Believe it or not there is a real estate company in California that, based on recent developments, is a great bargain for patient investors.

IN PICTURES: 7 Tips On Buying A Home In A Down Market

Down On The Ranch
Tejon Ranch Company (NYSE:TRC) owns 270,000 acres of land just north of Los Angeles. Back in May of 2008, Tejon won support from environmental groups to develop its raw land. This victory was the catalyst the company needed to pave the way for value creation over the next few years.

Tejon agreed that it would put 240,000 of its acres into a land trust that would preserve the land for environmental benefits. In return, Tejon received guarantees from several major environmental groups that they would not oppose development of the remaining 30,000 or so acres. This agreement is a big deal if you know anything about the land entitlement process. It takes years and is not is cheap to get land entitled for development. This deal saves Tejon valuable time and money.

Focus On The Land...
This is the time when you should be buying land because with housing in a funk, land is being given away. Buy it now when nobody wants it and sell it high when the housing market turns.

Since 30,000 acres are cleared for development, they provide the greatest source of value from an investment standpoint. Tejon has a market cap of $460 million. The market cap implies a value of roughly $15,300 per acre of developable land. While there may not be an exact formula for valuing land, very few will disagree that developable entitled land is worth much more than $15,000 an acre. In fact, before the housing bust raw land in nearby parts of California was fetching $200,000 an acre. (For further reading, see Can Real Estate Stabilize Your Portfolio?)

...And The Balance Sheet
In other words if Tejon's 30,000 acres are valued at $50,000 each, the company is worth $1.5 billion versus $460 million today. And this figure also assumes the other 240,000 acres are worth nothing. More importantly, Tejon is debt-free, an unbelievable advantage for land companies. The only other such company that comes to mind that is debt-free with attractive land assets is St. Joe (NYSE:JOE) in Florida.

Not having debt is crucial for a land company, because until the land is developed, it's not generating revenues, so there is no way to service the debt. Take a look at other companies like Forest City Enterprises (NYSE:FCE.A), Boston Properties (NYSE:BXP) and Prologis (NYSE:PLD). All have attractive land holdings that are easily worth more than the market values of the company, but all three are sitting on so much debt that I wouldn't want to touch them in this restricted credit environment.

The Bottom Line
Tejon is a debt-free, land-rich company. With the milestone agreement with the environmental groups, the company now has a value creating catalyst. (For more, see Add Some Real Estate To Your Portfolio)