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What changed in TEJON RANCH CO's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TEJON RANCH CO's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+319 added−325 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-08)

Top changes in TEJON RANCH CO's 2023 10-K

319 paragraphs added · 325 removed · 255 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

94 edited+23 added−19 removed61 unchanged
Biggest changeCharts presented only include the segment revenues, other income components are excluded. 6 Note: Our Resort Residential reporting segment did not report revenues in the periods reported herein. 7 The following table shows the revenues from continuing operations, segment profits and identifiable assets of each of our continuing segments for the last three years: FINANCIAL INFORMATION ABOUT SEGMENTS (Amounts in thousands of dollars) Year Ended December 31, 2022 2021 2020 Revenues and Other Income Real Estate—Commercial/Industrial $ 40,515 $ 19,476 $ 9,536 Mineral Resources 21,595 20,987 10,736 Farming 13,001 11,039 13,866 Ranch operations 4,106 4,111 3,692 Segment revenues 79,217 55,613 37,830 Investment income 634 57 884 Revenues and other income 79,851 55,670 38,714 Equity in earnings of unconsolidated joint ventures 7,752 9,202 4,504 Total revenues and other income (1) $ 87,603 $ 64,872 $ 43,218 Segment Profits (Losses) and Net Income Real Estate—Commercial/Industrial $ 24,159 $ 7,523 $ 2,414 Real Estate—Resort/Residential (1,629) (1,723) (1,612) Mineral Resources 8,626 7,428 4,322 Farming (6,810) (3,077) (1,237) Ranch operations (918) (568) (1,204) Segment profits (2) 23,428 9,583 2,683 Gain on sale of real estate — — 1,331 Investment income 634 57 884 Other income (loss) 1,088 164 110 Corporate expenses (9,699) (9,843) (9,430) Income (loss) from operations before equity in earnings of unconsolidated joint ventures and income tax expense 15,451 (39) (4,422) Equity in earnings of unconsolidated joint ventures 7,752 9,202 4,504 Income before income taxes 23,203 9,163 82 Income tax expense 7,393 3,821 829 Net income (loss) 15,810 5,342 (747) Net income (loss) attributable to non-controlling interest 2 (6) (7) Net income (loss) attributable to common stockholders $ 15,808 $ 5,348 $ (740) Identifiable Assets by Segment (3) Real estate—commercial/industrial $ 74,292 $ 82,397 $ 73,317 Real estate—resort/residential 312,956 305,818 297,052 Mineral Resources 48,780 52,440 57,797 Farming 45,814 47,160 38,090 Ranch operations 1,945 2,079 2,442 Corporate 83,004 56,142 67,651 Total assets $ 566,791 $ 546,036 $ 536,349 (1) Refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional detail on segment revenues.
Biggest changeAll of these efforts are supported by diverse revenue streams generated from other operations including: farming, mineral resources, ranch operations, and our various joint ventures. 6 7 Percentage of Total Revenue 1 by Segment: 1 Charts present segment revenues and equity in earnings of unconsolidated joint ventures, which has been included in real estate, while other income components are excluded. 8 Note: Our Resort Residential reporting segment did not report revenues in the periods reported herein. 9 The following table shows the revenues from continuing operations, segment profits and identifiable assets of each of our continuing segments for the last three years: FINANCIAL INFORMATION ABOUT SEGMENTS (Amounts in thousands of dollars) Year Ended December 31, 2023 2022 2021 Revenues and Other Income Real Estate—commercial/industrial $ 11,758 $ 40,515 $ 19,476 Mineral resources 14,524 21,595 20,987 Farming 13,950 13,001 11,039 Ranch operations 4,507 4,106 4,111 Segment revenues 44,739 79,217 55,613 Investment income 2,557 634 57 Revenues and other income 47,296 79,851 55,670 Equity in earnings of unconsolidated joint ventures 6,868 7,752 9,202 Total revenues and other income (1) $ 54,164 $ 87,603 $ 64,872 Segment Profits (Losses) and Net Income Real Estate—commercial/industrial $ 3,705 $ 24,159 $ 7,523 Real Estate—resort/residential (1,528) (1,629) (1,723) Mineral resources 5,839 8,626 7,428 Farming (1,307) (6,810) (3,077) Ranch operations (536) (918) (568) Segment profits (2) 6,173 23,428 9,583 Investment income 2,557 634 57 Other (loss) income (138) 1,088 164 Corporate expenses (9,872) (9,699) (9,843) (Loss) income from operations before equity in earnings of unconsolidated joint ventures and income tax expense (1,280) 15,451 (39) Equity in earnings of unconsolidated joint ventures 6,868 7,752 9,202 Income before income taxes 5,588 23,203 9,163 Income tax expense 2,323 7,393 3,821 Net income 3,265 15,810 5,342 Net income (loss) attributable to non-controlling interest — 2 (6) Net income attributable to common stockholders $ 3,265 $ 15,808 $ 5,348 Identifiable Assets by Segment (3) Real Estate—commercial/industrial $ 73,105 $ 74,292 $ 82,397 Real Estate—resort/residential 321,216 312,956 305,818 Mineral resources 52,068 48,780 52,440 Farming 52,094 45,814 47,160 Ranch operations 2,072 1,945 2,079 Corporate 76,968 83,004 56,142 Total assets $ 577,523 $ 566,791 $ 546,036 (1) Refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional detail on segment revenues.
We also face competition within Northern Los Angeles, which is comprised of the San Fernando Valley and Santa Clarita Valley along with areas north of us in the San Joaquin Valley of California. Strong demand for large distribution facilities is driving development farther east in search for large, entitled parcels.
We also face competition within Northern Los Angeles, which is comprised of the San Fernando Valley and Santa Clarita Valley along with areas north of us in the San Joaquin Valley of California. Strong demand for large distribution facilities is driving development farther east in the search for large, entitled parcels.
See discussion of water contract entitlement and long-term outlook for water supply under Item 2, “Properties.” Also see Note 6. (Long-Term Water Assets) of the Notes to Consolidated Financial Statements for additional information regarding our water assets. 22 Ranch Operations Our ranch operations segment consists of game management revenues and ancillary land uses such as grazing leases and filming.
See discussion of water contract entitlement and long-term outlook for water supply under Item 2, “Properties.” Also see Note 6 (Long-Term Water Assets) of the Notes to Consolidated Financial Statements for additional information regarding our water assets. Ranch Operations Our ranch operations segment consists of game management revenues and ancillary land uses, such as grazing leases and filming.
The developments in these areas will be providing similar housing product as our developments. The principal factors of competition in this industry are product segmentation, pricing of product, amenities offered, and location. We will attempt to differentiate our developments through our unique setting, land planning and different product offerings.
The developments in these areas will be providing similar housing products as our developments. The principal factors of competition in this industry are product segmentation, pricing of product, amenities offered, and location. We will attempt to differentiate our developments through our unique setting, land planning and different product offerings.
The term of this lease expires in 2026, however National has options to extend the lease until 2095. We also lease 521 acres to Granite Construction and Griffith Construction for the mining of rock and aggregate product that is used in construction of roads and bridges.
The term of this lease expires in 2026, however National has options to extend the lease until 2095. 23 We also lease 521 acres to Granite Construction and Griffith Construction for the mining of rock and aggregate product that is used in construction of roads and bridges.
Its receipt and review by each employee is documented and verified quarterly. None of our employees are covered by a collective bargaining agreement. Diversity, Equity and Inclusion Our policies are designed to promote fairness, equal opportunities, and diversity within the Company.
Its receipt and review by each employee are documented and verified quarterly. None of our employees are covered by a collective bargaining agreement. Diversity, Equity and Inclusion Our policies are designed to promote fairness, equal opportunities, and diversity within the Company.
The following table summarizes total entitlements for TRCC as of December 31, 2022: (in square feet) Industrial Commercial Retail Total entitlements received 19,300,941 956,309 Total entitlements used 8,201,864 674,246 Entitlements available 11,099,077 282,063 We believe we are well positioned for long-term value creation as we continue with our current development plans at TRCC.
The following table summarizes total entitlements for TRCC as of December 31, 2023: (in square feet) Industrial Commercial Retail Total entitlements received 19,300,941 956,309 Total entitlements used 8,201,864 674,246 Entitlements available 11,099,077 282,063 We believe we are well positioned for long-term value creation as we continue with our current development plans at TRCC.
TRCC sits on both sides of Interstate 5, giving distributors immediate access to the west coast’s principal north-south goods movement corridor. 10 TRCC has a Foreign Trade Zone, or FTZ, designation, of approximately 1,094 acres, which allows a user within the FTZ to secure the many benefits and cost reductions associated with streamlined movement of goods in and out of a trade zone.
TRCC sits on both sides of Interstate 5, giving distributors immediate access to the west coast’s principal north-south goods movement corridor. 12 TRCC has a Foreign Trade Zone, or FTZ, designation, of approximately 1,094 acres, which allows a user within the FTZ to secure the many benefits and cost reductions associated with streamlined movement of goods in and out of a trade zone.
The EDIP provides incentives such as assistance in obtaining state tax incentives, building supporting infrastructure, and workforce development. Recent Developments For a discussion of business developments that occurred in 2022, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” later in this report. Certain summarized highlights are contained below.
The EDIP provides incentives such as assistance in obtaining state tax incentives, building supporting infrastructure, and workforce development. Recent Developments For a discussion of business developments that occurred in 2023, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” later in this report. Certain summarized highlights are contained below.
Centennial is entitled for 19,333 housing units, including nearly 3,500 affordable units, and 10.1 million square feet of commercial development. Centennial will incorporate business districts, schools, retail and entertainment centers, medical facilities and other commercial office and light industrial businesses that, when complete, will create a substantial number of jobs.
Centennial is entitled for 19,333 housing units, including nearly 3,500 affordable units, and 10.1 million square feet of commercial development. Centennial will incorporate business districts, schools, retail and entertainment centers, medical facilities and other commercial offices and light industrial businesses that, when complete, will create a substantial number of jobs.
See Note 14 (Commitments and Contingencies) of the Notes to Consolidated Financial Statement for further discussion. 19 Grapevine at Tejon Ranch Grapevine is a mixed-use master planned community encompassing 8,010 acres of our lands within Kern County located on the San Joaquin Valley floor, adjacent to TRCC.
See Note 14 (Commitments and Contingencies) of the Notes to Consolidated Financial Statement for further discussion. 21 Grapevine at Tejon Ranch Grapevine is a mixed-use master planned community encompassing 8,010 acres of our lands within Kern County located on the San Joaquin Valley floor, adjacent to TRCC.
Within game management, we operate our High Desert Hunt Club, a premier upland bird hunting club. The High Desert Hunt Club offers over 6,400 acres and 35 hunting fields, each field providing different terrain and challenges. The hunting season runs from mid-October through March. We also sell individual hunting packages as well as seasonal hunting memberships.
Within game management, we operate our High Desert Hunt Club, a premier upland bird hunting club. The High Desert Hunt Club offers over 6,400 acres and 35 hunting fields, with each field providing different terrain and challenges. The hunting season runs from October through March. We also sell individual hunting packages as well as seasonal hunting memberships.
Litigation by environmental and other special interest groups have been a primary cause of delays and increased costs for our real estate development projects as well as other projects in California. For discussion on legal matters pertaining to our developments, see Note 14 (Commitments and Contingencies) of the Notes to Consolidated Financial Statements.
Litigation by environmental and other special interest groups has been a primary cause of delays and increased costs for our real estate development projects as well as other projects in California. For discussion on legal matters pertaining to our developments, see Note 14 (Commitments and Contingencies) of the Notes to Consolidated Financial Statements.
We have additional water resources, such as groundwater and surface sources, and those of the water districts we are in, that allow us to have sufficient water for our farming needs. It is too early in the year to determine the impact of 2023 water supplies on 2023 California crop production for almonds, pistachios, and wine grapes.
We have additional water resources, such as groundwater and surface sources, and those of the water districts we are in that allow us to have sufficient water for our farming needs. It is too early in the year to determine the impact of 2024 water supplies on 2024 California crop production for almonds, pistachios, and wine grapes.
Additionally, TRCC is in a position to capture tenant awareness due to our ability to provide a competitive alternative for users in the Inland Empire and the Santa Clarita Valley. 15 Real Estate - Resort/Residential Our resort/residential segment activities include land entitlement, land planning and pre-construction engineering, and land stewardship and conservation activities.
Additionally, TRCC is in a position to capture tenant awareness due to our ability to provide a competitive alternative for users in the Inland Empire and the Santa Clarita Valley. 17 Real Estate - Resort/Residential Our resort/residential segment activities include land entitlement, land planning and pre-construction engineering, and land stewardship and conservation activities.
(2) Segment profits are revenues less operating expenses, excluding investment income and expense, corporate expenses, equity in earnings of unconsolidated joint ventures, and income taxes. (3) Total Assets by Segment include both assets directly identified with those operations and an allocable share of jointly used assets.
(2) Segment profits are revenues less operating expenses, excluding investment income and expense, corporate expenses, equity in earnings of unconsolidated joint ventures, and income taxes. (3) Identifiable Assets by Segment include both assets directly identified with those operations and an allocable share of jointly used assets.
Interstate 5, one of the nation’s most heavily traveled freeways, brings in excess of 80,000 vehicles per day through our land, which includes 16 miles of Interstate 5 frontage on each side of the freeway and the commercial land surrounding three interchanges.
Interstate 5, one of the nation’s most heavily traveled freeways, brings in excess of 89,000 vehicles per day through our land, which includes 16 miles of Interstate 5 frontage on each side of the freeway and the commercial land surrounding three interchanges.
The uncertainty of estimated costs to completion is compounded by the potential impact of inflation, which will fluctuate with the equally uncertain completion dates for our projects. 16 17 Mountain Village at Tejon Ranch MV is planned to be an exclusive, low-density, resort-based community that will provide its owners and guests with a wide variety of recreational opportunities, lodging and spa facilities, putting greens, a range of housing options, and other exclusive services and amenities that are designed to distinguish MV as the resort community of choice for the Southern California market.
The uncertainty of estimated costs to completion is compounded by the potential impact of inflation, which will fluctuate with the equally uncertain completion dates for our projects. 18 19 Mountain Village at Tejon Ranch MV is planned to be an exclusive, low-density, resort-based community that will provide its owners and guests with a wide variety of recreational opportunities, lodging and spa facilities, putting greens, a range of housing options, and other exclusive services and amenities that are designed to distinguish MV as the resort community of choice for the Southern California market.
We manage the farming of alfalfa and forage mix on 626 acres in the Antelope Valley, and we periodically lease 530 acres of land that is used for the growing of vegetables which can also be used for the development of permanent crops such as almonds.
We manage the farming of alfalfa and forage mix on 120 acres in the Antelope Valley, and we periodically lease 530 acres of land that is used for the growing of vegetables which can also be used for the development of permanent crops, such as almonds.
Immediately northeast of Grapevine is Grapevine North, a 7,655-acre development area, that is currently used for agricultural purposes. Identified as a development area in the Tejon Ranch Conservation and Land Use Agreement, Grapevine North presents a significant opportunity for future development.
Immediately northeast of Grapevine is Grapevine North, a 7,655-acre development area, which is currently used for agricultural purposes. Identified as a development area in the Tejon Ranch Conservation and Land Use Agreement, Grapevine North presents a significant opportunity for future development.
In 2019, the Los Angeles County Board of Supervisors' affirmed their final approval of Centennial project, and Climate Resolve and CBD/California Native Plant Society, or CNPS, separately filed actions in Los Angeles Superior Court objecting to the Centennial project.
In 2019, the Los Angeles County Board of Supervisors affirmed their final approval of the Centennial project, and Climate Resolve and CBD/California Native Plant Society, or CNPS, separately filed actions in Los Angeles Superior Court objecting to the Centennial project.
Corporate assets consist of cash and cash equivalents, refundable and deferred income taxes, land, buildings, and improvements. 8 Real Estate Development Overview Our real estate operations consist of the following activities: real estate development, commercial land sales and leasing, land planning and entitlement, and conservation.
Corporate assets consist of cash and cash equivalents, refundable and deferred income taxes, land, buildings, and improvements. 10 Real Estate Development Overview Our real estate operations consist of the following activities: real estate development, commercial land sales and leasing, land planning and entitlement, and conservation.
TRPFFA, through bond sales, will reimburse the Company for qualifying infrastructure costs at TRCC. The above costs have increased as a result of inflationary factors on things such as labor, fuel, and material costs.
TRPFFA, through bond sales, will reimburse the Company for qualifying infrastructure costs at TRCC. The above costs have increased as a result of inflationary factors on expenditures such as labor, fuel, and material costs.
Prices for oil, natural gas fluctuate in response to relatively minor changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control, such as: changes in domestic and global supply and demand, domestic and global inventory levels, and political and economic conditions, including international disputes such as current conflicts in Eastern Europe.
Prices for oil and natural gas fluctuate in response to relatively minor changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control, such as: changes in domestic and global supply and demand, domestic and global inventory levels, and political and economic conditions, including international disputes such as current conflicts in the Middle East and Eastern Europe.
A recent analysis conducted for the Company by Dudek Environmental Service's determined that this acreage effectively sequesters 3.3 million tons of carbon. That equals the volume of carbon produced in a single year by 2.5 million passenger vehicles, approximately 5% of California’s 2022 passenger vehicle fleet. • Solar power is used significantly within TRCC.
An analysis conducted in 2020 for the Company by Dudek Environmental Service's determined that this acreage effectively sequesters 3.3 million tons of carbon. That equals the volume of carbon produced in a single year by 2.5 million passenger vehicles, approximately 5% of California’s 2022 passenger vehicle fleet. • Solar power is used significantly within TRCC.
In addition, the Company leases several microwave repeater locations, radio and cellular transmitter sites, fiber optic cable routes, and 32 acres of land to Pastoria Energy Facility, L.L.C., or PEF, for an electric power plant. 11 The following table summarizes information with respect to lease expirations for our consolidated entities as of December 31, 2022.
In addition, the Company leases several microwave repeater locations, radio and cellular transmitter sites, fiber optic cable routes, and 32 acres of land to Pastoria Energy Facility, L.L.C., or PEF, for an electric power plant. 13 The following table summarizes information with respect to lease expirations for our consolidated entities as of December 31, 2023.
Approximately 256,000 acres are used for two grazing leases, which account for 29% of total revenues from ranch operations at December 31, 2022. Game management offers a wide variety of guided big game hunts, including trophy Rocky Mountain elk, deer, turkey and wild pig. We offer guided hunts and memberships for both the Spring and Fall hunting seasons.
Approximately 256,000 acres are used for two grazing leases, which account for 36% of total revenues from ranch operations at December 31, 2023. Game management offers a wide variety of guided big game hunts, including trophy Rocky Mountain elk, deer, turkey and wild pig. We offer guided hunts and memberships for both the Spring and Fall hunting seasons.
Current entitlements available at TRCC can facilitate alternative uses and further increase the per acre value. 13 14 Commercial/industrial Real Estate Development Market Overview The logistics operators currently located within TRCC have demonstrated success in serving all of California and the western region of the United States, and we are building on their success in our marketing efforts.
Current entitlements available at TRCC can facilitate alternative uses and further increase the per-acre value. 15 16 Commercial/industrial Real Estate Development Market Overview The logistics operators currently located within TRCC have demonstrated success in serving all of California and the western region of the United States, and we are building on their success in our marketing efforts.
Tenants in these geographic areas are typically users of smaller facilities, but often are looking to expand operations and cannot find larger size buildings in these markets. We are also targeting larger users in the Inland Empire that are looking to relocate to lower their operating costs.
Tenants in these geographic areas are typically users of smaller facilities, but often are looking to expand operations and cannot find larger size buildings in these markets. We are also targeting larger users in the Inland Empire, east of Los Angeles, that are looking to relocate to lower their operating costs.
We enter into joint ventures as a means to facilitate the development of portions of our land. 3 Business Objectives and Strategies Our primary business objective is to maximize long-term shareholder value through the monetization of our land-based assets.
We enter into joint ventures as a means to facilitate the development of portions of our land. 4 Business Objectives and Strategies Our primary business objective is to maximize long-term shareholder value through the improvement and monetization of our land-based assets.
Any document we file with the Securities and Exchange Commission, or SEC, may be inspected, without charge, at the SEC’s website: http://www.sec.gov. Information about our Executive Officers The following table shows each of our executive officers and the offices held as of March 8, 2023, the period the offices have been held, and the age of the executive officer.
Any document we file with the Securities and Exchange Commission, or SEC, may be inspected, without charge, at the SEC’s website: http://www.sec.gov. Information about our Executive Officers The following table shows each of our executive officers and the offices held as of March 6, 2024, the period the offices have been held, and the age of the executive officer.
This allows us to combine our resources with other real estate companies and gain greater access to capital, share in the risks of real estate developments and share in the operating expenses. More importantly, it allows us to better manage the deployment of our capital and increase our leasing portfolio.
This allows us to combine our resources with other real estate companies and gain greater access to capital, share in the risks of real estate developments and share in the operating expenses. More importantly, it allows us to better manage the deployment of our capital for entitlement and litigation efforts, and increase our leasing portfolio.
The royalty revenues we receive under this arrangement are based upon the amount of product produced at these sites. The Granite site has reached its economic life and will undergo restoration activities during 2023.
The royalty revenues we receive under this arrangement are based upon the amount of product produced at these sites. The Granite site has reached the end of its economic life and began restoration activities during 2023.
At December 31, 2022, game management accounts for 42% of the total revenue from ranch operations. In addition, the Ranch Operations segment manages, and includes the expenses for the upkeep, maintenance, and security of all 270,000 acres of land.
At December 31, 2023, game management accounts for 43% of the total revenue from ranch operations. In addition, the Ranch Operations segment manages, and includes the expenses for the upkeep, maintenance, and security, of all 270,000 acres of land.
For example, the Company installed a solar covered parking structure at the Outlets at Tejon. The structure covers 1.85 acres and is projected to offset 83% of the center’s electricity needs for shared spaces and produce 1,076,000 kWh of clean energy every year.
For example, the Company installed a solar-covered parking structure at the Outlets at Tejon. The structure covers 1.85 acres and is projected to reduce by approximately 83% the center’s electricity consumption needs for shared spaces and produce approximately 1,076,000 kWh of clean energy every year.
Organization Tejon Ranch Co. is a Delaware corporation incorporated in 1987 to succeed the business operated as a California corporation since 1936. 24 Human Capital At December 31, 2022, we had 78 full-time employees. We believe our employees are among our most important resources and are critical to our continued success.
Organization Tejon Ranch Co. is a Delaware corporation incorporated in 1987 to succeed the business operated as a California corporation since 1936. 26 Human Capital At December 31, 2023, we had 87 full-time employees. We believe our employees are among our most important resources and are critical to our continued success.
TRCC Residential will be located on a 27-acre site located immediately north of the Outlets at Tejon. TRCC Residential will be the first residential community at TRCC and for the Company, providing an ideal housing option for the thousands of employees currently working at the various distribution centers, retailers and fast-food restaurants at TRCC.
The multi-family apartment community will be located on a 27-acre site located immediately north of the Outlets at Tejon. Terra Vista at Tejon will be the first residential community at TRCC and for the Company, providing an ideal housing option for the thousands of employees currently working at the various distribution centers, retailers, hotels and fast-food restaurants at TRCC.
Customers Our PEF power plant lease accounted for 6% of total revenues in 2022, 8% in 2021 and 12% in 2020. No other recurring customer represents 5% or more of our revenues in 2022, 2021 and 2020.
Customers Our PEF power plant lease accounted for 11% of total revenues in 2023, 6% in 2022 and 8% in 2021. No other recurring customer represents 5% or more of our revenues in 2023, 2022 and 2021.
(3) Total estimated project costs are difficult to accurately forecast with any certainty at this time due to finalization of entitlement and mapping processes, as well as final engineering for the developments, and capital funding structure selected. Dollars presented in thousands.
(3) As total project costs are difficult to accurately forecast with any certainty at this time due to finalization of entitlement and mapping processes, as well as final engineering for the developments, and capital funding structure selected, only costs incurred to date has been presented. Dollars presented in thousands.
The project is being developed by Centennial Founders, LLC, a consolidated joint venture in which we have a 93.27% ownership interest as of December 31, 2022. Centennial is envisioned to be an ecologically friendly community that will achieve a jobs-housing balance.
The project is being developed by Centennial Founders, LLC, a consolidated joint venture in which we have a 93.46% ownership interest as of December 31, 2023. Centennial is envisioned to be an ecologically friendly community that will achieve a job-housing balance.
At Centennial, at least 50% of the energy supply is intended to be 23 produced by on-site renewable sources, and natural gas use in the community will be limited to essential commercial uses only, significantly reducing emissions from residential and commercial natural gas. • At Grapevine, like Centennial, 50% or more of its energy supply is intended to be produced on site by renewable sources, and natural gas will not be installed in homes to further reduce carbon emissions. • All homes in Mountain Village will feature roof-top photovoltaic solar arrays and battery energy storage systems where required by code.
At Centennial, at least 50% of the energy supply is intended to be produced by on-site renewable sources, and natural gas use in the community will be limited to essential commercial uses only. • At Grapevine, like Centennial, 50% or more of its energy supply is intended to be produced on site by renewable sources, and natural gas will not be installed in homes. • All homes in Mountain Village will feature roof-top photovoltaic solar arrays and battery energy storage systems, where required by code.
Such financing opportunities could come from a variety of sources, such as joint ventures with financial partners, debt financing, or the Company’s issuance of common stock. 18 Centennial at Tejon Ranch The Centennial development is a mixed-use master planned community development encompassing 12,323 acres of our land within Los Angeles County.
Such financing opportunities could come from a variety of sources, such as joint ventures with financial partners, debt financing, or equity financing. 20 Centennial at Tejon Ranch The Centennial development is a mixed-use master planned community development encompassing 12,323 acres of our land within Los Angeles County.
Our share of production, based upon average royalty rates during the last three years, has been 36, 29, and 37 barrels of oil per day for 2022, 2021, and 2020, respectively. There are 306 active oil wells located on the leased land as of December 31, 2022. Royalty rates on our leases averaged approximately 14% of oil production in 2022.
Our share of production, based upon average royalty rates during the last three years, has been 34, 36, and 29 barrels of oil per day for 2023, 2022, and 2021, respectively. There are 305 active oil wells located on the leased land as of December 31, 2023. Royalty rates on our leases averaged approximately 13% of oil production in 2023.
Construction On March 29, 2022, we formed TRC-MRC 5 LLC, a joint venture with Majestic Realty Co., or Majestic, a Los Angeles-based commercial industrial developer, to pursue the development, construction, lease-up, and management of an approximately 446,400 square foot industrial building located within TRCC-East. Construction began in 2023 with completion expected later this year.
Construction On March 29, 2022, we formed TRC-MRC 5 LLC, a joint venture with Majestic Realty Co., or Majestic, a Los Angeles-based commercial industrial developer, to pursue the development, construction, lease-up, and management of an approximately 446,400 square foot industrial building located within TRCC-East. Construction of the building was completed in December 2023.
For Mountain Village, the Company has funded the replacement of outdated agricultural engines to provide emissions mitigation for the initial phase of development. • Nearly two decades ago, the Company helped establish and has continuously supported Valley Clean Air Now, or VCAN, a non-profit, 501(c)(3) public charity that advances quantifiable and voluntary solutions addressing air pollution in California’s San Joaquin Valley, a region with some of the worst air quality and highest poverty levels in the United States.
For Mountain Village, the Company has funded the replacement of outdated agricultural engines to help mitigate air emissions for the initial phase of development. • Two decades ago, the Company helped establish and has continued to support Valley Clean Air Now, or ValleyCAN, a non-profit, 501(c)(3) public charity that advances quantifiable and voluntary solutions addressing air pollution in California’s San Joaquin Valley, a region with some of the worst air quality and highest poverty levels in the United States.
The strategic plan for real estate focuses on development opportunities along the Interstate 5 and Highway 138 corridors, which includes TRCC in Kern County, Centennial, a mixed-use master planned community on our land in Los Angeles County, MV, a resort and residential community in Kern County, and Grapevine, a mixed-use master planned community on our land in Kern County.
The strategic plan for real estate focuses on development opportunities along the Interstate 5 and Highway 138 corridors, which includes TRCC; MV, a resort and residential community; Grapevine, a mixed-use master planned community in Kern County; Grapevine North, a 7,655-acre development area; and Centennial, a mixed-use master planned community in Los Angeles County.
We historically have not had material environmental liabilities. Environmental Sustainability Environmental stewardship, or sustainability, is one of Tejon Ranch Co.’s core values, along with quality and visionary innovation and development. This commitment to sustainability manifests itself in many ways throughout the Company and its operations.
We historically have not had material environmental liabilities. Environmental Sustainability Environmental stewardship and sustainability are core values at Tejon Ranch Co., along with quality, visionary innovation and development. This commitment to sustainability manifests itself in many ways throughout the Company and its operations.
As of December 31, 2022, our industrial portfolio, through our joint venture partnerships, consisted of 2.3 million square feet of gross leasable area, or GLA, and our TRCC commercial portfolio consisted of 620,907 square feet of GLA. As of December 31, 2022, our industrial portfolio was 100% leased and our commercial portfolio was 89% leased.
As of December 31, 2023, our industrial portfolio, through our joint venture partnerships, consisted of 2.8 million square feet of gross leasable area, or GLA, and our TRCC commercial portfolio consisted of 620,907 square feet of GLA. As of December 31, 2023, our industrial portfolio was 100% leased and our commercial portfolio was 96% leased.
MV will compete generally for discretionary dollars that consumers will allocate to recreational and residential homes. 20 The following is a summary of the Company's residential real estate developments as of December 31, 2022: Community: Mountain Village Grapevine Centennial Resort Location: Kern County Kern County Los Angeles County Residential Project Status 1 : Entitled Entitled Entitled Total Entitlement Area (acres): 26,417 8,010 12,323 46,750 Housing Units: 3,450 12,000 19,333 34,783 Commercial Development (sqft) 2 : 160,000 5,100,000 10,100,000 15,360,000 Open Areas (acres): 21,335 3,367 5,624 30,326 Costs to Date 3 : $153,156 $39,273 $115,221 $307,650 (1) Estimated completion anticipated to be 25 years, or longer, from commencement of construction.
MV will compete generally for discretionary dollars that consumers will allocate to recreational and residential homes. 22 The following is a summary of the Company's residential real estate developments as of December 31, 2023: Community: Mountain Village Centennial Grapevine Resort Location: Kern County Los Angeles County Kern County Residential Project Status 1 : Entitled Entitled Entitled Total Entitlement Area (acres): 26,417 12,323 8,010 46,750 Housing Units: 3,450 19,333 12,000 34,783 Commercial Development (sqft) 2 : 160,000 10,100,000 5,100,000 15,360,000 Open Areas (acres): 21,335 5,624 3,367 30,326 Costs to Date 3 : $155,168 $119,788 $40,716 $315,672 (1) Estimated completion anticipated to be 25 years, or longer, from commencement of construction.
In 2022, we sold 40% of our grape crop to one winery, 38% to a second winery and the remainder to two other customers. These sales are under contracts ranging from one to eight years. In 2022, our almonds were sold to various commercial buyers, with the largest buyer accounting for 34% of our crop.
In 2023, we sold 41% of our grape crop to one winery, 37% to a second winery and the remainder to two other customers. These sales are under contracts ranging from one to eight years. In 2023, our almonds were sold to various commercial buyers, with the largest buyer accounting for 35% of our crop.
The approved CUP authorize the Company to develop up to a maximum of 495 multi-family residences, in thirteen apartment buildings, as well as approximately 6,500 square feet of community amenity space and 8,000 square feet of community serving retail, collectively known as TRCC Residential.
The approved CUP authorizes the Company to develop up to a maximum of 495 multi-family residences, in thirteen apartment buildings, as well as approximately 6,500 square feet of community amenity space and 8,000 square feet of community serving retail, collectively known as Terra Vista at Tejon.
With access to markets of over 40 million people for next-day delivery service, they are also demonstrating success with e-commerce fulfillment. We believe that our ability to provide fully-entitled, shovel-ready land parcels to support buildings of any size, provides us with a marketing advantage.
With access to markets of over 40 million people for next-day delivery service, they are also demonstrating success with e-commerce fulfillment. We believe that our ability to provide fully-entitled, shovel-ready land parcels to support buildings ranging from 10,000 square feet to more than two million square feet, provides us with a marketing advantage.
Farming Operations In the San Joaquin Valley, we farm permanent crops including the following acreage: wine grapes— 1,036 (849 in production and 187 under development); almonds—2,235 (1,487 in production and 748 under development); and pistachios—932 (all in production).
Farming Operations In the San Joaquin Valley, we farm permanent crops including the following acreage: wine grapes— 1,036 (all in production); almonds—2,108 (1,652 in production and 456 under development); and pistachios—932 (all in production).
We do not engage in any oil exploration or extraction activities. As of December 31, 2022, 10,332 acres were committed to producing oil and gas leases from which the operators produced and sold approximately 92,788 barrels of oil and 57,000 MCF (each MCF being 1,000 cubic feet) of dry gas during 2022.
We do not engage in any oil exploration or extraction activities. As of December 31, 2023, 12,015 acres were committed to producing oil and gas leases from which the operators produced and sold approximately 94,780 barrels of oil and 62,000 MCF (each MCF being 1,000 cubic feet) of dry gas during 2023.
Lyda has been employed by us since 1990, initially serving as Vice President, Finance and Treasurer. He was elected Assistant Secretary in 1995 and Chief Financial Officer in 1999. Mr. Lyda was promoted to Senior Vice President in 2008, and Executive Vice President in 2012. Mr.
Bielli worked with Newland Communities from 2006 through August 2013. 27 Mr. Lyda has been employed by us since 1990, initially serving as Vice President, Finance and Treasurer. He was elected Assistant Secretary in 1995 and Chief Financial Officer in 1999. Mr. Lyda was promoted to Senior Vice President in 2008, and Executive Vice President in 2012. Mr.
A lease has been secured, in advance of construction, for the entirety of this space by Sunrise Brands, a leading designer, producer, distributor, and retailer of both branded and private-label apparel.
A lease was secured, in advance of construction, for the entirety of this space by Sunrise Brands, a leading designer, producer, distributor, and retailer of both branded and private-label apparel. The tenant took possession of the property in January 2024.
Pricing for nut and grape crops are particularly sensitive to the size of each year’s world crop and demand for those crops. The U.S. almond industry projects 2022 yields to be about 2.6 billion pounds compared to 2.9 billion pounds during the previous year.
Pricing for nut and grape crops is particularly sensitive to the size of each year’s world crop, prior year inventory carry forward, and demand for those crops. The U.S. almond industry projects 2023 yields to be about 2.40 billion pounds compared to 2.57 billion pounds during the previous year.
These measures include encouraging and facilitating the use of emission-free electric vehicles through vehicle purchase incentives and the installation of 30,000 EV chargers located within both residential and commercial sections of the community, at TRCC, and within disadvantaged communities in Southern California.
Centennial is designed to include electric vehicles, through vehicle purchase incentives, and the installation of 30,000 EV chargers located within both residential and commercial sections of the community, at TRCC, and within disadvantaged communities in Southern California.
These joint ventures currently operate four fully leased industrial buildings occupying over 2.3 million rentable square feet, and have a 446,400 square foot industrial building under construction. We are involved in one joint venture with Rockefeller Development Group, or RDG, as of December 31, 2022. The TRCC/Rock Outlet Center LLC operates the Outlets at Tejon.
These joint ventures currently operate five fully leased industrial buildings occupying over 2.8 million rentable square feet. 14 We are involved in a joint venture with Rockefeller Development Group, or RDG, as of December 31, 2023. The TRCC/Rock Outlet Center LLC operates the Outlets at Tejon.
As of 2022, the SJVUAPCD had fully offset current air emissions at TRCC-East, as well as future emissions projected to occur through full build-out of the project.
As of 2024, the SJVUAPCD had fully eliminated air emissions for fiscal 2023 at TRCC-East, as well as future emissions projected to occur through full build-out of the project.
We do not believe that we would be adversely affected by the loss of any or all of these buyers because of the markets for these commodities, the large number of buyers that would be available to us, and the fact that the prices for these commodities do not vary based on the identity of the buyer or the size of the contract.
We believe that we would not be adversely affected by the loss of any or all of these buyers, because of the markets for these commodities, the large number of buyers that would be available to us, and the fact that the prices for these commodities do not vary based on the identity of the buyer or the size of the contract. 24 At this time, the State Department of Water Resources has announced that the estimated water supply for 2024 will be at 15% of full entitlement.
Centennial at Tejon Ranch, or Centennial, had entitlements approved in 2018, and received legislative approvals in 2019 from the Los Angeles County Board of Supervisors. The approvals were litigated in May 2019 and the Company has since worked on addressing the ongoing litigation.
Centennial at Tejon Ranch, or Centennial, had entitlements approved in 2018, and received legislative approvals in 2019 from the Los Angeles County Board of Supervisors.
We also have a royalty arrangement with Granite Construction tied to land previously owned by the Company that began operations in 2021 and is now paying royalty payments which will more than offset the payments received from the old Granite site. 21 Water sales opportunities each year are impacted by rain and snowfall volume along with California State Water Project, or SWP, allocations.
We also have a royalty arrangement with Granite Construction tied to land previously owned by the Company that began operations in 2021 and is now paying royalty payments, which will more than offset the payments received from the old Granite site.
In addition, the IKEA distribution center at TRCC features a 1.8 MW photovoltaic solar array covering 370,000 square feet of the warehouse’s rooftop.
In addition, the IKEA distribution center at TRCC features a 1.8 MW photovoltaic solar array covering 370,000 square feet of the warehouse’s rooftop. The system handles the power needs of IKEA’s distribution center and provides power to the electrical grid as well.
The principal factors of competition in this industry are price, availability of labor, proximity to the port complexes of Los Angeles and Long Beach and customer base. A potential disadvantage to our development strategy is our distance from the ports of Los Angeles and Long Beach in comparison to the warehouses and distribution centers located in the West Inland Empire.
A potential disadvantage to our development strategy is our distance from the ports of Los Angeles and Long Beach in comparison to the warehouses and distribution centers located in the West Inland Empire.
TRCC Entitlements The following is a summary of the Company's commercial, retail and industrial real estate developments as of December 31, 2022: ($ in thousands) Project Cost to Date Estimated Cost to Complete Total Estimated Cost at Completion Estimated Completion Date Tejon Ranch Commerce Center $ 97,734 $ 100,589 $ 198,323 TBD Less: Reimbursements from TRPFFA 1 82,976 48,846 131,822 TBD TRCC Development Costs, net $ 14,758 $ 51,743 $ 66,501 1 The Tejon Ranch Public Facilities Financing Authority, or TRPFFA, is a joint powers authority formed by Kern County and Tejon-Castac Water District, or TCWD, to finance public infrastructure within the Company’s Kern County developments.
TRCC Entitlements The following is a summary of the Company's commercial, retail and industrial real estate developments as of December 31, 2023: ($ in thousands) Project Cost to Date Estimated Cost to Complete Total Estimated Cost at Completion Estimated Completion Date Tejon Ranch Commerce Center $ 101,421 $ 98,206 $ 199,627 TBD Less: Reimbursements from TRPFFA 1 86,276 45,546 131,822 TBD TRCC Development Costs, net $ 15,145 $ 52,660 $ 67,805 1 The Tejon Ranch Public Facilities Financing Authority, or TRPFFA, is a joint powers authority formed by Kern County and Tejon-Castac Water District, or TCWD, to finance public infrastructure within the Company’s Kern County developments.
Name Office Held since Age Gregory S. Bielli President and Chief Executive Officer, Director 2013 62 Allen E. Lyda Executive Vice President and Chief Operating Officer/Chief Financial Officer 2022 65 Hugh McMahon Executive Vice President, Real Estate 2014 56 Robert D. Velasquez Senior Vice President, Chief Accounting Officer 2022 56 Marc W.
Name Office Held since Age Gregory S. Bielli President and Chief Executive Officer, Director 2013 63 Allen E. Lyda Executive Vice President and Chief Operating Officer 2022 66 Brett A. Brown Executive Vice President & Chief Financial Officer 2023 59 Hugh McMahon Executive Vice President, Real Estate 2014 57 Robert D.
Annualized base rent shown in thousands. 2 - This lease pertains to a communication lease that does not have defined rentable square feet. 3 - This amount includes 32 acres of the PEF ground lease. For the year ended December 31, 2022, we had six lease renewals. Joint Ventures We use joint ventures to advance our development projects at TRCC.
Annualized base rent shown in thousands. 2 - This amount includes 32 acres of the PEF ground lease. 3 - These leases pertain to communication leases that do not have defined rentable square feet. For the year ended December 31, 2023, we had five lease renewals.
Over eight million square feet of industrial, commercial, and retail space has been developed at TRCC, including distribution centers for IKEA, Caterpillar, Famous Footwear, L'Oreal, Camping World, Sunrise Brands, and Dollar General.
Over eight million square feet of industrial, commercial, and retail space has been developed and is either operational (by us or third parties that we sold to), under construction, or soon to be under construction at TRCC, including distribution centers for IKEA, Caterpillar, Nestlé, Famous Footwear, L'Oreal, Camping World, Sunrise Brands, Dollar General and RectorSeal.
Prior to joining the Company, Mr. Bielli was President of Newland Communities' Western Region, a diversified real estate company, and was responsible for overseeing management of all operational aspects of Newland's real estate projects in the region. Mr. Bielli worked with Newland Communities from 2006 through August 2013. 25 Mr.
Bielli joined the Company as President and Chief Operating Officer and became President and Chief Executive Officer on December 17, 2013. Prior to joining the Company, Mr. Bielli was President of Newland Communities' Western Region, a diversified real estate company, and was responsible for overseeing management of all operational aspects of Newland's real estate projects in the region. Mr.
Our previous joint venture with RDG, the 18-19 joint venture, sold its land to a third-party during the fourth quarter of 2021 for $15.2 million, and was dissolved in 2022. 12 TRCC Residential In 2021, the Kern County Board of Supervisors approved a Conditional Use Permit (CUP) which authorizes the development of a multi-family apartment complex within the TRCC.
Our previous joint venture with RDG, the 18-19 joint venture, sold its land to a third-party during the fourth quarter of 2021 for $15.2 million, and was dissolved in 2022.
Year of Lease Expiration Number of Expiring Leases RSF of Expiring Leases Annualized Base Rent 1 Percentage of Annual Minimum Rent 2023 5 2,140 $419 6.30% 2024 2 1 — $152 2.29% 2025 5 61,708 $552 8.30% 2026 6 65,367 $532 8.00% 2027 3 1,201 $219 3.29% 2028 3 32,670 $106 1.59% 2029 3 1 1,394,000 $4,241 63.79% 2030 2 2 — $66 0.99% 2031 — — $— —% 2032 1 3,750 $152 2.29% 2033 1 125,453 $82 1.23% Thereafter 2 64,004 $127 1.91% 1 - Annualized base rent is calculated as monthly base rent (cash basis) per the lease, as of the reporting period, multiplied by 12.
Year of Lease Expiration Number of Expiring Leases Rentable Square Footage of Expiring Leases Annualized Base Rent 1 Percentage of Annual Minimum Rent 2024 3 6,810 $266 3.83% 2025 5 61,708 552 7.95% 2026 8 65,367 536 7.72% 2027 3 1,201 225 3.24% 2028 6 90,131 458 6.59% 2029 2 1 1,394,000 4,403 63.40% 2030 3 2 — 68 0.98% 2031 — — 0 —% 2032 1 3,750 152 2.19% 2033 1 125,453 82 1.18% 2034 1 1,801 76 1.09% Thereafter 2 64,004 127 1.83% 1 - Annualized base rent is calculated as monthly base rent (cash basis) per the lease, as of the reporting period, multiplied by 12.
Hardy Senior Vice President & General Counsel 2021 53 A description of present and prior positions with us, and business experience is given below. Mr. Bielli has been employed by the Company since September 2013. Mr. Bielli joined the Company as President and Chief Operating Officer and became President and Chief Executive Officer on December 17, 2013.
Velasquez Senior Vice President, Chief Accounting Officer 2022 57 Michael R.W. Houston Senior Vice President, General Counsel & Secretary 2023 49 A description of present and prior positions with us, and business experience is given below. Mr. Bielli has been employed by the Company since September 2013. Mr.
We have obtained entitlements on Mountain Village at Tejon Ranch, or MV, and the first approved final map for the project consisting of 401 residential lots and parcels for hospitality, amenities, and public uses. In 2019, the Kern County Board of Supervisors unanimously reapproved the Grapevine at Tejon Ranch project, or Grapevine.
We have obtained entitlements on MV and the first approved final map for the project consisting of 401 residential lots and parcels for hospitality, amenities, and public uses. The Grapevine at Tejon Ranch, or Grapevine, has approved entitlements for 12,000 units and 5 million square feet of commercial development.
At this time the State Department of Water Resources has announced that the estimated water supply for 2023 will be at 35% of full entitlement. This allocation may change based upon precipitation and snowpack runoff in Northern California from additional potential winter storms. The current 35% allocation of SWP water is enough for us to farm our crops.
This allocation may change based upon precipitation and snowpack runoff in Northern California from additional potential winter storms. The current 15% allocation of SWP water is enough for us to farm our crops when combined with our other water sources.
On January 1, 2019, he was appointed Chief Financial Officer. In 2022, he was given the title of Chief Accounting Officer Mr. Hardy is Senior Vice President and General Counsel, having joined the company in May 2021. From 2001 to 2020, Mr. Hardy served as Assistant General Counsel and then General Counsel/Assistant Secretary for the A.G.
On January 1, 2019, he was appointed Chief Financial Officer and served in that role until March 2022. In 2022, he was given the title of Chief Accounting Officer. Mr. Houston rejoined the Company in August 2023 as Senior Vice President, General Counsel & Secretary. Mr. Houston joined the Company in May 2016 as the Senior Vice President, General Counsel.
Investments Leasing Within our commercial/industrial segment, we lease land to various types of tenants. We currently lease land to two auto service stations with convenience stores, 13 fast-food operations, a motel, an antique shop, and a post office.
We currently lease land to two auto service stations with convenience stores, 11 fast-food operations, one service diner-style restaurant, a motel, an antique shop, and a post office.
This is evident in the 151% increase in land prices over the last five years, which reached $8.77 per square foot in 2022 compared with $3.50 per square foot in 2017. Industrial rents have increased 188% over the last five years, with rents at $0.72 per square foot in 2022 compared to $0.25 per square foot in 2017.
This is evident in the 151% increase in land prices over a six-year period starting with $3.50 per square foot in 2017. Industrial rents have increased 236% over the same six year period starting at $0.25 per square foot in 2017.
The current SWP allocation is at 35% of contract amounts with an expectation that the allocation will increase. At higher SWP allocations we anticipate a reduced amount of water will be sold in 2023. In 2015, we entered into a water sale agreement with PEF, our current lessee under a power plant lease.
Water sales opportunities each year are impacted by rain and snowfall volume along with California State Water Project, or SWP, allocations. The current SWP allocation, is at 15% of contract amounts with an expectation that the allocation may increase. In 2015, we entered into a water sale agreement with PEF, our current lessee under a power plant lease.
Such factors include litigation and a changing regulatory environment. 9 Operating Segments Real Estate - Commercial/Industrial A primary focus of the Company is our real estate commercial/industrial segment that includes: planning, and permitting of land held for development; construction of infrastructure; the construction of pre-leased buildings; the construction of buildings to be leased or sold; and the sale of land to third parties for their own development.
Note: Grapevine North's entitlement efforts have not yet begun, the Company continuously assesses its long-term growth strategy and capital resources when determining the start of this additional development. 11 Reporting Segments Real Estate - Commercial/Industrial A primary focus of the Company is our real estate commercial/industrial segment that includes: planning and permitting of land held for development; construction of infrastructure; the construction of pre-leased buildings; the construction of buildings to be leased or sold; and the sale of land to third parties for their own development.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSTRATEGIC RISKS Strategic risk relates to the Company's future business plans and strategies, including the risks associated with the macro- and micro- environment in which we operate, including the demand for our products and services, the success of investments in our real estate development, technology and public policy.
Biggest changeSTRATEGIC RISKS Strategic risk relates to the Company's future business plans and strategies, including the risks associated with the macro- and micro- environment in which we operate, including the demand for our products and services, the success of investments in our real estate development, technology and public policy. 28 Adverse changes in economic conditions in markets where we conduct our operations and where prospective purchasers of our future homes and commercial products live could reduce the demand for our products and, as a result, could adversely affect our business, results of operations, and financial condition.
The real estate development industry is cyclical and is significantly affected by changes in general and local economic conditions, including: • Employment levels • Availability of financing • Interest rates • Consumer confidence • Demand for the developed product, whether residential or industrial • Supply of similar product, whether residential or industrial The process of a project's development begins, and financial and other resources are committed long before a real estate project comes to market, which could occur at a time when the real estate market is depressed.
The real estate development industry is cyclical and is significantly affected by changes in general and local economic conditions, including: • Employment levels 30 • Availability of financing • Interest rates • Consumer confidence • Demand for the developed product, whether residential or industrial • Supply of similar product, whether residential or industrial The process of a project's development begins, and financial and other resources are committed long before a real estate project comes to market, which could occur at a time when the real estate market is depressed.
It is also possible in a rural area like ours that no market for the project will develop as projected. 28 The inability of a client tenant to pay us rent adversely affects our business. Our commercial revenues are derived primarily from rental payments and reimbursement of operating expenses under our leases.
It is also possible in a rural area like ours that no market for the project will develop as projected. The inability of a client tenant to pay us rent adversely affects our business. Our commercial revenues are derived primarily from rental payments and reimbursement of operating expenses under our leases.
In light of the fact that our water resources represent a portion of our overall business at present, our long-term profitability will be affected by various factors, including the availability and timing of water resource acquisitions, regulatory 29 approvals and permits associated with such acquisitions, transportation arrangements, and changing technology.
In light of the fact that our water resources represent a portion of our overall business at present, our long-term profitability will be affected by various factors, including the availability and timing of water resource acquisitions, regulatory approvals and permits associated with such acquisitions, transportation arrangements, and changing technology.
The loss of key personnel could materially and adversely affect our results of operations, financial condition, or our ability to pursue land development. Our success will also depend in part on our ability to attract and retain additional qualified management personnel. Volatile oil and natural gas prices could adversely affect our cash flows and results of operations.
The loss of key personnel could materially and adversely affect our results of operations, financial condition, or our ability to pursue land development. Our success will also depend in part on our ability to attract and retain additional qualified management personnel. 31 Volatile oil and natural gas prices could adversely affect our cash flows and results of operations.
In addition, the registration and sale of any significant number of additional shares of our Common Stock will have the immediate effect of increasing the public float of our Common Stock and any such increase may cause the market price of our Common Stock to decline or fluctuate significantly. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, the registration and sale of any significant number of additional shares of our Common Stock will have the immediate effect of increasing the public float of our Common Stock and any such increase may cause the market price of our Common Stock to decline or fluctuate significantly. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 34
A failure to comply 31 with these requirements could allow the lending bank to terminate the availability of funds under our revolving credit facility and/or cause any outstanding borrowings to become due and payable prior to maturity. MARKET RISKS Market risk relates to the functioning of the marketplace.
A failure to comply with these requirements could allow the lending bank to terminate the availability of funds under our revolving credit facility and/or cause any outstanding borrowings to become due and payable prior to maturity. MARKET RISKS Market risk relates to the functioning of the marketplace.
Higher interest rates can also lead to tighter construction lending markets impacting the development of industrial buildings within our projects. Any decrease in demand 26 will negatively impact our proposed developments. Lack of available credit to finance real estate purchases can also negatively impact demand.
Higher interest rates can also lead to tighter construction lending markets impacting the development of industrial buildings within our projects. Any decrease in demand will negatively impact our proposed developments. Lack of available credit to finance real estate purchases can also negatively impact demand.
The risks that we describe in our public filings are not the only risks that we face. Additional risks and uncertainties not presently known to us, or that we currently consider immaterial, also may materially adversely affect our business, financial condition, and results of operations.
The risks that we describe in our public filings are not the only risks that we face. Additional risks and uncertainties not presently known to us, or that we currently consider immaterial, may materially adversely affect our business, financial condition, and results of operations.
In addition, adverse decisions arising from any litigation would increase the costs and length of time to obtain ultimate approval of a project and could adversely affect the design, scope, plans and profitability of a project.
In addition, adverse decisions arising from any litigation increase the costs and length of time to obtain ultimate approval of a project and could adversely affect the design, scope, plans and profitability of a project.
Many states, cities and counties (including neighboring Ventura County) have in the past approved various “slow growth” or “urban limit line” measures. If that were to occur in the jurisdictions governing the Company’s land use, our future real estate development activities could be significantly adversely affected. Third-party litigation could increase the time and cost of our development efforts .
Many states, cities and counties (including neighboring Ventura County) have in the past approved various “slow growth” or “urban limit line” measures. If that were to occur in the jurisdictions governing the Company’s land use, our future real estate development activities could be significantly adversely affected. Third-party litigation increases the time and cost of our development efforts .
If our client tenants fail to make rental payments under their leases, our financial condition and cash flows could be adversely affected. Our inability to renew leases or re-lease space on favorable terms as leases expire may significantly affect our business. Some of our revenues are derived from rental payments and reimbursement of operating expenses under our leases.
If our client tenants fail to make rental payments under their leases, our financial condition and cash flows would be adversely affected. Our inability to renew leases or re-lease space on favorable terms as leases expire may significantly affect our business. Some of our revenues are derived from rental payments and reimbursement of operating expenses under our leases.
Inflation can have a major impact on our farming operations. The farming operations are most affected by escalating costs, unpredictable revenues and very high irrigation water costs. High fixed water costs related to our farm lands will continue to adversely affect earnings. Prices received for many of our products are dependent upon prevailing market conditions and commodity prices.
Inflation can have a major impact on our farming operations. The farming operations are most affected by escalating costs, unpredictable revenues and very high irrigation water costs. High fixed water costs related to our farmlands will continue to adversely affect earnings. Prices received for many of our products are dependent upon prevailing market conditions and commodity prices.
Agricultural commodity production and trade flows are significantly 30 affected by government policies and regulations.
Agricultural commodity production and trade flows are significantly affected by government policies and regulations.
As a result, the prospect of third-party challenges to planned real estate developments provides additional uncertainties in real estate development planning and entitlements. Third-party challenges in the form of litigation could result in denial of the right to develop, or would, by their nature, adversely affect the length of time and the cost required to obtain the necessary approvals.
As a result, the prospect of third-party challenges to planned real estate developments provides additional uncertainties in real estate development planning and entitlements. Third-party challenges in the form of litigation can result in denial of the right to develop, and, by their nature, adversely affect the length of time and the cost required to obtain the necessary approvals.
If operating expenses increase, the availability of other comparable space in the markets we operate in may hinder or limit our ability to increase our rents, if operating expenses increase without a corresponding increase in revenues, our profitability could diminish.
If operating expenses increase, the availability of other comparable space in the markets in which we operate may hinder or limit our ability to increase our rents. If operating expenses increase without a corresponding increase in revenues, our profitability would diminish.
We may also be subject to adverse business consequences if the market reputation or financial position of the strategic partner deteriorates. If we cannot successfully execute transactions with strategic partners, our business could be adversely affected. Inability to comply with long-term debt covenants, restrictions or limitations could adversely affect our financial condition.
We may also be subject to adverse business consequences if the market reputation or financial position of the strategic partner deteriorates. If we cannot successfully execute transactions with strategic partners, our business could be adversely affected. Inability to comply with credit facility covenants, restrictions or limitations could adversely affect our financial condition.
As of March 8, 2023, directors and members of our executive management team beneficially owned or controlled approximately 22.0% of our Common Stock. Investors who purchase our Common Stock may be subject to certain risks due to the concentrated ownership of our Common Stock.
As of March 6, 2024, directors and members of our executive management team beneficially owned or controlled approximately 22.6% of our Common Stock. Investors who purchase our Common Stock may be subject to certain risks due to the concentrated ownership of our Common Stock.
At Grapevine, the issues most commonly cited in opponents’ public comments include the poor air quality of the San Joaquin Valley air basin, potential impacts of projects on the California condor and other species of concern, the potential for our lands to function as wildlife movement corridors, potential impacts of our projects on traffic and air quality in Los Angeles County, emissions of greenhouse gases, water availability and criticism of proposed development in rural areas as being “sprawl.” In addition, California has a specific statutory and regulatory scheme intended to reduce greenhouse gas emissions in the state and efforts to enact federal legislation to address climate change concerns could require further reductions in our projects’ carbon footprint in the future.
The issues most commonly cited in opponents’ public comments include the poor air quality of the San Joaquin Valley air basin, potential impacts of projects on the California condor and other species of concern, the potential for our lands to function as wildlife movement corridors, potential impacts of our projects on traffic and air quality in Los Angeles County, emissions of greenhouse gases, water availability and criticism of proposed development in rural areas as being “sprawl.” In addition, California has a specific statutory and regulatory scheme intended to reduce greenhouse gas emissions in the state and efforts to enact federal legislation to address climate change concerns could require further reductions in our projects’ carbon footprint in the future. 29 Until final permits are received, litigation is complete, and final maps are received, we will have a limited inventory of real estate .
MV will compete generally for discretionary dollars that consumers will allocate to recreation and second homes, so its competition will include a greater area and range of projects.
MV will compete generally for discretionary dollars that consumers will allocate to recreation and second homes, so its competition will include a greater area and range of projects. Intense competition may decrease our sales and harm our results of operations.
However, we cannot provide assurance that a security breach, cyber-attack, data theft or other significant systems failure will not occur in the future, and such occurrences could have a material and adverse effect on our consolidated results of operations or financial position.
However, we cannot provide assurance that a security breach, cyber-attack, data theft or other significant systems failure will not occur in the future, and such occurrences could have a material and adverse effect on our consolidated results of operations or financial position. 32 Increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, solutions, services and data.
Intense competition may decrease our sales and harm our results of operations. 27 Increases in taxes or government fees could increase our cost, and adverse changes in tax laws could reduce demand for homes in our future residential communities.
Increases in taxes or government fees could increase our cost, and adverse changes in tax laws could reduce demand for homes in our future residential communities.
Until final permits are received, litigation is complete, and final maps are received, we will have a limited inventory of real estate . Each of our four current and planned real estate projects, TRCC, Centennial, MV, and Grapevine involve obtaining various governmental agency permits, overcoming litigation, and receiving final maps from local jurisdictions.
Each of our four current and planned real estate projects, TRCC, Centennial, MV, and Grapevine involve obtaining various governmental agency permits, local government permits, such as building permits, overcoming litigation, and receiving final maps from local jurisdictions.
Constriction of the credit markets or other adverse changes in capital market conditions could limit our ability to access capital and increase our cost of capital. During past economic downturns, we relied principally on positive operating cash flow, cash and investments, and equity offerings to meet current working capital needs, entitlement investment, and investment within our developments.
During past economic downturns, we relied principally on positive operating cash flow, cash and investments, our revolving credit facility and equity offerings to meet current working capital needs, entitlement investment, and investment within our developments.
We regularly assess our projected capital requirements to fund future growth in our business, repay our debt obligations, and support our other general corporate and operational needs, and we regularly evaluate our opportunities to raise additional capital.
Any slowdown in the economy could negatively impact our access to credit markets and may limit our sources of liquidity in the future and potentially increase our costs of capital. 33 We regularly assess our projected capital requirements to fund future growth in our business, repay our debt obligations, and support our other general corporate and operational needs, and we regularly evaluate our opportunities to raise additional capital.
Our credit facility contains financial covenants requiring the maintenance of a maximum total liabilities to tangible net worth not greater than .75 to 1.0 at each quarter end, and a debt service coverage ratio not less than 1.25 to 1.00.
The Revolving Credit Facility requires compliance with three financial covenants: (a) total liabilities divided by tangible net worth not greater than 0.55 to 1.00 at each year end; (b) a debt service coverage ratio not less than 1.50 to 1.00 as of each year end on a rolling four quarter basis; and (c) a liquidity ratio not less than 2.00 to 1.00 at each year end.
Any slowdown in the economy could negatively impact our access to credit markets and may limit our sources of liquidity in the future and potentially increase our costs of capital.
Constriction of the credit markets or other adverse changes in capital market conditions could limit our ability to access capital and increase our cost of capital.
Removed
Adverse changes in economic conditions in markets where we conduct our operations and where prospective purchasers of our future homes and commercial products live could reduce the demand for our products and, as a result, could adversely affect our business, results of operations, and financial condition.
Removed
Increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, solutions, services and data.

Item 2. Properties

Properties — owned and leased real estate

29 edited+5 added−3 removed26 unchanged
Biggest changeMuch of this property is included within the Conservation Agreement we entered into with five of the major environmental organizations in June 2008. As we receive entitlement approvals over the life span of our developments we will dedicate conservation easements on 145,000 acres of this land, which will preclude future development of the land.
Biggest changePortions of our land consist of mountainous terrain, much of which is not presently served by paved roads or by utility or water lines. Much of this property is included within the Conservation Agreement we entered into with five major environmental organizations in June 2008.
Several SWP Contractors, and others, filed litigation challenging the ITP on several grounds including CEQA and breach of contract. Additionally, the Bureau has reinitiated further consultation relative to the proposed actions in the federal BiOps.
Several SWP Contractors, and others, filed litigation challenging ITP on several grounds, including CEQA and breach of contract. Additionally, the Bureau has reinitiated further consultation relative to the proposed actions in the federal BiOps.
It is assumed, that at the end of the current contract period all water contracts will be extended for approximately the same amount of annual water. In addition to the WRMWSD contract water entitlements, we have an additional water entitlement from the SWP sufficient to service a substantial amount of future residential and/or commercial development in Kern County.
It is assumed that at the end of the current contract period, all water contracts will be extended for approximately the same amount of annual water. 36 In addition to the WRMWSD contract water entitlements, we have an additional water entitlement from the SWP sufficient to service a substantial amount of future residential and/or commercial development in Kern County.
It is expected that new biological options will be issued in 2024. 34 Other Activities TRPFFA is a joint powers authority formed by Kern County and TCWD to finance public infrastructure within the Company’s Kern County developments. TRPFFA has created two Community Facilities Districts, or CFDs, the West CFD and the East CFD.
It is expected that new biological options will be issued in 2024. 38 Other Activities TRPFFA is a joint powers authority formed by Kern County and TCWD to finance public infrastructure within the Company’s Kern County developments. TRPFFA has created two Community Facilities Districts, or CFDs, the West CFD and the East CFD.
At this time, Wheeler Ridge expects to be able to deliver our entire contract water entitlement in any year that the SWP allocations exceed 30% by drawing on its ground water wells and water banking assets. Based on historical records of water availability, we do not believe we have material problems with our water supply.
At this time, Wheeler Ridge expects to be able to deliver our entire contract water entitlement in any year that the SWP allocations exceed 30% by drawing on its ground water wells and water banking assets. Based on historical records of water availability, we believe we have no material problems with our water supply.
ITEM 2. PROPERTIES Land Our approximately 270,000 acres include portions of the San Joaquin Valley, portions of the Tehachapi Mountains and portions of the western end of the Antelope Valley. Each of our five reporting segments use various portions of this land.
ITEM 2. PROPERTIES Land Our approximately 270,000 acres include portions of the San Joaquin Valley, portions of the Tehachapi Mountains and portions of the western end of the Antelope Valley. Each of our five reporting segments uses various portions of this land.
Water from these sources may be more expensive than SWP water because of pumping costs and/or transfer costs. A 35% preliminary SWP water allocation has been made by the California Department of Water Resources, or DWR, for 2023. The current 35% allocation of SWP water will allow us to have sufficient water for our farming needs for the next year.
Water from these sources may be more expensive than SWP water because of pumping costs and/or transfer costs. A 15% preliminary SWP water allocation has been made by the California Department of Water Resources, or DWR, for 2024. The current 15% allocation of SWP water will allow us to have sufficient water for our farming needs for the next year.
Purchase costs are subject to annual cost increases based on the greater of the consumer price index or 3%, resulting in a 2023 purchase cost of $928 per acre-foot. The water purchased will ultimately be used in the development of the Company’s land for commercial/industrial development, residential development, and farming.
Purchase costs are subject to annual cost increases based on the greater of the consumer price index or 3%, resulting in a 2024 purchase cost of $956 per acre-foot. The water purchased will ultimately be used in the development of the Company’s land for commercial/industrial development, residential development, and farming.
Since 2006, we have banked 50,349 acre-feet of water from the Antelope Valley-East Kern Water Agency, or AVEK, which has been pumped from the California aqueduct and is currently retained in this water bank. We anticipate adding additional water to the water bank in the future, as water is available.
Since 2006, we have banked 54,728 acre-feet of water from the Antelope Valley-East Kern Water Agency, or AVEK, which has been pumped from the California aqueduct and is currently retained in this water bank. We anticipate adding additional water to the water bank in the future, as water is available.
The initial term of the water purchase agreement with Nickel runs through 2044 and includes a Company option to extend the contract for an additional 35 years. This contract allows us to purchase water each year. The purchase cost of water in 2022 was $861 per acre-foot.
The initial term of the water purchase agreement with Nickel runs through 2044 and includes a Company option to extend the contract for an additional 35 years. This contract allows us to purchase water each year. The purchase cost of water in 2023 was $928 per acre-foot.
TCWD, a local water district serving our land in the district and land we have sold in TRCC, has 5,749 acre-feet of SWP entitlement (also called Table A amount), subject to SWP allocations. In addition, TCWD has 52,554 acre-feet of water stored in Kern County water banks.
TCWD, a local water district serving our land in the district and land we have sold in TRCC, has 5,749 acre-feet of SWP entitlement (also called Table A amount), subject to SWP allocations. In addition, TCWD has 65,005 acre-feet of water stored in Kern County water banks.
It is expected that we will have special tax payments in 2023 of $2,816,000, but this could change in the future based on the amount of bonds outstanding within each CFD and the amount of taxes paid by other owners and tenants.
It is expected that we will have special tax payments in 2024 of $2,803,000, but this could change in the future based on the amount of bonds outstanding within each CFD and the amount of taxes paid by other owners and tenants.
The terms of these contracts extend to 2035. Under the contracts, we are entitled to annual water for 5,496 acres of land, or 15,547 acre-feet of water subject to SWP allocations, which is adequate for our present farming operations.
Under the contracts, we are entitled to annual water for 5,496 acres of land, or 15,547 acre-feet of water subject to SWP allocations, which is adequate for our present farming operations.
During 2022, SWP allocations were 5% of contract levels, and WRMWSD was able to supply us with water from various sources that when combined with our water sources provided sufficient water to meet our farming and real estate demands.
During 2023, SWP allocations were 100% of contract levels, and WRMWSD was able to supply us with water from various sources that, when combined with our water sources provided sufficient water to meet our farming and real estate demands.
Proceeds from the sales of these bonds are to reimburse the Company for public infrastructure related to TRCC-East. We paid $2,899,000 and $2,860,000 in special taxes related to the CFDs in 2022 and 2021, respectively.
Proceeds from the sales of these bonds are to reimburse the Company for public infrastructure related to TRCC-East. We paid $2,775,000 and $2,899,000 in special taxes related to the CFDs in 2023 and 2022, respectively.
Accordingly, the Company is not required to recognize an obligation at December 31, 2022.
Accordingly, the Company is not required to recognize an obligation at December 31, 2023.
This area is accessible from Interstate 5 via Highway 138. Los Angeles County has adopted general plan policies that contemplate future residential development of portions of this land, subject to further assessments of environmental and infrastructure constraints.
This area is accessible from Interstate 5 via Highway 138. Los Angeles County has adopted general plan policies that contemplate future residential development of portions of this land, subject to further assessments of environmental and infrastructure constraints. The Centennial master planned project is on our lands in Los Angeles County.
The State of California and various non-governmental organizations filed a legal challenge to the new BiOps. Shortly after the 2019 BiOps were finalized, the State of California issued an Incidental Take Permit, or ITP, pursuant to the CESA, which is generally more restrictive on pumping out of the Delta in comparison to the BiOps.
Shortly after the 2019 BiOps were finalized, the State of California issued an Incidental Take Permit, or ITP, pursuant to the California Endangered Species Act, or CESA, which is generally more restrictive on pumping out of the Delta in comparison to the BiOps.
Portions of our property also have available groundwater, which we believe would be sufficient to supply commercial development in the Interstate 5 corridor and support current agricultural operations. Ground water in the Antelope Valley Basin is subject to an adjudication of the water basin that limits groundwater pumping.
Portions of our property also have available groundwater, which we believe would be sufficient to supply commercial development in the Interstate 5 corridor and support current agricultural operations.
The Company's Kern County agricultural lands and development lands are located in the Kern Subbasin, the White Wolf Subbasin and the Castac Lake Basin. The Kern Subbasin is designated by DWR as a high priority, critically overdrafted basin, and its GSP was required by to be submitted to DWR by January of 2020.
The Kern Subbasin is designated by DWR as a high priority, critically overdrafted basin, and its GSP was required to be submitted to DWR by January of 2020.
DWR circulated the Draft Environmental Impact Report for the DCP and the public comment period on the DEIR closed on December 16, 2022. DWR is reviewing the comments received and presumably working on the Final EIR for DCP.
DWR circulated the Draft EIR for the DCP and the public comment period on the DEIR closed on December 16, 2022. DWR reviewed the comments received and has approved the Final EIR for DCP.
This is a process that DWR and the Bureau jointly requested in 2016 and that resulted in new federal FWS and NMFS Biological Opinions, or BiOps, under Federal Endangered Species Act, or ESA, in 2019. The 2019 BiOps were intended to enhance reliability of water available for pumping out of the Delta based on updated best available science.
This is a process that DWR and the Bureau of Reclamation, or Bureau, jointly requested in 2016 and that resulted in new federal FWS and NMFS Biological Opinions, or BiOps, under Federal Endangered Species Act, or ESA, in 2019.
After their initial submittal to DWR of their GSPs, DWR notified the Groundwater Sustainability Agencies in the Kern Subbasin of deficiencies in their GSPs, which were to be addressed to DWR’s satisfaction by July of 2022. The GSAs met that deadline and are awaiting a determination from DWR regarding the sufficiency of those GSPs.
After their initial submittal to DWR of their GSPs, DWR notified the Groundwater Sustainability Agencies in the Kern Subbasin of deficiencies in their GSPs, which were to be addressed to DWR’s satisfaction by July of 2022. The GSAs met that deadline. Upon evaluation of resubmitted plans, however, DWR determined that the basin is inadequate.
The White Wolf Subbasin is designated by DWR as a medium priority, non-critically overdrafted basin, and its GSP was required to be submitted to DWR by January 2022. The Board of Directors of the White Wolf GSA adopted the GSP for the White Wolf Subbasin and submitted it to DWR, where it remains under DWR review.
DWR has initiated consultation with the State Water Resources Control Board for possible State intervention. The White Wolf Subbasin is designated by DWR as a medium priority, non-critically overdrafted basin, and its GSP was required to be submitted to DWR by January 2022.
Accommodating these environmental concerns, could possibly limit development of portions of the land or result in substantial delays or certain changes to the scope of development in order to obtain governmental approval. 32 Water Operations Our existing long-term water contracts with the Wheeler Ridge-Maricopa Water Storage District, or WRMWSD, provide for water entitlements and deliveries from the SWP, to our agricultural and municipal/industrial operations in the San Joaquin Valley.
Water Operations Our existing long-term water contracts with the Wheeler Ridge-Maricopa Water Storage District, or WRMWSD, provide for water entitlements and deliveries from the SWP to our agricultural and municipal/industrial operations in the San Joaquin Valley. The terms of these contracts extend to 2035.
The DCP is intended to increase the amount of water available for delivery across the Delta, particularly in wet years. A third development is the Reinitiation of Consultation on the Coordinated Long-Term Operation of the Central Valley Project and State Water Project.
A third development is the Reinitiation of Consultation on the Coordinated Long-Term Operation of the Central Valley Project and State Water Project.
This acreage includes many of the most environmentally sensitive areas of our property and is home to many plant and wildlife species whose environments will remain undisturbed.
As we receive entitlement approvals over the life span of our developments, we will dedicate conservation easements on 145,000 acres of this land, which will preclude future development of the land. This acreage includes many of the most environmentally sensitive areas of our property and is home to many plant and wildlife species whose environments will remain undisturbed.
Through these plans it will have to be demonstrated to the satisfaction of the DWR that the groundwater within the basins is sustainably managed by 2040 or 2042. To achieve sustainability, the GSPs could impose limitations on the use of groundwater.
For the water districts in which the Company participates in the San Joaquin Valley, Groundwater Sustainability Plans have been developed and submitted to the DWR for review. Through these plans, it will have to be demonstrated to the satisfaction of the DWR that the groundwater within the basins is sustainably managed by 2040 or 2042.
The Sustainable Groundwater Management Act, or SGMA, is a sustainable groundwater framework that became effective January 1, 2015. For the water districts in which the Company participates in the San Joaquin Valley, Groundwater 33 Sustainability Plans have been developed and submitted to the DWR for review.
Ground water in the Antelope Valley Basin is subject to an adjudication of the water basin that limits groundwater pumping. 37 The Sustainable Groundwater Management Act, or SGMA, is a sustainable groundwater framework that became effective January 1, 2015.
Removed
In 2019, the Los Angeles County Board of Supervisors' affirmed their final approval of Centennial, and now the 19,333 residential units are fully entitled. See Item 1, “Business—Real Estate Development Overview.” Portions of our land consist of mountainous terrain, much of which is not presently served by paved roads or by utility or water lines.
Added
Accommodating these environmental concerns, could possibly limit development of portions of the land or result in substantial delays or certain changes to the scope of development in order to obtain governmental approval.
Removed
DWR and the SWP Contractors previously entered into an agreement in principle, or AIP, for terms of an amendment to the SWP long-term water supply contracts.
Added
To achieve sustainability, the GSPs could impose limitations on the use of groundwater. The Company's Kern County lands are located in the Kern Subbasin, the White Wolf Subbasin and the Castac Lake Basin.
Removed
If DWR adopts a Final EIR and approves the DCP, which could occur sometime late 2023, DWR and the SWP Contractors would need to execute amendments to the water supply contracts that provide for addition of the DCP to the SWP.
Added
The Board of Directors of the White Wolf GSA adopted the GSP for the White Wolf Subbasin and submitted it to DWR. In October 2023, DWR announced the approval of the GSP with only four minor correction items to be corrected in the five-year plan update due by 2027.
Added
DWR and the SWP Contractors will continue to work on executing amendments to the water supply contracts that provide for addition of the DCP to the SWP. The DCP is intended to increase the amount of water available for delivery across the Delta, particularly in wet years.
Added
The 2019 BiOps were intended to enhance reliability of water available for pumping out of the Delta based on updated best available science. The State of California and various non-governmental organizations filed a legal challenge to the new BiOps.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The Company is involved in various legal matters arising out of its operations in the normal course of business. None of these matters are expected, individually or in the aggregate, to have a material adverse effect on the Company.
Biggest changeITEM 3. LEGAL PROCEEDINGS The Company is involved in various legal matters arising out of its operations in the normal course of business. None of these matters are expected, individually or in aggregate, to have a material adverse effect on the Company.
For a discussion of legal proceedings, see Note 14 (Commitments and Contingencies) of the Notes to the Consolidated Financial Statements. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 35 PART II
For a discussion of legal proceedings, see Note 14 (Commitments and Contingencies) of the Notes to the Consolidated Financial Statements. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 39 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed1 unchanged
Biggest changeITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Common Stock trades under the symbol TRC on the New York Stock Exchange. As of February 28, 2023, there were 268 registered owners of record of our Common Stock.
Biggest changeITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Common Stock trades under the symbol TRC on the New York Stock Exchange. As of February 29, 2024, there were 270 registered owners of record of our Common Stock.
No cash dividends were paid in 2022 or 2021 and at this time there is no intention of paying cash dividends in the future.
No cash dividends were paid in 2023 or 2022 and at this time there is no intention of paying cash dividends in the future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

94 edited+35 added−42 removed59 unchanged
Biggest changeDecember 31, 2021 December 31, 2020 Change ($ in thousands) Revenue Quantity Sold 2 Average Price Revenue Quantity Sold 2 Average Price Revenue Quantity Sold 2 Average Price ALMONDS (lbs.) Current year crop $ 2,257 945 $ 2.39 $ 4,207 2,078 $ 2.02 $ (1,950) (1,133) $ 0.37 Prior crop years 670 377 1.78 783 405 $ 1.93 (113) (28) (0.15) Signing bonus — 31 (31) Crop Insurance 173 $ — $ 173 Subtotal Almonds 1 $ 3,100 1,322 $ 2.21 $ 5,021 2,483 $ 2.01 $ (1,921) (1,161) $ 0.20 PISTACHIOS (lbs.) Current year crop $ 3,462 1,615 $ 2.14 $ 932 456 $ 2.04 $ 2,530 1,159 $ 0.10 Prior crop years — — — 25 13 1.92 (25) (13) (1.92) Prior crop price adjustment 365 890 (525) Insurance 466 3,789 (3,323) Subtotal Pistachios 1 $ 4,293 1,615 $ 2.14 $ 5,636 469 $ 2.04 $ (1,343) 1,146 $ 0.10 WINE GRAPES (tons) Current year crop $ 2,850 9 $ 316.67 $ 2,589 9 $ 287.67 $ 261 — $ 29.00 Insurance — — — Subtotal Wine Grapes $ 2,850 9 $ 316.67 $ 2,589 9 $ 287.67 $ 261 — $ 29.00 Other Hay $ 408 $ 419 $ (11) Other farming revenues 388 201 187 Total farming revenues $ 11,039 $ 13,866 $ (2,827) 1 Average price calculation reflects sale of almond and pistachio crops during the calendar reported year exclusive of any price adjustments. 2 Almond and pistachio units are presented in thousands of pounds while wine grapes are presented in thousands of tons. 2021 Operational Highlights: • During 2021, farming segment revenues decreased $2,827,000, or 20%, from $13,866,000 in 2020 to $11,039,000 in 2021.
Biggest changeFor further discussion of mineral resources operations, refer to Item 1 “Business—Mineral Resources.” 46 Farming ($ in thousands) 2023 2022 2021 Farming revenues Almonds $ 5,378 $ 6,121 $ 3,100 Pistachios 4,036 2,450 4,293 Wine grapes 3,290 3,470 2,850 Hay 267 587 408 Other 979 373 388 Total farming revenues $ 13,950 $ 13,001 $ 11,039 Total farming expenses $ 15,257 $ 19,811 $ 14,116 Operating loss from farming $ (1,307) $ (6,810) $ (3,077) December 31, 2023 December 31, 2022 Change ($ in thousands) Revenue Quantity Sold 2 Average Price Revenue Quantity Sold 2 Average Price Revenue Quantity Sold 2 Average Price ALMONDS (lbs.) Current year crop $ 3,300 1,575 $ 2.10 $ 2,851 1,267 $ 2.25 $ 449 308 $ (0.15) Prior crop years 1,819 1,042 $ 1.75 3,216 1,584 $ 2.03 (1,397) (542) $ (0.28) Crop insurance 259 54 205 Subtotal Almonds 1 $ 5,378 2,617 $ 1.96 $ 6,121 2,851 $ 2.13 $ (743) (234) $ (0.17) PISTACHIOS (lbs.) Current year crop $ 3,990 2,466 $ 1.62 $ — — $ — $ 3,990 2,466 $ 1.62 Prior crop years — — — — — — — — — Prior crop price adjustment — 873 (873) Crop insurance 46 1,577 (1,531) Subtotal Pistachios 1 $ 4,036 2,466 $ 1.62 $ 2,450 — $ — $ 1,586 2,466 $ 1.62 WINE GRAPES (tons) Current year crop $ 3,290 11 $ 299.09 $ 3,470 10 $ 347.00 $ (180) 1 $ (47.91) Crop insurance — — — Subtotal Wine Grapes $ 3,290 11 $ 299.09 $ 3,470 10 $ 347.00 $ (180) 1 $ (47.91) Other Hay $ 267 $ 587 $ (320) Other farming revenues 979 373 606 Total farming revenues $ 13,950 $ 13,001 $ 949 1 Average price calculation reflects sale of almond and pistachio crops during the calendar reported year, exclusive of any price adjustments. 2 Almond and pistachio units are presented in thousands of pounds, while wine grapes are presented in thousands of tons. 47 2023 Operational Highlights: • During 2023, farming segment revenues increased $949,000, or 7%, from $13,001,000 in 2022 to $13,950,000 in 2023.
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimates that are likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimates that are likely to occur from period to period, use of different estimates that we reasonably could have used in the current period, or would have a material impact on our financial condition or results of operations.
Other Income Total other income increased $1,501,000, or 679%, from $221,000 in 2021 to $1,722,000 in 2022. In 2022, the Company had a higher average investment in marketable securities resulting in a $577,000 increase in interest income.
Total other income increased $1,501,000, or 679%, from $221,000 in 2021 to $1,722,000 in 2022. In 2022, the Company had a higher average investment in marketable securities resulting in a $577,000 increase in interest income.
Lastly, our farming segment had cash outlays of $5,915,000 for cultural and water costs tied to crops not yet in production, developing new almond orchards, grape vineyards, and replacing old farm equipment. Our mineral resources segment spent $988,000 to acquire water for use as needed and for future residential development activity. Lastly, the Company reinvested $63,882,000 into marketable securities.
Our farming segment had cash outlays of $5,915,000 for cultural and water costs tied to crops not yet in production, developing new almond orchards, grape vineyards, and replacing old farm equipment. Our mineral resources segment spent $988,000 to acquire water for use as needed and for future residential development activity. Lastly, the Company reinvested $63,882,000 into marketable securities.
This discussion and analysis is based on, should be read together with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in Item 15(a)1 of this Form 10-K, beginning at page F-1. It also should be read in conjunction with the disclosure under “Forward-Looking Statements” in Part 1 of this Form 10-K.
This discussion and analysis are based on, should be read together with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in Item 15(a)1 of this Form 10-K, beginning at page F-1. It also should be read in conjunction with the disclosure under “Forward-Looking Statements” in Part 1 of this Form 10-K.
Possible indications of impairment may include events or changes in circumstances affecting the 37 entitlement process, government regulation, litigation, geographical demand for new housing, and market conditions related to pricing of new homes. We make significant assumptions to evaluate each real estate development for possible indications of impairment.
Possible indications of impairment may include events or changes in circumstances affecting the entitlement process, government regulation, litigation, geographical demand for new housing, and market conditions related to pricing of new homes. We make significant assumptions to evaluate each real estate development for possible indications of impairment.
It does not include normal purchases, which are made in the ordinary course of business. 50 As discussed in Note 15 (Retirement Plans) of the Notes to Consolidated Financial Statements, we have long-term liabilities for deferred employee compensation, including pension and supplemental retirement plans.
It does not include normal purchases, which are made in the ordinary course of business. As discussed in Note 15 (Retirement Plans) of the Notes to Consolidated Financial Statements, we have long-term liabilities for deferred employee compensation, including pension and supplemental retirement plans.
The shelf registration allows for efficient and timely access to capital markets and when combined with our other potential funding sources just noted, provides us with a variety of capital funding options that can then be used and appropriately matched to the funding needs of the Company.
The shelf registration allows for efficient and timely access to capital markets and, when combined with our other potential funding sources just noted, provides us with a variety of capital funding options that can then be used and appropriately matched to our funding needs.
We believe the following critical accounting estimates reflect our more significant judgments and estimates used in the preparation of the consolidated financial statements: Impairment of Long-Lived Assets, Real Estate Development – We evaluate our real estate development projects for impairment on an ongoing basis.
We believe the following critical accounting estimates reflect our more significant judgments and estimates used in the preparation of the consolidated financial statements: 41 Impairment of Long-Lived Assets, Real Estate Development – We evaluate our real estate development projects for impairment on an ongoing basis.
The Company recognized land sales revenue of $19,627,000 and deferred revenues of $2,373,000 attributable to a performance obligation within the contract after applying the five-step revenue recognition model in accordance with ASC Topic 606 - Revenue From Contracts With Customers. ◦ 12.3 acres of industrial land located at TRCC West to a third party for $4,680,000. • Commercial/industrial real estate segment expenses increased $4,403,000, or 37%, from $11,953,000 in 2021 to $16,356,000 in 2022.
We recognized land sales revenue of $19,627,000 and deferred revenues of $2,373,000 attributable to a performance obligation within the contract after applying the five-step revenue recognition model in accordance with ASC Topic 606 - Revenue From Contracts With Customers. ◦ 12.3 acres of industrial land located at TRCC West to a third party for $4,680,000. • Commercial/industrial real estate segment expenses increased $4,403,000, or 37%, from $11,953,000 in 2021 to $16,356,000 in 2022.
Lastly, total other income increased $1,501,000 as a result of an increase in interest income along with receiving excess distributions and recognizing long-term deferred gains associated with the Company's former 18-19 West joint venture. The preceding improvements were offset by a $3,572,000 increase in income tax expense.
Lastly, total other income increased $1,501,000 as a result of an increase in interest income, along with receiving excess distributions and recognizing long-term deferred gains associated with our former 18-19 West joint venture. The preceding improvements were offset by a $3,572,000 increase in income tax expense.
It is useful to read the business segment information in conjunction with Note 16 (Reporting Segments and Related Information) of the Notes to Consolidated Financial Statements.
It is useful to read the reporting segment information in conjunction with Note 16 (Reporting Segments and Related Information) of the Notes to Consolidated Financial Statements.
We will use a combination of the above funding sources to properly match funding requirements with the assets or development project being funded. As we move into 2023, we will be evaluating various options for funding the potential start of development projects. There is no assurance that we can obtain financing or that we can obtain financing at favorable terms.
We will use a combination of the above funding sources to properly match funding requirements with the assets or development project being funded. As we move into 2024, we will be evaluating various options for funding the potential start of development projects. There is no assurance that we can obtain financing or that we can obtain financing at favorable terms.
During 2022, we made pension contributions of $165,000 and it is projected that we will make a similar contribution in 2023. Our cash contract commitments consist of contracts in various stages of completion related to infrastructure development within our industrial developments and entitlement costs related to our industrial and residential development projects.
During 2023, we made pension contributions of $165,000 and it is projected that we will make a similar contribution in 2024. Our cash contract commitments consist of contracts in various stages of completion related to infrastructure development within our industrial developments and entitlement costs related to our industrial and residential development projects.
The actual timing and completion of entitlement-related activities and the beginning of development is difficult to predict due to the uncertainties of the approval process, the length of time related to litigation defense, and the status of the economy. We will also continue to evaluate land resources to determine the highest and best use for our land holdings.
The actual timing and completion of entitlement-related activities and the beginning of development is difficult to predict due to the uncertainties of the approval process, the length of time related to litigation defense, and the status of the economy. We will also continue to evaluate land resources to determine the highest and best use for our landholdings.
Our mineral resources segment generates revenues from oil and gas royalty leases, rock and aggregate mining leases, a lease with National Cement and sales of water. The farming segment produces revenues from the sale of wine grapes, almonds, and pistachios.
Our mineral resources segment generates revenues from oil and gas royalty leases, rock and aggregate mining leases, a lease with National Cement of California Inc., and water sales. The farming segment produces revenues from the sale of wine grapes, almonds, and pistachios.
See table above for details of quantity sold. ◦ Pistachio revenues decreased $1,843,000 because the 2022 crop did not bear any fruit due to a very mild winter which limited the number of optimum chill hours (temperatures below 42 degrees for an extended period of time), which impacts the trees ability to produce fruit.
See table above for details of quantity sold. 48 ◦ Pistachio revenues decreased $1,843,000 because the 2022 crop did not bear any fruit due to a very mild winter, which limited the number of optimum chill hours (temperatures below 42 degrees for an extended period of time), which impacts the trees' ability to produce fruit.
We expect these expenses to remain consistent with current years cost in the near term and only begin to increase as we move into the development phase of each project in the future.
We expect these expenses to remain consistent with current years' cost in the near term and only begin to increase as we move into the development phase of each project in the future.
Our effective income tax rate for the year ended December 31, 2022 was higher than the federal statutory rate in the United States, a result of permanent differences arising from stock compensation and non-deductible compensation under Section 162(m) of the Tax Cuts and Jobs Act of 2017.
Our effective income tax rate for the year ended December 31, 2023 was higher than the federal statutory rate in the United States, as a result of permanent differences arising from stock compensation and non-deductible compensation under Section 162(m) of the Tax Cuts and Jobs Act of 2017.
In support of these objectives, we have been investing in land planning and entitlement activities for new industrial and residential land developments and in infrastructure improvements within our active industrial development.
In support of these objectives, we have been investing in land planning and entitlement activities for new commercial/industrial and resort/residential land developments and in infrastructure improvements within our active industrial development.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations provides a narrative discussion of our results of operations. It contains the results of operations for each operating segment of the business and is followed by a discussion of our financial position.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations provides a narrative discussion of our results of operations. It contains the results of operations for each reporting segment of the business and is followed by a discussion of our financial position.
The Company exited a consulting contract in 2014 related to the Grapevine Development and is obligated to pay an earned incentive fee at the time of successful receipt of litigated project entitlements and at a value measurement date five-years after entitlements have been achieved for Grapevine.
The Company exited a consulting contract in 2014 related to the Grapevine Development and is obligated to pay an earned incentive fee at the time of successful receipt of all project permits and entitlements and at a value measurement date five-years after entitlements have been achieved for Grapevine.
Recent Accounting Pronouncements For discussion of recent accounting pronouncements, see Note 1 (Summary of Significant Accounting Policies) of the Notes to Consolidated Financial Statements. 38 Results of Operations by Segment We evaluate the performance of our reporting segments separately to monitor the different factors affecting financial results.
Recent Accounting Pronouncements For discussion of recent accounting pronouncements, see Note 1 (Summary of Significant Accounting Policies) in the Notes to Consolidated Financial Statements. 42 Results of Operations by Segment We evaluate the performance of our reporting segments separately to monitor the different factors affecting financial results.
The timing of these investments is dependent on our coordination efforts with Los Angeles County regarding litigation defense for Centennial, permitting activities for Grapevine, and design, civil engineering, land planning and design, for MV. Our plans also include $1,800,000 for payment of annual water inventory and water related investments.
The timing of these investments is dependent on our coordination efforts with Los Angeles County regarding litigation defense for Centennial, permitting activities for Grapevine, and design, civil engineering, land planning and design, for MV. Our plans also include $6,684,000 for payment of annual water inventory and water related investments.
The resort/residential segment will continue to incur costs in the future related to professional service fees, public relations costs, and staffing costs as we continue forward with permitting activities for the above communities.
The resort/residential segment will continue to incur costs in the future related to professional service fees, public relations costs, and staffing costs as we continue to go forward with permitting and pre-development activities for the above communities.
Changes in estimates used in these and other items could have a material impact on our financial statements. See also Note 1 (Summary of Significant Accounting Policies) of the Notes to Consolidated Financial Statements, which discusses accounting policies that we have selected from acceptable alternatives.
Changes in estimates used in these and other items could have a material impact on our financial statements. Please refer to Note 1 (Summary of Significant Accounting Policies) in the Notes to Consolidated Financial Statements, which discusses accounting policies that we have selected from acceptable alternatives.
We do not provide a guarantee on the $13,318,000 of debt related to our joint venture with TA/Petro. 52 Non-GAAP Financial Measures EBITDA represents earnings before interest, taxes, depreciation, and amortization, a non-GAAP financial measure, and is used by us and others as a supplemental measure of performance.
We do not provide a guarantee on the $12,556,000 of debt related to our joint venture with TA/Petro. 55 Non-GAAP Financial Measures EBITDA represents earnings before interest, taxes, depreciation, and amortization, a non-GAAP financial measure, and is used by us and others as a supplemental measure of performance.
During the next few years, our net income will fluctuate from year-to-year based upon, among other factors, commodity prices, production within our farming segment, the timing of land sales and the leasing of land and/or industrial space within our industrial developments, and equity in earnings realized from our unconsolidated joint ventures.
During the next few years, our net income will fluctuate from year-to-year based upon, among other factors, commodity prices, production within our farming segment, the timing of land sales and the leasing of land, industrial space, and/or multi-family apartment units within our industrial developments, and equity in earnings generated from our unconsolidated joint ventures.
The Company recognized revenues of $5,489,000 and deferred profit of $3,012,000 after applying the five-step revenue recognition model in accordance with ASC Topic 606 — Revenue From Contracts With Customers and ASC Topic 323, Investments — Equity Method and Joint Ventures. ◦ 58.0 acres of industrial land located at TRCC East to a major multinational corporation for $22,000,000.
We recognized revenues of $5,489,000 and deferred profit of $3,012,000 after applying the five-step revenue recognition model in accordance with ASC Topic 606 — Revenue From Contracts With Customers and ASC Topic 323, Investments — Equity Method and Joint Ventures. ◦ 58.0 acres of industrial land located at TRCC East to Nestlé for $22,000,000.
In May 2022, we filed an updated shelf registration statement on Form S-3 that went effective in May 2022. Under the shelf registration statement, we may offer and sell in the future one or more offerings, common stock, preferred stock, debt securities, warrants or any combination of the foregoing.
In May 2022, we filed an updated shelf registration statement on Form S-3 that went effective in May 2022. Under the shelf registration statement, we may offer and sell in the future through one or more offerings not to exceed $200,000,000 of common stock, preferred stock, debt securities, warrants or any combination of the foregoing.
Capitalized interest for the years ended December 31, 2022 and 2021, of $2,294,000 and $2,459,000, respectively, is classified in real estate development. We also capitalized payroll costs related to development, pre-construction, and construction projects which aggregated $2,387,000 and $2,467,000 for the years ended December 31, 2022 and 2021, respectively. Expenditures for repairs and maintenance are expensed as incurred.
Capitalized interest for the years ended December 31, 2023 and 2022, of $3,098,000 and $2,294,000, respectively, is classified in real estate development. We also capitalized payroll costs related to development, pre-construction, and construction projects, which aggregated $2,270,000 and $2,387,000 for the years ended December 31, 2023 and 2022, respectively. Expenditures for repairs and maintenance are expensed as incurred.
The primary commercial/industrial development is TRCC. The resort/residential real estate development segment is actively involved in the land entitlement and pre-development efforts both internally and through a joint venture. Within our resort/residential segment, the three active mixed-use master plan developments are MV, Centennial, and Grapevine.
The primary commercial/industrial development is TRCC. The resort/residential real estate development segment is actively involved in the land entitlement and pre-development efforts both internally and through a joint venture. Our active developments within this segment are MV, Centennial, and Grapevine.
The factors contributing to this increase is as follow: ◦ Almond revenues increased $3,021,000 due an increase in pounds sold in 2022 when compared to 2021.
The factors contributing to this increase are as follows: ◦ Almond revenues increased $3,021,000 due to an increase in pounds sold in 2022 when compared to 2021.
The Company sold three land parcels in 2022, totaling 98.2 acres, for $29,796,000. ◦ A 27.88 acre land parcel contributed with a fair value of $8,501,000 to TRC-MRC 5, LLC.
The three land parcels we sold in 2022 totaling 98.2 acres include: ◦ A 27.88-acre land parcel contributed with a fair value of $8,501,000 to TRC-MRC 5, LLC.
As noted above, at December 31, 2022, we had $72,563,000 in cash and securities and as of the filing date of this Form 10-K, we had $40,607,000 available on credit lines to meet any short-term liquidity needs. We continue to expect that substantial investments will be required in order to develop our land assets.
As noted above, at December 31, 2023, we had $64,463,000 in cash and securities and as of the filing date of this Form 10-K, we had $108,615,000 available on credit lines to meet any short-term liquidity needs. We continue to expect that substantial investments will be required in order to develop our land assets.
Critical Accounting Estimates The preparation of our consolidated financial statements in accordance with generally accepted accounting principles in the United States, or GAAP, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
Critical Accounting Estimates The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and judgments that affect the reported amounts for assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
For further discussion of mineral resources operations, refer to Item 1 “Business—Mineral Resources.” 42 Farming ($ in thousands) 2022 2021 2020 Farming revenues Almonds $ 6,121 $ 3,100 $ 5,021 Pistachios 2,450 4,293 5,636 Wine grapes 3,470 2,850 2,589 Hay 587 408 419 Other 373 388 201 Total farming revenues $ 13,001 $ 11,039 $ 13,866 Total farming expenses $ 19,811 $ 14,116 $ 15,103 Operating loss from farming $ (6,810) $ (3,077) $ (1,237) December 31, 2022 December 31, 2021 Change ($ in thousands) Revenue Quantity Sold 2 Average Price Revenue Quantity Sold 2 Average Price Revenue Quantity Sold 2 Average Price ALMONDS (lbs.) Current year crop $ 2,851 1,267 $ 2.25 $ 2,257 945 $ 2.39 $ 594 322 $ (0.14) Prior crop years 3,216 1,584 $ 2.03 670 377 $ 1.78 2,546 1,207 0.25 Crop Insurance 54 173 (119) Subtotal Almonds 1 $ 6,121 2,851 $ 2.13 $ 3,100 1,322 $ 2.21 $ 3,021 1,529 $ (0.08) PISTACHIOS (lbs.) Current year crop $ — — $ — $ 3,462 1,615 $ 2.14 $ (3,462) (1,615) $ (2.14) Prior crop years — — — — — — — — — Prior crop price adjustment 873 365 508 Crop Insurance 1,577 466 1,111 Subtotal Pistachios 1 $ 2,450 — $ — $ 4,293 1,615 $ 2.14 $ (1,843) (1,615) $ (2.14) WINE GRAPES (tons) Current year crop $ 3,470 10 $ 347.00 $ 2,850 9 $ 316.67 $ 620 1 $ 30.33 Crop Insurance — — — Subtotal Wine Grapes $ 3,470 10 $ 347.00 $ 2,850 9 $ 316.67 $ 620 1 $ 30.33 Other Hay $ 587 $ 408 $ 179 Other farming revenues 373 388 (15) Total farming revenues $ 13,001 $ 11,039 $ 1,962 1 Average price calculation reflects sale of almond and pistachio crops during the calendar reported year exclusive of any price adjustments. 2 Almond and pistachio units are presented in thousands of pounds while wine grapes are presented in thousands of tons. 43 2022 Operational Highlights: • During 2022, farming segment revenues increased $1,962,000, or 18%, from $11,039,000 in 2021 to $13,001,000 in 2022.
December 31, 2022 December 31, 2021 Change ($ in thousands) Revenue Quantity Sold 2 Average Price Revenue Quantity Sold 2 Average Price Revenue Quantity Sold 2 Average Price ALMONDS (lbs.) Current year crop $ 2,851 1,267 $ 2.25 $ 2,257 945 $ 2.39 $ 594 322 $ (0.14) Prior crop years 3,216 1,584 2.03 670 377 1.78 2,546 1,207 0.25 Crop insurance 54 173 $ (119) Subtotal Almonds 1 $ 6,121 2,851 $ 2.13 $ 3,100 1,322 $ 2.21 $ 3,021 1,529 $ (0.08) PISTACHIOS (lbs.) Current year crop $ — — $ — $ 3,462 1,615 $ 2.14 $ (3,462) (1,615) $ (2.14) Prior crop years — — — — — — — — — Prior crop price adjustment 873 365 508 Crop insurance 1,577 466 1,111 Subtotal Pistachios 1 $ 2,450 — $ — $ 4,293 1,615 $ 2.14 $ (1,843) (1,615) $ (2.14) WINE GRAPES (tons) Current year crop $ 3,470 10 $ 347.00 $ 2,850 9 $ 316.67 $ 620 1 $ 30.33 Crop insurance — — — Subtotal Wine Grapes $ 3,470 10 $ 347.00 $ 2,850 9 $ 316.67 $ 620 1 $ 30.33 Other Hay $ 587 $ 408 $ 179 Other farming revenues 373 388 (15) Total farming revenues $ 13,001 $ 11,039 $ 1,962 1 Average price calculation reflects sale of almond and pistachio crops during the calendar reported year exclusive of any price adjustments. 2 Almond and pistachio units are presented in thousands of pounds while wine grapes are presented in thousands of tons. 2022 Operational Highlights: • During 2022, farming segment revenues increased $1,962,000, or 18%, from $11,039,000 in 2021 to $13,001,000 in 2022.
The following table summarizes the cash flow activities for the following years ended December 31: ($ in thousands) 2022 2021 2020 Operating activities $ 8,531 $ 2,816 $ 15,481 Investing activities $ (1,891) $ (14,652) $ 19,778 Financing activities $ (4,419) $ (6,086) $ (7,045) Cash flows provided by operating activities are primarily dependent upon the rental rates of our leases, the collectability of rent and recovery of operating expenses from our tenants, distributions from joint ventures, the success of our crops and commodity prices within our mineral resource segment.
The following table summarizes the cash flow activities for the following years ended December 31: ($ in thousands) 2023 2022 2021 Operating activities $ 13,655 $ 8,531 $ 2,816 Investing activities $ (14,002) $ (1,891) $ (14,652) Financing activities $ (6,865) $ (4,419) $ (6,086) Cash flows provided by operating activities are primarily dependent upon the rental rates of our leases, the collectability of rent and recovery of operating expenses from our tenants, distributions from joint ventures, the success of our crops and commodity prices within our mineral resources segment.
Please refer to Note 6 (Long-Term Water Assets) of the Notes to Consolidated Financial Statements for additional information regarding water assets. 51 Off-Balance Sheet Arrangements The following table shows contingent obligations we have with respect to the CFDs.
These contracts for the supply of future water run through 2035. Please refer to Note 6 (Long-Term Water Assets) of the Notes to Consolidated Financial Statements for additional information regarding water assets. Off-Balance Sheet Arrangements The following table shows contingent obligations we have with respect to the CFDs.
We are in the preliminary stages of development; hence, no revenues are attributed to this segment for these reporting periods. 2022 Operational Highlights: • In 2022, resort/residential segment expenses decreased $94,000 to $1,629,000, or 5%, when compared to $1,723,000 in 2021.
We are in the preliminary stages of development; hence, no revenues are attributed to this segment for these reporting periods. 2023 Operational Highlights: • In 2023, resort/residential segment expenses decreased $101,000 to $1,528,000, or 6%, when compared to $1,629,000 in 2022.
This decline was driven by less water available for sale but due to low statewide water supplies we were able to sell our available water at higher prices. • Mineral resources expenses decreased $590,000, or 4%, to $12,969,000 in 2022 when compared to $13,559,000 in 2021 as a result of having less water sales offset by an increase in property taxes. 2021 Operational Highlights: • Revenues from our mineral resources segment increased $10,251,000, or 95%, to $20,987,000 in 2021 when compared to $10,736,000 in 2020.
This decline was driven by less water available for sale, but due to low statewide water supplies, we were able to sell our available water at higher prices. • Mineral resources expenses decreased $590,000, or 4%, to $12,969,000 in 2022 when compared to $13,559,000 in 2021 as a result of having less water sales, offset by an increase in property taxes.
On an on-going basis, we evaluate our estimates, including those related to revenue recognition, impairment of long-lived assets, capitalization of costs, allocation of costs related to land sales and leases, and stock compensation.
On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, impairment of long-lived assets, capitalization of costs, allocation of costs related to land sales and leases, stock compensation, and our future ability to utilize deferred tax assets.
The increase is largely attributed to a 1,529,000-pound increase in almond sales, inclusive of a $1,050,000 write-down in the carrying value for the Company's 2022 almond crop driven by an increase in costs due to high water expense, the impact of inflation to cultural costs, and the impact of low pricing in the almond market as described in Item 1 “Business—Farming Operations.” Labor costs also continued to increase throughout 2022.
The increase is largely attributed to a 1,529,000-pound increase in almond sales, inclusive of a $1,050,000 write-down in the carrying value for the Company's 2022 almond crop driven by an increase in costs due to high water expense, the impact of inflation to cultural costs, and the impact of low pricing in the almond market.
Lastly, the ranch operation segment consists of game management revenues and ancillary land uses such as grazing leases and filming. 36 Financial Highlights For 2022, net income attributable to common stockholders was $15,808,000 compared to net income attributed to common stockholders of $5,348,000 in 2021.
Lastly, the ranch operations segment consists of game management revenues and ancillary land uses, such as grazing leases and filming. 40 Financial Highlights For 2023, net income attributable to common stockholders was $3,265,000 compared to net income attributed to common stockholders of $15,808,000 in 2022.
The New Credit Facility requires compliance with two financial covenants: (a) total liabilities divided by tangible net worth not greater than 0.75 to 1.0 at each quarter end; and (b) a debt service coverage ratio not less than 1.25 to 1.00 as of each quarter end on a rolling four quarter basis.
The Revolving Credit Facility requires compliance with three financial covenants: (a) total liabilities divided by tangible net worth not greater than 0.55 to 1.00 at each year end; (b) a debt service coverage ratio not less than 1.50 to 1.00 as of each year end on a rolling four quarter basis; and (c) a liquidity ratio not less than 2.00 to 1.00 at each year end.
Year-Ended December 31, ($ in thousands) 2022 2021 2020 Net income (loss) $ 15,810 $ 5,342 $ (747) Net income (loss) attributed to non-controlling interest 2 (6) (7) Interest, net Consolidated interest income (634) (57) (884) Our share of interest expense from unconsolidated joint ventures 2,974 1,708 1,902 Total interest, net 2,340 1,651 1,018 Income tax expense 7,393 3,821 829 Depreciation and amortization Consolidated 4,628 4,594 4,938 Our share of depreciation and amortization from unconsolidated joint ventures 4,618 4,639 4,419 Total depreciation and amortization 9,246 9,233 9,357 EBITDA 34,787 20,053 10,464 Stock compensation expense 2,877 4,271 4,494 Adjusted EBITDA $ 37,664 $ 24,324 $ 14,958 53 Net operating income (NOI) is a non-GAAP financial measure calculated as operating income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding general and administrative expenses, interest expense, depreciation and amortization, and gain or loss on sales of real estate.
Year-Ended December 31, ($ in thousands) 2023 2022 2021 Net income $ 3,265 $ 15,810 $ 5,342 Net income (loss) attributed to non-controlling interest — 2 (6) Interest, net Consolidated interest income (2,557) (634) (57) Our share of interest expense from unconsolidated joint ventures 4,879 2,974 1,708 Total interest, net 2,322 2,340 1,651 Income tax expense 2,323 7,393 3,821 Depreciation and amortization Consolidated 4,806 4,628 4,594 Our share of depreciation and amortization from unconsolidated joint ventures 5,418 4,618 4,639 Total depreciation and amortization 10,224 9,246 9,233 EBITDA 18,134 34,787 20,053 Stock compensation expense 3,252 2,877 4,271 Adjusted EBITDA $ 21,386 $ 37,664 $ 24,324 56 Net operating income (NOI) is a non-GAAP financial measure calculated as operating income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding general and administrative expenses, interest expense, depreciation and amortization, and gain or loss on sales of real estate.
($ in thousands) Year-Ended December 31, Net operating income 2022 2021 2020 Pastoria Energy Facility $ 4,846 $ 4,355 $ 4,576 TRCC 1,185 1,250 1,290 Communication leases 1,001 940 911 Other commercial leases 616 609 557 Total Commercial/Industrial net operating income $ 7,648 $ 7,154 $ 7,334 Year-Ended December 31, ($ in thousands) 2022 2021 2020 Commercial/Industrial operating income $ 24,159 $ 7,523 $ 2,414 Plus: Commercial/Industrial depreciation and amortization 455 463 486 Plus: General, administrative and other expenses 15,491 10,950 6,137 Less: Other revenues including land sales (32,457) (11,782) (1,703) Total Commercial/Industrial net operating income $ 7,648 $ 7,154 $ 7,334 The Company utilizes NOI of unconsolidated joint ventures as a measure of financial or operating performance that is not specifically defined by GAAP.
($ in thousands) Year-Ended December 31, Net operating income 2023 2022 2021 Pastoria Energy Facility $ 5,231 $ 4,846 $ 4,355 TRCC 1,296 1,185 1,250 Communication leases 1,070 1,001 940 Other commercial leases 631 616 609 Total Commercial/Industrial net operating income $ 8,228 $ 7,648 $ 7,154 Year-Ended December 31, ($ in thousands) 2023 2022 2021 Commercial/Industrial operating income $ 3,705 $ 24,159 $ 7,523 Plus: Commercial/Industrial depreciation and amortization 468 455 463 Plus: General, administrative, cost of sales and other expenses 7,130 15,491 10,950 Less: Other revenues including land sales (3,075) (32,457) (11,782) Total Commercial/Industrial net operating income $ 8,228 $ 7,648 $ 7,154 The Company utilizes NOI of unconsolidated joint ventures as a measure of financial or operating performance that is not specifically defined by GAAP.
The New Credit Facility also contains customary negative covenants that limit the ability of the Company to, among other things, make capital expenditures, incur indebtedness and issue guaranties, consummate certain assets sales, acquisitions or mergers, make investments, pay dividends or repurchase stock, make a change in capital ownership, or incur liens on any assets. 49 The New Credit Facility contains customary events of default, including: failure to make required payments; failure to comply with terms of the New Credit Facility; bankruptcy and insolvency.
The Revolving Credit Facility also contains customary negative covenants that limit the ability of the Company to, among other things, make capital expenditures, incur indebtedness and issue guaranties, consummate certain asset sales, acquisitions or mergers, make investments, pay dividends or repurchase stock, make a change in capital ownership, or incur liens on any assets.
Year-Ended December 31, ($ in thousands) 2022 2021 2020 Net income of unconsolidated joint ventures $ 12,662 $ 16,752 $ 7,099 Plus: Interest expense of unconsolidated joint ventures 5,834 4,926 5,154 Operating income of unconsolidated joint ventures 18,496 21,678 12,253 Plus: Depreciation and amortization of unconsolidated joint ventures 8,648 8,720 8,323 Less: Profit from sale of land — (10,380) — Net operating income of unconsolidated joint ventures $ 27,144 $ 20,018 $ 20,576 54
Year-Ended December 31, ($ in thousands) 2023 2022 2021 Net income of unconsolidated joint ventures $ 11,641 $ 12,662 $ 16,752 Plus: Interest expense of unconsolidated joint ventures 9,587 5,834 4,926 Operating income of unconsolidated joint ventures 21,228 18,496 21,678 Plus: Depreciation and amortization of unconsolidated joint ventures 10,246 8,648 8,720 Less: Profit from sale of land — — (10,380) Net operating income of unconsolidated joint ventures $ 31,474 $ 27,144 $ 20,018 57
Our current and future capital resource requirements will be provided primarily from current cash and marketable securities, cash flow from on-going operations, distributions from joint ventures, proceeds from the sale of developed and undeveloped parcels, potential sales of assets, additional use of debt or drawdowns against our line-of-credit, proceeds from the reimbursement of public infrastructure costs through CFD bond debt (described below under “Off-Balance Sheet Arrangements”), and the issuance of common stock.
At December 31, 2023, the Company was in compliance with all financial covenants. 53 We expect that current and future capital resource requirements will be provided primarily from current cash and marketable securities, cash flow from ongoing operations, distributions from joint ventures, proceeds from the sale of developed and undeveloped land parcels, potential sales of assets, additional use of debt or drawdowns against our line of credit, proceeds from the reimbursement of public infrastructure costs through CFD bond debt (described below under “Off-Balance Sheet Arrangements”), or issuance of additional common stock.
TRPFFA created two CFD's, the West CFD and the East CFD. The West CFD has placed liens on 420 acres of the Company’s land to secure payment of special taxes related to $19,540,000 of outstanding bond debt sold by TRPFFA for TRCC-West.
The West CFD has placed liens on 420 acres of land to secure payment of special taxes related to $19,540,000 of outstanding bond debt sold by TRPFFA for TRCC-West. The East CFD has placed liens on 1,931 acres of our land to secure payments of special taxes related to $72,055,000 of outstanding bond debt sold by TRPFFA for TRCC-East.
Within our farming segment, we will make investments as needed to improve efficiency and add capacity to its operations when it is profitable to do so. Our cash and cash equivalents and marketable securities totaled approximately $72,563,000 at December 31, 2022, an increase of $25,385,000, or 54%, from the corresponding amount at the end of 2021.
Within our farming segment, we will make investments as needed to improve efficiency and add capacity to its operations when it is profitable to do so. Our cash and cash equivalents and marketable securities totaled approximately $64,463,000 at December 31, 2023, a decrease of $8,100,000, or 11%, from the corresponding amount at the end of 2022.
The Company made income tax payments of $8,237,000 in 2022 and $730,000 in 2021. The Company received refunds of $1,410,000 in 2022 and $483,000 in 2021. For more detail, see Note 12. (Income Taxes), of the Notes to Consolidated Financial Statements, included this Annual Report on Form 10-K.
The Company received refunds of $0 in 2023 and $1,410,000 in 2022. For more details, see Note 12. (Income Taxes), of the Notes to Consolidated Financial Statements, included this Annual Report on Form 10-K.
See Item 1, “Business – Real Estate Development Overview” for a further discussion of real estate development activities. 40 Mineral Resources ($ in thousands) 2022 2021 2020 Mineral resources revenues Oil and gas $ 1,340 $ 737 $ 654 Rock aggregate 1,937 1,910 1,407 Cement 2,871 2,210 2,214 Exploration leases 94 119 100 Water sales 14,658 15,523 5,909 Reimbursables and other 695 488 452 Total mineral resources revenues $ 21,595 $ 20,987 $ 10,736 Total mineral resources expenses $ 12,969 $ 13,559 $ 6,414 Operating income from mineral resources $ 8,626 $ 7,428 $ 4,322 2022 2021 2020 Oil and gas Oil production (barrels) 92,788 75,006 114,567 Average price per barrel $98.00 $69.00 $46.00 Blended royalty rate 14.5% 13.9% 11.7% Natural gas production (millions of cubic feet) 57,000 64,000 207,000 Average price per thousand cubic feet $2.84 $1.50 $1.06 Blended royalty rate 14.5% 13.9% 11.7% Water Water sold in acre-feet 10,400 13,651 5,022 Average price per acre-feet $1,409 $1,137 $1,177 Cement Tons sold 1,356,000 1,275,000 1,253,000 Average price per ton $2.12 $1.73 $1.77 Rock/Aggregate Tons sold 1,677,000 1,466,000 1,272,000 Average price per ton $1.15 $1.30 $1.11 Note: Differences between revenues calculated within this table and reported revenues within the previous table are attributed to rounding and the level of precision presented on production units shown. 41 2022 Operational Highlights: • Revenues from our mineral resources segment increased $608,000, or 3%, to $21,595,000 in 2022 when compared to $20,987,000 in 2021.
See Item 1, “Business – Real Estate Development Overview” for a further discussion of real estate development activities. 44 Mineral Resources ($ in thousands) 2023 2022 2021 Mineral resources revenues Oil and gas $ 1,005 $ 1,340 $ 737 Rock aggregate 1,903 1,937 1,910 Cement 2,652 2,871 2,210 Exploration leases 29 94 119 Water sales 8,033 14,658 15,523 Reimbursables and other 902 695 488 Total mineral resources revenues $ 14,524 $ 21,595 $ 20,987 Total mineral resources expenses $ 8,685 $ 12,969 $ 13,559 Operating income from mineral resources $ 5,839 $ 8,626 $ 7,428 2023 2022 2021 Oil and gas Oil production (barrels) 94,780 92,788 75,006 Average price per barrel $78.00 $98.00 $69.00 Natural gas production (millions of cubic feet) 62,000 57,000 64,000 Average price per thousand cubic feet $2.87 $2.84 $1.50 Blended royalty rate 13.3% 14.5% 13.9% Water Water sold in acre-feet 5,145 10,400 13,651 Average price per acre-foot $1,561 $1,409 $1,137 Cement Tons sold 1,112,000 1,356,000 1,275,000 Average price per ton $2.39 $2.12 $1.73 Rock/Aggregate Tons sold 1,600,000 1,677,000 1,466,000 Average price per ton $1.19 $1.15 $1.30 Note: Differences between revenues calculated within this table and reported revenues within the previous table are attributed to rounding and the level of precision presented on production units shown. 45 2023 Operational Highlights: • Revenues from our mineral resources segment decreased $7,071,000, or 33%, to $14,524,000 in 2023 when compared to $21,595,000 in 2022.
During 2022, our operations generated $8,531,000 in cash, primarily through joint venture distributions and receivable collections. During 2021, our operations generated $2,816,000 in cash, primarily through joint venture distributions. 47 During 2022, investing activities used $1,891,000, which was largely attributed to capital expenditures of $22,602,000 used primarily for real estate development.
During 2022, our operations generated $8,531,000 in cash, primarily through joint venture distributions and receivable collections. 51 During 2023, investing activities used $14,002,000, which was largely attributed to capital expenditures of $21,328,000 used primarily for real estate development.
Offsetting cash outlays were maturities on marketable securities of $6,249,000, proceeds from water sales of $9,534,000, distributions from unconsolidated joint ventures of $5,734,000, and net proceeds from land sales of $4,413,000. Our estimated capital investment for 2023 is primarily related to our real estate projects as it was in 2022.
Offsetting cash outlays were maturities on marketable securities of $41,135,000, net proceeds from land sales of $24,950,000, distributions from unconsolidated joint ventures of $8,166,000, proceeds from water sales of $6,180,000, and CFD reimbursements of $5,950,000. Our estimated capital investment for 2024 is primarily related to our real estate projects as it was in 2023.
Over the comparative period, commercial/industrial segment profits increased $16,636,000 resulting from the sale of three land parcels totaling 98.2 acres. Profits from the mineral resources segment increased by $1,198,000 as a result of greater oil royalties.
For 2022, net income attributable to common stockholders was $15,808,000 compared to net income attributed to common stockholders of $5,348,000 in 2021. Over the comparative period, commercial/industrial segment profits increased $16,636,000, resulting from the sale of three land parcels totaling 98.2 acres. Profits from the mineral resources segment increased by $1,198,000 as a result of greater oil royalties.
Deferred tax liabilities consist of depreciation, deferred gains, joint venture differences, and cost of sales adjustments. Due to the nature of most of our deferred tax assets, we believe they will be used in future years and an allowance is not necessary. The Company classifies interest and penalties incurred on tax payments as income tax expenses.
Due to the nature of most of our deferred tax assets, we believe they will be used in future years and an allowance is not necessary. The Company classifies interest and penalties incurred on tax payments as income tax expenses. The Company made income tax payments of $2,564,000 in 2023 and $8,237,000 in 2022.
During 2021, financing activities used $6,086,000, which is comprised of long-term debt repayments of $4,295,000 and tax payments on vested stock grants of $1,791,000. It is difficult to accurately predict cash flows due to the nature of our businesses and fluctuating economic conditions.
During 2022, financing activities used $4,419,000, which is comprised of long-term debt repayments of $51,708,000 and tax payments on vested stock grants of $2,733,000. This was partially offset by the issuance of new debt of $49,080,000. It is difficult to accurately predict cash flows due to the nature of our businesses and fluctuating economic conditions.
The performance of each reporting segment is discussed below: Real Estate – Commercial/Industrial ($ in thousands) 2022 2021 2020 Commercial/industrial revenues Pastoria Energy Facility Lease $ 4,859 $ 4,380 $ 4,584 TRCC Leasing 1,535 1,724 1,744 TRCC management fees and reimbursements 1,431 692 715 Commercial leases 646 627 580 Communication leases 1,011 952 927 Landscaping and other 1,237 1,066 986 Land sales 29,796 10,035 — Total commercial revenues $ 40,515 $ 19,476 $ 9,536 Total commercial expenses $ 16,356 $ 11,953 $ 7,122 Operating income from commercial/industrial $ 24,159 $ 7,523 $ 2,414 2022 Operational Highlights: • During 2022, commercial/industrial segment revenues increased $21,039,000, or 108%, from $19,476,000 in 2021 to $40,515,000.
The performance of each reporting segment is discussed below: Real Estate – Commercial/Industrial ($ in thousands) 2023 2022 2021 Commercial/industrial revenues Pastoria Energy Facility Lease $ 5,089 $ 4,859 $ 4,380 TRCC Leasing 1,702 1,535 1,724 TRCC management fees and reimbursements 1,261 1,431 692 Commercial leases 662 646 627 Communication leases 1,079 1,011 952 Landscaping and other 1,965 1,237 1,066 Land sales — 29,796 10,035 Total commercial revenues $ 11,758 $ 40,515 $ 19,476 Total commercial expenses $ 8,053 $ 16,356 $ 11,953 Operating income from commercial/industrial $ 3,705 $ 24,159 $ 7,523 2023 Operational Highlights: • Commercial/industrial real estate development segment revenues were $11,758,000 for the twelve months ended December 31, 2023, a decrease of $28,757,000, or 71%, from $40,515,000 in 2022.
We also expect the commercial/industrial 39 segment to continue to experience operating costs, net of amounts capitalized, primarily related to professional service fees, marketing, commissions, planning, and staffing costs as we continue to pursue these development opportunities.
In 2023, we completed construction of a pre-leased 446,400 square-foot industrial building through a joint venture. We also expect the commercial/industrial segment to continue to experience operating costs, net of amounts capitalized, related to professional service fees, marketing, commissions, planning, and staffing costs as we continue to pursue development opportunities.
The Company believes that the letter of credit will never be drawn upon. This letter of credit is for a two-year period of time and will be renewed in two-year intervals as necessary. The annual cost related to the letter of credit is approximately $10,000.
As development occurs within TRCC-East, there is a mechanism in the bond documents to reduce the amount of the letter of credit. The Company believes that the letter of credit will never be drawn upon. This letter of credit is for a two-year period of time and will be renewed in two-year intervals as necessary.
The actual timing and completion of development is difficult to predict due to the uncertainties of the market. Infrastructure development and marketing activities and costs will continue over several years as we develop our land holdings. Prices for building materials such as concrete and steel have increased over the past year and have longer than usual lead times.
The actual timing and completion of development is difficult to predict due to the uncertainties of the market. Infrastructure development and marketing activities and costs will continue over several years as we develop our land holdings. We anticipate shorter lead times and more stable prices for materials, with electrical components being a notable exception.
As noted above, these costs are included in the above investment numbers. During 2022, financing activities used $4,419,000, which is comprised of long-term debt repayments of $51,708,000 and tax payments on vested stock grants of $2,733,000. This was partially offset by the issuance of new debt of $49,080,000.
As noted above, these costs are included in the above investment numbers. During 2023, financing activities used $6,865,000, which is comprised of long-term debt repayments of $50,357,000 and tax payments on vested stock grants of $3,353,000. This was partially offset by borrowings from the new line-of-credit facility of $47,942,000.
Estimated water payments include the Nickel water contract, which obligates us to purchase 6,693 acre-feet of water annually through 2044 and SWP contracts with Wheeler Ridge Maricopa Water Storage District, Tejon-Castac Water District, Tulare Lake Basin Water Storage District, and Dudley-Ridge Water Storage District. These contracts for the supply of future water run through 2035.
The Company believes that net savings from exiting the contract over this future time period will more than offset the incentive payment costs. 54 Estimated water payments include the Nickel water contract, which obligates us to purchase 6,693 acre-feet of water annually through 2044 and SWP contracts with Wheeler Ridge Maricopa Water Storage District, Tejon-Castac Water District, Tulare Lake Basin Water Storage District, and Dudley-Ridge Water Storage District.
For further discussion of the farming operations, refer to Item 1 “Business—Farming Operations.” Ranch Operations ($ in thousands) 2022 2021 2020 Ranch operations revenue Game management and other 1 $ 2,912 $ 2,744 $ 2,097 Grazing 1,194 1,367 1,595 Total ranch operations revenues $ 4,106 $ 4,111 $ 3,692 Total ranch operations expenses $ 5,024 $ 4,679 $ 4,896 Operating loss from ranch operations $ (918) $ (568) $ (1,204) 1 Game management and other revenues consist of revenues from hunting, filming, high desert hunt club (a premier upland bird hunting club), and other ancillary activities. 2022 Operational Highlights: • Revenues from ranch operations decreased $5,000, or 0%, from $4,111,000 in 2021 to $4,106,000 in 2022, which is primarily attributed to an increase in hunting and membership revenues of $167,000 offset by a decline in grazing revenues of $172,000 resulting from a drought clause that resulted from having fewer cattle grazing on the Company's land.
For further discussion of the farming operations, refer to Item 1 “Business—Farming Operations.” Ranch Operations ($ in thousands) 2023 2022 2021 Ranch operations revenue Game management and other 1 $ 2,884 $ 2,912 $ 2,744 Grazing 1,623 1,194 1,367 Total ranch operations revenues $ 4,507 $ 4,106 $ 4,111 Total ranch operations expenses $ 5,043 $ 5,024 $ 4,679 Operating loss from ranch operations $ (536) $ (918) $ (568) 1 Game management and other revenues consist of revenues from hunting, filming, high desert hunt club (a premier upland bird hunting club), and other ancillary activities. 2023 Operational Highlights: • Revenues from ranch operations increased $401,000, or 10%, from $4,106,000 in 2022 to $4,507,000 in 2023.
Income Taxes For the twelve months ended December 31, 2022, the Company's net income tax expense was $7,393,000 compared to $3,821,000 for the twelve months ended December 31, 2021. These represent effective income tax rates of approximately 32% and 42% for the twelve months ended December 31, 2022 and 2021, respectively.
These amounts represent effective income tax rates of approximately 42% and 32% for the twelve months ended December 31, 2023 and 2022, respectively.
Lastly, our farming segment had cash outlays of $7,416,000 for cultural and water costs tied to crops not yet in production, developing new almond orchards, grape vineyards, and replacing old farm equipment. The Company also reinvested $14,586,000 into marketable securities.
Lastly, our farming segment had cash outlays of $4,870,000 for cultural and water costs tied to crops not yet in production, developing new almond orchards, grape vineyards, and replacing old farm equipment. Additionally, our mineral resources segment spent $6,034,000 to acquire water for use as needed and for future residential development activity.
We are also planning to potentially invest up to $351,000 in the normal replacement of operating equipment, such as ranch equipment, and vehicles.
We are also investing approximately $3,068,000 to continue a farm redevelopment program, and $501,000 in the normal replacement of operating equipment, such as ranch equipment, and vehicles.
As of December 31, 2022 and 2021, we had an income tax receivable and payable of $636,000 and $1,217,000, respectively. As of December 31, 2022, we had net deferred tax liabilities of $7,180,000. Our largest deferred tax assets were made up of temporary differences related to the capitalization of costs, pension adjustments, interest rate swap, deferred gains, and stock compensation.
Our largest deferred tax assets were made up of temporary differences related to the deferred gains, pension adjustments, interest rate swap, capitalization of costs, and stock compensation. Deferred tax liabilities consist of joint venture differences, depreciation, deferred gains, interest rate swap, and stock compensation.
The decrease is attributed to lower professional service costs. 2021 Operational Highlights: • In 2021, resort/residential segment expenses increased $111,000 to $1,723,000, or 7%, when compared to $1,612,000 in 2020. The increase is primarily associated with payroll expenses net of capitalization associated with the Company's development efforts.
The decrease is namely attributed to a decrease in payroll costs. 2022 Operational Highlights: • In 2022, resort/residential segment expenses decreased $94,000 to $1,629,000, or 5%, when compared to $1,723,000 in 2021. The decrease is attributed to lower professional service costs.
The decrease is attributed to a $78,000 decrease in depreciation, a $44,000 decrease in insurance expense, and a $19,000 decrease in charitable contributions. Corporate general and administrative costs increased $413,000, or 4.4%, to $9,843,000 during 2021 when compared to $9,430,000 in 2020.
The decrease is attributed to a $78,000 decrease in depreciation, a $44,000 decrease in insurance expense, and a $19,000 decrease in charitable contributions.
The farm investments are part of a long-term farm management program to redevelop declining orchards and vineyards allowing the Company to maintain and improve future farm revenues. We expect to possibly invest up to $7,940,000 for permitting activities, predevelopment activities and land planning design at MV and Grapevine and litigation defense and supplemental recirculated environmental impact report preparation for Centennial.
We expect to possibly invest up to $9,949,000 for entitlement and permitting activities, predevelopment activities and land planning design at MV and Grapevine and litigation defense and supplemental recirculated environmental impact report preparation for Centennial.
Offsetting cash outlays were maturities on marketable securities of $41,135,000, net proceeds from land sales of $24,950,000, distributions from unconsolidated joint ventures of $8,166,000, proceeds from water sales of $6,180,000, and CFD reimbursements of $5,950,000. During 2021, investing activities used $14,652,000, which was largely attributed to capital expenditures of $20,879,000 used primarily for real estate development.
Offsetting cash outlays were maturities on marketable securities of $134,083,000, distributions from unconsolidated joint ventures of $10,978,000, proceeds from water sales of $1,324,000 and proceeds from the interest rate swap settlement of $3,715,000. During 2022, investing activities used $1,891,000, which was largely attributed to capital expenditures of $22,602,000 used primarily for real estate development.
In November 2021, the third-party exercised the land option and purchased the land from the joint venture for $15,213,000, the Company recognized $5,206,000 in equity in earnings from this land sale. • The Petro Travel Plaza equity in earnings increased $3,569,000 when compared to 2021, this increase is largely due to improved fuel margins; fuel margins improved 42% in 2022 when compared to 2021. 2021 Operational Highlights: During 2021, equity in earnings from unconsolidated joint ventures increased $4,698,000, or 104%, to $9,202,000 when compared to $4,504,000 in 2020. • The 18-19 West LLC joint venture had a purchase option in place with a third-party to purchase lots l8 and 19 at a price of $15,213,000.
In November 2021, the third-party exercised the land option and purchased the land from the joint venture for $15,213,000, the Company recognized $5,206,000 in equity in earnings from this land sale. • The Petro Travel Plaza equity in earnings increased $3,569,000 when compared to 2021, this increase is largely due to improved fuel margins; fuel margins improved 42% in 2022 when compared to 2021. 50 Income Taxes For the twelve months ended December 31, 2023, the Company's net income tax expense was $2,323,000 compared to $7,393,000 for the twelve months ended December 31, 2022.
This letter of credit will not be drawn upon unless the Company, as the largest landowner in the CFD, fails to make its property tax payments. As development occurs within TRCC-East there is a mechanism in the bond documents to reduce the amount of the letter of credit.
The standby letter of credit is in place to provide additional credit enhancement and cover approximately two years' worth of interest on the outstanding bonds. This letter of credit will not be drawn upon unless the Company, as the largest landowner in the CFD, fails to make its property tax payments.
($ in thousands) 2022 2021 2020 Equity in earnings (loss) Petro Travel Plaza Holdings LLC $ 8,526 $ 4,957 $ 5,722 Five West Parcel, LLC — — (2) 18-19 West, LLC (31) 5,206 (68) TRCC/Rock Outlet Center, LLC (1,569) (1,443) (2,090) TRC-MRC 1, LLC 21 (7) 64 TRC-MRC 2, LLC 692 634 678 TRC-MRC 3, LLC 297 (144) 200 TRC-MRC 4, LLC (184) (1) — Equity in earnings of unconsolidated joint ventures, net $ 7,752 $ 9,202 $ 4,504 2022 Operational Highlights: During 2022, equity in earnings from unconsolidated joint ventures decreased $1,450,000, or 16%, to $7,752,000 when compared to $9,202,000 in 2021. • The 18-19 West LLC joint venture had a purchase option in place with a third-party to purchase lots l8 and 19 at a price of $15,213,000.
Moreover, the lease within the TRC-MRC4, LLC joint venture commenced in late 2022, bringing on a new revenue stream for the Company. 2022 Operational Highlights: During 2022, equity in earnings from unconsolidated joint ventures decreased $1,450,000, or 16%, to $7,752,000 when compared to $9,202,000 in 2021. • The 18-19 West LLC joint venture had a purchase option in place with a third-party to purchase lots l8 and 19 at a price of $15,213,000.
The final amount of the incentive fees will not be finalized until the future payment dates. The Company believes that net savings from exiting the contract over this future time period will more than offset the incentive payment costs.
The final amount of the incentive fees will not be finalized until the future payment dates.
Long-term macro fundamentals, primarily California's population growth and household formation will also support housing demand in our region. California also has a significant documented housing shortage, which we believe our communities will help ease as the population base within California continues to grow.
Long-term market fundamentals, such as California's significant documented housing shortage and large Southern California population center we believe will support housing demand in our region.
The increase in expenses is primarily attributed to additional land cost of sales of $4,372,000. 2021 Operational Highlights: • During 2021, commercial/industrial segment revenues increased $9,940,000, or 104%, from $9,536,000 in 2020 to $19,476,000. During 2021, the Company sold two land parcels, comprised of 55.96 acres, for $10,035,000.
The decrease in expenses is primarily attributed to the absence of $8,623,000 in cost of sales from the land sales in 2022. 2022 Operational Highlights: • During 2022, commercial/industrial segment revenues increased $21,039,000, or 108%, from $19,476,000 in 2021 to $40,515,000.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−4 removed4 unchanged
Biggest changeInterest Rate Sensitivity Financial Market Risks Principal Amount by Expected Maturity At December 31, 2022 (In thousands except percentage data) 2023 2024 2025 2026 2027 Thereafter Total Fair Value Assets: Marketable securities $32,652 $1,000 $— $— $— $— $33,652 $33,444 Weighted average interest rate 2.82% 5.20% —% —% —% —% 2.89% Liabilities: Long-term debt ($4.75M note) $265 $277 $289 $302 $315 $244 $1,692 $1,692 Weighted average interest rate 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% Long-term debt ($49.1M note) $1,513 $1,589 $1,669 $1,753 $1,840 $40,098 $48,462 $48,462 Weighted average interest rate 4.62% 4.62% 4.62% 4.62% 4.62% 4.62% 4.62% Interest Rate Sensitivity Financial Market Risks Principal Amount by Expected Maturity At December 31, 2021 (In thousands except percentage data) 2022 2023 2024 2025 2026 Thereafter Total Fair Value Assets: Marketable securities $10,242 $750 $— $— $— $— $10,992 $10,983 Weighted average interest rate 0.20% 0.22% —% —% —% —% 0.20% Liabilities: Long-term debt ($4.75M note) $254 $265 $277 $289 $302 $560 $1,947 $1,947 Weighted average interest rate 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% Long-term debt ($70.0M note) $4,221 $4,429 $4,624 $4,825 $5,038 $27,700 $50,837 $50,837 Weighted average interest rate 4.16% 4.16% 4.16% 4.16% 4.16% 4.16% 4.16% Our risk with regard to fluctuations in interest rates has decreased slightly related to marketable securities since these balances have decreased compared to the prior year.
Biggest changeInterest Rate Sensitivity Financial Market Risks Principal Amount by Expected Maturity At December 31, 2022 (In thousands except percentage data) 2023 2024 2025 2026 2027 Thereafter Total Fair Value Assets: Marketable securities $32,652 $1,000 $— $— $— $— $33,652 $33,444 Weighted average interest rate 2.82% 5.20% —% —% —% —% 2.89% Liabilities: Long-term debt ($4.75M note) $265 $277 $289 $302 $315 $244 $1,692 $1,692 Weighted average interest rate 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% Long-term debt ($49.1M note) $1,513 $1,589 $1,669 $1,753 $1,840 $40,098 $48,462 $48,462 Weighted average interest rate 4.62% 4.62% 4.62% 4.62% 4.62% 4.62% 4.62% Commodity Price Exposure As of December 31, 2023, we have exposure to adverse price fluctuations associated with certain inventories and accounts receivable.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this Item is submitted in a separate section of this Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this Item is submitted in a separate section of this Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 59
Based on historical experience with our current customers and periodic credit evaluations of our customers’ financial conditions, we believe our credit risk is minimal. Market risk related to our farming inventories is discussed below in the section pertaining to commodity price exposure. 55 The following tables provide information about our financial instruments that are sensitive to changes in interest rates.
Based on historical experience with our current customers, and periodic credit evaluations of our customers’ financial conditions, we believe our credit risk is minimal. Market risk related to our farming inventories is discussed below in the section pertaining to commodity price exposure. 58 The following tables provide information about our financial instruments that are sensitive to changes in interest rates.
To achieve this objective and limit interest rate exposure, we limit our investments to securities with a maturity of less than five years and an investment grade rating from Moody’s or Standard and Poor’s. See Note 3 (Marketable Securities) of the Notes to Consolidated Financial Statements. Our current RLC has no outstanding balance.
To achieve this objective and limit interest rate exposure, we limit our investments to securities with a maturity of less than five years and an investment grade rating from Moody’s or Standard and Poor’s. See Note 3 (Marketable Securities) of the Notes to Consolidated Financial Statements. Our current RCL has a $47,942,000 outstanding balance.
During the term of this RLC (which matures in June 2032), the Company can borrow at any time and partially or wholly repay any outstanding borrowings and then re-borrow, as necessary outstanding balances. We are exposed to interest rate risk on our long-term debt.
The interest rate on this line of credit can float at a rate equal to one-month term SOFR plus 2.25%. During the term of this RCL (which matures in January 2029), the Company can borrow at any time and partially or wholly repay any outstanding borrowings and then re-borrow, as necessary outstanding balances.
Historically, these costs have been recovered each year when that year’s crop harvest has been sold. With respect to accounts receivable, the amount at risk relates primarily to farm crops. These receivables are recorded based on estimated final pricing. The final price is generally not known for several months following the close of our fiscal year.
Farming inventories consist of farming cultural and processing costs related to 2023 and 2022 crop production. The farming costs inventoried are recorded at actual costs incurred. Historically, these costs have been recovered each year when that year’s crop harvest has been sold. With respect to accounts receivable, the amount at risk relates primarily to farm crops.
Of the $4,453,000 in outstanding receivables, there were no receivables at December 31, 2022 that were at risk for changing prices as there were no pistachio yields. Over the previous three years pistachio prices have fluctuated between $1.98 to $2.72. 56 ITEM 8.
These receivables are recorded based on estimated final pricing. The final price is generally not known for several months following the close of our fiscal year. Of the $8,352,000 in outstanding receivables at December 31, 2023, $2,824,500 or 34% is at risk for changing prices. Over the previous three years, pistachio prices have fluctuated between $1.62 to $2.72. ITEM 8.
Removed
At the Company’s option, the interest rate on this line of credit can float at a rate equal to Daily SOFR plus 1.37% or can be fixed at a rate equal to Term SOFR plus 1.37% above Term SOFR for interest periods elected by the Company.
Added
Interest Rate Sensitivity Financial Market Risks Principal Amount by Expected Maturity At December 31, 2023 (In thousands except percentage data) 2024 2025 2026 2027 2028 Thereafter Total Fair Value Assets: Marketable securities $32,576 $— $— $— $— $— $32,576 $32,556 Weighted average interest rate 5.27% —% —% —% —% —% 5.27% Liabilities: Revolving line-of-credit $— $— $— $— $— $47,942 $47,942 $47,942 Weighted average interest rate 1 S+2.25% S+2.25% S+2.25% S+2.25% S+2.25% S+2.25% S+2.25% 1 The effective interest rate on this line of credit is SOFR plus a margin of 2.25%, and the rate was 7.59% as of December 31, 2023.
Removed
Long-term debt consists of two term loans, one for $48,462,000 and is tied to the daily secured overnight financing rate, or SOFR, plus a margin of 1.55 percentage points. The interest rate for the term of the New Term Note has been fixed through the use of an interest rate swap at a rate of 4.62%.
Removed
The outstanding balance on the second term loan is $1,692,000 and has a fixed rate of 4.25%. We believe it is prudent at times to limit the variability of floating-rate interest payments and have from time-to-time entered into interest rate swap arrangements to manage those fluctuations, as we did with the Term Loan.
Removed
Commodity Price Exposure As of December 31, 2022, we have exposure to adverse price fluctuations associated with certain inventories and accounts receivable. Farming inventories consist of farming cultural and processing costs related to 2022 and 2021 crop production. The farming costs inventoried are recorded at actual costs incurred.

Other TRC 10-K year-over-year comparisons