DECIPHER™ Case Study 10:
Product Segmentation, Investment Strategy, Competitive Performance Benchmarking, Redevelopment Analytics, Price Optimization
Synopsis
Advanced analytics and copious research supported a counter justification for decision makers to not go ahead with a $15 million rehab plan. CA determined that the ROI and payback period were not sufficient to justify reinvestment is specific assets.
Background
One of the largest real estate empires in California has been built on lima beans. The C.J. Segerstrom real estate empire built its crown jewel, South Coast Plaza, in 1967 on the family’s former lima bean farm in Orange County, California. The giant 2.8 million sq. ft. mall has since become one of the highest-grossing shopping centers in the US (surpassing $1 billion a year, with nearly 300 stores).  The family also has interests in hotels, apartments, an industrial park, and several office buildings, including the Offices of South Coast Plaza, a 21-story high-rise. The company has long courted the tourist trade, and has invested in the local performing arts center to lure visitors.C J Segerstrom & Sons is a family business incorporated as a major real estate company in Orange County (along with the Irvine Company and the O’Neill family), especially in the city of Costa Mesa. Swedish immigrant Carl Segerstrom started out by buying a large lima bean farm in 1900. In 1967 construction began on the jewel in their crown, South Coast Plaza. The enormous shopping mall is one of the highest grossing in the country, with over 300 stores and around one billion dollars in annual sales. The family’s monetary donations provided for the construction of the Orange County Performing Arts Center, on land also donated by the family/company. Besides the performing arts center the family/company gives heavily to the local Newport-Mesa school district. The family also owns land rights to much of the expanding commercial office space around the mall. Though they have sold the property rights to the residential areas south of the 405 Freeway, they still hold the mineral rights. In September 2006, the Segerstroms opened a new concert hall, the Renée and Henry Segerstrom Concert Hall. The family has also recently opened a high school near South Coast Plaza, Segerstrom High, under the Santa Ana Unified School District. Plans are currently underway to construct a church across the street from the high school as well.

 

Far West Management Corporation was founded in 1967 as a long-term investment company specializing in developing income-producing residential properties. After analyzing the highly competitive apartment market in Southern California, the firm introduced its concept, The Aspens, emphasizing creative land planning, design excellence and a unique approach to the internal environment. With lush landscaping featuring an abundance of trees, ornamental flowers, and shrubs, The Aspens incorporates decorative elements such as land sculpting, recirculating streams, arbors, and aviaries to create a serene, natural atmosphere. The Aspens were designed by renowned and published designer John Cottrell and landscape architect Phillip Shipley. Added to this is a complete array of recreational amenities including tennis courts, racquetball courts, swimming pools, saunas, billiard and game rooms, fitness centers, and a well-appointed clubhouse, all designed to enhance the apartment living experience. As a result of this comprehensive approach to community development, The Aspens enjoys a strong, attractive identity with apartment residents in Southern California. Far West Management continues to build on the tradition of quality, long-term relationships with residents, staff and suppliers. 42 years of commitment to their core values is clearly demonstrated by having achieved the longest resident retention record in the industry.
Challenge
Executive decision makers and investors of a legacy asset were planning a major rehab project but was unsure as to the scope and details of the rehab. Proforma was based on intuitive and experiential estimates.
Solution
Competitive Analytics conducted rigorous competitive and submarket research deploying DECIPHER™ RVO in order to determine the value versus rent level of every amenity, feature, and construction element planned for in order to provide an accurate determination of cost/benefits for decision makers.
Results
Saved investors and management team over $15 million in capital that would not have yielded targeted returns.
Return on Analytics
>3,000%
“Our relationship with Competitive Analytics goes back to more than 10 years ago. We’ve worked several projects with the wonderful team here and to say it shortly they have saved us a lot of money. Every project that we’ve worked with them on, their conclusions and the work that they put into it is more than impressive, it’s well over our heads, and that’s why we work with Competitive Analytics and expect to continue to work with them into the future whenever we have difficult decisions to make about where to put money, what our rents should be, and how to upgrade amenities. They have always come back with the right answers. The proof is in looking back, based on the decisions we made with the direction Competitive Analytics recommended. They have not been wrong yet and so we plan on continuing to work with this very fun team well into the future.”
– Rory Ferlauto, Vice President
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