Newhall Land and Farming Company History

Company History:

The Newhall Land and Farming Company is one of the oldest and most famous business operations in the state of California. Much of the development of the company parallels the development of the state itself. Newhall Land and Farming Company is involved in an extremely broad range of activities, including agricultural development, agricultural machinery rental, oil and gas production, livestock management, real estate development, commercial recreation activities such as designing golf courses and building theme parks, and land lease for the production of major Hollywood movies. From 1883 to the present, members of the Newhall family have held the majority of company shares.

The founder of Newhall Land and Farming Company, Henry Mayo Newhall, arrived in California during the autumn of 1848. Long before Newhall traveled to California, the Spanish has settled throughout its coastal region and established many missions that incorporated the land surrounding them. When Mexico won its independence from Spain, these missions and their vast estates were granted to private individuals who developed them into ranches. Known as Spanish Land Grants, the ranches were completely autonomous and self-sufficient.

The end of a way of life for the Mexican ranchers came suddenly with the California gold rush of 1848. The 24-year-old Newhall journeyed to California with $8,000 dollars in his pocket to seek his fortune in the Sierra foothills. But the young man found nothing, and before long his money had run out. He was offered a job at an auction house in San Francisco and worked his way up to become sole proprietor. The auction house grew rapidly, and Newhall sent for his wife to join him in San Francisco. By the time he was 35, Newhall had become one of the most prominent men in San Francisco and entered into an arrangement that made him president of a firm that constructed the first railroad in the city. As luck would have it, the brand-new Southern Pacific Railroad purchased his venture. Newhall was a millionaire overnight.

In 1870, with his new money, Newhall began to search for other business opportunities. A whole new area of investment opened up when Newhall came across the Spanish Land Grants. The U.S. government had put pressure on the original Mexican owners to prove their title to the land. But the cost of litigation was too expensive for the rancheros, and, already burdened with a series of droughts that had starved most of their cattle, they were forced to borrow money to keep the land. Unable to pay the debts, the great ranches were possessed by the local sheriffs and placed on sale at the auction block. Newhall purchased a total of six land grants, varying in size from a small ranch of 2,600 acres to the largest, which covered a total of 48,000 acres. The two largest ranches included one located north of Santa Maria, another situated on the border between Ventura and Los Angeles counties. Newhall turned the second of these into his home. Naming it the Newhall Ranch, the property became the headquarters for his business holdings.

In 1875 the Southern Pacific Railroad was laying its new track from San Francisco to Los Angeles, and Newhall Ranch was directly in the path. Newhall gave Southern Pacific the right-of-way on his land and immediately entered into an agreement with the railroad to transport his ranch products to San Francisco. Five out his six ranches focused on raising cattle, but the new land baron transformed Newhall Ranch into an agricultural showplace. Clearing approximately 3,000 acres, Newhall cultivated more wheat than he expected. Not content with harvesting just wheat, the innovator experimented with different kinds of fruit trees in order to find out which one might be the best for commercial production.

Henry Mayo Newhall died in 1882, leaving the entirety of his estate to a wife and five sons, William, Edwin, Henry, Walter, and George. The Newhall sons incorporated their father's business holdings as the Newhall Land and Farming Company. All of the real estate and property located in San Francisco was deeded to Mrs. Newhall and could be sold as she determined. Each of the five sons were equal shareholders in the new company, which covered 220 square miles of California terrain. All of the sons had also agreed that land could be sold in order to provide for each of their respective family needs.

By the early 1890s most of the brothers were married with large families. Unfortunately, the income that allowed their father and mother to live in luxury did not meet the demands of four families seeking the same lifestyle. Cattle breeding on the various Newhall ranches had decreased and was not able to garner large amounts of needed cash. In addition, a lengthy drought destroyed both the wheat and fruit orchards at Newhall Ranch. The only source of profit was horse raising, which fetched $50 for every horse sent to San Francisco in order to pull horsecars. Land leases of small acreage to farmers brought in some money, and leases to oil companies also resulted in small payments but no discovery of oil. At a loss for what to do, the brothers decided to sell parcels of the company's land.

Advertising land sales in newspapers throughout California and on the East Coast as well as in England, the brothers began to sell off company land. The sale of land to maintain the lifestyles of the brothers and their families continued during the early years of the new century until William Mayo Newhall, the second son, became active in the company. A graduate of Yale University, Mayo, as he was called, put an end to the liquidation of company land. Immediately before the start of World War I, Mayo agreed to sell a small ranch in Monterey County but insisted that the money should be reinvested rather than distributed in dividends to shares owned by his brothers. Mayo then used the profits to clear land at the Newhall Ranch and grow citrus trees. The remainder of the money was used to purchase land in Sacramento Valley that was leveled and irrigated for lima bean crops.

In 1922 Mayo arranged to sell some of the company land to William Randolph Hearst, whose luxurious palace at San Simeon was adjacent to Newhall Company ranches. Hearst paid $1 million for approximately 38,000 acres, to be paid in installments of $100,000 per year for the next ten years. The Newhall Land and Farming Company grew during the mid-1920s due to the income generated from Mayo's investments in citrus trees and lima bean crops. Yet disaster befell the company when the St. Francis Dam broke on March 13, 1928. Owned by the city of Los Angeles, the dam was part of a huge reservoir that was located next to Newhall Ranch and supplied water to the entire region. When the dam broke, the company's livestock, orchards, and all its buildings were completely destroyed. The city of Los Angeles took responsibility for the catastrophe, established a commission, and began the process of reparations for damages incurred.

Compounding the problems of the dam break was the onset of the Great Depression in 1929. The company's land values dropped precipitously. In addition, Mayo's last surviving brother, George, died during the same year. George had acted as the company's banker and treasurer, but Mayo soon discovered that the family firm was completely bankrupt. The banks took control of the company's entire assets, and, with unpaid debts and no cash reserves, it looked as if Newhall Land and Farming Company was at the end of its existence. Yet Mayo was not a man to give up. Already in his late seventies, blind, and growing more frail each day, Mayo turned to his son-in-law, Atholl McBean, for help. McBean, a prominent businessman in San Francisco, had been adroit enough to save his entire fortune during the 1929 stock market crash.

Meeting with the company's board of directors in August 1930, McBean discovered that most of them wanted to sell its assets and liquidate the company. However, McBean was in favor of revitalizing the entire firm's operations. With reparations money from the city of Los Angeles for flood damages and the final payments from Hearst, he paid the company's debts and began a thorough reconstitution of the board of directors. During its first year under McBean's direction, Newhall Land and Farming Company lost over $125,000. By the third year the firm reported profits of just under $25,000; by 1935 the company was averaging profits of over $100,000 and had reinstated its stock dividend, which had been suspended since 1930.

In 1936 McBean leased part of the Newhall Ranch land to Barnscall Oil Company. Mayo Newhall was convinced that no oil was to be discovered on the company's property, but when oil was struck in early 1937 it boggled even the imagination of McBean. The land was so rich in "black gold" that 44 oil wells were drilled during the next few years, and the company began making millions of dollars from oil production. McBean put this money to good use during the late 1930s and throughout the war years by purchasing even more land and by cultivating and irrigating property already owned by the company. One of McBean's first major investments after the oil strike was the construction of cattle feed-yards. Newhall Land and Farming Company built its feed-yard in the middle of Newhall Ranch and fattened cattle for market by using the firm's own agricultural produce.

During the postwar years Newhall Ranch, located in the San Fernando Valley and situated on the main road between Los Angeles and San Francisco, was gradually surrounded by urban expansion. The city of Los Angeles appraised the land surrounding Newhall Ranch at what was regarded as its potentially greatest use, which meant that the company's corn and barley fields were the perfect locations for new homes and shopping malls. When the city began to tax the Newhall Land and Farming Company accordingly, McBean quickly realized that the company could not pay the raise in taxes by using the land for farming. As a result, McBean initiated a comprehensive program for land development.

In order to enhance the value of its land, the company during the 1950s hired urban planners to create a strategy for how to profitably change onion fields into homes, amusement parks, and business centers. With more and more real estate developers imploring the company to sell its land, the board of directors decided to plan and create an entirely new city, Valencia. A wholly owned subsidiary, California Land, was formed to oversee the process and, after a long period of planning and design, the actual construction started in the early 1960s. Schools, swimming pools, clubhouses, golf courses, a hospital, shopping centers, government offices, and a downtown center were all built quickly. By 1967 the first residents had moved into the town. With the plan completed, McBean retired from active management of the company and handed over responsibilities to the first administrators outside the family.

During the 1970s Newhall Land and Farming Company concentrated on developing the city of Valencia. Major construction included the Magic Mountain Amusement Park, along with a motorcycle park, more golf courses, and a recreational vehicle campground. Publicity garnered from the Magic Mountain project was enormous and contributed to the company's heightened profile as a land developer. In addition, the publicity identified Valencia as a fast growing yet stable residential community. Soon nearly 15,000 residents were living in Valencia and over 5,000 housing units had been built. The company sold its interest in Magic Mountain to Six Flags, Inc., in 1979 when management decided that administration of the park was too large of a task.

The 1980s became the best decade to date for the company. Over 9,000 cattle were fed on the firm's winter ranges, 23 different varieties of crops were cultivated on company lands throughout California, and a new business in renting agricultural machinery was growing rapidly. During the 1980s the company expanded its oil operations to encompass seven states and Canada. These properties, especially in Canada, were highly profitable for the firm. At the same time, Newhall Land and Farming Company began a lucrative leasing policy to Hollywood producers who wanted to use its land for filming movies and television shows. Over 250 such productions were made on company properties. Yet the most important part of the company's expansion policy involved its continual growth as a land developer. Newhall Land and Farming Company purchased land to develop golf courses, motels, shopping centers, and other commercial ventures not only in California but in states like Arizona.

Well known for its careful and successful development of Valencia, in 1994 Newhall Land and Farming Company unveiled a comprehensive plan to design a new residential and commercial site. Located in the Santa Clara Valley, the company proposed to transform an area of 19 square miles into a community for over 70,000 people. With plans for the development of ten schools, 25,000 houses, a business park, and six shopping centers, the site was much more ambitious and more expensive than the previous project at Valencia. The project was planned to be built in five phases and take a quarter-century to complete, although environmentalists and municipal officials raised concerns about the company's plans for land that was occupied by two endangered species listed by the federal government.

Members of the Newhall family still sit on the company's board of directors, but most of the decisions are made by professional managers rather than family members.

Principal Subsidiaries: Valencia Company; Valencia Water Company.

Further Reading:

• Dickason, James F., The Newhall Land and Farming Company, Newcomen Society: New York, 1983.
• "Fourth-Quarter Net Slipped, Real-Estate Developer Says," Wall Street Journal, January 13, 1995, p. B9C(E).
• Herron, Melissa, "Servicing the Sale," Builder, July 1995, pp. 69--76.
• Kaplan, Tracey, "Plans for Planting Another Suburb," Los Angeles Times, July 12, 1994, pp. B1--B4.
• Nelson, Cristina, "Soft Sell," Custom Builder, January-February 1994, pp. 19--21.
• "Newhall Land and Farming Company," Wall Street Journal, July 25, 1995, p. B7(E).
• "Newhall Land and Farming Company," Wall Street Journal, December 21, 1994, P. B9(E).
• Schwolsky, Rick, "Delivering the Goods," Builder, July 1995, pp. 170--76.

Source: International Directory of Company Histories, Vol. 14. St. James Press, 1996.

Directory of Sample Business Plans Directory of Company Histories Contact Us Advertise