AGM 2021

May 19, 2021

Slides

And good morning from California. Thanks for logging into the 2021 Virtual Annual Meeting for Tejon Ranch Company. I'm Barry Zoller, Senior Vice President of Corporate Communications and Investor Relations. Given the ongoing travel and group meeting challenges caused by the COVID-nineteen pandemic, the company opted again this year to hold its Annual Shareholder Meeting as a live webcast. We believe using this technology allows us to maximize the participation of our shareholders, while still maintaining an appropriate level of safety. Before we begin the official business of the day, I'd like to call your attention to a couple of logistical items. First is to make sure that you're aware of the rules of conduct set forth for this meeting. These are made available to each shareholder on Tejon Ranch's Investor Relations webpage and here on the Virtual Shareholder Meeting webpage. If you have questions you'd like to submit online, you can do so using the identified portal. You must be a shareholder who registered for the meeting to submit a question. Relevant questions regarding the company's business operations will be held for the end of the meeting. With those preliminaries out of the way, I'll now turn the meeting over to Norman Metcalfe, Chairman of the Board of Directors of Tejon Ranch Company. Mr. Metcalfe? Thank you, Barry. This is Norm Metcalfe, Chairman of the Board of the Tejon Ranch Company. Good morning, ladies and gentlemen. On behalf of all directors and management, welcome to the 2021 Annual Shareholders Meeting. I will now call the meeting to order. I am joined today in this virtual annual meeting by Greg Biali, President and Chief Executive Officer of the company. Also participating today is Mark Hardy, Tejon's Senior Vice President and General Counsel. Mark will serve as Secretary of this meeting. Alan Leida, Tejon's Executive Vice President, Chief Operating Officer and Assistant Secretary has been designated by the Board of Directors to act as Inspector of Elections today. I will now introduce the company's directors and other officers who are in attendance at today's meeting. First, the directors, Stephen Betts, Gene Fuller, Anthony Legio, Fran Morgan, Jeffrey Stack, Daniel Tisch and Michael Weiner. I'm also pleased to introduce the balance of Tejon's senior management team in attendance today Hugh McMahon, Executive Vice President, Real Estate Robert Velasquez, Senior Vice President, Finance and Chief Financial Officer Barry Zohler, Senior Vice President, Corporate Communications and Investor Relations. I would like to express my sincere appreciation to our management team and I speak for the directors in thanking them for their dedication and performance in a difficult year we've just gone through. Also present today for the webcast is Jeff Statt from Deloitte and Touche, the company's auditor. Now we will begin the business of the meeting. As indicated in the proxy statement, the items of business requiring a vote at this meeting are number 1, election of 3 directors named in the proxy statement number 2, the ratification of the appointment of Deloitte and Touche as the company's independent registered public accounting firm for the fiscal year 2023 2021 and number 3, an advisory vote to approve executive officer compensation and number 4, an amendment to the certificate of incorporation to increase the authorized shares of the company's common stock. If you have not voted or wish to change your vote, you may do now by clicking on the link provided online. Any shareholder who has already voted and does not want to change their vote need not take any further action. For those of you voting for the election of directors, you may accumulate your votes by giving 1 nominee the number of votes equal to the number of shares held multiplied by 3, the number of directors to be elected or you may distribute the same number of votes that is the number of shares held multiplied by 3 as you see fit amongst the nominees. Let me give you a moment to vote. Thank you. The online voting is now closed. We appreciate all of you Thank you, Mr. Chairman. A quorum is present. A preliminary tabulation indicated more than 22,236,000 shares constituting more than 84% of the outstanding shares of the record date are represented at this meeting in person or by proxy. Thank you. The Board currently consists of 9 directors divided into 3 classes based upon when their terms expire. The terms of the 3 current Class 1 directors expire at the 2021 Annual Meeting. The terms of the 3 current Class 2 directors will expire at the 2022 Annual Meeting and the terms of the 3 Class 3 of Directors will expire at the 2023 Annual Meeting. In connection with the 2020 Annual Meeting of Shareholders, shareholders approved amendments to our certificate of incorporation to declassify the Board over a period of 3 years. As a result, each director elected at the 2021 Annual Meeting will be elected for a 2 year term. Next year, directors elected at the 2022 Annual Meeting will be elected for a 1 year term. Beginning with the 2023 Annual Meeting, all directors will be subject to annual election for 1 year terms. The directors who were nominated by the Board of Directors and who are candidates for reelection are Gene Fuller, Jeffrey L. Stack and Michael H. Weiner. Is there a motion to nominate these individuals as directors? I so move. I second the motion. Thank you. The articles of incorporation of this company require a shareholder who intends to nominate a person for elections to the Board to provide written notice thereof to the Secretary prior to the annual meeting. Since no notice was received, I declare the nominations closed. Mr. Hardy, would you announce the results of the balloting? Mr. Chairman, all ballots have been counted and Directors Fuller, Stack, Weiner have each received the requisite number of votes to be elected as Class 1 Director. Deloitte and Touche has been ratified as the company's independent registered public accounting firm for 2021, and the amendment to the certificate of incorporation has also been approved. However, the advisory vote for the executive officer compensation has not been approved. Thank you. I declare Ms. Fuller and Messrs Stack and Weiner to have been elected as Class 1 directors that Deloitte and Touche is the company's independent registered matter on executive compensation was not approved. This includes the formal business of the meeting. Therefore, I declare the meeting now adjourned. At this time, I would like to invite Mr. Biali to share with you the progress of the company's business plan and to answer any questions you may have. Thank you, Chairman Metcalf. I appreciate it. Before I begin, let me remind you that if you registered for the meeting as a shareholder and wish to ask a question online, please use the designated portal on the web page. I'll go forward with the presentation. Our Safe Harbor statement is up there before as everything has been talked about. As the shareholders note, Tone Ranch is a diversified real estate development and agribusiness company operating in 5 business segments. The 270,000 acres of continuous land is our primary asset. Our segments are the large scale master plan communities, the commercial and industrial real estate development, the mineral resources including our oil and gas, minerals and water sales, farming and ranch operations. Our strategic goal is to create long term shareholder value by monetizing the company's land based assets principally through the real estate development, but also including our other business lines. As the shareholders recognize, the Ranch is located between Bakersfield and LA along the I-five, As growth continues to come up the I-five into the Santa Clarita area, it is moving closer from the South area. Our 4 master plans and we do consider them all master plans are the Tejon Ranch Commerce Center, which is in its implementation stage, the Grapevine Project, Mountain Village and Centennial, and I'll go into those further later. We have our clear strategic vision under the auspices of being an integrated real estate development company. Today, we have over 6,000,000 square feet already developed. We're in the queue for another 630,000 square foot spec building. And then that still leaves an additional 13,400,000 square feet of commercial industrial space development that's available to be implemented. Overall, again, we look at with the legislative approvals, 35,000 plus or minus housing units, 35,000,000 square feet of commercial. Specifically, to the Tohono Ranch Commerce Center, as I previously mentioned, we have 3,400,000 square feet to monetize going forward and is fully entitled and litigated, a Californian term, litigated, industrial park. At the present time, technically we're fully leased with only 190,000 square feet to become available at the end of June of vacant space. The Commerce Center overall operational highlights from 2021 is that, as I mentioned, the 630,000 square foot building will be under construction soon, which is a new spec building. Camping World has been added as a tenant to our joint venture building with Majestic Realty in that effort. On the retail and commercial side, we still have 318,000 square feet to monetize in the area and it continues to grow. We do have during the 2021 period and I'll go into further detail later with regards to the impacts of the COVID year that we just saw or are going through, But we have been able to convert a Del Taco into a Taco Bell and then we sold that to our TA joint venture partnership that we have. We've had 3 expansions and added into the outlet tenant mix. One of the highlights in the Commerce Center this past year was the focus on repurposing some land that was identified as Phase 2 of the outlets. We did this for a couple of reasons into residential. One was to increase the activities around the outlets by bringing more bodies around the outlets, not just solely relying on the regional traffic efforts, but we moved in that direction. And then also we need housing to grow our TRCC Commerce Park and to bring housing in. So both of those opportunities were a focus. So we move forward with planning and got a conditional use permit approved for multifamily apartment development of 4 95 units that is located just north of the outlet, it's adjacent to the outlet. This is focused also as a reoccurring revenue generator for the company. We're currently exploring capital and partnership strategies to proceed with this project. Mountain Village, which is 3,450 Homes, 750 Keys, Hotel Keys and 160,000 square feet of commercial. As we previously reported prior years, the tentative map was approved. A priority this past year was to move forward with the final map. We have submitted the final map, which includes the first two phases of Mountain Village. We have 401 units in that effort. So we are now exploring capital strategies to fund the development, but we also will expect to have the final map approved this year. Centennial, the 19,000 3333 Unit Residential Master Plan and 10,000,000 Square Feet that was approved in 2019 in LA County, basically had a year of litigation, a challenge to our CEQA. We are now currently working on the court results of that and basically are focused on resolving a couple of issues that the court has identified with greenhouse gas and fire. Grapevine, the 12,000 unit residential project with 5,100,000 square feet was reapproved in 2019 and went through its court challenge last year also. And we received a favorable ruling from the court on our CEQA challenge. So now we're awaiting a possibility of any appeal by the plaintiffs on that project. As you all know, the California development process is timely and consuming. This graph is used in our investments discussions and Investor Relations discussions and kind of it shows basically the timelines of where our projects are at in the continuum of the California process. Looking at Grapevine and Centennial still at the litigation, Mountain Village now proceeding to the final maps and of course, TRCC in the implementation stage. We've been successful in achieving these entitlements on these different projects over the years and continue to do so. And now we're to the point that we are achieving what was identified in the Ranchoide agreement as those lands that have 10% for development possibilities. As I mentioned before, COVID-nineteen pandemic did have its impacts on the company. As we had the government shutdowns, we had to temporarily close the outlets. We did and moved very quickly in negotiating with our tenants to keep them in place through this period of time. We've had we worked in a way to defer rents for our tenants. And I'm pleased to say that what we did defer in our rents, we were able to get paid back in this current year. So it was a way to keep our tenants in place and move quickly. State restrictions reduced the number of travelers along the I-five, so we did see a decrease in our fuel volume sales during that 2020 period. And also we've had an impact on our oil royalties. The Tongue Ranch Commerce Center felt the impact of some of this reduced traffic, and it's still dealt. With able to manage through that working through the pandemic in many ways. And also our tenant effort there, we move very quickly like we did in the outlet to renegotiate and defer some rents that get paid back in 2021. The company did internally do a rightsizing with our essential employees being retained on essential being laid off and we adopted further a capital preservation strategy in our efforts. It also included management having a reduced compensation for a period of time in 2020. Strong foundation though is what the company has in our diversity. The farming operations, as you can see on the chart, we added 13,900,000 in revenue in the mineral operations moving forward. As some would say, we also have impact in the coming year given the drought of some opportunities for water sales. The operating segment and revenues, as you can see, the company maintained a stability. We did deviate from the 2019 period in that real estate sale real estate revenue that was a one time building sales. So we participated in that in 2019. So that's the difference. And then also we had some production reductions and almond pricing reductions in 2020 as opposed to 2019, but our stability was still there. And we've been able to maintain a strong balance sheet based on the commitment of the team and the operations along with the Board's support to defer capital and also eliminate unneeded expense. Now we'll move into the questions. I've asked Mr. Lyda to monitor our online questions I'm prepared to answer them now. Mr. Bailey, we have a couple of questions related to Mountain Village. The first is the final maps are achieved in 2021. And if the company is successful in securing funding, when is the possible construction date? If that those assumptions are put in place, we could begin within the 1 or 2 years from that point. And tied to that, it's a question regarding Farm Village and the status of delivering Farm Village. Is this timing also related to the approval of final map? Actually half of Farm Village's approval has already been done. So we could do that go forward with that. In our efforts. We see that Farm Village is essential to move forward with the residential and mountain village. So we would see them working together in that effort. We have one last question and I can answer that one. We had a question regarding the votes on the positive and negative votes on the resolutions that were voted on. And we will be filing a Form 8 ks within the next couple of days. So that information will be available to all of our shareholders at that time. Thank you. And that's all the questions we have. Seeing that there's no further questions, let me turn things back to Chairman, Metcalfe. Thank you, Greg. And I want to thank all of you for participating today and for your continued interest in the company. We hope you will join us next year when we were able to meet you in person. Thanks again and goodbye.