Seritage Growth Properties (NYSE: SRG) (the “Company”), a
national owner and developer of retail, residential and mixed-use
properties today reported financial and operating results for the
three months ended March 31, 2024.
"We are continuing to advance our Plan of Sale, having sold $80
million of assets year to date and repaid an equal amount of debt
in the process. Since the announcement of our strategic
review and election to be taxed as a C-Corp two years ago, we have
sold 151 assets for approximately $1.7 billion of gross proceeds
and repaid roughly $1.2 billion in debt. Based on our broad
transaction experience, we are seeing a few themes emerge. Assets
previously underwritten for life sciences or tech office are now
frequently being reconsidered for other uses in higher demand but
with less aggressive rent profiles, which, taken together with high
construction costs, drives down the amount that can be paid for
land. We are also seeing investors focusing on less risky
debt or cash flowing equity investments to generate double-digit
returns. Yet, some with a longer-term view are starting to come
back to the development market. With more stability in interest
rates and inflation, buyers are able to underwrite deals more
confidently, albeit at lower valuations. As such we are adjusting
our pricing projections for some of our assets." said Andrea L.
Olshan, Chief Executive Officer and President.
Sale Highlights:
- Generated $48.8 million of gross proceeds from sales including:
- $34.0 million in gross proceeds from one income producing
Multi-Tenant Retail asset reflecting a 7.6% capitalization rate;
and
- $14.8 million in gross proceeds from four vacant/non-income
producing Non-Core assets sold at $28.56 PSF eliminating $0.8
million of carry costs.
- Subsequent to quarter end, generated $31.8 million of gross
proceeds from sales including:
- $28.0 million in gross proceeds from one income producing
Multi-Tenant Retail asset reflecting a 5.3% capitalization rate;
and
- $3.8 million in gross proceeds from one income producing
Non-Core assets reflecting a 7.8% capitalization rate.
- As of May 7, the Company has four assets under contract for
anticipated gross proceeds of $30.1 million. All assets for sale
are subject to customary closing conditions. Of these four assets,
two are for sale with no due diligence contingencies for total
anticipated gross proceeds of $8.3 million and two assets are under
contract for sale subject to customary due diligence for total
anticipated gross proceeds of $21.8 million including:
- $25.4 million in gross proceeds from three vacant/non- income
producing Non-Core assets to be sold at $42.64 PSF eliminating $1.2
million of carry costs; and
- $4.7 million in gross proceeds from monetizing an
unconsolidated entity interest.
- The Company has accepted offers on and is currently negotiating
definitive purchase and sale agreements on four assets for total
gross proceeds of approximately $79.1 million including:
- $24.0 million in gross proceeds from one income producing
Multi-Tenant Retail asset reflecting a 8.5% capitalization
rate;
- $8.1 million in gross proceeds from one vacant / non-income
producing Non-Core assets to be sold at $55.18 PSF eliminating $0.3
million of carry costs; and
- $47.0 million in gross proceeds from monetizing two
unconsolidated entity interests.
Financial Highlights:
For the three months ended March 31, 2024:
- As of March 31, 2024, the Company had cash on hand of $130.8
million, including $15.9 million of restricted cash. As of May 7,
2024, the Company had cash on hand of $102.4 million, including
$11.7 million of restricted cash.
- Net loss attributable to common shareholders of ($20.2)
million, or ($0.36) per share.
- Total Net Operating Income (“Total NOI”) of $2.1 million.
- During the quarter, the Company made $30.0 million in principal
repayments on the Company’s term loan facility having a maturity
date of July 31, 2025 (the “Term Loan Facility”), reducing the
balance of the Term Loan Facility to $330.0 million at March 31,
2024. Subsequent to quarter end, the Company made additional
principal payments totaling $50.0 million reducing the balance of
the Term Loan Facility to $280.0 million as of May 7, 2024.
Other Highlights
- Signed one lease covering 1.6 thousand square feet in the first
quarter at a projected annual net rent of $110.25 PSF.
- Opened five tenants in the first quarter totaling approximately
53.5 thousand square feet at an average net rent of $53.98
PSF.
Future Sales Projections
The data below provides additional information regarding current
estimated gross sales proceeds per asset in the portfolio as of May
7, 2024, excluding assets under contract or in PSA negotiation,
which are described above. The assets listed below are either being
marketed or are to be marketed and, as a result, any sales thereof
are anticipated to occur in 2024 and beyond. Sales projections are
based on the Company’s latest forecasts and assumptions, but the
Company cautions that actual results may differ materially. In
addition, see “Market Update” below and the “Risk Factors” section
contained in the Company’s filings with the Securities and Exchange
Commission for discussion of the risks associated with such
estimated gross sale proceeds.
Gateway Markets
- One Multi-Tenant Asset $25 - $30 million
- Eight Premier Assets (Dallas & San Diego are each assumed
to be sold in two transactions)
- One Asset $15 - $20 million
- Two Assets $30 - $35 million
- Two Assets $50 - $60 million
- One Asset $60 - $70 million
- One Asset $100 - $150 million
- One Asset $150 - $200 million
Primary Markets
- Three Multi-Tenant Assets $25 - $30 million
- Three Joint Venture Assets $5 - $10 million
- One Non-Core Asset $25 - $30 million
Secondary Markets
- One Residential Asset with adjacent Retail asset $5 - $10
million
- One Joint Venture Asset $5 - $10 million
- One Non-Core Asset $5 - $10 million
Portfolio
The table below represents a summary of the Company’s properties
by planned usage as of March 31, 2024 (in thousands except number
of leases and acreage data):
Planned Usage
Total
Built SF / Acreage (1)
Leased SF (1)(2)
% Leased
Avg. Acreage / Site
Consolidated
Multi-Tenant Retail
5
876 sf / 93 acres
603
68.8%
18.7
Residential (3)
2
33 sf / 19 acres
33
100.0%
9.5
Premier
4
228 sf / 69 acres
138
71.4%
17.2
Non-Core (4)
7
1098 sf / 95 acres
13
1.2%
13.7
Unconsolidated
Other Joint Ventures
6
457 sf / 77 acres
11
2.3%
12.8
Premier
3
158 sf / 57 acres
106
69.1%
19.0
(1) Square footage is presented at the
Company’s proportional share.
(2) Based on signed leases at March 31,
2024.
(3) Square footage represents built
ancillary retail space whereas acreage represents both retail and
residential acreage.
(4) Represents assets the Company
previously designated for sale.
Multi-Tenant Retail
During the three months ended March 31, 2024, the Company
invested $1.8 million in its Multi-Tenant retail properties. Any
future capital expenditures in the Multi-Tenant retail portfolio
are primarily comprised of tenant improvements.
The table below provides a summary of all Multi-Tenant Retail
signed and in negotiation leases as of March 31, 2024 (in thousands
except for number of leases and PSF data):
Number of
Leased
% of Total
Gross Annual Base
% of
Gross Annual
Tenant
Leases
GLA
Leasable GLA
Rent ("ABR")
Total ABR
Rent PSF ("ABR PSF")
In-place retail leases
18
556.6
63.5
%
$
12,852.3
87.0
%
$
23.07
SNO retail leases (1)
4
46.2
5.3
%
1,175
8.0
%
25.54
Tenants in lease negotiation
1
102.0
10.6
%
750
5.1
%
7.35
Total retail leases
23
704.8
79.4
%
$
14,776.7
100.0
%
$
20.97
(1) SNO = signed not yet opened
leases.
During the three months ended March 31, 2024, the Company has a
leasing pipeline of over 100 thousand square feet. The Company has
557 thousand leased square feet and approximately 46 thousand
square feet signed but not opened. The Company has total occupancy
of 68.8% for its Multi-Tenant retail properties. As of March 31,
2024, there is an additional approximately 273 thousand square feet
available for lease.
Number of
Leased
Gross Annual Base
Gross Annual
SNO Leases
GLA
Rent ("ABR")
Rent PSF ("ABR PSF")
As of December 31, 2023
6
86.1
$
2,540.0
$
29.53
Opened
(1
)
(37.5
)
(1,215.0
)
32.40
Sold / terminated
(1
)
(2.4
)
(150.1
)
63.42
As of March 31, 2024
4
46.2
$
1,174.9
$
25.54
Premier Mixed-Use
The Company has three premier mixed-use projects in the active
leasing/tenant opening stage: Aventura, FL, Santa Monica, CA and
San Diego, CA. As of March 31, 2024, the Company has 332 thousand
in-place leased square feet (226 thousand square feet at share), 43
thousand square feet signed but not opened (43 thousand square feet
at share), and 168 thousand square feet available for lease (116
thousand square feet at share).
The table below provides a summary of all signed leases at
Premier assets as of March 31, 2024, including unconsolidated
entities at the Company’s proportional share (in thousands except
for number of leases and PSF data):
Number of
Leased
% of Total
Gross Annual
% of
Gross Annual
Tenant
Leases
GLA
Leasable GLA
Base Rent ("ABR")
Total ABR
Rent PSF ("ABR PSF")
In-place retail leases
35
117.9
30.6
%
$
8,406.2
45.6
%
$
71.30
In-place office leases
4
108.0
28.0
%
6,889.5
37.3
%
63.82
SNO retail leases as of December 31,
2023(1)
17
57.5
$
4,652.8
80.92
Opened
(4
)
(16.0
)
(1,673.4
)
104.55
Signed
1
1.6
174.6
110.23
SNO retail leases as of March 31,
2024(1)
14
43.1
18.7
%
$
3,154.0
17.1
%
73.22
Total diversified leases as of March
31, 2024
53
268.9
63.3
%
$
18,449.7
100.0
%
$
68.60
(1) SNO = Signed not yet opened leases
During the three months ended March 31, 2024, the Company
invested $6.4 million in its consolidated premier development and
operating properties and an additional $2.3 million into its
unconsolidated premier entities.
Aventura
During the first quarter of 2024, the Company continued to
advance 216 thousand square feet of office and retail leasing at
the project in Aventura, FL. The Company is finalizing construction
on the asset. As of March 31, 2024, 108 thousand square feet or 50%
of the asset is opened and the Company will continue with rolling
openings going forward.
With 70% leased through March 31, 2024, the Company has 65
thousand square feet or 30% available for lease, of which
approximately 17 thousand square feet or 8.0% is in lease
negotiation.
San Diego
As of March 31, 2024, the property is 100% leased and 100.0%
open and operating.
Financial Summary
The table below provides a summary of the Company’s financial
results for the three months ended March 31, 2024 (in thousands
except for per share amounts):
Three Months Ended
March 31, 2024
March 31, 2023
Net loss attributable to Seritage common
shareholders
$
(20,210
)
$
(63,211
)
Net loss per share attributable to
Seritage common shareholders
(0.36
)
(1.13
)
Total NOI
2,098
3,104
For the quarter ended March 31, 2024:
- Total NOI for the first quarter of 2024 reflects the impact of
($0.8) million Total NOI relating to sold properties.
Total NOI is comprised of:
(in thousands)
Three Months Ended March
31,
Consolidated Properties
2024
2023
Multi-tenant retail
$
2,368
$
2,163
Premier
(301
)
(1,280
)
Non-Core
(433
)
(702
)
Sold
(870
)
1,406
Total
764
1,587
Unconsolidated Properties
Residential
-
9
Premier
1,545
331
Other joint ventures
(211
)
1,177
Total
1,334
1,517
Total NOI
$
2,098
$
3,104
As of March 31, 2024, the Company had cash on hand of $130.8
million, including $15.9 million of restricted cash. The Company
expects to use these sources of liquidity, together with a
combination of future sales, to pay its financing obligations and
fund its operations and development activity. The availability of
funding from sales of assets is subject to various conditions, and
there can be no assurance that such transactions will be
consummated. For more information on our liquidity position,
including our going concern analysis, please see the notes to the
consolidated financial statements included in Part I, Item 1 and in
the section titled “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” each in our
Quarterly Report on Form 10-Q.
Dividends
On February 29, 2024, the Company’s Board of Trustees declared a
preferred stock dividend of $0.4375 per each Series A Preferred
Share. The preferred dividend was paid on April 15, 2024 to holders
of record on March 29, 2024.
On May 2, 2024, the Company’s Board of Trustees declared a
preferred stock dividend of $0.4375 per each Series A Preferred
Share. The preferred dividend will be paid on July 15, 2024 to
holders of record on June 28, 2024.
The Company’s Board of Trustees does not expect to declare
dividends on its common shares until such time as the Term Loan
Facility has been repaid in full.
Strategic Review
At the 2022 Annual Meeting of Shareholders on October 24, 2022,
Seritage shareholders approved the Company’s Plan of Sale. The
strategic review process remains ongoing as the Company executes
the Plan of Sale, and the Company remains open minded to pursuing
value maximizing alternatives, including a potential sale of the
Company. There can be no assurance regarding the success of the
process.
Market Update
As the Company has previously disclosed, the Company, along with
the commercial real estate market as a whole, has experienced and
continues to experience challenging market conditions as a result
of a variety of factors. These conditions have applied and continue
to apply downward pricing pressure on all of our assets. In making
decisions regarding whether and when to transact on each of the
Company’s remaining assets, the Company will consider various
factors including, but not limited to, the breadth of the buyer
universe, macroeconomic conditions, the availability and cost of
financing, as well as corporate, operating and other capital
expenses required to carry the asset. If these challenging market
conditions persist, then we expect that they will impact the Plan
of Sale proceeds from our assets and the amounts and timing of
distributions to shareholders.
Non-GAAP Financial
Measures
The Company makes references to NOI and Total NOI which are
financial measures that include adjustments to accounting
principles generally accepted in the United States (“GAAP”).
Neither of NOI or Total NOI are measures that (i) represent cash
flow from operations as defined by GAAP; (ii) are indicative of
cash available to fund all cash flow needs, including the ability
to make distributions; (iii) are alternatives to cash flow as a
measure of liquidity; or (iv) should be considered alternatives to
net income (which is determined in accordance with GAAP) for
purposes of evaluating the Company’s operating performance.
Reconciliations of these measures to the respective GAAP measures
the Company deems most comparable have been provided in the tables
accompanying this press release.
Net Operating Income ("NOI”) and Total
NOI
NOI is defined as income from property operations less property
operating expenses. Other real estate companies may use different
methodologies for calculating NOI, and accordingly the Company’s
depiction of NOI may not be comparable to other real estate
companies. The Company believes NOI provides useful information
regarding Seritage, its financial condition, and results of
operations because it reflects only those income and expense items
that are incurred at the property level.
The Company also uses Total NOI, which includes its proportional
share of unconsolidated properties. This form of presentation
offers insights into the financial performance and condition of the
Company as a whole given the Company’s ownership of unconsolidated
properties that are accounted for under GAAP using the equity
method.
The Company also considers NOI and Total NOI to be a helpful
supplemental measure of its operating performance because it
excludes from NOI variable items such as termination fee income, as
well as non-cash items such as straight-line rent and amortization
of lease intangibles.
Forward-Looking
Statements
This document contains forward-looking statements within the
meaning of the federal securities laws. Forward-looking statements
relate to expectations, beliefs, projections, future plans and
strategies, anticipated events or trends and similar expressions
concerning matters that are not historical facts. In some cases,
you can identify forward-looking statements by the use of
forward-looking terminology such as “may,” “should,” “expects,”
“intends,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” "will," "approximately," or "anticipates"
or the negative of these words and phrases or similar words or
phrases that are predictions of or indicate future events or trends
and that do not relate solely to historical matters.
Forward-looking statements involve known and unknown risks,
uncertainties, assumptions and contingencies, many of which are
beyond the Company’s control, which may cause actual results to
differ significantly from those expressed in any forward-looking
statement. Factors that could cause or contribute to such
differences include, but are not limited to: declines in retail,
real estate and general economic conditions; risks relating to
redevelopment activities; contingencies to the commencement of rent
under leases; the terms of the Company’s indebtedness and other
legal requirements to which the Company is subject; failure to
achieve expected occupancy and/or rent levels within the projected
time frame or at all; the impact of ongoing negative operating cash
flow on the Company’s ability to fund operations and ongoing
development; the Company’s ability to access or obtain sufficient
sources of financing to fund the Company’s liquidity needs;
environmental, health, safety and land use laws and regulations;
and possible acts of war, terrorist activity or other acts of
violence or cybersecurity incidents. For additional discussion of
these and other applicable risks, assumptions and uncertainties,
see the “Risk Factors” and forward-looking statement disclosure
contained in the Company’s filings with the Securities and Exchange
Commission, including the Company’s annual report on Form 10-K for
the year ended December 31, 2023 and any subsequent Form 10-Qs.
While the Company believes that its forecasts and assumptions are
reasonable, the Company cautions that actual results may differ
materially. The Company intends the forward-looking statements to
speak only as of the time made and do not undertake to update or
revise them as more information becomes available, except as
required by law.
About Seritage Growth
Properties
Prior to the adoption of the Company’s Plan of Sale (defined
below), Seritage was principally engaged in the ownership,
development, redevelopment, disposition, management and leasing of
diversified retail and mixed-use properties throughout the United
States. Seritage will continue to actively manage each remaining
location until such time as each property is sold. As of March 31,
2024, the Company’s portfolio consisted of interests in 27
properties comprised of approximately 3.5 million square feet of
gross leasable area (“GLA”) or build-to-suit leased area, and 410
acres of land. The portfolio consists of approximately 2.3 million
square feet of GLA and 276 acres held by 18 consolidated properties
(such properties, the “Consolidated Properties”) and 1.2 million
square feet of GLA and 134 acres held by nine unconsolidated
properties (such properties, the “Unconsolidated Properties”).
SERITAGE GROWTH PROPERTIES
CONSOLIDATED BALANCE SHEETS (In thousands, except share
and per share amounts) (Unaudited)
March 31, 2024
December 31, 2023
ASSETS
Investment in real estate
Land
$
72,562
$
102,090
Buildings and improvements
300,148
344,972
Accumulated depreciation
(31,514
)
(36,025
)
341,196
411,037
Construction in progress
132,210
135,305
Net investment in real estate
473,406
546,342
Real estate held for sale
75,574
39,332
Investment in unconsolidated entities
199,810
196,437
Cash and cash equivalents
114,875
134,001
Restricted cash
15,883
15,699
Tenant and other receivables, net
9,907
12,246
Lease intangible assets, net
191
886
Prepaid expenses, deferred expenses and
other assets, net
24,922
28,921
Total assets (1)
$
914,568
$
973,864
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Term loan facility, net
$
330,000
$
360,000
Accounts payable, accrued expenses and
other liabilities
40,970
50,700
Total liabilities (1)
370,970
410,700
Commitments and contingencies (Note 9)
Shareholders' Equity
Class A common shares $0.01 par value;
100,000,000 shares authorized; 56,262,944 and 56,194,727 shares
issued and outstanding as of March 31, 2024 and December 31, 2023,
respectively
562
562
Series A preferred shares $0.01 par value;
10,000,000 shares authorized; 2,800,000 shares issued and
outstanding as of March 31, 2024 and December 31, 2023; liquidation
preference of $70,000
28
28
Additional paid-in capital
1,362,386
1,361,742
Accumulated deficit
(820,552
)
(800,342
)
Total shareholders' equity
542,424
561,990
Non-controlling interests
1,174
1,174
Total equity
543,598
563,164
Total liabilities and equity
$
914,568
$
973,864
(1) The Company's consolidated balance
sheets include assets and liabilities of consolidated variable
interest entities ("VIEs"). See Note 2. The consolidated balance
sheets, as of March 31, 2024, include the following amounts related
to our consolidated VIEs, excluding the Operating Partnership: $3.3
million of land, $2.8 million of building and improvements, $(0.8)
million of accumulated depreciation and $2.6 million of other
assets included in other line items. The Company's consolidated
balance sheets as of December 31, 2023, include the following
amounts related to our consolidated VIEs, excluding the Operating
Partnership: $3.3 million of land, $2.8 million of building and
improvements, $(0.8) million of accumulated depreciation and $2.4
million of other assets included in other line items.
SERITAGE GROWTH PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands,
except per share amounts) (Unaudited)
Three Months Ended March
31,
2024
2023
REVENUE
Rental income
$
5,725
$
418
Management and other fee income
48
262
Total revenue
5,773
680
EXPENSES
Property operating
3,673
8,185
Real estate taxes
1,393
1,537
Depreciation and amortization
5,271
4,564
General and administrative
9,192
12,220
Total expenses
19,529
26,506
Gain on sale of real estate, net
1,139
12,392
Impairment of real estate assets
(1,148
)
(2,576
)
Equity in income (loss) of unconsolidated
entities
379
(36,372
)
Interest and other income, net
1,423
5,585
Interest expense
(7,011
)
(15,202
)
Loss before income taxes
(18,974
)
(61,999
)
(Provision) benefit for income taxes
(11
)
13
Net loss
(18,985
)
(61,986
)
Preferred dividends
(1,225
)
(1,225
)
Net loss attributable to Seritage common
shareholders
$
(20,210
)
$
(63,211
)
Net loss per share attributable to
Seritage Class A common shareholders - Basic
$
(0.36
)
$
(1.13
)
Net loss per share attributable to
Seritage Class A common shareholders - Diluted
$
(0.36
)
$
(1.13
)
Weighted average Class A common shares
outstanding - Basic
56,215
56,059
Weighted average Class A common shares
outstanding - Diluted
56,215
56,059
Reconciliation of Net Loss to NOI and Total NOI (in
thousands)
Three Months Ended March
31,
NOI and Total NOI
2024
2023
Net loss
$
(18,985
)
$
(61,986
)
Management and other fee income
(48
)
(262
)
Depreciation and amortization
5,271
4,564
General and administrative expenses
9,192
12,220
Equity in (income) loss of unconsolidated
entities
(379
)
36,372
Gain on sale of real estate, net
(1,139
)
(12,392
)
Impairment of real estate assets
1,148
2,576
Interest and other income, net
(1,423
)
(5,585
)
Interest expense
7,011
15,202
Provision (Benefit) for income taxes
11
(13
)
Straight-line rent
67
10,843
Above/below market rental expense
38
48
NOI
$
764
$
1,587
Unconsolidated
entities
Net operating income of unconsolidated
entities
1,531
1,659
Straight-line rent
(188
)
(147
)
Above/below market rental expense
(9
)
5
Total NOI
$
2,098
$
3,104
Properties sold during first quarter of 2024:
Total
2024 Qtr
City
State
Full / Partial Sale
SF (1)
Sold
North Little Rock
AR
Box
160,500
Q1
Watchung
NJ
Full Site
87,300
Q1
Cedar Rapids
IA
Full Site
146,200
Q1
Yuma
AZ
Full Site
90,100
Q1
Edgewater
MD
Full Site
122,000
Q1
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version on businesswire.com: https://www.businesswire.com/news/home/20240510152784/en/
Seritage Growth Properties (212) 355-7800 IR@Seritage.com
Grafico Azioni Seritage Growth Properties (NYSE:SRG)
Storico
Da Mar 2025 a Mar 2025
Grafico Azioni Seritage Growth Properties (NYSE:SRG)
Storico
Da Mar 2024 a Mar 2025
