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 | |||||||||
