Author Topic: SRG - Seritage Growth Properties  (Read 231921 times)

BTShine

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Re: SRG - Seritage Growth Properties
« Reply #620 on: July 13, 2018, 06:23:47 PM »
The incremental returns on capex for redevelopment are most important for me.  Also, if investing this capex not only increases lease rates per square foot, but also locks in existing rents with a higher quality and more diversified tenant base, that also creates value. 

Iím less concerned with absolute lease rates and more concerned with how much capital SRG must invest for the related rent increases.



vince

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Re: SRG - Seritage Growth Properties
« Reply #621 on: July 14, 2018, 09:31:49 AM »
The incremental returns on capex for redevelopment are most important for me.  Also, if investing this capex not only increases lease rates per square foot, but also locks in existing rents with a higher quality and more diversified tenant base, that also creates value. 

Iím less concerned with absolute lease rates and more concerned with how much capital SRG must invest for the related rent increases.
So True, excellent post

BTShine

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Re: SRG - Seritage Growth Properties
« Reply #622 on: July 16, 2018, 08:24:36 AM »
One thing of interest is the price of redevelopment per square foot.   The last three years (6 months for 2018) are as follows:

2016: $138.50             
2017: $197.20             
2018: $111.50           

While we don't see disclosure on what specific SNO or projected lease rates are associated with each tranche, it might be fair to assume that the 2018 redevelopments are associated with the lower SNO lease rates we saw this quarter.   If we continue to see redevelopment costs in the low $100s psf (it was below $100 in Q2 2018.  $97.60 to be exact) we should expect to see Seritage signing lower lease rates than before.  Based on this history I'd expect to see $100 psft of redevelopment capex produce new lease rates of around $14.50 a square foot. 


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Calculations:
2016  (=$370.7/2.677 sqft)
2017  (=$693.6/3.517 sqft)
2018  (=$152.7/1.369 sqft)
« Last Edit: July 17, 2018, 09:50:35 AM by BTShine »

koshigoe

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Re: SRG - Seritage Growth Properties
« Reply #623 on: July 17, 2018, 02:51:26 PM »
at least one recently closed Sears being actively offered for sale

https://www.pyramidbrokerage.com/properties/img/property/flyers/G5340.pdf


LongTermView

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Re: SRG - Seritage Growth Properties
« Reply #624 on: July 17, 2018, 03:01:02 PM »
One thing of interest is the price of redevelopment per square foot.   The last three years (6 months for 2018) are as follows:

2016: $138.50             
2017: $197.20             
2018: $111.50           

While we don't see disclosure on what specific SNO or projected lease rates are associated with each tranche, it might be fair to assume that the 2018 redevelopments are associated with the lower SNO lease rates we saw this quarter. 

Good point, BTShine. The lower SNO lease rates need to be evaluated in tandem with the redevelopment costs.

GCA

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Re: SRG - Seritage Growth Properties
« Reply #625 on: July 18, 2018, 01:18:43 PM »
The incremental returns on capex for redevelopment are most important for me.  Also, if investing this capex not only increases lease rates per square foot, but also locks in existing rents with a higher quality and more diversified tenant base, that also creates value. 

Iím less concerned with absolute lease rates and more concerned with how much capital SRG must invest for the related rent increases.

I agree but you also have to consider how much of this is priced in?  It's not like SRG is trading at book value.

BTShine

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Re: SRG - Seritage Growth Properties
« Reply #626 on: July 18, 2018, 03:07:19 PM »
If the majority of SRG's value will be realized via renting existing and redeveloped/newly developed space, then I think incremental rents and the related return on capex are what will help us determine the intrinsic value of the company.   Another important factor we must try to predict is the amount of capital they can invest on new and re-developments every year and in total over the next 10+ years with this portfolio. 

On the other hand, if you believe SRG will begin to sell off significant portions of land, then market value and it's approximate relation to book value are of importance.  Returns on capex do not matter if we are liquidating the portfolio.  In the current state I don't think SRG plans to liquidate it's land portfolio and therefore book value is not of utmost importance.