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What’s the price tag, South Coast? Some sleuthing suggests the Costa Mesa luxury mall is worth roughly $2 billion – maybe much more.

What’s the price tag, South Coast? Some sleuthing suggests the Costa Mesa luxury mall is worth roughly billion – maybe much more.

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The east entrance, facing Bristol Street, to the South Coast Plaza. MICHAEL GOULDING, STAFF PHOTOGRAPHER

Size: 2.7 million square feet of shopping space – including Crystal Court and South Coast Village

Stores: 300-plus. Key anchor merchants are Barneys New York, Bloomingdale’s, Macy’s, Macy’s Men & Home, Nordstrom, Saks Fifth Avenue and Sears.

Sales per square foot: $ 910 vs. $ 542 for malls in region.

Occupancy: 96 percent vs. 90 percent for malls in region.

Customer base: Just 60 percent from O.C.

So how much is The House That Henry Built worth?

Retail legend Henry Segerstrom died last month at 91, leaving behind a business and philanthropic legacy that is highlighted by his family’s iconic high-end South Coast Plaza mall, which he deftly carved out of a lima bean farm in Costa Mesa starting 48 years ago.

The cash value of one’s work in no way defines a life as rich as Segerstrom’s, but estimating the value of an asset like South Coast Plaza is one way of measuring his achievements.

The family rarely talks about its finances, so no simple answer is available. It’s never easy to appraise any commercial real estate, and this chore is trickier than most since we are reviewing a unique luxury shopping mall brand with only limited financial details at our disposal.

With the help of local retail property experts and industry insiders, I went through some of the thinking involved in evaluating a property like South Coast Plaza. Even if the mall isn’t for sale – family spokespeople say it’s business as usual after the patriarch’s death – you have to think like a buyer to get even a back-of-the-envelope guesstimate of a realistic price tag.

“We’ve always thought of South Coast Plaza as one of the most valuable malls in the country,” says DJ Busch, mall analyst for the Newport Beach-based commercial real estate tracker Green Street Advisors. “It’s one of the top five true destination shopping centers.”

My research – based on the best logic I could find – suggests the mall is worth at least $ 2 billion, and possibly much more. Here’s how I got there:

THE CASH FLOW

Every real estate appraisal starts with a simple question. What kind of income is this property generating?

After you know that answer, you can figure out the market value of that cash flow to an owner.

Sounds simple, yes? No! Limited financial data about South Coast Plaza made my guessing game challenging.

The mall’s merchants sold $ 1.7 billion of goods and services last year. Clearly, one of the national giants. We also know that sales at South Coast Plaza – by the key industry metric of dollars-per-square-foot – run better than twice the industry average.

Green Street’s Busch thinks a top-shelf mall like South Coast Plaza would be worth at least one time its annual sales. And he thinks it’s likely that with a few more financial details – information that any serious appraiser would get – the multiplier could be as high as two times sales.

That would put a price tag on the mall of between $ 1.7 billion and $ 3.4 billion.

THE COMPS

Anybody who’s ever traded real estate knows one key valuation tool is comparing the targeted property with other recent sales of comparable real estate.

Of course, when you’re talking about one of the elite shopping centers in the world, finding a comparable sale – the “comp,” in industry lingo – is nowhere near as easy as, say, finding a comp for a Costa Mesa single-family home.

The Orange County Register – News Headlines : Real Estate News