Real Estate Investment Ideas -- Tejon Ranch Corporation (NYSE:TRC)

If you're looking to add some exposure to real estate to your portfolio and are looking for something other than a Real Estate Investment Trust (REIT), consider Tejon Ranch Corporation (NYSE:TRC), a pure real estate play in California with potential for long term growth.

Upon first inspection of the Balance Sheet and Income Statement (you can review their financial statements here) for Tejon Ranch, it's hard to tell what is remarkable or even noteworthy about the company. It's only after digging a little deeper that you will discover that the main asset of Tejon Ranch is 270,000 acres of pristine undeveloped land located near Los Angeles. The area is approximately 60 miles to the North of Los Angeles and 20 miles east of Bakersfield, California. Even though it's a long distance, this is well within the commuting range of a Los Angeles resident, and a reasonable proximity for those looking for more affordable housing than is available in Los Angeles proper.

Given that raw land open for large scale development is scarce in the greater Los Angeles area, it's easy to extrapolate the potential for growth for this stock. For many years there had been legal impediments (in the form of legal challenges from a slew of different environmental groups) to developing the land. But in late 2009 an agreement was reached which calls for the permanent protection of 240,000 of the 270,000 acres in exchange for dropping all environmental challenges on future development of the remaining parcel of land. This opens the way for Tejon Ranch to fully develop its planned residential and resort communities in the area.

There's no way to describe this stock other than "highly speculative" and the window for this stock to turn to consistent profitability is a still a long way off. Along with the long time horizon to profitability, the stock is also fairly thinly traded, which means that you may have some trouble selling the stock quickly if you decide to unload it from your portfolio. This stock probably shouldn't be a cornerstone of your investment portfolio, but could be a great way to gain some exposure to the real estate sector.

The company currently generates small quarterly profits, due mainly to farming operations on land it owns in the San Joaquin valley, rents and lease payments from its commercial property, and revenue from the truck stop and gas station operations it manages along Interstate 5 as it runs through the Tejon Ranch area. All of these revenue sources are expected to continue in the future, but will likely be dwarfed by revenue from the planned residential and resort communities.

The stock is currently trading at about $27/share (get a current quote HERE) which is well off its 52-week high of $33.30/share. If you're looking for a real estate play and think that the housing market in California is due for a rebound, Tejon Ranch Corporation warrants some further investigation and may be right for your portfolio.

Full Disclosure: Long on Tejon Ranch Corporation.