Author Topic: SRG - Seritage Growth Properties  (Read 281032 times)

Candyman1

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Re: SRG - Seritage Growth Properties
« Reply #750 on: October 11, 2018, 01:10:19 PM »
without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

This is true, but the company has been working on a refinancing option for a long time.  The management is quality, they're not going to sit on their hands waiting for a disaster to strike.

Keep in mind that at the same time SRG management is supposed to raise a lot more money it looks it is about to lose $134 million in revenue payments from SHLD. The Q2 loss would have been about $78 million rather than $44 million.

One more point ... it seems Eddie L and SHLD weren't expecting to file as they seem to still be looking for DIP financing. Not sure why you think SRG management was aware already of the coming BK filing.


Candyman1

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Re: SRG - Seritage Growth Properties
« Reply #751 on: October 11, 2018, 01:13:26 PM »
without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

This is true, but the company has been working on a refinancing option for a long time.  The management is quality, they're not going to sit on their hands waiting for a disaster to strike.

Keep in mind that at the same time SRG management is supposed to raise a lot more money it looks it is about to lose $134 million in revenue payments from SHLD. The Q2 loss would have been about $78 million rather than $44 million.

One more point ... it seems Eddie L and SHLD weren't expecting to file as they seem to still be looking for DIP financing. Not sure why you think SRG management was aware already of the coming BK filing.

And in case of a Chapter 7 filing, 900 more SHLD stores are about to hit the market. 

Shane

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Re: SRG - Seritage Growth Properties
« Reply #752 on: October 11, 2018, 02:25:18 PM »
without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

This is true, but the company has been working on a refinancing option for a long time.  The management is quality, they're not going to sit on their hands waiting for a disaster to strike.

Keep in mind that at the same time SRG management is supposed to raise a lot more money it looks it is about to lose $134 million in revenue payments from SHLD. The Q2 loss would have been about $78 million rather than $44 million.

One more point ... it seems Eddie L and SHLD weren't expecting to file as they seem to still be looking for DIP financing. Not sure why you think SRG management was aware already of the coming BK filing.

I think they viewed it as an eventuality and therefore have been planning for it.  I don't think they knew a filing was necessarily imminent this month or anything like that.

Yes more stores will hit the market, but with retail it is all about location and SRG has some of the best locations in the Sears portfolio.  Doesn't matter if a ton of boxes hit the market in rural Alabama when you're trying to lease space in Miami...
« Last Edit: October 11, 2018, 02:27:56 PM by Shane »

Candyman1

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Re: SRG - Seritage Growth Properties
« Reply #753 on: October 11, 2018, 10:15:37 PM »
without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

This is true, but the company has been working on a refinancing option for a long time.  The management is quality, they're not going to sit on their hands waiting for a disaster to strike.

Keep in mind that at the same time SRG management is supposed to raise a lot more money it looks it is about to lose $134 million in revenue payments from SHLD. The Q2 loss would have been about $78 million rather than $44 million.

One more point ... it seems Eddie L and SHLD weren't expecting to file as they seem to still be looking for DIP financing. Not sure why you think SRG management was aware already of the coming BK filing.

I think they viewed it as an eventuality and therefore have been planning for it.  I don't think they knew a filing was necessarily imminent this month or anything like that.

Yes more stores will hit the market, but with retail it is all about location and SRG has some of the best locations in the Sears portfolio.  Doesn't matter if a ton of boxes hit the market in rural Alabama when you're trying to lease space in Miami...

Well about 125 of the SHLD stores were just in CA. Mervyn's had about the same amount of stores in CA and it took down rents to get the properties leased up. Or since you are a fan of Florida, based on the latest K, 75 SHLD stores are in Florida. SRG has 26 stores in Florida btw. Not sure how many of the Florida SRG stores have been retenanted/redeveloped yet, but the available supply in Florida is about to triple. This is not an issue of a store in Miami and another one in rural Alabama.

RadMan24

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Re: SRG - Seritage Growth Properties
« Reply #754 on: October 12, 2018, 05:17:32 AM »
without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

This is true, but the company has been working on a refinancing option for a long time.  The management is quality, they're not going to sit on their hands waiting for a disaster to strike.

Keep in mind that at the same time SRG management is supposed to raise a lot more money it looks it is about to lose $134 million in revenue payments from SHLD. The Q2 loss would have been about $78 million rather than $44 million.

One more point ... it seems Eddie L and SHLD weren't expecting to file as they seem to still be looking for DIP financing. Not sure why you think SRG management was aware already of the coming BK filing.

I think they viewed it as an eventuality and therefore have been planning for it.  I don't think they knew a filing was necessarily imminent this month or anything like that.

Yes more stores will hit the market, but with retail it is all about location and SRG has some of the best locations in the Sears portfolio.  Doesn't matter if a ton of boxes hit the market in rural Alabama when you're trying to lease space in Miami...

Well about 125 of the SHLD stores were just in CA. Mervyn's had about the same amount of stores in CA and it took down rents to get the properties leased up. Or since you are a fan of Florida, based on the latest K, 75 SHLD stores are in Florida. SRG has 26 stores in Florida btw. Not sure how many of the Florida SRG stores have been retenanted/redeveloped yet, but the available supply in Florida is about to triple. This is not an issue of a store in Miami and another one in rural Alabama.

Candyman, they knew they ain't stupid and Sears gave a ton of warning. You ready between the lines. Seritage has also been building its JV alliances. As mentioned above, the hit on earnings and cash flow with liquidation will hurt - but with financing in place it won't be dire and it will be manageable. That's not to say people freak out or question weather its enough, there may be a chance to buy shares at cheaper levels than they are at now. But in terms of shorting - that's a risky proposition.

Shane

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Re: SRG - Seritage Growth Properties
« Reply #755 on: October 12, 2018, 07:43:57 AM »
without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

This is true, but the company has been working on a refinancing option for a long time.  The management is quality, they're not going to sit on their hands waiting for a disaster to strike.

Keep in mind that at the same time SRG management is supposed to raise a lot more money it looks it is about to lose $134 million in revenue payments from SHLD. The Q2 loss would have been about $78 million rather than $44 million.

One more point ... it seems Eddie L and SHLD weren't expecting to file as they seem to still be looking for DIP financing. Not sure why you think SRG management was aware already of the coming BK filing.

I think they viewed it as an eventuality and therefore have been planning for it.  I don't think they knew a filing was necessarily imminent this month or anything like that.

Yes more stores will hit the market, but with retail it is all about location and SRG has some of the best locations in the Sears portfolio.  Doesn't matter if a ton of boxes hit the market in rural Alabama when you're trying to lease space in Miami...

Well about 125 of the SHLD stores were just in CA. Mervyn's had about the same amount of stores in CA and it took down rents to get the properties leased up. Or since you are a fan of Florida, based on the latest K, 75 SHLD stores are in Florida. SRG has 26 stores in Florida btw. Not sure how many of the Florida SRG stores have been retenanted/redeveloped yet, but the available supply in Florida is about to triple. This is not an issue of a store in Miami and another one in rural Alabama.

Even comparing within a state makes no sense Candyman1.  It can be as specific as neighborhood or block.  Two retail locations can have substantially different rent profiles and be only blocks away from each other.  There isn't much logic in saying the supply in Florida will triple when a store services a few square miles.
« Last Edit: October 12, 2018, 07:46:55 AM by Shane »

Candyman1

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Re: SRG - Seritage Growth Properties
« Reply #756 on: October 12, 2018, 08:13:50 AM »
Even comparing within a state makes no sense Candyman1.  It can be as specific as neighborhood or block.  Two retail locations can have substantially different rent profiles and be only blocks away from each other.  There isn't much logic in saying the supply in Florida will triple when a store services a few square miles.
[/quote]

Interesting ... so why did redevelopment deals and terms struggle in CA when Mervyn's took Chapter 7 with about 120 stores. I guess those stores don't cover a few square miles. =) I know someone that was involved in that situation. Yes, the store covers only a local area, but the tenants don't. And the tenants now will have three times the choices to pick where they will open their new stores. It is much easier to negotiate with landlords when you have 4 knocking on your door with a great location each than when you have one. And the landlords will all call on the same potential tenants at the same time.

BTShine

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Re: SRG - Seritage Growth Properties
« Reply #757 on: October 12, 2018, 09:12:07 AM »
Candyman,

Interesting point.   Do you know if the rent rate $psf or length of vacancy had the bigger affect on properties during the Mervyn's process?   

koshigoe

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Re: SRG - Seritage Growth Properties
« Reply #758 on: October 12, 2018, 12:50:46 PM »
Even comparing within a state makes no sense Candyman1.  It can be as specific as neighborhood or block.  Two retail locations can have substantially different rent profiles and be only blocks away from each other.  There isn't much logic in saying the supply in Florida will triple when a store services a few square miles.
Quote
Interesting ... so why did redevelopment deals and terms struggle in CA when Mervyn's took Chapter 7 with about 120 stores. I guess those stores don't cover a few square miles. =) I know someone that was involved in that situation. Yes, the store covers only a local area, but the tenants don't. And the tenants now will have three times the choices to pick where they will open their new stores. It is much easier to negotiate with landlords when you have 4 knocking on your door with a great location each than when you have one. And the landlords will all call on the same potential tenants at the same time.

Suppose you're correct Candyman, yes there will be more supply a la Mervyns, and rental rates should come down. SRG, as we have seen, should do just fine because 1) they can sit on properties acquired at garage sale prices (EV/sqft of $120/sq ft) and release far below what other REITs avg sq ft rental is for similar quality property for a nice profit and multiple of historical Sears rents => competitive advantage.

We have seen this over last several years with REIs, Olive Gardens, Steakhouses moving from literally blocks down the street to fill in the new supply at SRG.

I'd argue you're right, but I don't draw same conclusion as you. As Berkowitz said a couple of years back before he threw in the towel on all things SRG, "anyway you slice it, SRG is cheap" at around 40-something a share.

And with the 5 yr loan from BRK, to me SRG remains quite a lopsided positive bet, and nice risk adjusted returns.


edit: also getting the whole boxes back means the JVs can finally be greenlit with Macerich, Simon, and rest of GGP.
« Last Edit: October 12, 2018, 03:08:24 PM by koshigoe »

Candyman1

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Re: SRG - Seritage Growth Properties
« Reply #759 on: October 12, 2018, 03:15:24 PM »
Even comparing within a state makes no sense Candyman1.  It can be as specific as neighborhood or block.  Two retail locations can have substantially different rent profiles and be only blocks away from each other.  There isn't much logic in saying the supply in Florida will triple when a store services a few square miles.
Quote
Interesting ... so why did redevelopment deals and terms struggle in CA when Mervyn's took Chapter 7 with about 120 stores. I guess those stores don't cover a few square miles. =) I know someone that was involved in that situation. Yes, the store covers only a local area, but the tenants don't. And the tenants now will have three times the choices to pick where they will open their new stores. It is much easier to negotiate with landlords when you have 4 knocking on your door with a great location each than when you have one. And the landlords will all call on the same potential tenants at the same time.

Suppose you're correct Candyman, yes there will be more supply a la Mervyns, and rental rates should come down. SRG, as we have seen, should do just fine because 1) they can sit on properties acquired at garage sale prices (EV/sqft of $120/sq ft) and release far below what other REITs avg sq ft rental is for similar quality property for a nice profit and multiple of historical Sears rents => competitive advantage.

We have seen this over last several years with REIs, Olive Gardens, Steakhouses moving from literally blocks down the street to fill in the new supply at SRG.

I'd argue you're right, but I don't draw same conclusion as you. As Berkowitz said a couple of years back before he threw in the towel on all things SRG, "anyway you slice it, SRG is cheap" at around 40-something a share.

And with the 5 yr loan from BRK, to me SRG remains quite a lopsided positive bet, and nice risk adjusted returns.

edit: also getting the whole boxes back means the JVs can finally be greenlit with Macerich, Simon, and rest of GGP.

You are seriously going to throw Berkowitz as a reference at me? LOL. If you show that guy a dollar bill, he'd tell you its worth two dollars. Go through his letters and reasoning why SHLD was worth so much more. Made no sense at all. All of his reasonings were laughable but the best one was when he put a value on the SHLD pharmacies.
« Last Edit: October 12, 2018, 03:53:20 PM by Candyman1 »