Seritage(SRG) - 2024 Q4 - Annual Results

Company Overview and Executive Summary CEO Statement and Strategic Progress The company made significant progress preparing assets for sale, including key leases and zoning, with most expected to enter the market by 2025 - The company has made significant progress in completing its 'Plan of Sale', with most assets expected to enter the market in 2025[2] - Progress includes significant milestones such as signing key leases, obtaining partnership approvals, and securing zoning[2] About Seritage Growth Properties Seritage managed diversified retail and mixed-use properties, holding 17 properties totaling 1.7 million sq ft and 274 acres as of December 31, 2024 - Prior to the Plan of Sale, Seritage primarily engaged in the ownership, development, management, sale, and leasing of diversified retail and mixed-use properties[31] Portfolio Overview as of December 31, 2024 | Category | Number of Properties | Total Leasable Area (million sq ft) | Land Area (acres) | | :--- | :------- | :--------------------------- | :------------- | | Total | 17 | 1.7 | 274 | | Wholly-Owned Properties | 10 | 0.9 | 166 | | Unconsolidated Entities | 7 | 0.8 | 108 | Financial Performance Highlights Full Year and Q4 2024 Financial Results For FY2024, the company reported a net loss of $158.4 million attributable to common stockholders, while Q4 saw a net loss of $12.6 million FY2024 Key Financial Metrics (as of December 31, Units: $ million) | Metric | 2024 (FY) | 2023 (FY) | YoY Change | | :------------------------------------------ | :------------ | :------------ | :------- | | Net Loss Attributable to Common Stockholders | (158.4) | (159.8) | 1.4 | | Net Loss Per Share Attributable to Common Stockholders ($) | (2.82) | (2.85) | 0.03 | | NOI-cash basis at share | 2.6 | 8.6 | (6.0) | Q4 2024 Key Financial Metrics (as of December 31, Units: $ million) | Metric | Q4 2024 | Q4 2023 | YoY Change | | :------------------------------------------ | :------------- | :------------- | :------- | | Net Loss Attributable to Common Stockholders | (12.6) | 4.7 | (17.3) | | Net Loss Per Share Attributable to Common Stockholders ($) | (0.22) | 0.08 | (0.30) | | NOI-cash basis at share | 3.5 | 1.4 | 2.1 | Liquidity and Capital Resources The company's cash on hand increased to $107 million by March 28, 2025, following a $120 million term loan repayment in 2024 Cash on Hand | Date | Cash on Hand (including restricted cash) | | :--- | :------------------------------------ | | December 31, 2024 | $97.7 million | | March 28, 2025 | $107 million | - The company repaid $120 million of term loan principal in 2024, reducing the term loan balance to $240 million as of December 31, 2024[4] - An extension option for the term loan was obtained, which if exercised, could extend the maturity date to July 31, 2026[4] - In 2024, the company invested $27.5 million in its consolidated properties and $9.3 million in its unconsolidated entities[4] Explanation of Non-GAAP Financial Measures Non-GAAP metrics like NOI-cash basis and NOI-cash basis at share are used to provide property-level operational insights, excluding non-cash items - NOI-cash basis is defined as property operating revenue less property operating expenses, adjusted for variable items like termination fee income and non-cash items such as straight-line rent and amortization of lease intangibles[26] - NOI-cash basis at share includes the company's proportional share in unconsolidated properties to provide insight into overall financial performance[27] - These non-GAAP measures are not substitutes for GAAP cash flow or net income, nor do they indicate cash available for all needs or liquidity[25][29] Asset Sales and Portfolio Management Q4 2024 Sale Highlights In Q4 2024, the company generated $50.8 million from selling three vacant assets and $11 million from monetizing unconsolidated entity interests Q4 2024 Sale Proceeds | Source | Total Proceeds | | :--- | :------------- | | Sale of vacant/non-income producing assets | $50.8 million | | Monetization of unconsolidated entity interests | $11 million | | Income-producing asset sold after December 31, 2024 | $29.9 million | - The sale of three vacant/non-income producing assets generated $92.87 per square foot and eliminated $1.2 million in carrying costs[4] Q4 2024 Property Sales Overview | City | State | Sale Type | Gross Area (share, sq ft) | | :--- | :---- | :------- | :----------------------- | | Doral | FL | Full Parcel | 195,600 | | Ft. Meyer | FL | Full Parcel | 146,800 | | Plantation | FL | Full Parcel | 204,000 | | Frisco | TX | Full Parcel | 87,500 | | Nanuet | NY | Full Parcel | 110,700 | Future Sales Projections Most assets are projected to enter the market in 2025, with one consolidated joint venture property under contract for $14 million - Most assets, including large development parcels, smaller leased properties, and vacant assets, are expected to enter the market in 2025[2][5] Contracted/Negotiated Assets (as of March 31, 2025) | Status | Asset Type | Estimated Gross Proceeds | | :--- | :------- | :----------------------- | | Contracted | Consolidated JV Property | $14 million (share: $11.2 million) | | Negotiating | Premier Development Asset | Approx. $70 million (expected long-term closing) | - Future sales projections cover various asset types, with expected sale timelines in 2025 and beyond, ranging from under $5 million to $150-200 million[5][9] Portfolio Summary by Planned Usage As of December 31, 2024, the company's portfolio is categorized by planned usage, including multi-tenant retail, residential, premier, and non-core assets Property Overview by Planned Usage (as of December 31, 2024) | Planned Usage | Total Properties | Built Area / Land Area | Leased Area (thousand sq ft) | Avg Land Area/Parcel (acres) | | :------------ | :------- | :----------------------- | :--------------------------- | :--------------------------- | | Consolidated Properties | | | | | | Multi-Tenant Retail | 3 | 507 thousand sq ft / 63 acres | 335 | 20.9 | | Residential | 2 | 33 thousand sq ft / 19 acres | 33 | 9.5 | | Premier Properties | 4 | 228 thousand sq ft / 69 acres | 182 | 17.2 | | Non-Core Properties | 1 | 134 thousand sq ft / 15 acres | 0 | 14.8 | | Unconsolidated Properties | | | | | | Other Entities | 4 | 258 thousand sq ft / 52 acres | 5 | 13.0 | | Premier Properties | 3 | 158 thousand sq ft / 57 acres | 106 | 19.0 | Leasing Activity Multi-Tenant Retail Leasing As of December 31, 2024, multi-tenant retail properties had 335,000 sq ft leased, representing 66.1% occupancy, with a 141,000 sq ft lease executed post-year-end Multi-Tenant Retail Lease Overview (as of December 31, 2024) | Category | Number of Leases | Total Leased Area (thousand sq ft) | % of Total Leasable Area | Annual Base Rent (ABR) ($ thousand) | % of Total ABR | ABR Per Square Foot ($) | | :------- | :------- | :-------------------- | :------------------- | :------------------------ | :------------ | :------------------------------------ | | Existing Retail Leases | 10 | 335.2 | 66.1% | 8,895.0 | 93.1% | 26.54 | | Tenants in Negotiation | 1 | 141.1 | 27.9% | 663.4 | 6.9% | 4.70 | | Total Retail Leases | 11 | 476.3 | 94.0% | 9,558.4 | 100.0% | 20.07 | - A 141,000 sq ft lease, previously a Q4 2024 letter of intent, was executed after year-end[11] Premier Mixed-Use Leasing As of December 31, 2024, premier mixed-use properties had 288,100 sq ft of diversified leases (share basis), representing 63.7% of total leasable area Premier Mixed-Use Property Lease Overview (as of December 31, 2024, Proportional Share) | Category | Number of Leases | Total Leased Area (thousand sq ft) | % of Total Leasable Area | Annual Base Rent (ABR) ($ thousand) | % of Total ABR | ABR Per Square Foot ($) | | :------- | :------- | :-------------------- | :------------------- | :------------------------ | :------------ | :------------------------------------ | | Existing Retail Leases | 41 | 134.5 | 26.4% | 9,614.6 | 57.3% | 71.48 | | Existing Office Leases | 4 | 108.0 | 28.0% | 6,936.9 | 41.4% | 63.35 | | Signed Not Yet Commenced Retail Leases | 11 | 45.6 | 8.3% | 3,577.0 | 21.3% | 78.44 | | Total Diversified Leases as of December 31, 2024 | 56 | 288.1 | 63.7% | 16,769.6 | 100.0% | 58.21 | Aventura Project Leasing The Aventura project achieved 78.7% leased occupancy by December 31, 2024, with 216,000 sq ft of office and retail leasing activity in Q4 2024 - The Aventura project was 78.7% leased as of December 31, 2024, with 216,000 sq ft of office and retail leasing activity in Q4 2024[14] - 46,000 sq ft (21.3%) remains available for lease, with approximately 17,000 sq ft (8.0%) currently in lease negotiations[14] Corporate and Market Developments Strategic Review and Plan of Sale Shareholders approved the company's Plan of Sale in October 2022, and the strategic review continues, exploring value-maximizing alternatives - Shareholders approved the company's Plan of Sale on October 24, 2022[21] - The strategic review process is ongoing, and the company remains open to value-maximizing alternatives, including a potential company sale[21] Leadership Transition Andrea L. Olshan will resign as CEO, President, and board member effective April 11, 2025, with Adam Metz appointed Interim CEO - Andrea L. Olshan will resign as Chief Executive Officer, President, and Board member effective April 11, 2025[22] - Board Chairman Adam Metz has been appointed Interim Chief Executive Officer, effective April 11, 2025, and will continue as Chairman of the Board[22] - Mitchell Sabshon has been appointed Lead Independent Director, effective April 11, 2025[22] Market Conditions Update Challenging commercial real estate market conditions are causing downward pricing pressure on assets, potentially impacting sale proceeds and shareholder distributions - The commercial real estate market continues to face challenging conditions, leading to downward pricing pressure on all company assets[23] - The company considers buyer universe, macroeconomic conditions, financing availability and cost, and operating capital expenditures in its asset transaction decisions[23] - If challenging market conditions persist, they are expected to impact the proceeds from the Plan of Sale and the timing and amount of distributions to stockholders[23] Litigation Matters The company faces a class action lawsuit alleging federal securities law violations regarding internal controls and property valuations, plus two derivative lawsuits - The company faces a class action lawsuit alleging violations of federal securities laws for false, misleading, or omitted disclosures regarding internal controls and real estate asset valuations between July 7, 2022, and May 10, 2024[17] - Two derivative lawsuits allege breaches of fiduciary duty by the company's CEO, CFO, and current and former board members, raising similar claims to the class action[17] - The company intends to vigorously defend itself against the allegations in these lawsuits[17] Dividends Declared Seritage Growth Properties consistently declared a preferred stock dividend of $0.4375 per share of Series A Preferred Stock throughout 2024 and Q1 2025 - The company consistently declared a preferred stock dividend of $0.4375 per share of Series A Preferred Stock throughout 2024 and Q1 2025[18][19][20] Preferred Stock Dividend Payment Dates | Declaration Date | Payment Date | Record Date | Dividend Per Share | | :--------------- | :----------- | :---------- | :----------------- | | February 29, 2024 | April 15, 2024 | March 29, 2024 | $0.4375 | | May 2, 2024 | July 15, 2024 | June 28, 2024 | $0.4375 | | July 31, 2024 | October 15, 2024 | September 30, 2024 | $0.4375 | | October 28, 2024 | January 15, 2025 | December 31, 2024 | $0.4375 | | February 26, 2025 | April 15, 2025 | March 31, 2025 | $0.4375 | Consolidated Financial Statements Consolidated Balance Sheets As of December 31, 2024, total assets decreased to $677.8 million, with net real estate investments at $358.6 million and term loan balance at $240 million Consolidated Balance Sheet Highlights (as of December 31, Units: $ thousand) | Item | 2024 | 2023 | YoY Change | | :-------------------------- | :------- | :------- | :------- | | Total Assets | 677,774 | 973,864 | (296,090) | | Real Estate Investments, Net | 358,634 | 546,342 | (187,708) | | Investments in Unconsolidated Entities | 189,699 | 196,437 | (6,738) | | Cash and Cash Equivalents | 85,206 | 134,001 | (48,795) | | Term Loan | 240,000 | 360,000 | (120,000) | | Total Liabilities | 271,971 | 410,700 | (138,729) | | Total Stockholders' Equity | 404,456 | 561,990 | (157,534) | Consolidated Statements of Operations For FY2024, total revenue was $17.6 million, with total expenses at $69.1 million, resulting in a net loss of $158.4 million attributable to common stockholders Consolidated Statements of Operations Highlights (as of December 31, Units: $ thousand) | Item | 2024 | 2023 | YoY Change | | :------------------------------------------ | :------- | :------- | :------- | | Total Revenue | 17,622 | 20,779 | (3,157) | | Total Expenses | 69,145 | 87,869 | (18,724) | | Net Gain on Real Estate Sales | 10,678 | 96,214 | (85,536) | | Impairment of Real Estate Assets | (87,536) | (107,043) | 19,507 | | Equity in Net Loss of Unconsolidated Entities | (3,154) | (55,857) | 52,703 | | Interest Expense | (24,972) | (44,571) | 19,599 | | Net Loss Attributable to Common Stockholders | (158,436) | (159,811) | 1,375 | | Net Loss Per Share Attributable to Common Stockholders ($) | (2.82) | (2.85) | 0.03 | Reconciliation of Net Loss to NOI-cash basis For FY2024, NOI-cash basis was negative $2.1 million, and NOI-cash basis at share was $2.6 million, both lower than 2023 due to adjustments and unconsolidated entity performance Reconciliation of Net Loss to NOI-cash basis (as of December 31, Units: $ thousand) | Item | 2024 | 2023 | YoY Change | | :------------------------------------------ | :------- | :------- | :------- | | Net Loss | (153,536) | (154,911) | 1,375 | | Adjustments (e.g., Depreciation & Amortization, G&A, Impairment, Interest Expense) | 151,423 | 159,611 | (8,188) | | NOI-cash basis | (2,113) | 4,700 | (6,813) | | NOI from Unconsolidated Entities | 5,315 | 8,384 | (3,069) | | NOI-cash basis at share | 2,588 | 8,600 | (6,012) | Forward-Looking Statements Forward-Looking Statements This document contains forward-looking statements regarding future plans and strategies, subject to various risks and uncertainties that may cause actual results to differ materially - Forward-looking statements involve projections about future plans, strategies, and anticipated events, subject to known and unknown risks, uncertainties, assumptions, and contingencies[30] - Factors that could cause actual results to differ materially include: declines in retail, real estate, and general economic conditions; risks related to redevelopment activities; contingencies in lease commencements; company debt terms; failure to achieve expected occupancy and/or rent levels; impact of continued negative operating cash flow on funding operations and development; ability to obtain sufficient financing; environmental, health, safety, and land use laws; and potential acts of war, terrorism, or cybersecurity incidents[30] - The company undertakes no obligation to update or revise these forward-looking statements, except as required by law[30]