When Newhall Land & Farming's directors met recently to replace James F. Dickason, who retires Saturday as chairman and chief executive, they not unexpectedly named the company's president, Thomas L. Lee, the new chief executive.
But Lee was not immediately elected to succeed Dickason as chairman of the board. Not that Newhall plans to bring in an outsider; Lee is expected to gain that post as well, and the chairmanship simply remains vacant in the meantime.
It's just that at 104-year-old Newhall Land, where relatives of the founding Newhall family still control 30% of the company, change comes gradually.
"Jim (Dickason) was CEO for six years before he gained the chairman's title," said Lee, 45. "You earn your stripes."
And true to Newhall's conservative style, Lee will try to earn his by staying close to the company's current strategy of focusing its resources on Valencia, the 10,000-acre master-planned community Newhall Land has been developing for more than 20 years in the Santa Clarita Valley.
"We don't really have any big changes in the works," Lee said in a recent interview at Newhall's Valencia headquarters. "We think we're on a good course."
Which does not mean Lee is averse to any change. One item on his agenda is to have the company acquire additional land to build another planned community, which would be Newhall's first major land acquisition in 28 years.
"We have the money and it's a question of finding the right piece" of land, he said, adding that Newhall Land would prefer to find another ranch in Southern California.
Newhall Land already is one of California's largest landowners, developers and farmers. It owns 123,500 acres spread over eight ranches in the state. Seven of the ranches are used for raising cattle and for growing two dozen crops, and the other is the 37,250-acre Newhall ranch that encompasses Valencia.
About 3,500 of the 10,000 acres slated for development in the Valencia area alone have been developed so far. Earlier this month, the Los Angeles County Board of Supervisors approved Newhall's plan to start its next major residential project, Northbridge, which calls for 1,830 homes to be built on 605 acres.
Costs of new housing in Valencia range from $70,000 condominiums to $400,000 single-family homes. The company places Valencia's current population at about 20,000, and the population of the Santa Clarita Valley overall at 105,000.
Newhall last year earned $43.7 million on revenue of $169.2 million, with about 75% of the revenue generated by real estate activities and the balance from farming. On the real estate side, Newhall builds the homes it sells, develops commercial properties to generate leasing income and sells land for commercial and industrial use.
Publicly Held Partnership
In early 1985, Newhall converted from a corporation to a publicly held partnership, whose 20.7 million units are traded on the New York and Pacific stock exchanges like shares of stock. But unlike a corporation, the partnership's earnings and other income flow directly to the limited partners without first being taxed at the corporate level.
The market value of Newhall's land and other assets was roughly $565 million as of Dec. 31 (or $27.30 per unit), up from $510 million a year earlier, according to an appraisal done for the company each year.
Investors, however, assign a higher value--about $823 million based on the unit's closing price Monday of $39.75--on the expectation that the ongoing development of Valencia will enhance Newhall's overall growth.
Newhall Land and many other real estate companies are known in Wall Street parlance as "asset plays," that is, companies whose attraction as investments reflects the expectation that their overall property values will rise steadily even if their quarterly earnings do not.
"Earnings on a quarterly basis mean little, just so long as your cash flow is covered and so long as you feel comfortable that the long-term trend of values in the Valencia area is still up," said Kenneth Campbell, president of Audit Investments, a securities research firm in Montvale, N.J., that recommends Newhall's units.
Year-to-year comparisons of Newhall Land's financial results often are difficult because its sales of land and developed property can be erratic.
Strong Land Sales
For example, the firm expects to sell 25 to 30 acres of industrial land this year. Ordinarily that would be a brisk sales rate, except that sales in 1985 and 1986 were an especially strong 67 acres and 52.5 acres, respectively.
So with industrial land sales trailing last year's pace, Newhall Land's first-half 1987 profit fell 28% from a year earlier to $11.7 million from $16.3 million, and revenue slipped 5% to $64.4 million from $68.1 million.