Market Overview

Seritage Growth Properties Reports Third Quarter 2019 Operating Results

Share:

– Signed new leases totaling $13.2 million of base rent at an average of $20 PSF for retail leases –

– Increased diversified, non-Sears base rent to 90% of total base rent, including signed leases –

– Ended the quarter with over $680 million of liquidity, including cash on hand and committed capital –

Seritage Growth Properties (NYSE:SRG) (the "Company"), a national owner of 217 retail and mixed-use properties totaling approximately 34.4 million square feet of gross leasable area ("GLA"), today reported financial and operating results for the three and nine months ended September 30, 2019.

Summary Financial Results

For the three months ended September 30, 2019:

  • Net loss attributable to common shareholders of $12.1 million, or $0.33 per share
  • Total Net Operating Income ("Total NOI") of $14.7 million
  • Funds from Operations ("FFO") of ($2.4) million, or ($0.04) per share
  • Company FFO of ($7.8) million, or ($0.14) per share

For the nine months ended September 30, 2019:

  • Net loss attributable to common shareholders of $38.4 million, or $1.06 per share
  • Total NOI of $53.5 million
  • FFO of ($13.7) million, or ($0.25) per share
  • Company FFO of ($18.9) million, or ($0.34) per share

"We are pleased with our strong third quarter of leasing, development and transaction activity and our consistent execution as we unlock value for shareholders. We signed new leases totaling 878,000 square feet at a 3.8x re-leasing multiple, in line with the 4.1x multiple that we have achieved while leasing almost 10 million square feet since our formation. This robust leasing activity has generated a diverse tenant roster of leading retailers and associated uses that derives 90% of its income, on a signed lease basis, from non-Sears tenants. Our retail development program continues to target low double digit incremental yields on an unlevered basis and now totals 104 completed or commenced projects and approximately $1.7 billion of total investment," said Benjamin Schall, President and Chief Executive Officer. "We have also demonstrated our ability to harvest value from our portfolio through asset sales and joint ventures. Over the last two years, we have executed transactions with an aggregate value of over $825 million, which have raised over $640 million of gross cash proceeds that we are reinvesting into our growing development pipeline. Finally, we are pleased with the progress we have made on our portfolio of roughly three dozen premier and larger-scale development opportunities. To date, we have selected multifamily development partners for over 3,000 apartment units – out of our prioritized opportunity set of 6,000-8,000 apartments – that we will integrate with retail and other uses to create vibrant, mixed-use environments."

Operating Highlights

During the quarter ended September 30, 2019:

  • Signed new leases totaling 878,000 square feet (760,000 square feet at share) at an average base rent of $17.23 PSF ($17.43 PSF at share). Since the Company's inception in July 2015, the Company's share of new leasing activity has totaled over 9.6 million square feet at an average rent of $17.41 PSF, including new retail leases totaling 8.7 million square feet at an average rent of $18.46 PSF.
  • Achieved an average re-leasing multiple of 3.8x for space currently or formerly occupied by Sears or Kmart, with new retail rents averaging $19.71 PSF compared to $5.12 PSF paid by Sears or Kmart. Since inception, releasing multiples have averaged 4.1x, with new retail rents at $18.65 PSF compared to $4.60 PSF paid by Sears or Kmart.
  • Increased the Company's share of annual base rent from diversified, non-Sears tenants to 89.8% of total annual base rent from 60.1% in the prior year period, including all signed leases and net of rent attributable to associated space to be recaptured. Since inception, diversified, non-Sears rental income has increased by nearly 300% to $174.9 million, including all signed leases and net of dispositions.
  • Announced new redevelopment activity totaling approximately $35.1 million, including two new projects and the expansion of one previously announced project. Total redevelopment activity year to date includes six new projects and three expansions totaling an aggregate of approximately $126 million, and the redevelopment program since inception totals 104 completed or commenced projects representing approximately $1.7 billion of estimated capital investment.
  • Sold five properties totaling 550,000 square feet for gross cash proceeds of $36.1 million. Since inception, the Company has sold 37 properties totaling 3.8 million square feet for gross cash proceeds of $197.7 million. Substantially all of these properties were located in smaller markets and a majority were vacant at the time of sale.
  • Signed contracts to sell an additional six assets for gross proceeds for $29.1 million. As of September 30, 2019, the Company had 10 assets under contract to sell for gross proceeds of $51.0 million.

Additionally, subsequent to the quarter end, the Company signed an agreement with Four Corners Property Trust for the disposition of 23 outparcel properties, totaling 155,000 square feet, for gross proceeds of $67.9 million. The transaction is expected to close in multiple tranches in 2019 and 2020 and is subject to customary closing conditions, due diligence provisions and regulatory approvals.

Financial Results

Below is a summary of financial results for the three and nine months ended September 30, 2019 and September 30, 2018:

(in thousands except per share amounts)

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net (loss) income attributable to Seritage

common shareholders

 

$

(12,103

)

 

$

(23,441

)

 

$

(38,423

)

 

$

(22,337

)

Net (loss) income per diluted share attributable to Seritage

common shareholders

 

 

(0.33

)

 

 

(0.66

)

 

 

(1.06

)

 

 

(0.63

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total NOI

 

 

14,661

 

 

 

35,713

 

 

 

53,584

 

 

 

109,052

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO

 

 

(2,389

)

 

 

(433

)

 

 

(13,734

)

 

 

17,102

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com