Seritage Growth Properties Reports First Quarter 2024 Operating Results

Business Wire
21 min read

In This Article:

NEW YORK, May 10, 2024--(BUSINESS WIRE)--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 months ended March 31, 2024.

"We are continuing to advance our Plan of Sale, having sold $80 million of assets year to date and repaid an equal amount of debt in the process.  Since the announcement of our strategic review and election to be taxed as a C-Corp two years ago, we have sold 151 assets for approximately $1.7 billion of gross proceeds and repaid roughly $1.2 billion in debt.  Based on our broad transaction experience, we are seeing a few themes emerge. Assets previously underwritten for life sciences or tech office are now frequently being reconsidered for other uses in higher demand but with less aggressive rent profiles, which, taken together with high construction costs, drives down the amount that can be paid for land.  We are also seeing investors focusing on less risky debt or cash flowing equity investments to generate double-digit returns. Yet, some with a longer-term view are starting to come back to the development market. With more stability in interest rates and inflation, buyers are able to underwrite deals more confidently, albeit at lower valuations. As such we are adjusting our pricing projections for some of our assets." said Andrea L. Olshan, Chief Executive Officer and President.

Sale Highlights:

  • Generated $48.8 million of gross proceeds from sales including:

    • $34.0 million in gross proceeds from one income producing Multi-Tenant Retail asset reflecting a 7.6% capitalization rate; and

    • $14.8 million in gross proceeds from four vacant/non-income producing Non-Core assets sold at $28.56 PSF eliminating $0.8 million of carry costs.

  • Subsequent to quarter end, generated $31.8 million of gross proceeds from sales including:

    • $28.0 million in gross proceeds from one income producing Multi-Tenant Retail asset reflecting a 5.3% capitalization rate; and

    • $3.8 million in gross proceeds from one income producing Non-Core assets reflecting a 7.8% capitalization rate.

  • As of May 7, the Company has four assets under contract for anticipated gross proceeds of $30.1 million. All assets for sale are subject to customary closing conditions. Of these four assets, two are for sale with no due diligence contingencies for total anticipated gross proceeds of $8.3 million and two assets are under contract for sale subject to customary due diligence for total anticipated gross proceeds of $21.8 million including:

    • $25.4 million in gross proceeds from three vacant/non- income producing Non-Core assets to be sold at $42.64 PSF eliminating $1.2 million of carry costs; and

    • $4.7 million in gross proceeds from monetizing an unconsolidated entity interest.

  • The Company has accepted offers on and is currently negotiating definitive purchase and sale agreements on four assets for total gross proceeds of approximately $79.1 million including:

    • $24.0 million in gross proceeds from one income producing Multi-Tenant Retail asset reflecting a 8.5% capitalization rate;

    • $8.1 million in gross proceeds from one vacant / non-income producing Non-Core assets to be sold at $55.18 PSF eliminating $0.3 million of carry costs; and

    • $47.0 million in gross proceeds from monetizing two unconsolidated entity interests.

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