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    Seritage Growth Properties
    500 Fifth Avenue
    Suite 1530
    New York, NY 10110
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    Computershare Trust Company, N.A
    (201) 324-0014

    News Details

    Seritage Growth Properties Reports First Quarter 2023 Operating Results

    Company Release - 5/10/2023 07:00 AM ET

    Seritage Growth Properties (NYSE: SRG) (the “Company”), a national owner and developer of retail, residential and mixed-use properties today reported financial and operating results for the three months ended March 31, 2023.

    “We continue to make steady progress on our plan of sale since initiating the process in March of 2022. Year to date we have sold 31 wholly owned properties for total gross proceeds of $311.9 million. In addition to the sales closed year to date, we have over $500 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. Despite the ongoing challenging market conditions, we are prudently progressing our plan of sale to maximize value for our shareholders,” said Andrea L. Olshan, Chief Executive Officer and President.

    Sale Highlights:

    • Generated $290.8 million of gross proceeds during the quarter ended March 31, 2023 from the sale of 27 wholly owned or consolidated assets.
    • Subsequent to quarter end, generated $21.1 million of gross proceeds from the sale of four wholly owned assets.
    • The Company has 15 assets under contract for sale with no due diligence contingencies for total anticipated proceeds of $295.6 million and four assets under contract for sale subject to customary due diligence for total anticipated proceeds of $37.9 million. All assets for sale are subject to customary closing conditions.
    • The Company has exercised its put rights on four joint venture properties with anticipated proceeds of $106.5 million.
    • The Company has accepted offers on and is currently negotiating definitive purchase and sale agreements for assets with accepted offers of approximately $67.7 million on wholly owned assets and $35 million in joint ventures interests.

    Financial Highlights:

    For the quarter ended March 31, 2023:

    • As of March 31, 2023, the Company had cash on hand of $132.1 million, including $11.6 million of restricted cash. As of May 8, 2023, the Company had cash on hand of $143.5 million, including $11.6 million of restricted cash.
    • Net loss attributable to common shareholders of ($63.2) million, or ($1.13) per share.
    • Total Net Operating Income (“Total NOI”) of $3.1 million.
    • During the quarter, the Company made $230 million in principal repayments on the Company’s term loan facility (“Term Loan Facility”), reducing the balance of the Term Loan Facility to $800 million. The Company also extended the maturity of the Term Loan Facility for an additional two years to July 31, 2025.

    Other Highlights

    • Signed three leases covering 84 thousand square feet in the first quarter at an average projected annual rent of $16.33 PSF.
      • One new lease covering approximately eight thousand square feet at a Premier asset at an average projected annual net rent of $71.25 PSF; and
      • Two ground floor leases covering approximately 76 thousand square feet at a Multi-Tenant Retail asset at an average projected annual net rent of $10.54 PSF.
    • Opened seven tenants in the first quarter totaling approximately 139 thousand square feet (70 thousand square feet at share) at an average net rent of $67.47 PSF.

    Sales Activity

    The tables below provide additional information regarding the Company’s sales activity. The first table provides in chart format certain information contained in the Company’s April 4, 2023 business update. The second table updates this information as of May 9, 2023. The third table provides updated information, as of May 9, 2023, on portfolio status by market, property type and transaction size consistent with the Company’s prior disclosure on April 4, 2023.

    Sales Progress as of April 4, 2023 (1)

     

     

     

     

     

     

     

    Stabilized

    Number

    Cap

     

    2023 Sales

    2024 & Beyond Sales

    Gross Proceeds

     

     

     

     

     

     

     

    Under Contract - No DD

    2

    7.2

    %

     

    2

    -

    $

    36,650

    Under Contract - In DD

    1

    8.6

    %

     

    1

    -

    $

    25,313

    PSA Neg. / Accepted Offer

    1

    9.2

    %

     

    1

    -

    $

    10,400

    Total

    4

    8.0

    %

     

    4

    -

    $

    72,363

    Remaining Stabilized Sales Parcels

    5

     

     

    2

    3

     

     

     

     

     

     

     

     

    Partially Stabilized

    Number

    Cap

     

    2023 Sales

    2024 & Beyond Sales

    Gross Proceeds

     

     

     

     

     

     

     

    Under Contract - No DD

    4

    7.6

    %

     

    4

    -

    $

    115,850

    Under Contract - In DD

    -

    N/A

     

     

    -

    -

    $

    -

    PSA Neg. / Accepted Offer

    1

    4.0

    %

     

    1

    -

    $

    7,600

    Total

    5

    7.5

    %

     

    5

    -

    $

    123,450

    Remaining Partially Stabilized Sales
    Parcels

    7

     

     

    2

    5

     

     

     

     

     

     

     

     

    Pads

    Number

    Cap

     

    2023 Sales

    2024 & Beyond Sales

    Gross Proceeds

     

     

     

     

     

     

     

    Under Contract - No DD

    -

    N/A

     

     

    -

    -

    $

    -

    Under Contract - In DD

    2

    5.7

    %

     

    2

    -

    $

    7,015

    PSA Neg. / Accepted Offer

    -

    N/A

     

     

    -

    -

    $

    -

    Total

    2

    5.7

    %

     

    2

    -

    $

    7,015

    Remaining Pad Sales Parcels

    3

     

     

    3

    -

     

     

     

     

     

     

     

     

    Joint Ventures

    Number

    PSF

     

    2023 Sales

    2024 & Beyond Sales

    Gross Proceeds

     

     

     

     

     

     

     

    Under Contract - No DD

    4

    $

    171.52

     

     

    4

    -

    $

    104,850

    Under Contract - In DD

    -

    N/A

     

     

    -

    -

    $

    -

    PSA Neg. / Accepted Offer

    1

    $

    38.75

     

     

    1

    -

    $

    4,500

    Total

    5

    $

    150.32

     

     

    5

    -

    $

    109,350

    Remaining Joint Venture Sales Parcels

    10

     

     

    2

    8

     

    Non-Income Producing

    Number

     

    PSF

     

    Per Acre

     

    Carry Cost

     

    2023 Sales

    2024 & Beyond Sales

     

    Gross Proceeds

     

     

     

     

     

     

     

     

     

     

     

     

     

    Under Contract - No DD

    9

     

    $

    128.06

     

    $

    1,277

     

    $

    (5,019

    )

    9

    -

     

    $

    155,375

    Under Contract - In DD

    2

     

    $

    38.92

     

    $

    491

     

    $

    (854

    )

    2

    -

     

    $

    11,000

    PSA Neg. / Accepted Offer

    7

     

    $

    33.81

     

    $

    453

     

    $

    (1,811

    )

    7

    -

     

    $

    42,489

    Total

    18

     

    $

    75.87

     

    $

    878

     

    $

    (7,683

    )

    18

    -

     

    $

    208,864

    Remaining Non-Income
    Producing Sales Parcels

    19

     

     

     

     

     

     

     

    9

    10

     

    Sales Progress as of May 9, 2023 (1)

     

     

     

     

     

     

     

     

     

    Stabilized

    Number

     

    Cap

     

    2023 Sales

    2024 & Beyond Sales

     

    Gross Proceeds

    Closed since April 4, 2023

    -

     

    N/A

     

    -

    -

     

    $

    -

    Under Contract - No DD

    2

     

    7.2%

     

    2

    -

     

    $

    36,650

    Under Contract - In DD

    1

     

    9.2%

     

    1

    -

     

    $

    10,400

    PSA Neg. / Accepted Offer

    -

     

    N/A

     

    -

    -

     

    $

    -

    Total

    3

     

    7.6%

     

    3

    -

     

    $

    47,050

    Remaining Stabilized Sales Parcels (2)

    6

     

     

     

    4

    2

     

     

     

     

     

     

     

     

     

     

     

    Partially Stabilized

    Number

     

    Cap

     

    2023 Sales

    2024 & Beyond Sales

     

    Gross Proceeds

    Closed since April 4, 2023

    -

     

    N/A

     

    -

    -

     

    $

    -

    Under Contract - No DD

    4

     

    7.6%

     

    4

    -

     

    $

    115,850

    Under Contract - In DD

    1

     

    3.0%

     

    1

    -

     

    $

    16,500

    PSA Neg. / Accepted Offer

    2

     

    4.3%

     

    2

    -

     

    $

    14,600

    Total

    7

     

    6.9%

     

    7

    -

     

    $

    146,950

    Remaining Partially Stabilized Sales Parcels

    5

     

     

     

    2

    3

     

     

     

     

     

     

     

     

     

     

     

    Pads

    Number

     

    Cap

     

    2023 Sales

    2024 & Beyond Sales

     

    Gross Proceeds

    Closed since April 4, 2023

    -

     

    N/A

     

    -

    -

     

    $

    -

    Under Contract - No DD

    2

     

    5.7%

     

    2

    -

     

    $

    7,015

    Under Contract - In DD

    -

     

    N/A

     

    -

    -

     

    $

    -

    PSA Neg. / Accepted Offer

    1

     

    5.3%

     

    1

    -

     

    $

    2,857

    Total

    3

     

    5.5%

     

    3

    -

     

    $

    9,872

    Remaining Pad Sales Parcels

    2

     

     

     

    2

    -

     

     

     

     

     

     

     

     

     

     

     

    Joint Ventures

    Number

     

    PSF

     

    2023 Sales

    2024 & Beyond Sales

     

    Gross Proceeds

    Closed since April 4, 2023

     

     

     

     

     

     

     

    $

    -

    Under Contract - No DD

    4

     

    $

    174.24

     

    4

    -

     

    $

    106,515

    Under Contract - In DD

    -

     

    N/A

     

    -

    -

     

    $

    -

    PSA Neg. / Accepted Offer

    4

     

    $

    44.63

     

    4

    -

     

    $

    35,000

    Total

    8

     

    $

    101.40

     

    8

    -

     

    $

    141,515

    Remaining Joint Venture Sales Parcels

    7

     

     

     

    2

    5

     

     

    Non-Income Producing

    Number

    PSF

     

    Per Acre

     

    Carry Cost

     

    2023 Sales

    2024 & Beyond Sales

    Gross Proceeds

    Closed since April 4, 2023

    4

    $

    33.77

     

    $

    457

     

    $

    (1,601

    )

    4

    -

    $

    21,125

    Under Contract - No DD (3)

    7

    $

    142.25

     

    $

    1,481

     

    $

    (4,200

    )

    5

    2

    $

    136,055

    Under Contract - In DD

    2

    $

    38.92

     

    $

    491

     

    $

    (854

    )

    2

    -

    $

    11,000

    PSA Neg. / Accepted Offer

    8

    $

    41.81

     

    $

    491

     

    $

    (2,392

    )

    6

    2

    $

    50,239

    Total

    21

    $

    74.13

     

    $

    831

     

    $

    (9,047

    )

    17

    4

    $

    218,419

    Remaining Non-Income
    Producing Sales Parcels

    16

     

     

     

     

     

     

    7

    9

     

    (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) Remaining Stabilized Sales Parcels includes one asset under contract as of April 4, 2023 that was subsequently terminated

    (3) Gross sales price per square foot excludes one asset which is land only

     

    As of January
    1, 2023

    2023 Sales Projections as of May 9, 2023

    2024 & Beyond Sales Projections as of
    May 9, 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

    -

    -

    -

    1

    -

    9

    Primary markets

    43

    11

    8

    1

    4

    11

    1

    -

    7

    Secondary markets

    35

    14

    6

    1

    7

    3

    -

    1

    3

    Tertiary markets

    16

    6

    2

    2

    2

    3

    -

    1

    -

    Market Composition
    Total

    105

    31

    17

    4

    13

    17

    2

    2

    19

     

     

     

     

     

     

     

     

     

     

    Multi-Tenant Retail

    32

    18

    6

    1

    -

    4

    -

    -

    3

    Premier

    10

    -

    1

    -

    -

    -

    1

    -

    8

    Residential

    5

    2

    1

    -

    -

    -

    -

    -

    2

    Other Unconsolidated
    Entities

    13

    -

    3

    -

    4

    2

    -

    -

    4

    Non-Core Properties

    45

    11

    6

    3

    9

    11

    1

    2

    2

    Property Type Total

    105

    31

    17

    4

    13

    17

    2

    2

    19

     

     

     

     

     

     

     

     

     

     

    Under $10M

    57

    20

    5

    2

    10

    12

    -

    2

    6

    $10M - $30M

    29

    10

    8

    2

    3

    3

    1

    -

    2

    $30M - $50M

    11

    1

    2

    -

    -

    2

    1

    -

    5

    Over $50M

    8

    -

    2

    -

    -

    -

    -

    -

    6

    Transaction Size Total

    105

    31

    17

    4

    13

    17

    2

    2

    19

    (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 seven 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 105 transactions at this time.

    Portfolio

    The table below represents a summary of the Company’s properties by planned usage as of March 31, 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

     

    13

     

    2,019 sf / 198 acres

     

     

    1,534

     

     

    15.2

    Residential (3)

     

    2

     

    33 sf / 19 acres

     

     

    33

     

     

    9.5

    Premier

     

    5

     

    235 sf / 99 acres

     

     

    163

     

     

    19.7

    Non-Core (4)

     

    35

     

    5,292 sf / 428 acres

     

     

    325

     

     

    12.2

    Unconsolidated

     

     

     

     

     

     

     

     

    Other Entities

     

    13

     

    1,106 sf / 185 acres

     

     

    278

     

     

    14.2

    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 March 31, 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 March 31, 2023, the Company invested $4.1 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 March 31, 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
    ("ABR PSF")

    In-place retail leases

     

     

    55

     

     

    1,374

     

     

    68.1

    %

    $

    30,014

     

     

    90.7

    %

    $

    21.84

    SNO retail leases (1)

     

     

    9

     

     

    160

     

     

    7.9

    %

     

    3,085

     

     

    9.3

    %

     

    19.28

    Total retail leases

     

     

    64

     

     

    1,534

     

     

    76.0

    %

    $

    33,099

     

     

    100.0

    %

    $

    21.58

    (1) SNO = signed not yet opened leases.

     

     

     

     

     

     

     

     

     

     

     

     

    During the three months ended March 31, 2023, the Company signed new leases at its retail properties totaling approximately 76 thousand square feet at an average base rent of $10.54 PSF stabilized net. Additionally, the Company generated a leasing pipeline of over 100 thousand square feet. The Company has 1.4 million leased square feet and approximately 160 thousand square feet signed but not opened. Seritage has total occupancy of 76.0% for its multi-tenant retail properties. As of March 31, 2023, there is an additional approximately 484 thousand square feet available for lease.

    (in thousands except number of leases and PSF data)

     

     

     

     

     

     

     

     

     

     

    Number of
    SNO Leases

     

    GLA

     

    ABR

     

    Annual
    Rent PSF

    As of December 31, 2022

     

     

    15

     

     

    141

     

    $

    3,355

     

    $

    23.79

    Sold / terminated

     

     

    (8

    )

     

    (58

    )

     

    (1,071

    )

     

    18.47

    Signed

     

     

    2

     

     

    76

     

     

    801

     

     

    10.54

    As of March 31, 2023

     

     

    9

     

     

    159

     

    $

    3,085

     

    $

    19.28

    Premier Mixed-Use

    The Company has three premier mixed-use projects in the active leasing/tenant opening stage: Aventura, FL, Santa Monica, CA and San Diego, CA. As of March 31, 2023, the Company has 205 thousand in-place leased square feet (112 thousand square feet at share), 171 thousand square feet signed but not opened (157 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 March 31, 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

     

    22

     

     

     

    50

     

     

     

    12.8

    %

     

    $

    3,215

     

     

     

    17.6

    %

     

    $

    64.30

    In-place office leases

     

    1

     

     

     

    62

     

     

     

    15.7

    %

     

     

    4,220

     

     

     

    23.2

    %

     

     

    68.06

    SNO retail leasesas of December 31, 2022(1)

     

    27

     

     

     

    111

     

     

     

     

     

     

    8,612

     

     

     

     

     

     

    77.59

    Opened

     

    (6

    )

     

     

    (8

    )

     

     

     

     

     

    (503

    )

     

     

     

     

     

    62.88

    Signed

     

    1

     

     

     

    8

     

     

     

     

     

     

    570

     

     

     

     

     

     

    71.25

    SNO retail leases as of March 31, 2023(1)

     

    22

     

     

     

    111

     

     

     

    28.2

    %

     

     

    8,679

     

     

     

    47.6

    %

     

     

    78.19

    SNO office leases as of December 31, 2022(1)

     

    4

     

     

     

    108

     

     

     

     

     

    $

    6,329

     

     

     

     

     

     

    58.60

    Opened

     

    (1

    )

     

     

    (62

    )

     

     

     

     

    $

    (4,220

    )

     

     

     

     

     

    68.06

    SNO retail leases as of March 31, 2023(1)

     

    3

     

     

     

    46

     

     

     

    11.8

    %

     

    $

    2,109

     

     

     

    11.6

    %

     

     

    45.85

    Total diversified leases as of March 31, 2023

     

    48

     

     

     

    270

     

     

     

    68.5

    %

     

    $

    18,223

     

     

     

    100.0

    %

     

    $

    67.49

    (1) SNO = Signed not yet opened leases

     

     

     

     

     

     

     

     

     

    (2) In thousands except number of leases and PSF data

     

     

     

     

     

     

     

     

     

    During the three months ended March 31, 2023, the Company invested $27.2 million in its consolidated development and operating properties and an additional $2.8 million into its unconsolidated entities.

    Aventura

    During the first 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 remains on track to open its first tenants to the public in the second quarter of 2023, with rolling openings thereafter.

    During the quarter ended March 31, 2023, the Company signed one new lease totaling eight thousand square feet at an average base rent of $71.25 PSF stabilized net and has 144 thousand square feet signed but not opened. With occupancy at 66.6%, the Company has 72 thousand square feet available for lease, of which one thousand square feet is in lease negotiation and has leasing activity on over an additional 71 thousand square feet.

    Financial Summary

    The table below provides a summary of the Company’s financial results for the three months ended March 31, 2023:

    (in thousands except per share amounts)

     

    Three Months Ended

     

     

     

    March 31, 2023

     

     

    March 31, 2022

     

    Net loss attributable to Seritage
       common shareholders

     

    $

    (63,211

    )

     

    $

    (53,430

    )

    Net loss per share attributable to Seritage
       common shareholders

     

     

    (1.13

    )

     

     

    (1.22

    )

    Total NOI

     

     

    3,104

     

     

     

    10,493

     

    For the quarter ended March 31, 2023:

    • Total NOI for the first quarter of 2023 reflects the impact of $0.5 million Total NOI relating to sold properties.

    Total NOI is comprised of:

    (in thousands)

     

    Three Months Ended March 31,

     

    Consolidated Properties

     

    2023

     

    2022

    Multi-tenant retail

     

    $

    6,432

     

     

    $

    6,205

     

    Premier

     

     

    (1,441

    )

     

     

    (1,400

    )

    Residential

     

     

    (735

    )

     

     

    (717

    )

    Non-Core

     

     

    (2,317

    )

     

     

    (687

    )

    Sold

     

     

    (352

    )

     

     

    5,568

     

    Total

     

     

    1,587

     

     

     

    8,969

     

    Unconsolidated Properties

     

     

     

     

    Residential

     

     

    9

     

     

     

    (289

    )

    Premier

     

     

    331

     

     

     

    (209

    )

    Other joint ventures

     

     

    1,177

     

     

     

    2,022

     

    Total

     

     

    1,517

     

     

     

    1,524

     

    Total NOI

     

    $

    3,104

     

     

    $

    10,493

     

    As of March 31, 2023, the Company had cash on hand of $132.1 million, including $11.6 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.

    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 be 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 will be paid on July 14, 2023 to holders of record on June 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, which is recorded in interest and other income in the consolidated statements of operations and received $7.8 million subsequent to March 31, 2023.

    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. While the Company believes that its forecasts and assumptions are reasonable, the Company cautions that actual results may differ materially. The Company intends the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available, except as required by law.

    About Seritage Growth Properties

    Seritage is principally engaged in the ownership, development, redevelopment, management and leasing of retail and mixed-use properties throughout the United States. As of March 31, 2023, the Company’s portfolio consisted of interests in 72 properties comprised of approximately 10.2 million square feet of gross leasable area (“GLA”) or build-to-suit leased area, approximately 157 acres held for or under development and approximately 5.3 million square feet or approximately 428 acres to be disposed of. The portfolio consists of approximately 7.6 million square feet of GLA held by 55 wholly owned properties (such properties, the “Consolidated Properties”) and 2.6 million square feet of GLA held by 17 unconsolidated entities (such properties, the “Unconsolidated Properties”).

    SERITAGE GROWTH PROPERTIES

    CONSOLIDATED BALANCE SHEETS

    (In thousands, except share and per share amounts)

    (Unaudited)

     

     

     

    March 31, 2023

     

     

    December 31, 2022

     

    ASSETS

     

     

     

     

     

     

    Investment in real estate

     

     

     

     

     

     

    Land

     

    $

    154,807

     

     

    $

    172,813

     

    Buildings and improvements

     

     

    464,586

     

     

     

    463,616

     

    Accumulated depreciation

     

     

    (55,347

    )

     

     

    (57,330

    )

     

     

     

    564,046

     

     

     

    579,099

     

    Construction in progress

     

     

    157,824

     

     

     

    185,324

     

    Net investment in real estate

     

     

    721,870

     

     

     

    764,423

     

    Real estate held for sale

     

     

    245,894

     

     

     

    455,617

     

    Investment in unconsolidated entities

     

     

    353,919

     

     

     

    382,597

     

    Cash and cash equivalents

     

     

    120,476

     

     

     

    133,480

     

    Restricted cash

     

     

    11,576

     

     

     

    11,459

     

    Tenant and other receivables, net

     

     

    25,982

     

     

     

    41,495

     

    Lease intangible assets, net

     

     

    1,615

     

     

     

    1,791

     

    Prepaid expenses, deferred expenses and other assets, net

     

     

    35,041

     

     

     

    50,859

     

    Total assets (1)

     

    $

    1,516,373

     

     

    $

    1,841,721

     

     

     

     

     

     

     

     

    LIABILITIES AND SHAREHOLDERS' EQUITY

     

     

     

     

     

     

    Liabilities

     

     

     

     

     

     

    Term loan facility, net

     

    $

    799,859

     

     

    $

    1,029,754

     

    Accounts payable, accrued expenses and other liabilities

     

     

    58,559

     

     

     

    89,368

     

    Total liabilities (1)

     

     

    858,418

     

     

     

    1,119,122

     

     

     

     

     

     

     

     

    Commitments and contingencies (Note 9)

     

     

     

     

     

     

     

     

     

     

     

     

     

    Shareholders' Equity

     

     

     

     

     

     

    Class A common shares $0.01 par value; 100,000,000 shares authorized;
       56,059,530 and 56,052,546 shares issued and outstanding
       as of March 31, 2023 and December 31, 2022, respectively

     

     

    561

     

     

     

    561

     

    Series A preferred shares $0.01 par value; 10,000,000 shares authorized;
       2,800,000 shares issued and outstanding as of March 31, 2023 and
       December 31, 2022; liquidation preference of $70,000

     

     

    28

     

     

     

    28

     

    Additional paid-in capital

     

     

    1,360,060

     

     

     

    1,360,411

     

    Accumulated deficit

     

     

    (703,742

    )

     

     

    (640,531

    )

    Total shareholders' equity

     

     

    656,907

     

     

     

    720,469

     

    Non-controlling interests

     

     

    1,048

     

     

     

    2,130

     

    Total equity

     

     

    657,955

     

     

     

    722,599

     

    Total liabilities and shareholders' equity

     

    $

    1,516,373

     

     

    $

    1,841,721

     

    (1) The Company's consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs"). See Note 2. The consolidated balance sheets, as of March 31, 2023, include the following amounts related to our consolidated VIEs, excluding the Operating Partnership: $3.3 million of land, $2.8 million of building and improvements, $(0.7) million of accumulated depreciation and $3.4 million of other assets included in other line items. The Company's consolidated balance sheets as of December 31, 2022, include the following amounts related to our consolidated VIEs, excluding the Operating Partnership: $6.6 million of land, $3.9 million of building and improvements, $(1.0) million of accumulated depreciation and $4.0 million of other assets included in other line items.

    SERITAGE GROWTH PROPERTIES

    CONSOLIDATED STATEMENTS OF OPERATIONS

    (In thousands, except per share amounts)

    (Unaudited)

     

     

    Three Months Ended
    March 31,

     

     

     

    2023

     

     

    2022

     

    REVENUE

     

     

     

     

     

     

    Rental income

     

    $

    418

     

     

    $

    29,084

     

    Management and other fee income

     

     

    262

     

     

     

    1,821

     

    Total revenue

     

     

    680

     

     

     

    30,905

     

    EXPENSES

     

     

     

     

     

     

    Property operating

     

     

    8,185

     

     

     

    11,032

     

    Real estate taxes

     

     

    1,537

     

     

     

    8,150

     

    Depreciation and amortization

     

     

    4,564

     

     

     

    11,934

     

    General and administrative

     

     

    12,220

     

     

     

    9,092

     

    Total expenses

     

     

    26,506

     

     

     

    40,208

     

    Gain (loss) on sale of real estate, net

     

     

    12,392

     

     

     

    (1,015

    )

    Impairment of real estate assets

     

     

    (2,576

    )

     

     

    (991

    )

    Equity in loss of unconsolidated entities

     

     

    (36,372

    )

     

     

    (33,076

    )

    Interest and other income

     

     

    5,585

     

     

     

    11

     

    Interest expense

     

     

    (15,202

    )

     

     

    (22,588

    )

    Loss before income taxes

     

     

    (61,999

    )

     

     

    (66,962

    )

    Benefit (provision) for income taxes

     

     

    13

     

     

     

    (25

    )

    Net loss

     

     

    (61,986

    )

     

     

    (66,987

    )

    Net loss attributable to non-controlling interests

     

     

     

     

     

    14,782

     

    Net loss attributable to Seritage

     

    $

    (61,986

    )

     

    $

    (52,205

    )

    Preferred dividends

     

     

    (1,225

    )

     

     

    (1,225

    )

    Net loss attributable to Seritage common shareholders

     

    $

    (63,211

    )

     

    $

    (53,430

    )

     

     

     

     

     

     

     

    Net loss per share attributable to Seritage Class A
       common shareholders - Basic

     

    $

    (1.13

    )

     

    $

    (1.22

    )

    Net loss per share attributable to Seritage Class A
       common shareholders - Diluted

     

    $

    (1.13

    )

     

    $

    (1.22

    )

    Weighted average Class A common shares
       outstanding - Basic

     

     

    56,059

     

     

     

    43,634

     

    Weighted average Class A common shares
       outstanding - Diluted

     

     

    56,059

     

     

     

    43,634

     

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

     

     

     

    Three Months Ended March 31,

     

    NOI and Total NOI

     

    2023

     

     

    2022

     

    Net loss

     

    $

    (61,986

    )

     

    $

    (66,987

    )

    Termination fee income

     

     

     

     

     

    (277

    )

    Management and other fee income

     

     

    (262

    )

     

     

    (1,821

    )

    Depreciation and amortization

     

     

    4,564

     

     

     

    11,934

     

    General and administrative expenses

     

     

    12,220

     

     

     

    9,092

     

    Equity in loss of unconsolidated entities

     

     

    36,372

     

     

     

    33,076

     

    (Gain) loss on sale of real estate, net

     

     

    (12,392

    )

     

     

    1,015

     

    Impairment of real estate assets

     

     

    2,576

     

     

     

    991

     

    Interest and other income

     

     

    (5,585

    )

     

     

    (11

    )

    Interest expense

     

     

    15,202

     

     

     

    22,588

     

    (Benefit) provision for income taxes

     

     

    (13

    )

     

     

    25

     

    Straight-line rent

     

     

    10,843

     

     

     

    (721

    )

    Above/below market rental expense

     

     

    48

     

     

     

    65

     

    NOI

     

    $

    1,587

     

     

    $

    8,969

     

    Unconsolidated entities

     

     

     

     

     

     

    Net operating income of unconsolidated entities

     

     

    1,659

     

     

     

    1,846

     

    Straight-line rent

     

     

    (147

    )

     

     

    (328

    )

    Above/below market rental expense

     

     

    5

     

     

     

    6

     

    Total NOI

     

    $

    3,104

     

     

    $

    10,493

     

     

    Seritage Growth Properties
    (212) 355-7800
    IR@Seritage.com

    Source: Seritage Growth Properties
    IR CONTACTS
    Seritage Growth Properties
    500 Fifth Avenue
    Suite 1530
    New York, NY 10110
    Investor Relations Contact
    Transfer Agent
    Computershare Trust Company, N.A
    (201) 324-0014