Seritage(SRG) - 2025 Q1 - Quarterly Results

Company Overview & Strategy Seritage Growth Properties reports Q1 2025 results, reiterating its strategy to execute the "Plan of Sale" through asset dispositions to repay debt and maximize shareholder value Introduction Seritage Growth Properties announced its first quarter financial and operating results for the period ended March 31, 2025, continuing its asset disposition plan - Seritage Growth Properties (NYSE: SRG) reported first quarter financial and operating results for the three months ended March 31, 2025[1] CEO Statement & Strategic Direction Interim CEO Adam Metz reaffirmed the company's strategy to continue executing the "Plan of Sale," prioritizing debt repayment through asset dispositions and focusing on value realization for shareholders - The company's strategy remains unchanged, continuing to execute the "Plan of Sale" with a priority on repaying remaining debt through asset dispositions[2] - The team focuses on executing transactions at appropriate prices and monetizing remaining assets to create shareholder value[2] About Seritage Growth Properties Prior to adopting the "Plan of Sale," Seritage focused on owning, developing, managing, and leasing diverse retail and mixed-use properties across the U.S., with a portfolio of 16 property interests totaling 1.6 million square feet of GLA and 240 acres as of March 31, 2025 - Prior to adopting the "Plan of Sale," Seritage primarily engaged in the ownership, development, redevelopment, management, sale, and leasing of diversified retail and mixed-use properties across the United States[29] Portfolio Composition as of March 31, 2025 | Category | Number of Properties | GLA (million sq ft) | Land Area (acres) | | :------- | :------------------- | :------------------ | :---------------- | | Total Portfolio | 16 | 1.6 | 240 | | Wholly-Owned Properties | 9 | 0.8 | 132 | | Non-Consolidated Entities | 7 | 0.8 | 108 | First Quarter 2025 Operating Highlights This section details Seritage's operational and financial performance in Q1 2025, including asset sales, cash position, and net loss Q1 Sale Highlights In Q1 2025, the company generated $29.9 million in gross proceeds from an income-producing asset sale at a 7.7% capitalization rate, with additional sales under contract or negotiation totaling approximately $84 million Q1 2025 Sale Highlights | Item | Details | | :--- | :------ | | Gross Proceeds from Asset Sale | $29.9 million | | Capitalization Rate | 7.7% | | Gross Proceeds from JV Asset Under Contract | $14.0 million | | Pro Rata Share of JV Asset Under Contract | $11.2 million | | Estimated Gross Proceeds from Premier Development Asset Under Negotiation | approximately $70.0 million | Financial Highlights As of March 31, 2025, the company held $107.1 million in cash, including $12.9 million in restricted cash, with a net loss attributable to common shareholders of $23.4 million and $2.6 million in NOI-cash basis at share Key Financial Metrics (Q1 2025) | Metric | Amount | | :--- | :---- | | Cash Balance (as of March 31, 2025) | $107.1 million | | Restricted Cash (as of March 31, 2025) | $12.9 million | | Investment in Consolidated Properties (Q1 2025) | $13.3 million | | Net Loss Attributable to Common Shareholders (Q1 2025) | ($23.4 million) | | Net Loss Per Share (Q1 2025) | ($0.42) | | NOI-cash basis at share (Q1 2025) | $2.6 million | Asset Portfolio & Sales Strategy This section outlines the company's asset portfolio composition, future sales projections across different market types, and leasing status for retail and mixed-use properties Future Sales Projections The company provides estimated gross sales proceeds for its portfolio assets as of May 15, 2025, excluding those under contract or negotiation, with sales anticipated in late 2025 and beyond, subject to market conditions and potential material differences from projections - Sales projections for remaining assets are based on current forecasts, with sales anticipated in late 2025 and beyond, but are subject to market conditions and risks[5] - The company cautions that actual results may differ materially from sales projections[5] Gateway Markets This subsection details the estimated sales proceeds for multi-tenant and premier assets located in gateway markets Estimated Sales Proceeds - Gateway Markets | Asset Type | Number | Estimated Proceeds Range | | :--------- | :------- | :----------------------- | | Multi-Tenant Assets | 1 | $25 million - $30 million | | Premier Assets | 8 | $15 million - $200 million (individual range) | Primary Markets This subsection details the estimated sales proceeds for multi-tenant and joint venture assets located in primary markets Estimated Sales Proceeds - Primary Markets | Asset Type | Number | Estimated Proceeds Range | | :--------- | :------- | :----------------------- | | Multi-Tenant Assets | 1 | $25 million - $30 million | | Joint Venture Assets | 2 | $5 million - $10 million (each) | Secondary Markets This subsection details the estimated sales proceeds for joint venture, retail, and non-core assets located in secondary markets Estimated Sales Proceeds - Secondary Markets | Asset Type | Number | Estimated Proceeds Range | | :--------- | :------- | :----------------------- | | Joint Venture Assets | 1 | Less than $5 million | | Retail Assets | 1 | $5 million - $10 million | | Joint Venture Assets | 1 | Less than $5 million | | Non-Core Assets | 1 | $5 million - $10 million | Portfolio Summary by Planned Usage As of March 31, 2025, Seritage's portfolio comprises consolidated properties (multi-tenant retail, residential, premier, non-core) and non-consolidated joint ventures (other JVs, premier), with multi-tenant retail at 92.0% and residential at 100.0% leased Property Summary by Planned Usage (as of March 31, 2025) | Planned Usage | Total | Built Area/Land Area | Leased Area | Occupancy Rate | Average Land Area/Location | | :------------ | :---- | :----------------- | :-------- | :------- | :------------------ | | Consolidated Properties | | | | | | | Multi-Tenant Retail | 2 | 425 sf / 28 acres | 391 | 92.0% | 14.2 | | Residential | 2 | 33 sf / 19 acres | 33 | 100.0% | 9.5 | | Premier | 4 | 228 sf / 69 acres | 189 | 83.2% | 17.2 | | Non-Core | 1 | 134 sf / 15 acres | - | 0.0% | 14.8 | | Non-Consolidated Properties | | | | | | | Other Joint Ventures | 4 | 258 sf / 52 acres | 5 | 1.8% | 13.0 | | Premier | 3 | 158 sf / 57 acres | 106 | 67.4% | 19.0 | Multi-Tenant Retail Portfolio As of March 31, 2025, Seritage's multi-tenant retail portfolio is 92% leased, totaling 391,200 square feet, comprising 250,100 square feet of existing leases and 141,100 square feet of signed but not yet opened (SNO) leases, with approximately 34,000 square feet available Multi-Tenant Retail Lease Summary (as of March 31, 2025) | Lease Type | Number of Leases | Leased GLA (thousand sq ft) | Percent of Total Leasable GLA | Annual Base Rent ("ABR") | Percent of Total ABR | ABR per sq ft | | :--------- | :--------------- | :-------------------------- | :---------------------- | :----------------------- | :------------- | :-------- | | Existing Retail Leases | 7 | 250.1 | 58.8% | $6,474.3 | 90.7% | $25.89 | | SNO Retail Leases | 1 | 141.1 | 33.2% | $663.5 | 9.3% | $4.70 | | Total Retail Leases | 8 | 391.2 | 92.0% | $7,137.8 | 100.0% | $18.25 | - The total occupancy rate for multi-tenant retail properties is 92%, with approximately 34,000 square feet available for lease[10] Premier Mixed-Use Portfolio As of March 31, 2025, the premier mixed-use portfolio has 352,000 square feet of existing leases (246,000 sq ft at share) and 50,000 square feet of SNO leases (50,000 sq ft at share), with an additional 141,000 square feet available (90,000 sq ft at share), totaling 295,600 square feet of diversified leased area, representing 76.7% of leasable GLA Premier Asset Signed Lease Summary (as of March 31, 2025, Pro Rata Share) | Lease Type | Number of Leases | Leased GLA (thousand sq ft) | Percent of Total Leasable GLA | Annual Base Rent ("ABR") | Percent of Total ABR | ABR per sq ft | | :--------- | :--------------- | :-------------------------- | :---------------------- | :----------------------- | :------------- | :-------- | | Existing Retail Leases | 43 | 137.8 | 35.7% | $10,104.7 | 48.1% | $73.33 | | Existing Office Leases | 4 | 108.0 | 28.0% | $7,070.2 | 33.7% | $65.46 | | SNO Retail Leases | 12 | 49.9 | 12.9% | $3,824.2 | 18.2% | $76.70 | | Total Diversified Leases | 59 | 295.6 | 76.7% | $20,999.1 | 100.0% | $71.04 | - The premier mixed-use portfolio has 352,000 square feet of existing leased area (246,000 square feet at share) and 50,000 square feet of signed but not yet opened (SNO) area (50,000 square feet at share)[11] Aventura Project This subsection provides specific leasing details for the Aventura project within the premier mixed-use portfolio - As of March 31, 2025, the Aventura project is 82.2% leased, with 38,000 square feet available for lease[13] - Approximately 9,000 square feet (4%) of available space at the Aventura project is currently under lease negotiation[13] Financial Performance & Liquidity This section reviews Seritage's financial results for Q1 2025, including net loss, cash position, and the use of non-GAAP financial measures Financial Summary For the three months ended March 31, 2025, net loss attributable to Seritage common shareholders expanded to $23.4 million from $20.2 million year-over-year, with net loss per share increasing to $0.42, while NOI-cash basis at share improved to $2.6 million from $2.1 million Financial Performance Summary (Three Months Ended March 31) | Metric | 2025 (USD) | 2024 (USD) | Y-o-Y Change (USD) | | :--- | :--- | :--- | :----------- | | Net Loss Attributable to Common Shareholders | (23,427) | (20,210) | (3,217) | | Net Loss Per Share | (0.42) | (0.36) | (0.06) | | NOI-cash basis at share | 2,588 | 2,098 | 490 | - Q1 2025 NOI-cash basis at share reflects the impact of $0.5 million from properties sold[14] Liquidity and Capital Resources As of March 31, 2025, the company held $107.1 million in cash, including $12.9 million in restricted cash, and plans to utilize these and future sales or alternative financing to meet obligations and fund operations and development Cash Balances | Date | Total Cash Balance | Restricted Cash | | :--- | :----------------- | :-------------- | | March 31, 2025 | $107.1 million | $12.9 million | | May 13, 2025 | $99.9 million | $11.9 million | - The company expects to utilize existing liquidity, future sales, and/or alternative financing to cover obligations and fund operations and development[15] Non-GAAP Financial Measures Seritage uses non-GAAP financial measures, including NOI-cash basis and NOI-cash basis at share, to provide additional insight into property-level operating performance by adjusting GAAP property operating income for variable and non-cash items, with NOI-cash basis at share also including the company's pro rata share in non-consolidated properties - NOI-cash basis and NOI-cash basis at share are non-GAAP metrics used to reflect property-level revenues and expenses, adjusted for variable and non-cash items[21][23][27] - NOI-cash basis at share includes the company's pro rata share in non-consolidated properties to provide insight into overall company financial performance[24] - These non-GAAP metrics should not be considered substitutes for GAAP cash flow or net income for assessing liquidity or operating performance[22][27] Corporate Developments & Governance This section covers Seritage's ongoing litigation, dividend declarations, strategic review process, and recent changes in executive leadership Litigation Matters Seritage faces multiple lawsuits, including a July 2024 class action alleging federal securities law violations regarding internal controls and asset valuation disclosures, and derivative lawsuits in January and May 2025 alleging similar conduct and breaches of fiduciary duty by executives and board members, which the company intends to vigorously defend - A class action lawsuit was filed in July 2024, alleging violations of federal securities laws regarding internal controls and real estate asset valuation disclosures[16] - Multiple derivative lawsuits were filed in January and May 2025, alleging breaches of fiduciary duty and similar claims against executives and board members[16] - The company intends to vigorously defend itself against these allegations[16] Dividends Seritage's Board declared a $0.4375 per share preferred stock dividend on February 26, 2025, paid on April 15, 2025, and again on May 8, 2025, payable on July 15, 2025 Declared Preferred Stock Dividends | Declaration Date | Dividend Per Share | Record Date | Payment Date | | :--------------- | :----------------- | :---------- | :----------- | | February 26, 2025 | $0.4375 | March 31, 2025 | April 15, 2025 | | May 8, 2025 | $0.4375 | June 30, 2025 | July 15, 2025 | Strategic Review The strategic review process for the "Plan of Sale," approved by shareholders on October 24, 2022, is ongoing, with the company open to alternative value maximization options, including a potential sale of the entire company, though success is not guaranteed - The strategic review process for the "Plan of Sale," approved by shareholders in October 2022, is ongoing[18] - Seritage remains open to alternative value maximization options, including a potential sale of the entire company[18] Appointment of New Chief Executive Officer and President Effective April 11, 2025, Andrea L. Olshan resigned as CEO and President, with Board Chairman Adam Metz appointed Interim CEO and Mitchell Sabshon named Lead Independent Director - Andrea L. Olshan resigned as Chief Executive Officer and President effective April 11, 2025[19] - Board Chairman Adam Metz was appointed Interim Chief Executive Officer, and Mitchell Sabshon was named Lead Independent Director[19] Market Conditions & Outlook This section addresses the challenging market environment, its potential impact on asset pricing and the "Plan of Sale," and the nature of forward-looking statements Market Update The company continues to face a challenging market environment, including high interest rates and macroeconomic impacts, which may exert downward pressure on asset pricing and adversely affect the "Plan of Sale" proceeds and shareholder distributions - The company continues to face a challenging market environment, including high interest rates and potential macroeconomic impacts[20] - These conditions may lead to downward pressure on asset pricing and adversely affect the proceeds from the "Plan of Sale" and shareholder distributions[20] Forward-Looking Statements This document contains forward-looking statements subject to known and unknown risks, uncertainties, assumptions, and contingencies that may cause actual results to differ materially, with no obligation to update or revise unless legally required - Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and contingencies that may cause actual results to differ materially from expectations[28] - Key risk factors include declines in retail, real estate, and overall economic conditions; risks associated with redevelopment activities; and the availability and cost of financing[28] - The company undertakes no obligation to update or revise forward-looking statements unless required by law[28] Consolidated Financial Statements This section presents Seritage's consolidated financial statements, including the balance sheets, statements of operations, and reconciliation of net loss to non-GAAP operating income Consolidated Balance Sheets As of March 31, 2025, total assets decreased to $649.7 million from $677.8 million, with net investment in real estate falling to $329.951 million, total liabilities slightly down to $267.25 million, and total shareholders' equity decreasing to $381.103 million Consolidated Balance Sheet Highlights (USD in thousands) | Metric | March 31, 2025 | December 31, 2024 | Change | | :--- | :------------- | :---------------- | :----- | | Total Assets | $649,700 | $677,774 | ($28,074) | | Net Investment in Real Estate | $329,951 | $358,634 | ($28,683) | | Real Estate Held for Sale | $8,406 | $0 | $8,406 | | Investment in Non-Consolidated Entities | $176,104 | $189,699 | ($13,595) | | Cash and Cash Equivalents | $94,268 | $85,206 | $9,062 | | Total Liabilities | $267,250 | $271,971 | ($4,721) | | Term Loan | $240,000 | $240,000 | $0 | | Total Shareholders' Equity | $381,103 | $404,456 | ($23,353) | Consolidated Statements of Operations In Q1 2025, total revenue decreased to $4.6 million from $5.8 million, primarily due to lower rental income, while total expenses rose to $21.6 million from $19.5 million, driven by increased general and administrative costs, leading to a wider net loss attributable to common shareholders of $23.4 million Consolidated Statements of Operations Highlights (USD in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Y-o-Y Change | | :--- | :-------------------------------- | :-------------------------------- | :----------- | | Total Revenue | $4,599 | $5,773 | ($1,174) | | Total Expenses | $21,629 | $19,529 | $2,100 | | Net Gain on Sale of Real Estate | $6,936 | $1,139 | $5,797 | | Equity in Earnings (Loss) of Non-Consolidated Entities | ($7,928) | $379 | ($8,307) | | Interest Expense | ($5,230) | ($7,011) | $1,781 | | Net Loss Attributable to Common Shareholders | ($23,427) | ($20,210) | ($3,217) | | Net Loss Per Share | ($0.42) | ($0.36) | ($0.06) | Reconciliation of Net Loss to NOI-cash basis and NOI-cash basis at share The reconciliation shows Q1 2025 NOI-cash basis increased to $0.898 million from $0.764 million, and NOI-cash basis at share improved to $2.588 million from $2.098 million, reflecting adjustments for non-consolidated entities and non-cash items Reconciliation Highlights (USD in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Y-o-Y Change | | :--- | :-------------------------------- | :-------------------------------- | :----------- | | Net Loss | ($22,202) | ($18,985) | ($3,217) | | General and Administrative Expenses | $15,693 | $9,192 | $6,501 | | Equity in Earnings (Loss) of Non-Consolidated Entities | $7,928 | ($379) | $8,307 | | Net Gain on Sale of Real Estate | ($6,936) | ($1,139) | ($5,797) | | Interest Expense | $5,230 | $7,011 | ($1,781) | | NOI-cash basis | $898 | $764 | $134 | | NOI from Non-Consolidated Entities | $1,794 | $1,531 | $263 | | NOI-cash basis at share | $2,588 | $2,098 | $490 | Properties Sold For the three months ended March 31, 2025, Seritage sold one entire property in Braintree, Massachusetts, totaling 85,100 square feet Properties Sold (Q1 2025) | City | State | Sale Type | Area (at share) | Sale Quarter | | :--- | :---- | :-------- | :-------------- | :----------- | | Braintree | Massachusetts | Entire Parcel | 85,100 sq ft | Q1 |