NEW YORK–(BUSINESS WIRE)–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 and six months ended June 30, 2023.
“We continue to make to progress on our strategy to maximize value for our shareholders. Since initiating our plan of sale in March of 2022, we have sold 127 properties for approximately $1.4 billion in gross proceeds and paid down $960 million on our term loan. Our rapid deleveraging has eliminated $67.2 million in debt service, $21.9 million in negative carry on wholly owned vacant or non-income producing properties and significant annual carry and development costs on disposed Joint Venture assets. Year to date we have sold 54 wholly owned, consolidated or joint venture properties for total gross proceeds of $654.6 million. Additionally, we have over $200 million of assets either under contract or with accepted offers. We plan to continue to use excess sales proceeds to reduce the Company’s term loan balance. In conjunction with our sales activity, we continue to build asset value through leasing, development and entitlement activity for the properties slated for sale later in our process,” said Andrea L. Olshan, Chief Executive Officer and President.
Sale Highlights:
- Generated $295.4 million of gross proceeds during the quarter ended June 30, 2023 from the sale of 19 wholly owned or consolidated assets and five joint venture assets.
- Subsequent to quarter end, generated $68.4 million of gross proceeds from the sale of one outparcel and two joint venture assets.
- The Company has nine assets under contract for sale with no due diligence contingencies or with an exercised put option for total anticipated proceeds of $133.3 million and four assets under contract for sale subject to customary due diligence for total anticipated proceeds of $26.9 million. All assets for sale are subject to customary closing conditions.
- The Company has accepted offers on and is currently negotiating definitive purchase and sale agreements on six wholly owned assets and one joint venture asset for total gross proceeds of approximately $62.2 million.
Financial Highlights:
For the three months ended June 30, 2023:
- As of June 30, 2023, the Company had cash on hand of $137.8 million, including $12.9 million of restricted cash. As of August 11, 2023, the Company had cash on hand of $190.9 million, including $12.9 million of restricted cash, prior to making an additional principal prepayment of $70 million on August 14, 2023.
- Net loss attributable to common shareholders of ($96.9) million, or ($1.73) per share.
- Total Net Operating Income (“Total NOI”) of $3.0 million.
- During the quarter, the Company made $250 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 $550 million. Subsequent to quarter end, the Company made an additional $70 million in principal repayments reducing the balance of our Term Loan Facility to $480 million.
- During the quarter, the Company recorded a total of $104.5 million of impairment on four assets.
Other Highlights
-
Signed one lease and one lease expansion covering 11 thousand square feet in the second quarter at an average projected annual net rent of $30.91 PSF.
- One ground lease covering approximately 5 thousand square feet at a Multi-Tenant Retail asset at a projected annual net rent of $38.50 PSF; and
- One ground floor lease expansion covering approximately 6 thousand square feet at a Multi-Tenant Retail asset at a projected annual net rent of $24.30 PSF.
- Opened seven tenants in the second quarter totaling approximately 26 thousand square feet (18 thousand square feet at share) at an average net rent of $57.90 PSF.
Sales Activity
The two tables below provide additional information regarding the Company’s disposition activity. The first table provides disposition information as of August 11, 2023. The second table provides updated information, as of August 11, 2023, on portfolio status by market, property type and transaction size consistent.
|
Sales Progress as of August 11, 2023 (1) (2) |
|
||||||||
|
|
|
|
|
|
|
|
|
||
|
Stabilized |
Number |
Cap |
|
2023 Sales |
2024 & Beyond Sales |
Gross Proceeds |
|
||
|
Closed since March 31, 2023 |
2 |
7.2% |
|
2 |
– |
$ |
36,650 |
|
|
|
Under Contract – No DD |
2 |
7.5% |
|
2 |
– |
$ |
48,200 |
|
|
|
Under Contract – In DD |
1 |
6.6% |
|
1 |
– |
$ |
5,200 |
|
|
|
PSA Neg. / Accepted Offer |
1 |
7.4% |
|
1 |
– |
$ |
34,000 |
|
|
|
Total |
6 |
7.3% |
|
6 |
– |
$ |
124,050 |
|
|
|
Remaining Stabilized Sales Parcels |
3 |
|
|
– |
3 |
|
|
||
|
|
|
|
|
|
|
|
|
||
|
Partially Stabilized |
Number |
Cap |
|
2023 Sales |
2024 & Beyond Sales |
Gross Proceeds |
|
||
|
Closed since March 31, 2023 |
5 |
7.3% |
|
5 |
– |
$ |
102,450 |
|
|
|
Under Contract – No DD |
2 |
5.8% |
|
1 |
1 |
$ |
43,500 |
|
|
|
Under Contract – In DD |
– |
N/A |
|
– |
– |
$ |
– |
|
|
|
PSA Neg. / Accepted Offer |
– |
N/A |
|
– |
– |
$ |
– |
|
|
|
Total |
7 |
6.8% |
|
6 |
1 |
$ |
145,950 |
|
|
|
Remaining Partially Stabilized Sales Parcels |
5 |
|
|
2 |
3 |
|
|
||
|
|
|
|
|
|
|
|
|
||
|
Pads |
Number |
Cap |
|
2023 Sales |
2024 & Beyond Sales |
Gross Proceeds |
|
||
|
Closed since March 31, 2023 |
2 |
5.7% |
|
2 |
– |
$ |
7,015 |
|
|
|
Under Contract – No DD |
1 |
9.8% |
|
1 |
– |
$ |
2,450 |
|
|
|
Under Contract – In DD |
1 |
5.5% |
|
1 |
– |
$ |
2,727 |
|
|
|
PSA Neg. / Accepted Offer |
1 |
6.1% |
|
1 |
– |
$ |
4,000 |
|
|
|
Total |
5 |
6.4% |
|
5 |
– |
$ |
16,192 |
|
|
|
Remaining Pad Sales Parcels |
– |
|
|
– |
– |
|
|
||
|
|
|
|
|
|
|
|
|
||
|
Joint Ventures |
Number |
PSF |
|
2023 Sales |
2024 & Beyond Sales |
Gross Proceeds |
|
||
|
Closed since March 31, 2023 |
7 |
$ |
101.47 |
|
7 |
– |
$ |
114,675 |
|
|
Under Contract – No DD |
1 |
$ |
97.82 |
|
1 |
– |
$ |
25,964 |
|
|
Under Contract – In DD |
– |
N/A |
|
– |
– |
$ |
– |
|
|
|
PSA Neg. / Accepted Offer |
1 |
$ |
43.53 |
|
1 |
– |
$ |
8,139 |
|
|
Total |
9 |
$ |
94.01 |
|
9 |
– |
$ |
148,778 |
|
|
Remaining Joint Venture Sales Parcels |
7 |
|
|
1 |
6 |
|
|
||
|
Non-Income Producing |
Number |
PSF |
|
Per Acre |
|
Carry Cost |
|
2023 Sales |
2024 & Beyond Sales |
Gross Proceeds |
|
||||
|
Closed since March 31, 2023 |
11 |
$ |
76.19 |
|
$ |
754 |
|
$ |
(5,809 |
) |
11 |
– |
$ |
102,997 |
|
|
Under Contract – No DD (3) |
3 |
$ |
19.60 |
|
$ |
417 |
|
$ |
(822 |
) |
3 |
– |
$ |
13,137 |
|
|
Under Contract – In DD |
2 |
$ |
69.73 |
|
$ |
890 |
|
$ |
(602 |
) |
2 |
– |
$ |
18,952 |
|
|
PSA Neg. / Accepted Offer |
4 |
$ |
24.28 |
|
$ |
259 |
|
$ |
(1,241 |
) |
3 |
1 |
$ |
16,100 |
|
|
Total |
20 |
$ |
51.13 |
|
$ |
601 |
|
$ |
(8,474 |
) |
19 |
1 |
$ |
151,186 |
|
|
Remaining Non-Income Producing Sales Parcels |
18 |
|
|
|
|
|
|
5 |
13 |
|
|
||||
|
|
As of |
2023 Sales Projections as of August 11, 2023 |
2024 & Beyond Sales Projections as of August 11, 2023 |
||||||
|
Category |
Sales Portfolio |
Sold |
Under Contract – No DD |
Under Contract – in DD |
PSA Neg. / Accepted Offer |
Pipeline |
Under Contract – No DD |
PSA Neg. / Accepted Offer |
Pipeline |
|
Gateway markets |
11 |
1 |
– |
– |
– |
– |
– |
– |
10 |
|
Primary markets |
44 |
20 |
5 |
2 |
1 |
4 |
1 |
– |
11 |
|
Secondary markets |
35 |
24 |
1 |
2 |
2 |
2 |
– |
1 |
3 |
|
Tertiary markets |
17 |
9 |
2 |
– |
3 |
2 |
– |
– |
1 |
|
Market Composition Total |
107 |
54 |
8 |
4 |
6 |
8 |
1 |
1 |
25 |
|
|
|
|
|
|
|
|
|
|
|
|
Multi-Tenant Retail |
32 |
23 |
2 |
– |
1 |
1 |
1 |
– |
4 |
|
Premier |
10 |
1 |
– |
– |
– |
– |
– |
– |
9 |
|
Residential |
5 |
3 |
– |
– |
– |
– |
– |
– |
2 |
|
Other Unconsolidated Entities |
13 |
6 |
1 |
– |
1 |
1 |
– |
– |
4 |
|
Non-Core Properties |
47 |
21 |
5 |
4 |
4 |
6 |
– |
1 |
6 |
|
Property Type Total |
107 |
54 |
8 |
4 |
6 |
8 |
1 |
1 |
25 |
|
|
|
|
|
|
|
|
|
|
|
|
Under $10M |
60 |
31 |
5 |
3 |
5 |
7 |
– |
1 |
8 |
|
$10M – $30M |
28 |
19 |
2 |
1 |
– |
1 |
– |
– |
5 |
|
$30M – $50M |
11 |
2 |
1 |
– |
1 |
– |
1 |
– |
6 |
|
Over $50M |
8 |
2 |
– |
– |
– |
– |
– |
– |
6 |
|
Transaction Size Total |
107 |
54 |
8 |
4 |
6 |
8 |
1 |
1 |
25 |
(1) 2023 and 2024 sales projections are based on the Company’s latest forecasts and assumptions, but the Company cautions that actual results may differ materially.
(2) Includes both partial and full asset transactions currently being forecasted by Seritage. At January 1, 2023, the Company had an interest in 97 properties. It is currently projected that nine of these properties will be parceled and sold in two or more separate transactions each, which is subject to change, resulting in a total portfolio count of 107 transactions at this time.
Portfolio
The table below represents a summary of the Company’s properties by planned usage as of June 30, 2023:
(in thousands except number of leases and acreage data)
|
Planned Usage |
|
Total |
|
Built SF / Acreage (1) |
|
Leased SF (1)(2) |
|
|
Avg. Acreage / Site |
|
||
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
||
|
Multi-Tenant Retail |
|
8 |
|
1,299 sf / 130 acres |
|
|
948 |
|
|
|
16.3 |
|
|
Residential (3) |
|
2 |
|
33 sf / 19 acres |
|
|
33 |
|
|
|
9.5 |
|
|
Premier |
|
4 |
|
228 sf / 69 acres |
|
|
156 |
|
|
|
17.2 |
|
|
Non-Core (4) |
|
24 |
|
3,624 sf / 303 acres |
|
|
182 |
|
|
|
12.6 |
|
|
Unconsolidated |
|
|
|
|
|
|
|
|
|
|
||
|
Other Entities |
|
8 |
|
626 sf / 130 acres |
|
|
152 |
|
|
|
16.2 |
|
|
Residential (3) |
|
1 |
|
49 sf / 12 acres |
|
|
32 |
|
|
|
11.7 |
|
|
Premier |
|
3 |
|
158 sf / 57 acres |
|
|
106 |
|
|
|
19.0 |
|
(1) Square footage is presented at the Company’s proportional share.
(2) Based on signed leases at June 30, 2023.
(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 June 30, 2023, the Company invested $1.2 million in its multi-tenant retail properties. The remaining 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 leases as of June 30, 2023, including unconsolidated entities at the Company’s proportional share:
|
(in thousands except 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 |
|
||||||
|
In-place retail leases |
|
|
38 |
|
|
|
784 |
|
|
|
60.3 |
% |
|
$ |
19,126 |
|
|
|
85.9 |
% |
|
$ |
24.40 |
|
|
SNO retail leases (1)(2) |
|
|
8 |
|
|
|
164 |
|
|
|
12.7 |
% |
|
|
3,146 |
|
|
|
14.1 |
% |
|
|
19.18 |
|
|
Total retail leases |
|
|
46 |
|
|
|
948 |
|
|
|
73.0 |
% |
|
$ |
22,272 |
|
|
|
100.0 |
% |
|
$ |
23.49 |
|
|
(1) SNO = signed not yet opened leases. |
|
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|
(2) SNO GLA and rent include one tenant expansion signed in Q2 2023 not counted as a lease. |
|
|||||||||||||||||||||||
During the three months ended June 30, 2023, the Company signed one new lease and one lease expansion at its retail properties totaling approximately 11 thousand square feet at an average base rent of $30.91 PSF stabilized net. Additionally, the Company generated a leasing pipeline of over 100 thousand square feet. The Company has 784 thousand leased square feet and approximately 164 thousand square feet signed but not opened. Seritage has total occupancy of 73.0% for its multi-tenant retail properties. As of June 30, 2023, there is an additional approximately 351 thousand square feet available for lease.
|
(in thousands except number of leases and PSF data) |
|
Number of |
|
|
|
|
|
|
|
|
Annual |
|
|
||||
|
|
|
SNO Leases |
|
|
GLA |
|
|
ABR |
|
|
Rent PSF |
|
|
||||
|
As of March 31, 2023 |
|
|
9 |
|
|
|
159 |
|
|
$ |
3,085 |
|
|
$ |
19.40 |
|
|
|
Opened |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(129 |
) |
|
|
32.25 |
|
|
|
Sold / terminated |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(150 |
) |
|
|
75.00 |
|
|
|
Signed |
|
|
1 |
|
|
|
11 |
|
|
|
340 |
|
|
|
30.91 |
|
|
|
As of June 30, 2023 |
|
|
8 |
|
|
|
164 |
|
|
$ |
3,146 |
|
|
$ |
19.18 |
|
|
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 June 30, 2023, the Company has 205 thousand in-place leased square feet (109 thousand square feet at share), 163 thousand square feet signed but not opened (153 thousand square feet at share), and 175 thousand square feet available for lease (124 thousand square feet at share).
The table below provides a summary of all signed leases at Premier assets as of June 30, 2023, including unconsolidated entities at the Company’s proportional share:
|
|
Number of |
|
|
Leased |
|
|
% of Total |
|
|
Net Annual |
|
|
% of Total |
|
|
Net Annual |
|
||||||
|
Tenant |
Leases |
|
|
GLA |
|
|
Leasable GLA |
|
|
Base Rent |
|
|
Annual Rent |
|
|
Rent PSF |
|
||||||
|
In-place retail leases |
|
24 |
|
|
|
47 |
|
|
|
12.1 |
% |
|
$ |
3,070 |
|
|
|
17.3 |
% |
|
$ |
65.32 |
|
|
In-place office leases |
|
1 |
|
|
|
62 |
|
|
|
16.0 |
% |
|
|
4,220 |
|
|
|
23.8 |
% |
|
|
68.06 |
|
|
SNO retail leases as of March 31, 2022(1) |
|
22 |
|
|
|
111 |
|
|
|
|
|
|
8,679 |
|
|
|
|
|
|
78.19 |
|
||
|
Opened |
|
(4 |
) |
|
|
(4 |
) |
|
|
|
|
|
(381 |
) |
|
|
|
|
|
95.25 |
|
||
|
SNO retail leases as of June 30, 2023(1) |
|
18 |
|
|
|
107 |
|
|
|
27.8 |
% |
|
|
8,298 |
|
|
|
46.9 |
% |
|
|
77.55 |
|
|
SNO office leases as of March 31, 2022(1) |
|
3 |
|
|
|
46 |
|
|
|
|
|
|
2,109 |
|
|
|
|
|
|
45.85 |
|
||
|
Opened |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
SNO retail leases as of June 30, 2023(1) |
|
3 |
|
|
|
46 |
|
|
|
11.9 |
% |
|
|
2,109 |
|
|
|
11.9 |
% |
|
|
45.85 |
|
|
Total diversified leases as of June 30, 2023 |
|
46 |
|
|
|
262 |
|
|
|
67.8 |
% |
|
$ |
17,697 |
|
|
|
100.0 |
% |
|
$ |
67.55 |
|
|
(1) SNO = Signed not yet opened leases |
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
(2) In thousands except number of leases and PSF data |
|
|
|
|
|
|
|
|
|
|
|||||||||||||
During the three months ended June 30, 2023, the Company invested $15.4 million in its consolidated premier development and operating properties and an additional $3.0 million into its unconsolidated premier entities.
Aventura
During the second quarter of 2023, 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 and opened its first tenants to the public in July and August 2023 representing approximately 26 thousand square feet and will continue with rolling openings going forward.
With occupancy at 66.6%, the Company has 72 thousand square feet available for lease, of which 32 thousand square feet is in lease negotiation and has leasing activity on over an additional 31 thousand square feet. See the “Impairment” section below for a discussion of the impairment the Company recognized for the three months ended June 30, 2023 on its development property in Aventura, FL.
Financial Summary
The table below provides a summary of the Company’s financial results for the three and six months ended June 30, 2023:
|
(in thousands except per share amounts) |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||||
|
Net loss attributable to Seritage |
|
$ |
(96,932 |
) |
|
$ |
(111,980 |
) |
|
$ |
(160,143 |
) |
|
$ |
(165,410 |
) |
|
Net loss per share attributable to Seritage |
|
|
(1.73 |
) |
|
|
(2.56 |
) |
|
|
(2.85 |
) |
|
|
(3.79 |
) |
|
Total NOI |
|
|
2,996 |
|
|
|
10,602 |
|
|
|
6,099 |
|
|
|
21,095 |
|
For the quarter ended June 30, 2023:
- Total NOI for the second quarter of 2023 reflects the impact of $(0.1) million Total NOI relating to sold properties.
Total NOI is comprised of:
|
(in thousands) |
|
Three Months Ended June 30, |
|
|||||
|
Consolidated Properties |
|
2023 |
|
|
2022 |
|
||
|
Multi-tenant retail |
|
$ |
3,920 |
|
|
$ |
3,936 |
|
|
Premier |
|
|
(402 |
) |
|
|
(163 |
) |
|
Residential |
|
|
(57 |
) |
|
|
— |
|
|
Non-Core |
|
|
(1,331 |
) |
|
|
(1,044 |
) |
|
Sold |
|
|
(138 |
) |
|
|
5,828 |
|
|
Total |
|
|
1,992 |
|
|
|
8,557 |
|
|
Unconsolidated Properties |
|
|
|
|
||||
|
Residential |
|
|
194 |
|
|
|
84 |
|
|
Premier |
|
|
306 |
|
|
|
(96 |
) |
|
Other joint ventures |
|
|
504 |
|
|
|
2,057 |
|
|
Total |
|
|
1,004 |
|
|
|
2,045 |
|
|
Total NOI |
|
$ |
2,996 |
|
|
$ |
10,602 |
|
As of June 30, 2023, the Company had cash on hand of $137.8 million, including $12.9 million of restricted cash. The Company expects to use these sources of liquidity, together with a combination of future sales and/or potential debt and capital markets transactions, to pay its financing obligations and fund its operations and development activity. The availability of funding from sales of assets, partnerships and credit or capital markets transactions 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.
Impairment
During the quarter ended June 30, 2023, due to increasing development and construction costs and deteriorating market conditions, the Company recognized a $101.5 million impairment on its development property in Aventura, FL. In accordance with GAAP, the impairment was recognized as a result of the carrying value of the asset exceeding the undiscounted cash flows over the estimated holding period. The amount of the impairment is determined by applying a discount to the projected cash flows and writing down the carrying value to the discounted current fair value.
The Company will continue to evaluate its portfolio, including its development plans and holding periods, which may result in additional impairments in future periods.
Dividends
On February 15, 2023, 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 17, 2023 to holders of record on March 31, 2023.
On April 27, 2023, 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 July 14, 2023 to holders of record on June 30, 2023.
On July 23, 2023, 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 October 13, 2023 to holders of record on September 30, 2023.
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 progressively more 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.
D&O Insurance Litigation
On March 2, 2021, the Company brought a lawsuit in Delaware state court against QBE Insurance Corporation, Endurance American Insurance Company, Allianz Global Risks US Insurance Company and Continental Casualty Company, each of which are D&O insurance providers of the Company (the “D&O Insurers”). The Company’s lawsuit sought, among other things, declaratory relief and money damages as a result of certain of the D&O Insurers refusal to pay certain costs and expenses related to the defense of the Sears Bankruptcy Litigation. During the fourth quarter of 2022, the Company reached settlement agreements with two of the D&O Insurers and received gross proceeds of $12.7 million. During the three months ended March 31, 2023, the Company reached settlement agreements with the other two D&O Insurers for gross proceeds of $11.6 million. The Company received $3.8 million during the three months ended March 31, 2023 and received $7.8 million during the three months ended June 30, 2023, which is recorded in interest and other income in the consolidated statements of operations.
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 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,” 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: declines in retail, real estate and general economic conditions; the impact of the COVID-19 pandemic on the business of the Company’s tenants and business, income, cash flow, results of operations, financial condition, liquidity, prospects, ability to service the Company’s debt obligations and ability to pay dividends and other distributions to shareholders; 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; the Company’s relatively limited history as an operating company; and environmental, health, safety and land use laws and regulations. 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, 2022 and any subsequent Form 10-Qs.
Contacts
Seritage Growth Properties
(212) 355-7800
[email protected]
