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No. 1 – Donald Bren

Donald Bren didn’t defy gravity in the past year.

We upped our estimate for the Irvine Company chairman and principal owner to $12 billion, but not because we believe he saw a rise in wealth in the past year.

Irvine Co. surely has seen declines in value for its office buildings, shopping centers, hotels and land for housing development, along with the rest of the industry.

Our estimate is based on new information from sources familiar with Irvine Co.’s holdings and debt. The input confirms our $10.5 billion estimate for Bren a year ago was too low.

Last year, we called our estimate conservative and said less conservative number crunching and input from sources put him at $15 billion to $20 billion.

Based on new information, it turns out Bren easily could have been put in that higher range, even at the high end of that range.

Even in a downturn, Bren, the county’s largest land owner, landlord and most prominent businessman, is the richest person seen here. He tops Broadcom Corp. founders Henry Samueli and Henry Nicholas at their 2000 peak of $10 billion each.

Our estimate this year matches that of Forbes from March, when the magazine ranked Bren as the richest U.S. real estate owner and as the 26th richest person in the world.

It’s the first time our estimate has matched that of Forbes, which for years undervalued Bren during the real estate boom. The magazine is set to come out with its Forbes 400 list of the richest Americans in September with an estimate for Bren.

It turns out our working figure for the amount of Irvine Co.’s office space, shopping centers, apartments and hotels was underestimated by more than half. It actually owns 85 million square feet of rentable space, according to sources familiar with the company.

Irvine Co., which declined to comment on Bren’s wealth or the company’s holdings, ac-counts for hotels and apartments on a square foot basis to put them on an equal footing with offi-ces and shopping centers, according to sources.

Presuming a value of $300 per square foot for the company’s rentable space (which assumes a premium for the space and a drop of at least 30% from a year earlier), gross valuations run pretty high,in the $25 billion range.

Even assuming a per square foot figure of half that brings a valuation of nearly $13 billion before debt.

We also got some detailed information on Bren’s land for development, though it wasn’t far off from our prior assumptions.

He’s estimated to hold 27,000 acres, about half of which probably is developable. The land could accommodate 29,000 lots for homes, after factoring in streets, parks and other uses.

Of course, land for homebuilding has been among the hardest hit segments of real estate. Assuming a hugely discounted $250,000 an acre,versus the $3 million to $5 million Irvine Co. saw during the boom,and the land could be valued at nearly $7 billion, before development expenses. The land carries no debt.

Which brings us to debt. Sources familiar with the company confirm that Irvine Co. has debt much lower than that typical in real estate. Debt is estimated to be 40% or less of the company’s entire portfolio, compared to 60% to 80% for some real estate owners or specific buildings.

Irvine Co. has an “A” credit rating and stable outlook from Fitch Ratings Inc., confirming its relatively low debt. The ratings agency calls one mortgage tied to the company’s La Jolla Executive Center a “loan of concern” that is in “the process of stabilizing.”

The company acquired the La Jolla buildings for a reported $1 billion in early 2007 when Blackstone Group LP sold a number of San Diego office buildings once owned by Equity Office Properties Trust.

What isn’t entirely clear is Irvine Co.’s

cash flow.

The company is said to generate sizable annual cash flow. That money has been used in the past two to three years to develop an additional 5 million square feet of apartments, office and retail space and the Resort at Pelican Hill, they said.

The company’s recently built office buildings in Irvine have been slow to lease amid the downturn. Rents have been flat or slightly down at most of the company’s buildings, except those in upscale Newport Center, sources said.

The Resort at Pelican Hill also has seen light occupancy since opening late last year, though sources said it has seen a summer pickup.

The company’s recent developments are cash flow positive with cost cutting, sources said. There’s no debt specifically tied to the newly developed properties.

In all, Bren’s estimated empire includes 475 office buildings, 115 apartment complexes with some 42,000 units, 41 shopping centers, three hotels, three golf courses and five marinas.

In OC, holdings include large parts of the 5,000-acre Irvine Spectrum, Newport Center and half of Irvine’s 185-acre University Research Park and all of Fashion Island, Jamboree Center, MacArthur Court and the Island Hotel Newport Beach.

The ultra luxurious Pelican Hill in Newport Coast is Bren’s crown jewel. The company spared no expense on the resort, with Bren having a big hand in the resort’s Italian-inspired design.

The company has scaled back large development this year. Unlike other developers, the company isn’t under pressure to get land off its books by selling at fire-sale prices, sources said.

The company recently hired eight builders to put up 24 model homes in Irvine starting next month. The models are expected to open early next year in a bid to time a projected housing rebound in 2010.

The move is a shift for the company, which plans to finance the construction of the models.

Bren got his start as a homebuilder in 1958 and later formed Mission Viejo Co. with the O’Neill-Moiso family before selling his stake to his partners.

In 1977, he was part of a group that acquired control of Irvine Co., the successor to the massive ranch bought by James Irvine in the 1800s.

Bren bought out most partners for $518 million in 1983.

In 1991, he paid a $256 million court award to heiresses Joan Irvine Smith and mother Athalie Clarke for their shares.

He became Irvine Co.’s sole owner in 1996.

Bren has expanded to San Diego, Los Angeles and Silicon Valley in recent years. Acquisitions in recent years have made the company the dominant landlord in downtown San Diego and La Jolla.

Last year, Irvine Co. paid a reported $50 million for a 14-acre former school site in San Diego where it eventually plans to build about 500 apartments.

The company is spending $100 million on improvements to Fashion Island and is finishing an apartment complex in the Irvine Spectrum that’s set to open in the fall.

The biggest remaining development for Bren is the balance of Irvine’s Northern Sphere, which eventually could include 12,000 homes and apartments. The company also is developing homes in East Orange and Anaheim Hills.

He’s set aside more than half of the 93,000-acre Irvine Ranch as parks, trails and open space.

Immense wealth has brought sizable giving by Bren. BusinessWeek continues to name him one of the nation’s most generous philanthropists. The magazine estimates his lifetime giving at more than $1.3 billion.

The University of California, Irvine, has been a big beneficiary with $70 million in giving, including $20 million for its law school opening this fall.

Bren also has given to University of Califor-nia, Santa Barbara, and he has endowed more UC distinguished faculty chairs than any other individual donor, earning him the University of California Presidential Medal in 2004.

He has pledged some $10 million since 2006 to Think Together, a Santa Ana nonprofit that offers after-school programs.

Last year, he was named the ninth greenest business leader in world by Sunday Times of London for his backing of the Donald Bren School of Environmental Science and Manage-ment at UC Santa Barbara.


,Michael Lyster, Mark Mueller

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