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Section 1: 8-K (8-K)

srg-8k_20200507.htm
false 0001628063 0001628063 2020-02-27 2020-02-27 0001628063 us-gaap:CommonClassAMember 2020-02-27 2020-02-27 0001628063 srg:SeriesACumulativeRedeemablePreferredSharesMember 2020-02-27 2020-02-27

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  May 7, 2020

 

SERITAGE GROWTH PROPERTIES

(Exact Name of Registrant as Specified in Its Charter)

 

 

Maryland

 

001-37420

 

38-3976287

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

 

 

 

 

500 Fifth Avenue, Suite 1530

New York, New York

 

10110

(Address of principal executive offices)

 

(Zip code)

 

Registrant’s telephone number, including area code: (212) 355-7800

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbols

Name of each exchange on which registered

Class A common shares of beneficial interest, par value $0.01 per share

SRG

New York Stock Exchange

7.00% Series A cumulative redeemable preferred shares of beneficial interest, par value $0.01 per share

SRG-PA

New York Stock Exchange

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

 


Item 1.01

Entry into a Material Definitive Agreement

On May 5, 2020, Seritage Growth Properties, L.P. (the “Operating Partnership”), a subsidiary of Seritage Growth Properties (the “Company”), and Berkshire Hathaway Life Insurance Company of Nebraska (“Berkshire Hathaway”) entered into an amendment to the Senior Secured Term Loan Agreement by and among the Operating Partnership and Berkshire Hathaway as initial lender and administrative agent (the “Amendment”) that permits the deferral of payment of interest under the Term Loan Agreement if, as of the first day of each applicable month, (x) the amount of unrestricted and unencumbered (other than liens created under the Term Loan Agreement) cash on hand of the Operating Partnership and its subsidiaries, minus (y) the aggregate amount of anticipated necessary expenditures for such period (such sum, “Available Cash”) is equal to or less than $30 million.  In such instances, for each interest period, the Operating Partnership is obligated to make payments of interest in an amount equal to the difference between (i) Available Cash and (ii) $20 million (provided that such payment shall not exceed the amount of current interest otherwise due under the Term Loan Agreement).  Any deferred interest shall accrue interest at 2.0% in excess of the then applicable interest rate and shall be due and payable on July 31, 2023, provided that the Operating Partnership is required to pay any deferred interest from Available Cash in excess of $30 million (unless otherwise agreed to by the Administrative Agent under the Term Loan Agreement in its sole discretion). In addition, repayment of any outstanding deferred interest is a condition to any borrowings under the $400 million incremental funding facility under the Term Loan Agreement.

Additionally, the Amendment provides that the Administrative Agent and the Lenders express their continued support for asset dispositions, subject to the Administrative Agent’s right to approve the terms of individual transactions due to the occurrence of a Financial Metric Trigger Event.

The foregoing description of the amendment to the Term Loan Agreement is subject to and qualified in its entirety by reference to the copy of that agreement attached as Exhibit 10.1 herewith.

Item 2.02

Results of Operations and Financial Condition.

On May 7, 2020, the Company issued a press release regarding its financial results for the three months ended March 31, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report.

In addition, on May 7, 2020, the Company published certain supplementary financial information relating to the three months ended March 31, 2020.  Such information is furnished as Exhibit 99.2 to this report.

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01

Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.

 

Description

 

 

 

10.1

 

Amendment No. 1 to Senior Secured Term Loan Agreement, dated May 5, 2020, among Seritage Growth Properties, L.P. and Berkshire Hathaway Life Insurance Company of Nebraska

 

 

 

99.1

 

Press release dated May 7, 2020, furnished pursuant to Item 2.02.

 

 

 

99.2

 

Supplementary Financial Information dated May 7, 2020, furnished pursuant to Item 2.02.

 

 

 

104

 

Cover Page Interactive Data File (embedded within Inline XBRL document)

 


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

SERITAGE GROWTH PROPERTIES 

 

By:

 

/s/ Matthew Fernand

 

 

Matthew Fernand

 

 

Executive Vice President, General

Counsel & Secretary

 

Date: May 7, 2020

 

(Back To Top)

Section 2: EX-10.1 (EX-10.1)

srg-ex101_8.htm

 

Exhibit 10.1

 

EXECUTION VERSION

AMENDMENT NO. 1

Dated as of May 5, 2020

to

SENIOR SECURED TERM LOAN AGREEMENT

Dated as of July 31, 2018

THIS AMENDMENT NO. 1 (this “Amendment”) is made as of May 5, 2020 by and among Seritage Growth Properties, L.P. (the “Borrower”), Berkshire Hathaway Life Insurance Company of Nebraska, as initial lender (the “Initial Lender”), and Berkshire Hathaway Life Insurance Company of Nebraska, as Administrative Agent (the “Administrative Agent’), under that certain Senior Secured Term Loan Agreement dated as of July 31, 2018 by and among the Borrower, Seritage Growth Properties (the “Parent”), the Lenders party thereto from time to time and the Administrative Agent (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “Existing Term Loan Agreement” and, as amended by the Amendment, the “Amended Term Loan Agreement”).  Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Amended Term Loan Agreement.

WHEREAS, the Borrower, the Initial Lender and the Administrative Agent have agreed to make certain amendments to the Existing Term Loan Agreement on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Initial Lender and the Administrative Agent hereby agree to enter into this Amendment.

1.Amendments to the Existing Term Loan Agreement.  Effective as of the Amendment No. 1 Effective Date, Section 2.06(a) of the Existing Term Loan Agreement is amended by adding the following five (5) sentences at the end thereof:

Notwithstanding the foregoing, if as of the first day of any calendar month the sum of (x) aggregate amount of unrestricted and unencumbered (other than Liens created pursuant to the Credit Documents) cash on hand of the Borrower and its Subsidiaries, minus (y) the aggregate amount of anticipated necessary expenditures for such period (such sum, “Available Cash”) is equal to or less than $30,000,000, then the Borrower shall only be obligated to make a payment of interest for such Interest Period in an amount equal to the difference between (i) Available Cash as of the first day of such calendar month and (ii) $20,000,000; provided that in no event shall the current interest payable for any Interest Period pursuant to this sentence exceed the amount of current interest for such Interest Period otherwise due hereunder.  In connection with the foregoing, on the first day of each applicable month, Borrower shall provide the Administrative Agent with a pro forma cash statement for the following thirty (30) days setting forth Available Cash and the resulting amount available for payment of interest for the applicable Interest Period

 


 

as set forth above.  Any interest due and payable but not paid on the applicable Interest Payment Date (“Deferred Interest”) shall accrue interest in accordance with Section 2.06(c) (i.e. the Interest Rate plus 2.00%) (the “Deferred Interest Rate”) and shall be due and payable on the Maturity Date; provided that the Borrower shall be required to pay any Deferred Interest from Available Cash in excess of $30,000,000 (unless otherwise agreed to by Administrative Agent in its sole discretion following a request by Borrower to apply such amounts to an alternative use).  Repayment of any outstanding Deferred Interest shall be a condition to any Incremental Advances. By way of illustration, if Available Cash is $25,000,000, then the Borrower shall make a payment of interest in the amount of $5,000,000 and the remaining interest due on the applicable Interest Payment Date shall be deemed Deferred Interest and if in the following month Available Cash is $35,000,00 then Borrower shall repay the $4,333,333 of Deferred Interest at the Deferred Interest Rate (unless otherwise agreed to by Administrative Agent in its sole discretion).

2.Support for Asset Dispositions.  In connection with this Amendment, the Administrative Agent and the Lenders express their continued support for asset dispositions, subject to the Administrative Agent’s right to approve the terms of individual transactions due to the occurrence of a Financial Metric Trigger Event.

3.Conditions of Effectiveness.  The effectiveness of this Amendment (the “Amendment No. 1 Effective Date”) is subject to the satisfaction (or waiver) of the following conditions precedent:

(a)The Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrower, the Required Lenders and the Administrative Agent; and

(b)The Administrative Agent shall have received payment of the reasonable out-of-pocket expenses required to be reimbursed or paid by the Borrower in connection with this Amendment pursuant to the terms of the Amended Term Loan Agreement.

4.Representations and Warranties of the Borrower.  The Borrower hereby represents and warrants as follows:

(a)This Amendment and the Amended Term Loan Agreement constitute legal, valid and binding obligations of the Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or other similar law affecting creditors’ rights generally and by general principles of equity (whether considered in a proceeding at law or in equity).

(b)After giving effect to the terms of this Amendment, (i) no Default or Event of Default has occurred and is continuing, or would result therefrom and (ii) the representations and warranties of the Loan Parties set forth in the Amended Term Loan Agreement and the other Credit Documents are true and correct in all material respects (except to the extent that any representation or warranty that is qualified by materiality shall be true and correct in all respects), provided, to the extent that any representation and warranty specifically refers to a given date or period, it shall be true and correct in all material respects as of such date or for such period.

5.Reference to and Effect on the Existing Term Loan Agreement.

(a)Upon the effectiveness hereof, each reference to the Existing Term Loan Agreement in the Amended Term Loan Agreement or any other Credit Document shall mean and be a reference to the Amended Term Loan Agreement.

(b)

 

2


 

The Amended Term Loan Agreement and all other documents, instruments and agreements executed and/or delivered in connection with the Existing Term Loan Agreement shall remain in full force and effect and are hereby ratified and confirmed.

(c)Except with respect to the subject matter hereof, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Existing Term Loan Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.

(d)This Amendment is a Credit Document.

6.Governing Law.  This Amendment shall be governed by, and construed in accordance with, the law of the State of New York.

7.Headings.  Section headings in this Amendment are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment.

8.Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Amendment by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment. The words “execution,” “signed,” “signature,” and words of like import in this Amendment shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, or any other state laws based on the Uniform Electronic Transactions Act.

[Signature Pages Follow]

 

 

3


 

 

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

 

SERITAGE GROWTH PROPERTIES, L.P.,

as the Borrower

 

By: Seritage Growth Properties,

its general partner

 

 

By: /s/ Matt Fernand

Name: Matthew Fernand

Title: EVP & General Counsel

 

 

 

 

 

Signature Page to Amendment No. 1 to

Senior Secured Term Loan Agreement

Seritage Growth Properties, L.P.


 

BERKSHIRE HATHAWAY LIFE INSURANCE COMPANY OF NEBRASKA,

as Administrative Agent and individually as a Lender

 

 

By: /s/ Brian Snover

Name: Brian Snover

Title: Senior Vice President

 

Signature Page to Amendment No. 1 to

Senior Secured Term Loan Agreement

Seritage Growth Properties, L.P.

(Back To Top)

Section 3: EX-99.1 (EX-99.1)

srg-ex991_7.htm

Exhibit 99.1

 

Seritage Growth Properties Reports First Quarter 2020 Operating Results

– Provides business update regarding impact of COVID-19 pandemic –

New York, NY – May 7, 2020 – Seritage Growth Properties (NYSE: SRG) (the “Company”), a national owner of 208 retail and mixed-use properties totaling approximately 32.8 million square feet of gross leasable area (“GLA”), today reported financial and operating results for the quarter ended March 31, 2020.

Summary Financial Results

For the quarter ended March 31, 2020:

Net loss attributable to common shareholders of $21.9 million, or $0.59 per share

Total Net Operating Income (“Total NOI”) of $15.8 million

Funds from Operations (“FFO”) of ($17.6) million, or ($0.31) per share

Company FFO of ($18.4) million, or ($0.33) per share

COVID-19 Pandemic and Business Update

In response to the anticipated impact of the COVID-19 pandemic on its business and the communities in which it operates, the Company has taken a number of measures to reduce operating expenses while preserving the value of its assets and its platform:

Adapted operations to protect employees and their families, including by implementing a work from home policy;

Communicated consistently with tenants, including to provide assistance in identifying local, state and federal resources that may be available to support their businesses and employees;

Made over 180 properties available to governmental and community organizations for relief efforts at no cost;

Implemented plans to reduce operating expenses at the property and corporate level, each by approximately 20-25%; and

Put substantially all construction projects on hold at the end of March, limiting capital expenditures until the Company can better assess the duration and extent of the disruption to the economy and its business.

Subsequent to the quarter ended March 31, 2020, the Company:

Amended its Term Loan Facility to provide increased flexibility with respect to the deferral of interest expense, under specified circumstances, until the Term Loan Facility matures in July 2023.  As part of the amendment, the lender also reaffirmed its continued support for asset dispositions, subject to the lender’s right to approve individual transactions;

Collected April rental income representing 47% of contractual amounts, including 54% from tenants other than Transform Holdco LLC (“Sears” or “Holdco”);

Sold one asset for gross proceeds of $10.0 million, bringing total gross sales proceeds for the year to $70.4 million; and

Entered into contracts to sell assets for anticipated gross proceeds of $78.2 million; as of May 6, 2020, the Company had asset sales under contract for anticipated gross proceeds of $135.1 million, subject to buyer diligence and closing conditions.

“While we began 2020 focused on the continued execution of our redevelopment program, the COVID-19 pandemic has had a meaningful near-term impact on our business and that of our tenants.  Our first priority is always the health and safety of our team, our communities and our partners, and we moved quickly to implement changes at both the corporate and property level,” said Benjamin Schall, President and Chief Executive Officer.  “We took a number of immediate steps to reduce operating expenses to partially offset expected reductions in rental income, and also placed substantially all of our construction projects on hold for a period of time.  

1


Additionally, we reached an agreement with Berkshire Hathaway to modify our Term Loan Facility, providing us with the flexibility to defer interest expense under certain circumstances.”

Mr. Schall continued, “The foundation of our platform is to convert well-located former retail real estate into a broad set of new uses in enhanced physical environments. While recognizing the temporary and potentially permanent changes from the COVID-19 pandemic, we believe our portfolio, which consists of over 30 million square feet of existing buildings and 2,500 acres of land, is a unique and valuable asset, with a multitude of possibilities for end use. The breadth of our property holdings should allow us to select the best go-forward opportunities for redevelopment and engage with potential buyers for a variety of other assets as we continue our strategy to realize value and generate additional liquidity through asset monetization.  As we look ahead, our team, track record, relationships with tenants and partnerships with mixed-use developers and capital providers position us to be a leader in the transformation of real estate that will be necessary as part of the larger economic recovery in our communities.”

Operating Results

Leasing

During the quarter ended March 31, 2020, the Company signed new leases totaling 203,000 square feet (124,000 square feet at share) at an average base rent of $20.63 PSF ($21.97 PSF at share).  On a same-space basis, new rents averaged 3.6x prior rents for space formerly occupied by Sears or Kmart, increasing to $22.01 PSF for new tenants compared to $6.06 PSF paid by Sears or Kmart across 122,000 square feet.

Below is a summary of the Company’s leasing activity, including its proportional share of unconsolidated joint ventures, for the quarter ended March 31, 2020 and since the Company’s inception in July 2015:

 

(in thousands, except PSF amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Since

 

 

 

Q1 2020

 

 

Inception

 

Leases

 

 

12

 

 

 

414

 

Square feet

 

 

124,000

 

 

 

10,551,000

 

Annual base rent ($000s)

 

$

2,735

 

 

$

182,502

 

Annual base rent PSF (1)

 

$

21.97

 

 

$

18.34

 

Re-leasing multiple (1)(2)

 

 

3.6

x

 

 

4.0

x

 

 

(1)

Excludes certain self storage, medical office, auto-related and ground leases.

 

 

(2)

Excludes densification square footage (e.g. new outparcel developments) and backfill of vacant space not previously occupied by Sears or Kmart.

 

 

The table below provides a summary of all the Company’s signed leases as of March 31, 2020, including unconsolidated joint ventures presented at the Company’s proportional share:

 

(in thousands except number of leases and PSF data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

Leased

 

 

% of Total

 

 

Annual Base

 

 

% of

 

 

 

 

 

Tenant

 

Leases

 

 

GLA

 

 

Leased GLA

 

 

Rent ("ABR")

 

 

Total ABR

 

 

ABR PSF

 

In-place diversified leases

 

 

281

 

 

 

6,864

 

 

 

53.3

%

 

$

97,972

 

 

 

51.7

%

 

$

14.27

 

SNO diversified leases (1)

 

 

173

 

 

 

3,917

 

 

 

30.4

%

 

 

80,786

 

 

 

42.6

%

 

 

20.62

 

  Total diversified leases

 

 

454

 

 

 

10,781

 

 

 

83.8

%

 

$

178,758

 

 

 

94.3

%

 

$

16.58

 

Sears or Kmart (2)

 

 

19

 

 

 

2,091

 

 

 

16.2

%

 

 

10,807

 

 

 

5.7

%

 

 

5.17

 

    Total

 

 

473

 

 

 

12,872

 

 

 

100.0

%

 

$

189,565

 

 

 

100.0

%

 

$

14.73

 

 

(1)

SNO = signed but not yet opened leases.

(2)

Includes 17 properties subject to a master lease (the “Holdco Master Lease”) between the Company and affiliates of Holdco, an affiliate of ESL Investments, Inc., and two leases between the Company’s unconsolidated joint ventures and Holdco.

Development

The Company put substantially all of its construction projects on hold at the end of March and reduced capital expenditures to a select handful of projects. The Company deemed this action prudent in light of the COVID-19 pandemic, the resulting economic uncertainty and the direct impacts on its business, including reductions in rental income and the potential effects on future asset sales, which have been a meaningful source of capital for the Company’s development program.

 

2


These decisions were also influenced by tenant and construction uncertainty, including tenants’ ability to construct and open new stores and the feasibility of sustaining labor levels with safe working conditions and sourcing supplies, as well as restrictions at the state and local levels, including restrictions on construction and difficulties obtaining inspections and permits.

As of March 31, 2020, the Company had originated 91 retail redevelopment projects since the Company’s inception.  Excluding six projects that have been sold, these projects represented an estimated total investment of $1.6-1.7 billion ($1.4-1.5 billion at share), of which an estimated $570-650 million ($520-600 million at share) remained to be spent under the original development plans.  Additionally, the Company had recently announced its first three multifamily projects, each of which represented the first phase of larger, mixed-use developments and were expected to have an aggregate incremental cost of $325-350 million for the initial phases.

In this interim period, the Company is working with tenants to preserve signed leases and modify schedules for the projected completion of work and opening of the projects.  Once the Company can better assess economic conditions, including the tenant environment and state of the transaction markets, it expects to focus its capital on projects with nearer-term rent commencements and superior value creation prospects, and with tenants and uses that the Company believes can thrive in a post-COVID environment.

Transactions

During the quarter ended March 31, 2020, the Company completed the sale of four properties totaling 475,000 square feet and generated gross proceeds of $60.4 million.

Approximately $56.9 million of the Company’s asset sales were income-producing assets sold at a blended cap rate of 5.5%.  The remaining $3.5 million represented a smaller market asset sold at approximately $40 PSF.

Subsequent to March 31, 2020, the Company sold one asset for $10.0 million and entered into contracts to sell six additional assets.  As of May 6, 2020, the Company had assets under contract for sale representing anticipated gross proceeds of $135.1 million, subject to buyer diligence and closing conditions.

Since it began its capital recycling program in July 2017, the Company has raised over $770 million from the sale or joint venture of interests in 70 properties, plus outparcels at several properties, and reinvested the majority of the proceeds into its redevelopment pipeline.

Balance Sheet and Liquidity

As of March 31, 2020, the Company had cash on hand of $96.7 million and, as of May 6, 2020, the Company had closed one asset sale in Q2 2020 for $10.0 million and had additional asset sales under contract for anticipated gross proceeds of $135.1 million.  The Company expects to use these sources of liquidity, together with a combination of future sales of wholly-owned assets and joint venture interests and/or potential credit and capital markets transactions to fund its operations and, on a limited basis given the current environment, select development activity.

The availability of funding from sales of assets and credit or capital markets transactions is subject to various conditions, including the consent of the Company’s lender under its $2.0 billion term loan facility (the “Term Loan Facility”), and there can be no assurance that such transactions will be consummated.

On May 5, 2020, the Company and Berkshire Hathaway, the administrative agent and the lender under the Term Loan Facility, entered into an amendment (the “Amendment”) to the agreement governing the Term Loan Facility that permits the deferral of interest payments based on the amount of Available Cash (as defined in the Amendment) for each period. If Available Cash is less than or equal to $30 million in a period, the Company shall pay current interest to the extent such Available Cash exceeds $20 million (provided any such interest payment will not exceed the amount otherwise due under the Term Loan Facility).  Any deferred interest payments will accrue interest at 2.0% in excess of the then applicable interest rate and shall be due and payable when the Term Loan Facility matures on July 31, 2023; provided that the Company is required to pay any deferred interest from Available Cash in excess of $30 million (unless otherwise agreed to by the administrative agent under the Term Loan Facility in its sole discretion), and the repayment of any outstanding deferred interest will be a condition to any borrowings under the $400 million Incremental Funding Facility described below.  Additionally, the Amendment provides that the administrative agent and the lenders express their continued support for asset dispositions, subject to the Administrative Agent’s right to approve the terms of individual transactions due to the occurrence of a Financial Metric Trigger Event, as such term is defined under the Term Loan Facility.

Our Term Loan Facility includes a $400 million Incremental Funding Facility, access to which is subject to rental income from non-Sears Holdings tenants of at least $200 million, on an annualized basis and after giving effect to SNO leases expected to commence rent payment within 12 months, which we have not yet achieved. The timing of our ability to access the Incremental Funding Facility, if at all, will be adversely impacted by the COVID-19 pandemic.

3


Dividends

The Company’s Board of Trustees continues to support a policy of retaining capital to invest in the Company’s operations and not paying dividends on its common shares unless required to do so to maintain REIT status.  In light of the current environment, the Company’s Board of Trustees is currently evaluating the payment of dividends on the Company’s preferred shares for the quarter ending June 30, 2020 and subsequent periods.

Financial Results

Below is a summary of financial results for the quarter ended March 31, 2020 and March 31, 2019:

 

(in thousands except per share amounts)

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Net loss attributable to Seritage

   common shareholders

 

$

(21,889

)

 

$

(8,192

)

Net loss per diluted share attributable to Seritage

   common shareholders

 

 

(0.59

)

 

 

(0.23

)

 

 

 

 

 

 

 

 

 

Total NOI

 

 

15,847

 

 

 

24,278

 

 

 

 

 

 

 

 

 

 

FFO

 

 

(17,557

)

 

 

(5,178

)

FFO per diluted share

 

 

(0.31

)

 

 

(0.09

)

 

 

 

 

 

 

 

 

 

Company FFO

 

 

(18,441

)

 

 

(5,060

)

Company FFO per diluted share

 

 

(0.33

)

 

 

(0.09

)

Net Loss

The increase in net loss was driven primarily by the same factors driving the decreases in Total NOI and FFO, as described below, as well as an increase in depreciation and amortization expense related to the accelerated amortization of certain lease intangibles as a result of the termination of space by Holdco.

Total NOI

The decrease in Total NOI was driven primarily by (i) reduced rental income under the Holdco Master Lease and the Company’s original master lease (the “Original Master Lease”) with Sears Holdings Corporation (“Sears Holdings”) as a result of recapture and termination activity at the Company’s properties and the rejection of the Original Master Lease during the three months ended March 31, 2019 and (ii) the rejection of the master leases between Sears Holdings and certain of the Company’s unconsolidated joint venture properties during the three months ended June 30, 2019.

Since inception, 31.3 million square feet of leased space, representing $130.6 million of annual base rent, has been taken offline through recapture and termination activity, or as a result of the rejection of the Original Master Lease and the master leases between Sears Holdings and certain unconsolidated joint venture properties. To date, the Company has signed new leases with diversified, non-Sears tenants for aggregate annual base rent of $182.5 million across 10.6 million square feet of space, a majority of which continues to be categorized as SNO leases.

FFO and Company FFO

The decrease in FFO was driven primarily by the same factors driving the decreases in Total NOI, as well as (i) lower straight-line rent as a result of recapture and termination activity under the Holdco Master Lease and (ii) lower interest and other income, offset by (i) lower interest expense resulting from an increase in capitalized amounts and (ii) termination income received in the quarter ended March 31, 2020 under the Holdco Master Lease.

COVID-19 Pandemic

The recent COVID-19 pandemic is having a significant impact on the global economy, the U.S. economy, the local economies in which the Company’s properties are located, and the broader financial markets.  Nearly every industry has been impacted directly or indirectly, and the retail, retail real estate and real estate development industries in the United States have all come under severe pressure due to numerous factors, including preventative measures taken by local, state and federal authorities to alleviate the public health crisis such as mandatory business closures, quarantines, restrictions on travel and “shelter-in-place” or “stay-at-home” orders.

4


These containment measures and other factors have affected operations at the Company’s properties and, with the exception of "essential" businesses, substantially all of the Company’s tenants have closed their stores.  The Company also paused substantially all of its construction projects as of the end of March 2020.

As a result of the rapid development, fluidity and uncertainty surrounding this situation, the Company expects that these conditions will change, potentially significantly, in future periods, and results for the three months ended March 31, 2020 may therefore not be indicative of the impact of the COVID-19 pandemic on the Company’s business for the second quarter of 2020 or for future periods.

As of May 6, 2020, the Company had collected approximately 47% of contractual base rent and tenant reimbursements billed for the month of April (54% from tenants other than Holdco).  The Company has received a number of rent relief requests from tenants, most often in the form of rent deferral requests, which the Company is evaluating on a case-by-case basis.  Absent agreement between the Company and tenants with respect to such rent relief requests, the Company fully intends to enforce its contractual rights under its leases.  There can be no assurance that rental modifications agreements will be reached or, if agreements are reached, that tenants will meet their future obligations.

There is uncertainty as to the timing and extent to which these restrictions will be relaxed or lifted, businesses will reopen and previously underway projects will recommence.  As such, the Company cannot reasonably estimate the impact of COVID-19 on its financial condition, results of operations or cash flows over the foreseeable future.

Supplemental Report

A Supplemental Report will be available in the Investors section of the Company’s website, www.seritage.com.

Non-GAAP Financial Measures

The Company makes reference to NOI, Total NOI, FFO and Company FFO which are financial measures that include adjustments to accounting principles generally accepted in the United States (“GAAP”).

None of NOI, Total NOI, FFO or Company FFO, 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 we deem most comparable have been provided in the tables accompanying this press release.

Net Operating Income ("NOI”), Total NOI and Annualized Total NOI

NOI is defined as income from property operations less property operating expenses.  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.

Funds from Operations ("FFO") and Company FFO

FFO is calculated in accordance with NAREIT which defines FFO as net income computed in accordance with GAAP, excluding gains (or losses) from property sales, real estate related depreciation and amortization, and impairment charges on depreciable real estate assets.  The Company considers FFO a helpful supplemental measure of the operating performance for equity REITs and a complement to GAAP measures because it is a recognized measure of performance by the real estate industry.  

The Company makes certain adjustments to FFO, which it refers to as Company FFO, to account for certain non-cash and non-comparable items, such as termination fee income, unrealized loss on interest rate cap, litigation charges, acquisition-related expenses, amortization of deferred financing costs and certain up-front-hiring costs, that it does not believe are representative of ongoing operating results.

5


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,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” 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: our historical exposure to Sears Holdings and the effects of its previously announced bankruptcy filing; the litigation filed against us and other defendants in the Sears Holdings adversarial proceeding pending in bankruptcy court; Holdco’s termination and other rights under its master lease with us; competition in the real estate and retail industries; risks relating to our recapture and redevelopment activities; contingencies to the commencement of rent under leases; the terms of our indebtedness; restrictions with which we are required to comply in order to maintain REIT status and other legal requirements to which we are 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 our ability to fund operations and ongoing development; our ability to access or obtain sufficient sources of financing to fund our liquidity needs; our relatively limited history as an operating company; and the impact of the COVID-19 pandemic on the business of our tenants and our business, income, cash flow, results of operations, financial condition, liquidity, prospects, ability to service our debt obligations and our ability to pay dividends and other distributions to our shareholders.  For additional discussion of these and other applicable risks, assumptions and uncertainties, see the “Risk Factors” and forward-looking statement disclosure contained in our filings with the Securities and Exchange Commission, including the risk factors relating to Sears Holdings and Holdco.  While we believe that our forecasts and assumptions are reasonable, we caution that actual results may differ materially.  We intend 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

Seritage Growth Properties is a publicly-traded, self-administered and self-managed REIT with 180 wholly-owned properties and 28 joint venture properties totaling approximately 32.8 million square feet of space across 44 states and Puerto Rico.  The Company was formed to unlock the underlying real estate value of a high-quality retail portfolio it acquired from Sears Holdings in July 2015.  The Company’s mission is to create and own revitalized shopping, dining, entertainment and mixed-use destinations that provide enriched experiences for consumers and local communities, and create long-term value for our shareholders.

Contact

Seritage Growth Properties

646-277-1268

[email protected]

6


Seritage Growth Properties

CONDENSED Consolidated Balance SheetS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Investment in real estate

 

 

 

 

 

 

 

 

Land

 

$

654,698

 

 

$

667,004

 

Buildings and improvements

 

 

1,133,636

 

 

 

1,112,653

 

Accumulated depreciation

 

 

(156,023

)

 

 

(147,696

)

 

 

 

1,632,311

 

 

 

1,631,961

 

Construction in progress

 

 

412,222

 

 

 

338,672

 

Net investment in real estate

 

 

2,044,533

 

 

 

1,970,633

 

Real estate held for sale

 

 

3,204

 

 

 

5,275

 

Investment in unconsolidated joint ventures

 

 

459,646

 

 

 

445,077

 

Cash and cash equivalents

 

 

96,737

 

 

 

139,260

 

Tenant and other receivables, net

 

 

48,602

 

 

 

54,470

 

Lease intangible assets, net

 

 

44,121

 

 

 

68,153

 

Prepaid expenses, deferred expenses and other assets, net

 

 

67,525

 

 

 

67,744

 

Total assets

 

$

2,764,368

 

 

$

2,750,612

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Term Loan Facility, net

 

$

1,598,593

 

 

$

1,598,487

 

Accounts payable, accrued expenses and other liabilities

 

 

153,407

 

 

 

108,755

 

Total liabilities

 

 

1,752,000

 

 

 

1,707,242

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

Class A common shares $0.01 par value; 100,000,000 shares authorized;

   38,622,102 and 36,897,364 shares issued and outstanding

   as of March 31, 2020 and December 31, 2019, respectively

 

 

386

 

 

 

369

 

Class B common shares $0.01 par value; 5,000,000 shares authorized;

   0 and 1,242,536 shares issued and outstanding

   as of March 31, 2020 and December 31, 2019, respectively

 

 

 

 

 

12

 

Series A preferred shares $0.01 par value; 10,000,000 shares authorized;

   2,800,000 shares issued and outstanding as of March 31, 2020 and

   December 31, 2019; liquidation preference of $70,000

 

 

28

 

 

 

28

 

Additional paid-in capital

 

 

1,177,553

 

 

 

1,149,721

 

Accumulated deficit

 

 

(440,600

)

 

 

(418,711

)

Total shareholders' equity

 

 

737,367

 

 

 

731,419

 

Non-controlling interests

 

 

275,001

 

 

 

311,951

 

Total equity

 

 

1,012,368

 

 

 

1,043,370

 

Total liabilities and equity

 

$

2,764,368

 

 

$

2,750,612

 

 

7


Seritage Growth Properties

CONDENSED Consolidated Statements of OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

REVENUE

 

 

 

 

 

 

 

 

Rental income

 

$

33,110

 

 

$

43,578

 

Management and other fee income

 

 

207

 

 

 

282

 

Total revenue

 

 

33,317

 

 

 

43,860

 

EXPENSES

 

 

 

 

 

 

 

 

Property operating

 

 

10,301

 

 

 

10,237

 

Real estate taxes

 

 

9,225

 

 

 

10,192

 

Depreciation and amortization

 

 

34,097

 

 

 

26,216

 

General and administrative

 

 

9,420

 

 

 

9,759

 

Total expenses

 

 

63,043

 

 

 

56,404

 

Gain on sale of real estate, net

 

 

20,788

 

 

 

21,261

 

Equity in (loss) income of unconsolidated joint ventures

 

 

(894

)

 

 

1,222

 

Interest and other income

 

 

333

 

 

 

2,598

 

Interest expense

 

 

(21,513

)

 

 

(23,454

)

Loss before taxes

 

 

(31,012

)

 

 

(10,917

)

Provision for taxes

 

 

37

 

 

 

23

 

Net loss

 

 

(30,975

)

 

 

(10,894

)

Net loss attributable to non-controlling interests

 

 

10,311

 

 

 

3,927

 

Net loss attributable to Seritage

 

$

(20,664

)

 

$

(6,967

)

Preferred dividends

 

 

(1,225

)

 

 

(1,225

)

Net loss attributable to Seritage common shareholders

 

$

(21,889

)

 

$

(8,192

)

 

 

 

 

 

 

 

 

 

Net loss per share attributable to Seritage Class A

   and Class C common shareholders - Basic

 

$

(0.59

)

 

$

(0.23

)

Net loss per share attributable to Seritage Class A

   and Class C common shareholders - Diluted

 

$

(0.59

)

 

$

(0.23

)

Weighted average Class A and Class C common shares

   outstanding - Basic

 

 

37,232

 

 

 

35,671

 

Weighted average Class A and Class C common shares

   outstanding - Diluted

 

 

37,232

 

 

 

35,671

 

 

8


Reconciliation of Net Loss to NOI and Total NOI (in thousands)

 

 

Three Months Ended March 31,

 

NOI and Total NOI

 

2020

 

 

2019

 

Net loss

 

$

(30,975

)

 

$

(10,894

)

Termination fee income

 

 

(990

)

 

 

 

Management and other fee income

 

 

(207

)

 

 

(282

)

Depreciation and amortization

 

 

34,097

 

 

 

26,216

 

General and administrative expenses

 

 

9,420

 

 

 

9,759

 

Equity in loss of unconsolidated

   joint ventures

 

 

894

 

 

 

(1,222

)

Gain on sale of real estate

 

 

(20,788

)

 

 

(21,261

)

Interest and other income

 

 

(333

)

 

 

(2,598

)

Interest expense

 

 

21,513

 

 

 

23,454

 

Provision for income taxes

 

 

(37

)

 

 

(23

)

Straight-line rent adjustment

 

 

2,701

 

 

 

(3,355

)

Above/below market rental income/expense

 

 

(97

)

 

 

(104

)

NOI

 

$

15,198

 

 

$

19,690

 

NOI of unconsolidated joint ventures

 

 

1,302

 

 

 

4,310

 

Straight-line rent adjustment

   (unconsolidated joint ventures)

 

 

(171

)

 

 

375

 

Above/below market rental income/expense

   (unconsolidated joint ventures)

 

 

(482

)

 

 

(97

)

Total NOI

 

$

15,847

 

 

$

24,278

 

Reconciliation of Net Loss to FFO and Company FFO (in thousands)

 

 

 

Three Months Ended March 31,

 

FFO and Company FFO

 

2020

 

 

2019

 

Net loss

 

$

(30,975

)

 

$

(10,894

)

Real estate depreciation and amortization

   (consolidated properties)

 

 

33,587

 

 

 

25,575

 

Real estate depreciation and amortization

   (unconsolidated joint ventures)

 

 

1,844

 

 

 

2,627

 

Gain on sale of real estate

 

 

(20,788

)

 

 

(21,261

)

Dividends on preferred shares

 

 

(1,225

)

 

 

(1,225

)

FFO attributable to common shareholders

   and unitholders

 

$

(17,557

)

 

$

(5,178

)

Termination fee income

 

 

(990

)

 

 

 

Amortization of deferred financing costs

 

 

106

 

 

 

118

 

Company FFO attributable to common

   shareholders and unitholders

 

$

(18,441

)

 

$

(5,060

)

 

 

 

 

 

 

 

 

 

FFO per diluted common share and unit

 

$

(0.31

)

 

$

(0.09

)

Company FFO per diluted common share and unit

 

$

(0.33

)

 

$

(0.09

)

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares and Units Outstanding

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

37,232

 

 

 

35,671

 

Weighted average OP units outstanding

 

 

18,578

 

 

 

20,119

 

Weighted average common shares and

   units outstanding

 

 

55,810

 

 

 

55,790

 

 

 

 

 

9

(Back To Top)

Section 4: EX-99.2 (EX-99.2)

srg-ex992_6.htm

Exhibit 99.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION      ||     PERIOD ENDED MARCH 31, 2020

 

 

 

 


INTRODUCTION

 

 

 

Overview

Seritage Growth Properties (NYSE: SRG) (“Seritage” or the “Company”) is a fully-integrated, self-administered and self-managed REIT that is principally engaged in the acquisition, ownership, development, redevelopment, management, and leasing of diversified retail and mixed-use real estate throughout the United States.

As of March 31, 2020, the Company’s portfolio consisted of interests in 208 properties totaling approximately 32.8 million square feet of gross leasable area, including 180 wholly owned properties totaling approximately 28.3 million square feet of GLA across 44 states and Puerto Rico (the “Wholly Owned Properties”), and interests in 28 joint venture properties totaling approximately 4.5 million square feet of GLA across 14 states (the “JV Properties”).

The Company’s primary objective is to create value for its shareholders through the re-leasing and redevelopment of the majority of its Wholly Owned Properties and JV Properties.  In doing so, the Company expects to meaningfully grow net operating income and diversify its tenant base while transforming its portfolio from one with a single-tenant orientation to one comprised predominately of first-class, multi-tenant shopping centers and larger-scale, mixed-use properties.  In order to achieve its objective, the Company intends to execute the following strategies:

Convert single-tenant buildings into multi-tenant properties at meaningfully higher rents;

Maximize the value of vast land holdings through retail and mixed-use densification;

Leverage existing and future joint venture relationships with leading landlords and financial partners; and

Maintain a flexible capital structure to support value creation activities.

Background

On June 11, 2015, Sears Holdings Corporation (“Sears Holdings”) effected a rights offering to Sears Holdings stockholders to purchase common shares of Seritage in order to fund, in part, the $2.7 billion acquisition of (i) 234 of Sears Holdings’ owned properties and one of its ground leased properties (the “Acquired Properties”), and (ii) Sears Holdings’ 50% interests in three joint ventures that collectively owned 28 properties, ground leased one property and leased two properties (the “Acquired JV Properties”).  Concurrent with the acquisition, the Company leased back to Sears Holdings space at 224 of the Acquired Properties under a master lease agreement (the “Original Master Lease”) and space at all 31 Acquired JV Properties under multiple master lease agreements (the “Original JV Master Leases”).

The rights offering ended on July 2, 2015, and the Company’s Class A common shares were listed on the New York Stock Exchange on July 6, 2015.  On July 7, 2015, the Company completed the transactions with Sears Holdings and commenced operations.  The Company did not have any operations prior to the completion of the rights offering and the transactions with Sears Holdings.

As of March 31, 2020, the Company leased space at 17 Wholly Owned Properties to Transform Holdco LLC (“Holdco”), an affiliate of ESL Investments, Inc. (“ESL”) and the successor to Sears Holdings, under a master lease (the “Holdco Master Lease”).  The Company also leased space to Holdco at two JV Properties (the “Holdco JV Leases”).

General Information

Unless the context indicates otherwise, references in this supplemental information package (the "Supplemental") to "Seritage Growth,” “Seritage,” the “Company,” or “SRG” refer to Seritage Growth Properties and its subsidiaries.  Additionally, where reference is made to "GAAP", this refers to accounting principles generally accepted in the United States.


i


COVID-19 Pandemic

The recent COVID-19 pandemic is having a significant impact on the global economy, the U.S. economy, the local economies in which the Company’s properties are located, and the broader financial markets.  Nearly every industry has been impacted directly or indirectly, and the retail, retail real estate and real estate development industries in the United States have all come under severe pressure due to numerous factors, including preventative measures taken by local, state and federal authorities to alleviate the public health crisis such as mandatory business closures, quarantines, restrictions on travel and “shelter-in-place” or “stay-at-home” orders.

These containment measures and other factors have affected operations at the Company’s properties and, with the exception of "essential" businesses, substantially all of the Company’s tenants have closed their stores.  The Company also paused substantially all of its construction projects as of the end of March 2020.

As a result of the rapid development, fluidity and uncertainty surrounding this situation, the Company expects that these conditions will change, potentially significantly, in future periods, and results for the three months ended March 31, 2020 may therefore not be indicative of the impact of the COVID-19 pandemic on the Company’s business for the second quarter of 2020 or for future periods.

 

ii


TABLE OF CONTENTS

 

 

 

SERITAGE GROWTH PROPERTIES

SUPPLEMENTAL INFORMATION

PERIOD ENDED MARCH 31, 2020

 

 

 

Page

COMPANY INFORMATION

 

1

 

 

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Condensed Consolidated Balance Sheets

 

2

Condensed Consolidated Statements of Operations

 

3

 

 

 

SUPPLEMENTAL FINANCIAL INFORMATION

 

 

Market Capitalization and Financial Ratios

 

4

Total Net Operating Income

 

5

EBITDAre and Company EBITDA

 

6

Funds from Operations and Company FFO

 

7

Additional Information

 

8

 

 

 

PROPERTY INFORMATION

 

 

Portfolio Overview

 

10

Leasing Activity

 

13

Redevelopment Program

 

14

Recapture and Termination Properties

 

15

Joint Venture Properties

 

16

Wholly Owned Properties

 

18

 

 

 

DISCLOSURES

 

 

Non-GAAP Measures

 

24

Forward-Looking Statements

 

25

 

 

 

iii


COMPANY INFORMATION

 

 

 

Company Contacts

 

 

 

 

 

 

Benjamin Schall

 

President and Chief Executive Officer

 

Kenneth Lombard

 

EVP and Chief Operating Officer

Brian Dickman

 

EVP and Chief Financial Officer

 

Mary Rottler

 

EVP, Leasing and Operations

Matthew Fernand

 

EVP and General Counsel

 

James Bry

 

EVP, Development and Construction

[email protected]

 

Investor Relations and Communications

 

Andrew Galvin

 

EVP, Investments

 

 

646.277.1268

 

 

 

 

Summary Information

March 31, 2020

(in thousands, except per share and PSF amounts)

 

 

 

 

 

 

Three Months Ended March 31,

 

Financial Results

 

 

 

 

 

2020

 

 

2019

 

Net loss attributable to Seritage common shareholders (page 3)

 

 

 

 

 

$

(21,889

)

 

$

(8,192

)

Total NOI (page 5)

 

 

 

 

 

 

15,847

 

 

 

24,278

 

FFO (page 7)

 

 

 

 

 

 

(17,557

)

 

 

(5,178

)

Company FFO (page 7)

 

 

 

 

 

 

(18,441

)

 

 

(5,060

)

Net loss per diluted share attributable to Seritage common shareholders (page 3)

 

 

 

 

 

$

(0.59

)

 

$

(0.23

)

FFO per diluted share (page 7)

 

 

 

 

 

 

(0.31

)

 

 

(0.09

)

Company FFO per diluted share (page 7)

 

 

 

 

 

 

(0.33

)

 

 

(0.09

)

Wtd. avg. diluted shares - EPS

 

 

 

 

 

 

37,232

 

 

 

35,671

 

Wtd. avg diluted shares - FFO/share

 

 

 

 

 

 

55,810

 

 

 

55,790

 

Stock trading price range

 

 

 

 

 

$9.11 to $39.21

 

 

$32.98 to $46.48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

As of

 

Financial Ratios (page 4)

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Total debt to total market capitalization

 

 

 

 

 

 

73.4

%

 

 

41.0

%

Net debt to total real estate investments

 

 

 

 

 

 

52.6

%

 

 

52.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

As of

 

Property Data (page 10)

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Number of properties

 

 

 

 

 

 

208

 

 

 

212

 

Gross leasable area (total / at share)

 

 

 

 

 

32,804 / 30,541

 

 

33,371 / 31,046

 

Percentage leased (total / at share)

 

 

 

 

 

42.1% / 42.1%

 

 

42.6% / 42.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2020

 

 

 

 

 

 

 

% of Total

 

 

 

 

 

Tenant

 

Annual Rent

 

 

Annual Rent

 

 

Annual Rent PSF

 

In-place diversified, non-Sears leases

 

$

97,972

 

 

 

51.7

%

 

$

14.27

 

Signed not yet opened ("SNO") in-place diversified, non-Sears leases

 

 

80,786

 

 

 

42.6

%

 

 

20.62

 

Sears/Kmart

 

 

10,807

 

 

 

5.7

%

 

 

5.17

 

Total

 

$

189,565

 

 

 

100.0

%

 

$

14.73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2019

 

 

 

 

 

 

 

% of Total

 

 

 

 

 

Tenant

 

Annual Rent

 

 

Annual Rent

 

 

Annual Rent PSF

 

In-place diversified, non-Sears leases

 

$

74,692

 

 

 

39.2

%

 

$

13.58

 

SNO in-place diversified, non-Sears leases

 

 

84,032

 

 

 

44.1

%

 

 

18.18

 

Sears/Kmart

 

 

31,746

 

 

 

16.7

%

 

 

3.89

 

Total

 

$

190,470

 

 

 

100.0

%

 

$

8.00

 

 

 

- 1 -


CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

Condensed Consolidated Balance Sheets (unaudited)

March 31, 2020

(in thousands, except share and per share amounts)

 

 

 

March 31, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Investment in real estate

 

 

 

 

 

 

 

 

Land

 

$

654,698

 

 

$

667,004

 

Buildings and improvements

 

 

1,133,636

 

 

 

1,112,653

 

Accumulated depreciation

 

 

(156,023

)

 

 

(147,696

)

 

 

 

1,632,311

 

 

 

1,631,961

 

Construction in progress

 

 

412,222

 

 

 

338,672

 

Net investment in real estate

 

 

2,044,533

 

 

 

1,970,633

 

Real estate held for sale

 

 

3,204

 

 

 

5,275

 

Investment in unconsolidated joint ventures

 

 

459,646

 

 

 

445,077

 

Cash and cash equivalents

 

 

96,737

 

 

 

139,260

 

Tenant and other receivables, net

 

 

48,602

 

 

 

54,470

 

Lease intangible assets, net

 

 

44,121

 

 

 

68,153

 

Prepaid expenses, deferred expenses and other assets, net

 

 

67,525

 

 

 

67,744

 

Total assets

 

$

2,764,368

 

 

$

2,750,612

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Term Loan Facility, net

 

$

1,598,593

 

 

$

1,598,487

 

Accounts payable, accrued expenses and other liabilities

 

 

153,407

 

 

 

108,755

 

Total liabilities

 

 

1,752,000

 

 

 

1,707,242

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

Class A common shares $0.01 par value; 100,000,000 shares authorized;

   38,622,102 and 36,897,364 shares issued and outstanding

   as of March 31, 2020 and December 31, 2019, respectively

 

 

386

 

 

 

369

 

Class B common shares $0.01 par value; 5,000,000 shares authorized;

   0 and 1,242,536 shares issued and outstanding

   as of March 31, 2020 and December 31, 2019, respectively

 

 

 

 

 

12

 

Series A preferred shares $0.01 par value; 10,000,000 shares authorized;

   2,800,000 shares issued and outstanding as of March 31, 2020 and

   December 31, 2019; liquidation preference of $70,000

 

 

28

 

 

 

28

 

Additional paid-in capital

 

 

1,177,553

 

 

 

1,149,721

 

Accumulated deficit

 

 

(440,600

)

 

 

(418,711

)

Total shareholders' equity

 

 

737,367

 

 

 

731,419

 

Non-controlling interests

 

 

275,001