Tejon Ranch Co. (TRC) Q3 2025 Earnings Report, Transcript and Summary

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

Good afternoon, and welcome to Tejon Ranch Company's Third Quarter 2025 Earnings Call. My name is Nick Ortiz. Joining me today are Matthew Walker, President and CEO; and Robert Velasquez, Senior Vice President and Chief Financial Officer. Today's press release, 10-Q and this webcast are available on our Investor Relations website. A replay will be posted after we conclude. That site is ir.tejonranch.com. Today's remarks may include forward-looking statements. These statements are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Key factors are detailed in our SEC filings, including our most recent Forms 10-Q and 10-K. We assume no obligation to update any forward-looking statements. We may reference non-GAAP measures. These measures should be considered in addition to, not as a substitute for GAAP results. Reconciliations to the most directly comparable GAAP measure and reasons why we use non-GAAP are included in today's filings and are posted on our IR website. Again, it is ir.tejonranch.com. After prepared remarks, we'll address questions. Shareholders were invited to submit questions by e-mail in advance. With that, I'll turn the call over to Matt.

Good afternoon. I'm Matt Walker, President and CEO of Tejon Ranch Company. I'd like to thank you for joining us on our earnings call for the third quarter of 2025. Before we get started, I want to mark this milestone and explain today's format. This is the first quarterly earnings call that Tejon Ranch has ever hosted. With it, we joined the 97% of companies listed on the New York Stock Exchange that communicate with investors in this way. Over the past 9 months, we've made it a priority to be more transparent, more consistent and more direct. With today's earnings call and next week's Investor Engagement Day in New York, we're building better ways to connect with our shareholders and talk about the business. Our call today follows the format used by many public companies, but with a few variations. About 3/4 of companies limit live questions to sell-side analysts and only a very small percentage open questions to all investors. We're providing every shareholder with the opportunity to submit questions via e-mail, and we'll be answering those live during the Q&A session. Please know that this is a work in process, and we will continue to refine and improve our format from here. Now let's talk about the quarter. We were encouraged by our farming operations, which delivered strong year-over-year improvement last quarter. Revenues increased by more than 50% and our farming segment bottom line in GAAP terms improved by $2 million as we held expenses flat and capitalized on higher production. Our farming business remains a foundational part of Tejon Ranch. It's a cash generator whose adjusted EBITDA has been positive in 11 out of the last 12 years. Farming also provides several strategic advantages. It helps us manage our water rights. It supports access to low-cost debt through our AgWest credit facility, and it produces solid returns with reasonable capital investment. We'll be talking more about our farming economic story next week. At the Tejon Ranch Commerce Center, we continue to see the power of the TRCC platform, even in a challenging market for industrial and commercial real estate. Our industrial portfolio remains 100% leased. Our commercial portfolio is 95% leased, while the outlets at Tejon maintain a 90% occupancy. Our joint ventures play a major role in driving organic growth at TRCC with our 5 industrial JVs with Majestic Realty contributing stable cash flow. TRCC as a whole remains fully leased, and our weighted average rent levels continue to climb. We're also maintaining about a 40% cost advantage to the Inland Empire West, which makes TRCC an attractive logistics solution for tenants. The TA/Petro joint venture continues to be our highest performing profit center. While reduced car and truck traffic impacted our sales last quarter, the opening of the new $600 million Hard Rock Tejon Casino in just a few days will be a real game changer. The casino should increase traffic to TRCC, benefiting all of our retail assets, including the TA Travel Centers, our retail and the outlets at Tejon. We're also expanding the TRCC platform, adding new projects that deepen its ecosystem. Terra Vista at Tejon, our first multifamily community, is heading on track towards stabilization and is now more than halfway leased. It's a milestone for the company and a key part of our long-term strategy to build a residential community around our commercial center. This starts with Terra Vista and will continue in the future with our fully entitled Grapevine master planned community, which is currently advancing through design. With that, our CFO, Robert Velasquez, will walk you through the quarter financials in more detail, and then I'll provide some additional remarks before we open it up for questions.

Thank you, Matt, and good afternoon, everyone. I'll start with a summary of the quarter's results, then walk through performance by segment and finish with a brief update on liquidity and the balance sheet. For the third quarter ended September 30, Tejon Ranch reported net income of $1.7 million or $0.06 per basic and diluted shares compared with a net loss of $1.8 million or $0.07 per share in the same period last year. Total revenues were $12 million, up 10% year-over-year, while total costs and expenses declined by nearly 5%. As Matt mentioned, the improvement in quarterly profitability was driven primarily by strong farming results, stable commercial and industrial leasing and steady performance from our mineral resources and joint venture operations. I'll turn to the performance of our individual segments, starting with real estate, commercial and industrial. In this sector, revenues increased 4% to $3.1 million, reflecting income from the continued leasing up of Terra Vista as well as additional revenues from communication leases. Those increases were partially offset by slightly lower revenue from 1967083865 due to milder summer temperatures. Operating income for this segment rose 7% to $976,000. Within our unconsolidated joint ventures, equity in earnings totaled $2.6 million. The TA/Petro partnership remains our largest single earnings contributor, generating $1.9 million in the quarter. Our 5 industrial joint ventures with Majestic Realty contributed $945,000 of earnings in the quarter, reflecting a 24% margin across the MRC buildings. Turning to mineral resources. This segment produced operating income of $1.1 million on revenues of $3.2 million, which was stable year-over-year. The business continues to require minimal capital expenditures outside of water operations. After adjusting for costs, water sales contributed $322,000 to the minerals segment's operating profit for the quarter. In farming, revenues improved by more than 50% compared to last year, while GAAP operating losses, which includes water holding costs, were reduced by 40%. The segment's rebound reflects both improved production and the advantages of how we manage our cultural costs and water resources. Last year's results were hurt by weather challenges. And with the pistachios, lack of chill hours, coupled with it being a down-bearing year, yielded no pistachios crop, but this season yields normalized across all major crops. Our integrated approach to water gives us significant flexibility. When allocations from the state water projects are high, we benefit from lower farming costs. When they're low, we're positioned to monetize our stored and contracted supplies. Moving on to ranch operations. That segment delivered consistent results with total revenues of $1.3 million and positive operating income, supported by stable [ grazing ] and gain management activities. At the corporate level, general and administrative costs declined slightly from the prior year to $2.9 million in the quarter. Consolidated operating income improved by 37% year-over-year to $3.4 million across our operating segments. Depreciation and amortization totaled $3.8 million and adjusted EBITDA for the year-to-date period was $13.9 million, up 7.3% from the same period last year. As of September 30, total assets were $630 million, up from $608 million at year-end. We ended the quarter with $21 million in cash and marketable securities and $68 million of availability under our AgWest revolving credit facility. Our total debt stood at $91.9 million, resulting in a debt to total capitalization ratio of roughly 16%. Year-to-date capital investment was $49.9 million, primarily tied to construction of Terra Vista, infrastructure at TRCC east and legal and permitting work across our master planned communities. Reimbursement proceeds from the Community Facilities District amounted to $5.6 million, offsetting the capital investments made during the year. We continue to manage capital allocation carefully, focusing on projects that enhance cash generation. In summary, the quarter reflected solid improvement in profitability, steady contributions from our recurring revenue businesses and disciplined cost control. We believe that the combination of resilient operating assets, growing rental income and the strength of our joint venture partnerships positions Tejon Ranch well as we move into 2026. I'll stop there and turn it back to Matt.

Thanks, Robert. While the quarter was positive, I'd like to make something clear, Tejon Ranch is not yet where it needs to be, and we have a lot more to do to get it there. Accordingly, we've been focused intently on cost discipline to improve our operating margins. We've been scrutinizing every contract, looking for efficiencies and lower cost solutions. We've identified savings today, which will result in a far more efficient operation in the future. Additionally, our largest overhead cost is staffing. As part of our G&A review, we recently completed a workforce reduction that will save more than $2 million per year. This reduction impacted employees at all levels of the organization and lowered our headcount by 20%. It wasn't an easy decision, but it was a necessary one. These expense reductions represent a down payment on change. They demonstrate our intent to operate with discipline, accountability and a clear eye on the bottom line. In closing, we had a good quarter, but we still have a long ways to go, and we're not done yet. We look forward to sharing more of how we are positioning the company for success in the quarters and years to come. That concludes our prepared remarks. We would now like to respond to the questions that were submitted by shareholders. Please give us a minute while we pull those up.

Thanks, Matt. We received 20 questions via e-mail. We'll read and respond to the questions in the order that they were received. Our first question today is from [ Larry Zicklin ]. His question is, after all these years of failure, don't you think you should just sell as much land as you can and buy back stock so as to realize the maximum amounts for shareholders?

Thanks for the question, Larry. Let me first emphasize that my one and only goal for our master planned communities is to create long-term shareholder value, however we get there. I do believe that a successfully implemented master planned community can generate decades of significant cash flow. You can see this with other public companies that are in our space. With that said, I understand your concern and that of other shareholders. I want to reiterate that everything is on the table. So if there is a compelling opportunity to monetize a portion of our land holdings, as you've suggested, we will evaluate it. However, for right now, I believe that with Grapevine, pursuing an implementation plan, which builds on the significant growth that we're having at TRCC makes a lot of sense. On Mountain Village, I'd like to embark on a capital raising effort to identify a joint venture partner who would contribute equity and avoid dilution to our shareholders. And on Centennial, completing a re-entitlement is the most prudent approach at this point to preserve our investment in that asset. Let me add that I will be discussing all of this in greater detail at our Investor Engagement Event next week. I know there are strong opinions about what we should do, and I would like to more fully explain our rationale to you all then. Nick?

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

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

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

Okay. I've covered some of that, but let me expand on other portions of your question. So similar to my previous answer, we do provide information in our most recent SEC filings on our material cash requirements, and that includes our CapEx, as I mentioned before. We haven't yet disclosed specific capital cost estimates or project budgets for the initial development phases of any of our MPCs. Those depend on several ongoing factors, including the final design or market conditions at the time that we intend to launch them and the final infrastructure scope and cost. As it relates to the funding sources that you mentioned, the plan for all of our master planned communities, as I mentioned in the previous question, we intend to capitalize those with a third-party joint venture partner who would contribute the new equity, and we would contribute the land to that venture. And this strategy would avoid dilution to our shareholders' projects. They'd also include a capitalization with construction financing at the venture level.

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

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

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

So we definitely consider absorption when we're talking about proceeding with development. But more generally, we look at the entire investment holistically. So typically, absorption is slower at the beginning of a project and then it ramps up to a stabilized level over time. Each project is expected to have a joint venture partner. So that JV partner is going to be looking for an expected market rate return that they would need in order to proceed with the project. So we would expect that the equity would end up driving that return decision to proceed. We also have an internal hurdle rate to return so that we're generating a sufficient return for our shareholders. So that's how we approach the investment criteria that's necessary in order to move ahead with the project.

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

Let's see, not knowing which project you're speaking about, let me speak to this more generally. I think I can cover the question. For any given master planned community, there is expected to be a material book profit for the entire project, and that would be consistent with achieving the hurdle rates that I just mentioned in your previous question. So I think you'd have a book profit for the entire project. For the first phase of development for any of our master planned communities, that phase is likely going to have a significant amount of upfront infrastructure. So the initial phase is not likely to include a book profit. I can't speak to other companies and their master planned communities, but what I just said isn't unique to Tejon Ranch. That's typical of many master planned communities where you have a multi-phase MPC. The return of capital typically occurs beyond that initial phase.

All right. Thanks, Matt. From [ David Spier with Nitor Capital ], we received the following questions. First question, the $2 million expense reduction is welcomed and appreciated. However, based on management's stated value of TRCC, the book value of our MPC assets and the estimated value of our cash flowing land leases and royalties, Tejon arguably has a net asset value that is north of $40 per share. Following the expense reduction and the implementation of your plan, what will our annual per share cash earnings power be? Public markets do not value non-cash flow producing assets nor assets that are not being actively monetized. So if your plan will not lead to near-term earnings power north of $2 per share, and we are not going to monetize our MPC assets in the near term, how will we make money as public shareholders?

David, thanks for your question. Appreciate it. First off, we agree with you that the company is undervalued. A critical part of that value is the expectation of future returns. That future earnings potential comes in a couple of different areas. It will come from the build-out of the 11 million square feet of TRCC over time and as the market permits. We're also working to identify new revenue sources that take advantage of the unique attributes of the ranch. So there will be value, we hope that's created there. We expect that value will come from the ongoing cash flow from our existing portfolio of income-producing assets. And then -- and we're looking to find ways to increase that over time. And it will come from the development of master planned communities. Those master planned communities have the potential to generate earnings, which are in order of magnitude greater than what the company is producing today and to do that over a sustained period of time. So I believe that the combination of all of those assets will result in a material earnings per share growth.

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

Okay. I'm going to cover this in more detail next week, but let me answer it for you today in this way. On Mountain Village, as I mentioned in previous answers, I'm going to be focused on a capital raising effort in the near term over the next year or so. So the capital allocation for that will be rather modest, and it will be sized just to complete that capital raising effort. I've previously mentioned also that we're going to go out and look for a joint venture equity partner who will provide the additional equity so that we don't dilute our shareholders. That JV between Tejon and the equity partner would then complete the construction documents that would probably take 18 to 24 months. And then we break ground on the initial phase of horizontal infrastructure, and that would take 24 months or so. And then at that point, you would be initiating home site sales to builders and to custom lot buyers. At that point, there would be ongoing revenue generation. So that's a quick breakdown of -- in rough terms of the timetable for Mountain Village. You also mentioned Centennial. So on Centennial, our first step is to re-entitle the project through Los Angeles County. That would include us updating our environmental documentation. This would take, we would think, until sometime near the end of next year, plus or minus. That process of going through the county would take a couple of months after that as well. At that point, I think a lot depends on our ability to move more immediately into a mapping process and that mapping process would take a couple of years. And then with our construction documents in hand after we completed the mapping, we'd be able to commence construction, and similar to what I just described on Mountain Village, then start with the installation of the horizontal infrastructure. Given that we do have a re-entitlement effort, it's harder to estimate the outer time frames given some uncertainty to complete the entitlement process. And then that implementation phase, once we completed the entitlement, would also be done under a joint venture similar to the ones that I've described before. Hope that helps. And again, I'll be able to talk more about that next week with a little more time.

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

Justin, thanks for the question. So we agree with you that Mountain Village and Centennial are worth more than their book value. One comment I'd make on your net asset value. So when we were looking at that range of net asset values for TRCC and you noted that it's in excess of our current market cap. I just want you to know that, that -- when we did that exercise, that didn't include the Grapevine master planned community. It was just for the commercial assets that are part of TRCC. As I mentioned in my answer to some of the previous questions, we believe that Mountain Village and Centennial both provide significant long-term cash flow generating potential. I'll be talking, like I said before, more about that next week. And I again, just want to say that the company is always keeping its options open and evaluating all approaches to maximizing asset value. And that goes for our master planned communities or any other asset on the ranch.

All right. We have 6 questions from [ David Roth ]. The first one is the release says Terra Vista will increase to 228 units. Are you committed to that?

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

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

I couldn't agree with you more. So TRCC remains our focus. I think if you've looked at how we've deployed capital over the last 5 years, the majority of it has gone to TRCC. We continue to see the value of the future there. The flywheel effect that I've talked about between our industrial and our outlets and our retail and our travel and the hotel and all the residential uses feeding off each other, that's real. The casino is only going to add to that. And the advantage of the casino is we're leveraging the $600 million that the tribe is spending to -- and that's going to help bring traffic into TRCC, which should just continue that flywheel. So I agree, I call TRCC the nucleus of our activity from which all of our growth should emanate.

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

It's a good, fair question. We tried to cover it in the press release. I covered it in my earlier remarks. I'll talk about it again some more next week, but let me just again answer it for you here. Taking a step back, I've heard from a lot of shareholders, many of you who have submitted questions that the focus that we should have is on generating cash flow. We agree with that. So what that means with respect to farming, we should be looking at farming through a cash flow lens, not necessarily an earnings lens. And the measure that in my effort to try to better tell the story of the company, we've mentioned in the press release our concept of an adjusted EBITDA figure. And we think that's the right way to look at the farming business. So adjusted EBITDA, as we're measuring it, it backs out non-cash expenses like depreciation, and it also accounts for the water holding costs that we're going to have to spend whether we farm the property or not. And if you do all of that and you look at farming on an adjusted EBITDA basis, as I mentioned in my earlier remarks and Robert did as well, we've generated positive cash flow from farming, and it's something like 23 out of the last 24 years. Again, I'll go through this more next week. But I do believe there is a more favorable story to tell about farming and we would be happy to have the dialogue.

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

David, I understand your frustration. The lack of share price appreciation over 52 years, it's unacceptable. I mean, what can I say? I've been here for 8 months, and I intend to change that. It's not going to happen overnight, but I want to see the share price move. And I intend to implement a plan that will achieve that. So you know we have in the past, paid a dividend, but it has been a while. So my intention is to implement a plan. It will leverage our existing balance sheet. It will utilize capital from third parties to help start growing our cash flow producing asset base. The goal of all of this is to create share price appreciation, and it's also to create cash flow so that we can ultimately allow for things like the payment of dividends again or share repurchases. So that is the end goal, and we need to find a way to get there, and I intend to do that.

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

So on the Board, I'm going to be addressing a number of governance issues next week. So if you could wait until next week, you should expect that I'll cover that topic then. I'd prefer to cover all of the governance topics at once. On the MPCs, so we look at value a couple of different ways. We do believe that given the fact that we're bringing in a third-party investor, we look at the value relative to our book value and the appreciation on that land, and we need to produce an acceptable hurdle on our cost to date. So I'll again be talking more about that next week.

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

Let's see. So I define fiduciary responsibility as putting shareholders first. I'm here to create shareholder value. The management team, all of us, we're here to create value for the shareholders. And that's how I and we would like to be judged. There are many areas that I think we have been good stewards of the company's capital. I believe the significant investment that the company made in our Terra Vista apartments. I believe that, that will prove to be a very important catalyst for creating value all throughout TRCC, particularly when we look back at that in 5, 10, 15 years from now. I'd also like to be clear, I'm not afraid to admit my mistakes. There are definitely things that I would do differently. I put the contested election last spring in that category. Certainly, when you look at the results, it's hard to conclude anything else. You're right that capital could have been deployed into things which create economic value. I'll leave it at that.

We'll move on to questions from Richard Rudgley and Grover Wickersham from Glenbrook Capital. The first question is, given the 49.84% that voted in favor of the PFS Trust proposal to allow shareholders to call a special meeting, will this be approved by the Board of Directors as was recommended by ISS? We would appreciate a response to this question. We have previously asked it in a public letter to the Board, which letter was ignored.

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

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

Yes. That's a -- I can see the confusion with that. As Robert and I mentioned in our remarks, the earnings from our joint venture with TA/Petro, and we're a 60% partner of that. So those are driven by 3 different things. First, our fuel sales, that's both diesel, gas -- diesel and gasoline. Second, our convenience store and travel store sales. Third would be the related commercial real estate, that's mostly fast food restaurants. So there was less traffic on Interstate 5 last quarter. There's really been less traffic on the 5 for the entire year. There are any number of reasons for that and reduced port shipments has something to do with it. There's less local travel from traffic counts that we get. So all of that, when you have fewer cars getting off the freeway, whether they're cars or trucks that come into TRCC, that's going to have a cascading effect on the equity in earnings for the assets that are part of our joint venture with TA/Petro. So hopefully, that explains the nature of the reduction of our joint venture there. Unlike our Majestic industrial joint ventures where you've got a lease that from quarter-to-quarter should be constant, the TA/Petro varies according to demand.

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

Okay. I've talked a couple of times about joint ventures. Let me summarize all of them all at once. So again, we've got 5 joint ventures with Majestic Realty on 5 different industrial buildings. Each of those is a 50-50 joint venture. The outlets at Tejon, that's also a 50-50 joint venture, and we have that with Rockefeller. And then I just mentioned the 60-40 joint venture that we've got with TA/Petro. We've got good joint venture partners. Going forward, as we look at the remaining 11.1 million square feet left to develop, I would expect us to develop more real estate at TRCC on our own balance sheet. But given that, I do want to be clear, we look at each opportunity individually. So it's based on a whole bunch of different factors. But I do understand the question, capturing 100% of the revenue as part of our asset base is helpful for the long-term growth of our cash flow in the future.

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

So that's a good question. The short answer is yes. I mean we definitely have plans to build more residential at TRCC, and that includes multifamily housing. It also includes the single-family homes in the Grapevine master planned community. So we've now -- as I mentioned before, we've completed 228 units in our first phase at Terra Vista. The second phase is entitled for an additional -- it's like 170 units. So as you mentioned in your question, we have, in fact, seen demand for our apartments for the casino employees. We've been working pretty closely with Hard Rock to encourage their employees to consider us. It's been a good partnership, and they haven't yet even opened their doors. So those are capital allocation decisions and return hurdle decisions that we are exploring every single day on where to deploy our capital. But the short answer is, yes, we expect to develop more residential around TRCC.

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

Good question, John. Thanks for asking. A couple of things. As I previously noted, I'll say all options are on the table. So if a reputable party made a substantive offer, I would be obligated to bring that offer to the Board to consider. With that said, as I noted before, we believe that the property is worth more than book. So I'll just leave it at that. But we're flexible, and we're looking at alternatives, but we have a plan in place.

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

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

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

Great. Well, thank you all very much.

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

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