Quote:
Originally Posted by LeftCoaster
Careful using sales as a proxy for revenue to the landlords. Your above assessment of Oakridge being a less valuable asset than metrowtown is correct, however revenue of those sales go to the tenants, landlords only get rent,a additionals, and possibly a small percentage of sales in the form of percentage rent. Another important point is $1,080 is the CRU sales per square foot, and does not include LNM or anchor tenants, so you need to multiply the $1,080 by a much smaller number than 1.78m square feet.
My guess on a valuation of the existing asset would be $4.25 billion based off a 3.75% cap... but that's a swing in the dark since there are so many unknowns.
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I realize that.
Which is why I was hesitant using the ranking to make that argument because I have my issues with the whole reasoning and logic behind it (like the fact that it tells us more about the tenants and the particular type of shoppers who shop at those malls than it does about the actual malls and the mall owners).
I should have added the caveat that the Mall owners revenue is more or less "fixed" and not really dependent on whether the tenants are struggling or having a bumper year in sales (except in situations like you pointed out in which they get a percentage in sales) - assuming the tenants honor the leases and pay their rents on time and in full, that is.
But they naturally do, nonetheless have a vested interest in the tenants doing well - beyond which it means they'll be able to pay their rent - but also because it adds to the vibrant business atmosphere and climate of the mall which helps encourage foot traffic and bring more business (and more tenants if needs be, for vacated spots).
Also good point about the anchor tenants, which is YET another issue I have with that ranking system because, by not having the LNM and anchor tenants factored in, it likely penalizes the bigger malls that are likely to have more anchor tenants (like a Metropolis versus an Oakridge or a Pacific Center)
Regardless, it was the only listing and ranking done with easily and readily accessible and available hard numbers that we could make a crude, fast comparison off of, so I used it knowing the shortcomings.
But you rightly point out the fact that there's too many unknowns not just in the revenue assessment and comparison (property rates, Overheads, alternate revenue streams not directly connected to the mall business but still part of the landowners' portfolio (like Metro Office Towers rents and business)) etc) but also in considering the Mall's actual value and the value of the land it sits on.
I'd be curious as to what the government uses to make the assessments since it has to figure out the property rates and taxes somehow - but its highly unlikely any of these folks will be releasing their tax returns and financial evaluations anytime soon.
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