Seritage(US:SRG)2023-03-14 20:50Portfolio and Assets - As of December 31, 2022, the company's portfolio consisted of 97 properties with approximately 13.5 million square feet of GLA, including 80 consolidated properties and 17 unconsolidated properties[202]. - The company sold 65 wholly owned assets during the year ended December 31, 2022, generating gross proceeds of $650.3 million, with a recorded gain of $211.9 million[207][223]. - The company has 22 assets under contract to sell for total anticipated proceeds of $366.3 million as of March 6, 2023[207]. - As of March 6, 2023, the company had 17 assets under contract for sale with anticipated proceeds of $326.7 million and 5 assets under contract subject to due diligence for $39.6 million[233]. - The company has sold 148 Consolidated Properties since July 2017, generating approximately $1.6 billion in gross proceeds[236]. Financial Performance - Rental income for the year ended December 31, 2022, was $104.6 million, a decrease of 10% from $115.7 million in 2021, primarily due to property sales[215][216]. - The company recorded net operating cash outflows of $117.9 million for the year ended December 31, 2022, as property rental income did not fully fund obligations[231]. - The company generated net investing cash inflows of $586.1 million during the year ended December 31, 2022, driven by asset sales[231]. - The Company reported net cash used in operating activities of $117.9 million for the year ended December 31, 2022, an improvement of $18.1 million compared to 2021[261]. - Net cash provided by investing activities increased significantly to $586.1 million in 2022, up by $325.4 million from 2021[261]. Impairment and Losses - The company recognized $126.9 million in impairment losses for the year ended December 31, 2022, reflecting a 32% increase from the previous year's impairment of $95.8 million[205][226]. - The company experienced a 681% increase in equity in loss of unconsolidated entities, totaling $72.1 million for the year ended December 31, 2022, primarily due to impairment charges[228]. - The company recorded $35.6 million in other-than-temporary impairment losses in investments in unconsolidated entities for the year ended December 31, 2022, with no such losses recognized in 2021[277]. - The company recognized impairment losses of $126.9 million and $95.8 million for real estate assets for the years ended December 31, 2022, and 2021, respectively[276]. Expenses and Settlements - General and administrative expenses increased by $5.7 million to $47.6 million for the year ended December 31, 2022, driven by third-party consultants and retention bonuses[222]. - The company recorded a $35.5 million litigation settlement during the year ended December 31, 2022, which was approved by the court on September 2, 2022[220]. - The Company made a settlement payment of $35.5 million related to litigation, recorded as a litigation settlement in the consolidated statement of operations for the year ended December 31, 2022[272]. Debt and Financing - Interest expense decreased by $21.2 million for the year ended December 31, 2022, due to partial term loan pay-downs of $160 million in 2021 and $410 million in 2022[230]. - The company repaid $570 million against the principal of the Term Loan Facility, with an outstanding balance of $1.03 billion as of December 31, 2022, reduced to $800 million after a $230 million prepayment on March 6, 2023[239]. - The maturity date for the Term Loan Facility has been extended to July 31, 2025, due to the reduction of the principal balance[258]. - The Term Loan Facility includes a $400 million Incremental Funding Facility, which the company has not yet accessed due to not achieving the required rental income[236]. - The company incurred $2.1 million in debt issuance costs related to the Term Loan Facility, amortized over the term of the agreement[248]. Shareholder Value and Strategic Review - The strategic review process for enhancing shareholder value is ongoing, with no assurance of successful execution of the proposed plan of sale[204]. - As of December 31, 2022, the company was not in compliance with certain financial metrics, requiring consent from Berkshire Hathaway for asset disposals[247]. Operating Income and Metrics - Net Operating Income (NOI) for the year ended December 31, 2022, was $37.5 million, compared to $29.9 million in 2021, reflecting a year-over-year increase of approximately 25.7%[286]. - Total NOI for the year ended December 31, 2022, was $43.5 million, up from $35.5 million in 2021, indicating a growth of about 22.5%[286]. - The company believes that NOI and Total NOI provide useful insights into its financial performance, excluding variable and non-cash items[284]. - The company’s financial measures, including NOI and Total NOI, should be viewed as supplemental and not as alternatives to GAAP measures[285]. Compliance and Fair Value - The company assesses the collectability of tenant receivables, which can significantly impact rental revenue recognized in the consolidated statements of income[278]. - Management exercises judgment in estimating the fair value of real estate assets, considering factors such as expected future operating income and market conditions[276]. - As of December 31, 2022, the company had $1.03 billion of consolidated debt, all under a fixed-rate Term Loan Facility, mitigating exposure to interest rate fluctuations[288]. - The estimated fair value of the company's consolidated debt as of December 31, 2022, was $1.0 billion, calculated based on current market prices and discounted cash flows[289]. Shareholder Information - The Company has 2,800,000 Series A Preferred Shares outstanding, with a redemption price of $25.00 per share plus any accrued dividends[255]. - The Board of Trustees did not declare dividends on Class A common shares during 2022, with the last dividend declared on February 25, 2019[256]. - Total contractual obligations as of December 31, 2022, amount to $1.08 billion, including $1.07 billion in long-term debt and $8.7 million in operating leases[257].