Seritage(SRG) - 2025 Q2 - Quarterly Results

Company Overview & Strategic Direction Executive Summary Seritage Growth Properties extended its term loan maturity, reported progress on asset sales including three signed purchase agreements and five under negotiation, aiming to maximize shareholder value and repay debt through asset divestitures - Company extended its term loan maturity to execute sales at appropriate pricing and timing, maximizing shareholder value[2] - Progress made on asset sales with three purchase and sale agreements signed and five more under negotiation[2] - Company continues to execute its plan of sale, aiming to repay remaining debt and ultimately distribute proceeds to shareholders[2] Strategic Review (Plan of Sale) Shareholders approved the plan of sale in October 2022, and the strategic review is ongoing, with the company open to value-maximizing alternatives including a potential sale of the company - Seritage shareholders approved the company's plan of sale on October 24, 2022[22] - The strategic review process is ongoing, and the company remains open to pursuing value-maximizing alternatives, including a potential sale of the company[22] Market Update The company continues to face challenging market conditions, such as high interest rates and debt/equity capital availability, which may exert downward pressure on remaining asset pricing and impact the proceeds and timing of shareholder distributions from the plan of sale - The company continues to face challenging market conditions, including high interest rates and the availability of debt and equity capital[23] - These market conditions may exert downward pressure on the pricing of the company's remaining assets[23] - If challenging market conditions persist, it is expected to adversely affect the proceeds from the plan of sale and the amount and timing of distributions to shareholders[23] Financial Performance Highlights Q2 2025 Financial Highlights In Q2 2025, the company significantly narrowed its net loss and reduced net loss per share, with NOI-Cash Basis turning positive, but still recognized an $18 million real estate asset impairment charge Q2 2025 Key Financial Metrics | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net Loss Attributable to Seritage Common Shareholders (thousand dollars) | $(29,731) | $(102,452) | | Net Loss Per Share Attributable to Seritage Common Shareholders (dollars) | $(0.53) | $(1.82) | | NOI-Cash Basis (at share) (thousand dollars) | $2,582 | $(137) | - In Q2 2025, the company recognized an $18 million impairment charge on its consolidated properties[10] H1 2025 Financial Highlights In H1 2025, the company's net loss and net loss per share significantly decreased year-over-year, NOI-Cash Basis (at share) turned positive, and a $40 million term loan principal repayment was made H1 2025 Key Financial Metrics | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net Loss Attributable to Seritage Common Shareholders (thousand dollars) | $(53,158) | $(122,662) | | Net Loss Per Share Attributable to Seritage Common Shareholders (dollars) | $(0.94) | $(2.18) | | NOI-Cash Basis (at share) (thousand dollars) | $5,170 | $1,961 | - In H1 2025, the company invested $18 million in its consolidated properties, primarily for tenant lease costs, and $0.4 million in its unconsolidated properties[10] - The company received $7.4 million in distributions from unconsolidated properties in H1 2025[10] - In H1 2025, the company repaid $40 million of term loan principal[10] Liquidity Position As of June 30, 2025, the company held $80.1 million in cash, including $8.3 million in restricted cash, and plans to utilize these liquidity sources, future sales, and/or potential alternative financing to meet obligations and fund operations and development Cash Holdings | Date | Cash (million dollars) | Restricted Cash (million dollars) | | :----------- | :------------------- | :------------------------------ | | June 30, 2025 | 80.1 | 8.3 | | August 13, 2025 | 65.1 | 8.3 | - The company expects to utilize existing liquidity, future sales, and/or potential alternative financing arrangements to pay financing obligations and fund operating and development activities[18] Asset Sales & Future Outlook Q2 2025 Sales Activities In Q2 2025, the company generated $31.1 million in gross proceeds from the sale of one premier property and an interest in an unconsolidated entity, also eliminating associated carrying costs Q2 2025 Sales Proceeds | Sale Type | Gross Proceeds (million dollars) | Eliminated Carrying Costs (million dollars) | | :------------------- | :----------------------------- | :---------------------------------------- | | One Premier Property | 23.0 | 0.6 | | Interest in an Unconsolidated Entity | 8.1 | Not Applicable | Assets Under Contract & Negotiation As of August 14, 2025, the company has three assets under contract with expected gross proceeds of $109.8 million, and five assets under negotiation with estimated gross proceeds of approximately $226.4 million Assets Under Contract Details (as of August 14, 2025) | Asset Type | Estimated Gross Proceeds (million dollars) | Capitalization Rate (%) | Eliminated Carrying Costs (million dollars) | | :------------------- | :------------------------------------- | :---------------------- | :---------------------------------------- | | One Income-Producing Asset | 28.5 | 7.4 | Not Applicable | | One Vacant/Non-Income Producing Asset | 10.5 | Not Applicable | 0.1 | | One Premier Development Asset | 70.8 | Not Applicable | Not Applicable | - The company is currently negotiating definitive purchase and sale agreements for five assets, with estimated gross proceeds of approximately $226.4 million (company's share $181.2 million)[4] Future Sales Projections The company provides future sales projections as of August 14, 2025, excluding assets already under contract or negotiation, with sales expected in late 2025 and beyond, though actual results may vary significantly - Gateway Markets' projected asset sales include: one multi-tenant asset ($25 million-$30 million), five premier assets (two at $15 million-$20 million, two at $30 million-$40 million, one at $60 million-$70 million, and one at $100 million-$150 million)[11] - Secondary Markets' projected asset sales include: one residential asset ($5 million-$10 million)[8] - Sales projections are based on the company's latest forecasts and assumptions, but actual results may differ materially[6] Properties Sold in H1 2025 In H1 2025, the company sold four properties located in Boca Raton, Barton Creek, Santa Rosa, and Braintree Properties Sold in H1 2025 | City | State | Sale Type | Area (square feet) | Sale Quarter | | :--------- | :--- | :--------- | :----------------- | :----------- | | Boca Raton | FL | Full Parcel | 4,200 | Q2 | | Barton Creek | TX | Full Parcel | 82,300 | Q2 | | Santa Rosa | CA | Full Parcel | 82,700 | Q2 | | Braintree | MA | Full Parcel | 85,100 | Q1 | Property Portfolio & Leasing Portfolio Summary by Planned Usage As of June 30, 2025, the company's portfolio includes consolidated and unconsolidated properties, with multi-tenant retail properties 92.0% leased and residential properties 100.0% leased Portfolio Summary by Planned Usage (as of June 30, 2025) | Planned Usage | Total | Building/Land Area (sf/acres) | Leased Area (sf) | Leased Percentage (%) | Average Land Area/Site (acres) | | :----------- | :--- | :---------------------------- | :--------------- | :-------------------- | :----------------------------- | | 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 Properties | 3 | 224 sf / 51 acres | 189 | 84.0 | 16.8 | | Non-Core Properties | 1 | 134 sf / 15 acres | - | 0.0 | 14.8 | | Unconsolidated Properties | | | | | | | Other Joint Ventures | 2 | 93 sf / 28 acres | 5 | 5.1 | 14.2 | | Premier Properties | 3 | 158 sf / 57 acres | 105 | 66.6 | 19.0 | Multi-Tenant Retail Leasing As of June 30, 2025, the company's multi-tenant retail properties have a total leased area of 391,000 square feet with a 92% occupancy rate, and approximately 34,000 square feet available for lease Multi-Tenant Retail Leases Signed and Under Negotiation Summary (as of June 30, 2025) | Tenant | Number of Leases | Total Leased GLA (thousand square feet) | Percentage of Total GLA (%) | Total Annual Base Rent (thousand dollars) | Percentage of Total Annual Base Rent (%) | Annual Base Rent Per Square Foot (dollars) | | :----------- | :--------------- | :-------------------------------------- | :-------------------------- | :---------------------------------------- | :--------------------------------------- | :----------------------------------------- | | Existing Retail Leases | 7 | 250.1 | 58.8 | 6,474.3 | 90.7 | 25.89 | | Signed, Not Commenced | 1 | 141.1 | 33.2 | 663.5 | 9.3 | 4.7 | | Total Retail Leases | 8 | 391.2 | 92.0 | 7,137.8 | 100.0 | 18.25 | - The company's multi-tenant retail properties have a total occupancy rate of 92%, with approximately 34,000 square feet available for lease[13] Premier Mixed-Use Property Leasing As of June 30, 2025, the company's premier mixed-use properties have 353,000 square feet of existing leased area, 45,000 square feet signed but not yet commenced, and 141,000 square feet available for lease Premier Property Leases Signed Summary (as of June 30, 2025) | Tenant | Number of Leases | Total Leased GLA (thousand square feet) | Percentage of Total GLA (%) | Total Annual Base Rent (thousand dollars) | Percentage of Total Annual Base Rent (%) | Annual Base Rent Per Square Foot (dollars) | | :----------- | :--------------- | :-------------------------------------- | :-------------------------- | :---------------------------------------- | :--------------------------------------- | :----------------------------------------- | | Existing Retail Leases | 44 | 140.3 | 36.8 | 10,567.2 | 50.5 | 75.32 | | Existing Office Leases | 4 | 108.0 | 28.3 | 7,070.2 | 33.8 | 65.46 | | Signed, Not Commenced | 11 | 44.6 | 11.7 | 3,276.3 | 15.7 | 73.46 | | Total | 59 | 292.9 | 76.9 | 20,913.7 | 100.0 | 71.40 | - As of June 30, 2025, the company's premier mixed-use properties have 353,000 square feet of existing leased area (company's share 248,000 square feet), 45,000 square feet signed but not yet commenced (company's share 45,000 square feet), and 141,000 square feet available for lease (company's share 88,000 square feet)[14] Aventura Project Leasing Update As of June 30, 2025, the Aventura project's 216,000 square feet of office and retail leasing is 83.5% complete, with 36,000 square feet still available for lease - As of June 30, 2025, the Aventura project's 216,000 square feet of office and retail leasing is 83.5% complete[16] - The Aventura project still has 36,000 square feet (16.5%) available for lease[16] Corporate Matters Litigation Matters The company faces multiple securities class action and derivative lawsuits alleging internal control deficiencies in identifying and reviewing real estate investment impairment indicators, and misstatements or omissions regarding the value and projected gross proceeds of certain real estate assets - The company faces a securities class action lawsuit alleging false, misleading, and/or omitted disclosures regarding internal controls and real estate asset values between July 7, 2022, and May 10, 2024[19] - The company also faces multiple derivative lawsuits alleging breaches of fiduciary duty by its CEO, CFO, and board members, seeking damages and corporate governance reforms[19] - The company intends to vigorously defend itself against the allegations in these lawsuits[19] Dividends The company's Board of Trustees declared and paid dividends for its Series A Preferred Stock in February and May 2025, and declared a dividend for July 2025, all at $0.4375 per share Series A Preferred Stock Dividend Declarations | Declaration Date | Dividend Per Share (dollars) | Payment Date | Record Date | | :--------------- | :--------------------------- | :----------- | :---------- | | February 26, 2025 | $0.4375 | April 15, 2025 | March 31, 2025 | | May 8, 2025 | $0.4375 | July 15, 2025 | June 30, 2025 | | July 23, 2025 | $0.4375 | October 15, 2025 | September 30, 2025 | Non-GAAP Financial Measures NOI-Cash Basis and NOI-Cash Basis (at share) Definition NOI-Cash Basis and NOI-Cash Basis (at share) are non-GAAP financial measures adjusted from GAAP to reflect property-level revenues and expenses, providing insight into overall financial performance but not replacing GAAP cash flow or net income - NOI-Cash Basis is defined as property operating revenues 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, aiming to provide insight into the company's overall financial performance and condition[27] - These non-GAAP measures do not represent cash flow from operations as defined by GAAP and should not be considered as alternatives to net income for evaluating the company's operating performance[25][30] Reconciliation to GAAP Net Loss The company provides a detailed table reconciling GAAP net loss to NOI-Cash Basis and NOI-Cash Basis (at share) to illustrate the calculation process for these non-GAAP measures Reconciliation of Net Loss to NOI-Cash Basis and NOI-Cash Basis (at share) (thousand dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net Loss | $(28,506) | $(101,227) | $(50,708) | $(120,212) | | Management and other fee income | (127) | (50) | (269) | (98) | | Depreciation and amortization | 2,040 | 1,212 | 4,115 | 6,483 | | General and administrative expenses | 6,172 | 6,874 | 21,865 | 16,066 | | Equity in earnings (losses) of unconsolidated entities | (756) | 566 | 7,172 | 187 | | Loss on sale of interest in unconsolidated entity | 1,417 | - | 1,417 | - | | Net gain on sale of real estate | (1,967) | (2,034) | (8,903) | (3,173) | | Real estate asset impairment | 18,000 | 86,388 | 18,000 | 87,536 | | Interest and other income (expense), net | (930) | (717) | (1,790) | (2,140) | | Interest expense | 5,139 | 6,282 | 10,369 | 13,293 | | Income tax (benefit) expense | 115 | 1,474 | (75) | 1,485 | | Straight-line rent | (34) | 179 | 225 | 246 | | Above/below market lease expense | 44 | 38 | 87 | 76 | | NOI-Cash Basis | $607 | $(1,015) | $1,505 | $(251) | | Net operating income from unconsolidated entities | 2,026 | 1,020 | 3,820 | 2,551 | | Straight-line rent | (42) | (133) | (137) | (321) | | Above/below market lease expense | (9) | (9) | (18) | (18) | | NOI-Cash Basis (at share) | $2,582 | $(137) | $5,170 | $1,961 | Consolidated Financial Statements Consolidated Balance Sheets As of June 30, 2025, the company's total assets were $575.7 million, a decrease from $677.8 million on December 31, 2024, primarily due to reductions in real estate investments and cash and cash equivalents Consolidated Balance Sheets (thousand dollars) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------- | :---------------- | | Assets | | | | Real estate investments, net | 291,661 | 358,634 | | Real estate held for sale | 8,511 | - | | Investments in unconsolidated entities | 165,937 | 189,699 | | Cash and cash equivalents | 71,802 | 85,206 | | Restricted cash | 8,328 | 12,503 | | Total assets | 575,707 | 677,774 | | Liabilities | | | | Term loan | 200,000 | 240,000 | | Accounts payable, accrued expenses and other liabilities | 22,970 | 31,971 | | Total liabilities | 222,970 | 271,971 | | Stockholders' equity | | | | Total stockholders' equity | 351,372 | 404,456 | | Noncontrolling interests | 1,365 | 1,347 | | Total equity | 352,737 | 405,803 | | Total liabilities and equity | 575,707 | 677,774 | Consolidated Statements of Operations In Q2 and H1 2025, the company's total revenues slightly increased, but it still reported a net loss due to real estate asset impairment and general and administrative expenses, though the loss significantly narrowed compared to the prior year Consolidated Statements of Operations (thousand dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Revenues | | | | | | Rental revenues | 4,526 | 4,166 | 8,983 | 9,891 | | Management and other fee income | 127 | 50 | 269 | 98 | | Total revenues | 4,653 | 4,216 | 9,252 | 9,989 | | Expenses | | | | | | Property operating | 3,237 | 4,160 | 6,145 | 7,833 | | Real estate taxes | 692 | 1,238 | 1,645 | 2,631 | | Depreciation and amortization | 2,040 | 1,212 | 4,115 | 6,483 | | General and administrative | 6,172 | 6,874 | 21,865 | 16,066 | | Total expenses | 12,141 | 13,484 | 33,770 | 33,013 | | Net gain on sale of real estate | 1,967 | 2,034 | 8,903 | 3,173 | | Loss on sale of interest in unconsolidated entity | (1,417) | — | (1,417) | — | | Real estate asset impairment | (18,000) | (86,388) | (18,000) | (87,536) | | Equity in earnings (losses) of unconsolidated entities | 756 | (566) | (7,172) | (187) | | Interest and other income (expense), net | 930 | 717 | 1,790 | 2,140 | | Interest expense | (5,139) | (6,282) | (10,369) | (13,293) | | Net loss | (28,506) | (101,227) | (50,708) | (120,212) | | Net Loss Attributable to Seritage Common Shareholders | $(29,731) | $(102,452) | $(53,158) | $(122,662) | | Net loss per share - basic (dollars) | $(0.53) | $(1.82) | $(0.94) | $(2.18) | Additional Information About Seritage Growth Properties Before adopting its plan of sale, Seritage Growth Properties primarily owned, developed, managed, sold, and leased diversified retail and mixed-use properties, with a portfolio of 13 properties totaling approximately 1.3 million square feet and 198 acres as of June 30, 2025 - Before adopting its 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[32] - As of June 30, 2025, the company's portfolio included interests in 13 properties, totaling approximately 1.3 million square feet and 198 acres of land[32] - The portfolio comprises 8 consolidated properties (approximately 0.8 million square feet and 113 acres) and 5 unconsolidated entities (approximately 0.5 million square feet and 85 acres)[32] Forward-Looking Statements This document contains forward-looking statements regarding expectations for future plans, strategies, and trends, which are subject to known and unknown risks, uncertainties, assumptions, and contingencies that could cause actual results to differ materially from expectations - Forward-looking statements involve projections of future plans, strategies, anticipated events, or trends, rather than historical facts[31] - These statements are subject to known and unknown risks, uncertainties, assumptions, and contingencies that could cause actual results to differ materially from those expressed in the forward-looking statements[31] - The company undertakes no obligation to update or revise any forward-looking statements, except as required by law[31] Contact Information To contact Seritage Growth Properties, please call (212) 355-7800 or email IR@Seritage.com - Contact Phone: (212) 355-7800[33] - Email: IR@Seritage.com[33]