Seritage Growth Properties Reports First Quarter 2024 Operating Results
"We are continuing to advance our Plan of Sale, having sold
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
-
As of
March 31, 2024 , the Company had cash on hand of$130.8 million , including$15.9 million of restricted cash. As ofMay 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 ofJuly 31, 2025 (the “Term Loan Facility”), reducing the balance of the Term Loan Facility to$330.0 million atMarch 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 ofMay 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
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
-
One Asset
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
Planned Usage |
|
Total |
|
Built SF / Acreage (1) |
|
Leased SF (1)(2) |
|
|
% Leased |
|
Avg. Acreage / Site |
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Consolidated |
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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. |
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(2) Based on signed leases at |
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(3) Square footage represents built ancillary retail space whereas acreage represents both retail and residential acreage. |
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(4) Represents assets the Company previously designated for sale. |
Multi-Tenant Retail
During the three months ended
The table below provides a summary of all Multi-Tenant Retail signed and in negotiation leases as of
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Number of |
|
|
Leased |
|
|
% of Total |
|
|
Gross Annual
|
|
|
% of |
|
|
Gross Annual |
|
||||||
Tenant |
|
Leases |
|
|
GLA |
|
|
Leasable GLA |
|
|
Rent ("ABR") |
|
|
Total ABR |
|
|
Rent 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
|
|
Number of |
|
|
Leased |
|
|
Gross Annual Base |
|
|
Gross Annual |
|
|
||||
|
|
SNO Leases |
|
|
GLA |
|
|
Rent ("ABR") |
|
|
Rent PSF ("ABR
|
|
|
||||
As of |
|
|
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 |
|
|
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:
The table below provides a summary of all signed leases at Premier assets as of
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|
Number
|
|
|
Leased |
|
|
% of
|
|
|
Gross Annual |
|
|
% of |
|
|
Gross Annual |
|
||||||
Tenant |
Leases |
|
|
GLA |
|
|
Leasable
|
|
|
Base Rent
|
|
|
Total ABR |
|
|
Rent PSF ("ABR
|
|
||||||
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 leasesas of |
|
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 |
|
14 |
|
|
|
43.1 |
|
|
|
18.7 |
% |
|
$ |
3,154.0 |
|
|
|
17.1 |
% |
|
|
73.22 |
|
Total diversified leases as of |
|
53 |
|
|
|
268.9 |
|
|
|
63.3 |
% |
|
$ |
18,449.7 |
|
|
|
100.0 |
% |
|
$ |
68.60 |
|
(1) SNO = Signed not yet opened leases |
|
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|
|
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|
During the three months ended
During the first quarter of 2024, the Company continued to advance 216 thousand square feet of office and retail leasing at the project in
With 70% leased through
As of
Financial Summary
The table below provides a summary of the Company’s financial results for the three months ended
|
|
Three Months Ended |
|
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|
|
|
|
|
|
|
||
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
-
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 |
|
|||||
|
|
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 |
|
|
|
|
|
|
||||
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
Dividends
On
On
The Company’s
Strategic Review
At the 2022 Annual Meeting of Shareholders on
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
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
About
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
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
|
|
|
|
|
|
|
||
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 |
|
|
562 |
|
|
|
562 |
|
Series A preferred shares |
|
|
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 |
|
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
|
|
Three Months Ended
|
|
|
|||||
|
|
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 |
|
|||||
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 |
|
|
|
MD |
|
Full Site |
|
|
122,000 |
|
|
Q1 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240510152784/en/
(212) 355-7800
IR@Seritage.com
Source: