outlet traffic up 22% and sales up nearly 12% compared to last year, and similar gains at TA Petro Travel Center.

For the 12 - month trailing adjusted EBITDA by segment: Commercial real estate contributed $7.5 million, reflecting steady performance from the income - producing portfolio. Mineral resources delivered $4.8 million, supported by strength in water sales. Farming contributed $2.2 million. Ranch operations added approximately $1 million, benefiting from increased membership activity. In the first quarter of 2026, revenues were up 16% from Q1 2025, operating costs were down 14% including a $2.4 million reduction in corporate costs. 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. Commercial and industrial real estate generated $2.8 million in revenue for the quarter. Farming segment revenues were approximately $900,000 in Q1 2026 compared to $1.6 million in Q1 2025, due to lower carryover crop available for sale. Mineral resource revenues increased 36% to $3.5 million in Q1 2026, with segment operating profit more than doubling to $1 million, driven primarily by opportunistic water sales.

• Remain focused on successful lease - up of Terra Vista. - Maintain momentum at TRCC as a premier logistics and distribution hub. - Leverage diversified revenue base to deliver consistent results. - Continue to seek external capital for master plan community projects as mentioned, going through the process over the next several quarters.

Q: In prior calls and presentations, the company cited Five Point Holdings as a positive example of the long - term master plan community entitlement and development strategy. But FivePoint stock is significantly lower than prior to Valencia's development and Howard Hughes stock is down over the past 10 years. How are these two examples not an indictment on the publicly traded master plan community development model and how can you expect shareholders to buy into continuing to pursue Mountain Village and Centennial and absorb millions of costs related to these assets?

A: Hey, Justin. Thanks for your question. You know, this is a humbling job. I've thought a lot about some of the comments that I made during last quarter's call with respect to the public master plan 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 facts are the facts 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 MVCs. 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 plan community developments, 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 MLIC and with recurring cash flow. So for me, the takeaway is if we're going to pursue master plan 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 it.

Q: 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. Companies with similar passive operations trade at higher multiples. How can we justify pursuing master plan 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 three to four times the current price?

A: Okay, thanks, Vic. Thanks, David. Good comment. 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. Tejano 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 plan community project into 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.

Q: We applaud the cost structure improvements, yet the company generated just $200,000, or one cent per share of earnings. Even with capitalized interest, the company is still losing money each quarter and generating negative free cash flow. Given the recurring passive income, how can you justify holding on to non - income producing assets like Mountain Village and Centennial and pursuing the same failed strategy? Also, farming EBITDA was $185,000 but continues to cost millions per year. Why continue to accept these losses?

A: 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 allocations. 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.