Author Topic: SRG - Seritage Growth Properties  (Read 280943 times)

koshigoe

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Re: SRG - Seritage Growth Properties
« Reply #770 on: October 13, 2018, 07:58:54 PM »
Average new lease for SRG $17.5 per sq foot. Average SPG base minimum rent (before CAM) $53 per sq foot. Btw. if you assume that the $17.5 is before CAM, well SPG's  is close to $70 a sq foot after cam. Are you still sure that SRG "owns the best and the most". The SPG numbers are US numbers.

uh, *** gross conceptual error alert ***.

form an earlier post:
Quote
All mall REITs cheat (industry practice) and don't include dept stores in their per foot rent averages. A holdover from the olden days and probably misleading at best, in the new de-malling, mixed use paradigm. For example, Macerich only reports per square foot for stores under 10k sq ft.

To be specific, from SPG 10k edit: pg 58

Quote
We include all company owned space except for mall anchors, mall majors, mall freestanding and mall outlots in the calculation. Base minimum rent per square foot is the average base minimum rent charge in effect for the reporting period for all tenants that would qualify to be included in ending occupancy.

Total Sales per Square Foot. Total sales include total reported retail tenant sales on a trailing 12‐month basis at owned GLA (for mall stores with less than 10,000 square feet) in the malls and The Mills and stores with less than 20,000 square feet in the Premium Outlets. Retail sales at owned GLA affect revenue and profitability levels because sales determine the amount of minimum rent that can be charged, the percentage rent realized, and the recoverable expenses (common area maintenance, real estate taxes, etc.) that tenants can afford to pay.

if anything, that comically inflated rent avg is warning signs for SPG and $$ signs for SRG. As Bezos says, your margin is my opportunity.

Are you one of the shorts I've been loaning shares to for the last two years?
« Last Edit: October 13, 2018, 08:07:18 PM by koshigoe »


Candyman1

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Re: SRG - Seritage Growth Properties
« Reply #771 on: October 13, 2018, 10:01:51 PM »
Straw man aside, SRG has strong properties (fact) and is low cost provider compared to competition (fact). They've been operating in tough environment for over 3 years and operationally have done quite well.  And best is yet to come with large projects. Look at some of the IRRs on the residential deal at Redmond, on the resale of Tanforan, on JV of West Hartford and Santa Monica. Clear, conservative path to 3 bagger in 7-10 years => ~15% compounded.

... the next 3 years are going to be a lot more challenging than the past 3 years. And I am not referring to the rough retail environment, no this one is specific to SRG.

how will it be more difficult? in the last 3 years they've scaled a business from scratch to one of the leading retail developers in the US as far as development backlog.

1) scaled up from skeleton crew to 70+ full timers over last three years
2) instituted JV policies and asset sales as well as capital raising - now they're proven veterans with well placed and high quality partners and contacts
3) steady state leasing of around 500k sq ft per quarter at 4x multiples - all while scaling up!
4) ended talk of liquidity concerns, as by the time the 2B is due in 4.5 years, they will have several hundred million in rev.

so now with all that out of the way, you're saying just executing - now with laser like focus - will be tougher? signs point to no.
[/quote]

One of the four you got wrong. I'll let you figure out which one it is.
« Last Edit: October 13, 2018, 10:14:42 PM by Candyman1 »

Candyman1

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Re: SRG - Seritage Growth Properties
« Reply #772 on: October 13, 2018, 10:12:14 PM »
Average new lease for SRG $17.5 per sq foot. Average SPG base minimum rent (before CAM) $53 per sq foot. Btw. if you assume that the $17.5 is before CAM, well SPG's  is close to $70 a sq foot after cam. Are you still sure that SRG "owns the best and the most". The SPG numbers are US numbers.

uh, *** gross conceptual error alert ***.

form an earlier post:
Quote
All mall REITs cheat (industry practice) and don't include dept stores in their per foot rent averages. A holdover from the olden days and probably misleading at best, in the new de-malling, mixed use paradigm. For example, Macerich only reports per square foot for stores under 10k sq ft.

To be specific, from SPG 10k edit: pg 58

Quote
We include all company owned space except for mall anchors, mall majors, mall freestanding and mall outlots in the calculation. Base minimum rent per square foot is the average base minimum rent charge in effect for the reporting period for all tenants that would qualify to be included in ending occupancy.

Total Sales per Square Foot. Total sales include total reported retail tenant sales on a trailing 12‐month basis at owned GLA (for mall stores with less than 10,000 square feet) in the malls and The Mills and stores with less than 20,000 square feet in the Premium Outlets. Retail sales at owned GLA affect revenue and profitability levels because sales determine the amount of minimum rent that can be charged, the percentage rent realized, and the recoverable expenses (common area maintenance, real estate taxes, etc.) that tenants can afford to pay.

if anything, that comically inflated rent avg is warning signs for SPG and $$ signs for SRG. As Bezos says, your margin is my opportunity.

Are you one of the shorts I've been loaning shares to for the last two years?

Yes, and is SRG trying to rent out the space to mall anchors? Fine you can cut that number in two and that still gets you $26 per sq foot for SPG. Again does that mean that SRG "owns the best and most". It still cannot get to that number. You said SRG got the best stores/locations, well wouldn't one expect then rents to be higher than even the ones advertized by 50% of SPG numbers?

Candyman1

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Re: SRG - Seritage Growth Properties
« Reply #773 on: October 13, 2018, 10:20:45 PM »
form an earlier post:
Quote
All mall REITs cheat (industry practice) and don't include dept stores in their per foot rent averages. A holdover from the olden days and probably misleading at best, in the new de-malling, mixed use paradigm. For example, Macerich only reports per square foot for stores under 10k sq ft.

So i guess if all of these reits "cheat", I have to assume that SRG isn't "cheating"?


koshigoe

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Re: SRG - Seritage Growth Properties
« Reply #775 on: October 14, 2018, 10:48:15 AM »
form an earlier post:
Quote
All mall REITs cheat (industry practice) and don't include dept stores in their per foot rent averages. A holdover from the olden days and probably misleading at best, in the new de-malling, mixed use paradigm. For example, Macerich only reports per square foot for stores under 10k sq ft.

So i guess if all of these reits "cheat", I have to assume that SRG isn't "cheating"?

that's correct. They lay out their performance data as the chips fall.

Do you really support the idea of not including some of your owned space if it looks bad for rental prices?  "Oh that rate is too low, don't worry we just won't count it! lolololol"

We are no longer in 1985, segregated residential, industrial, retail...the future is mixed use and excluding "anchors" in rental numbers is avoiding reality.

But that's why SRG is cheap, because people who just look at top line numbers that are bogus come to the wrong conclusion.




koshigoe

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Re: SRG - Seritage Growth Properties
« Reply #776 on: October 14, 2018, 10:57:26 AM »
You said SRG got the best stores/locations, well wouldn't one expect then rents to be higher than even the ones advertized by 50% of SPG numbers?

no!

the thesis, through a margin of safety lens, is that SRG can undercut these inflated rent levels, release space at 17 (or 25$ a square foot if you look to projected stabilized numbers) and still make 4-5x off their rents at acquisition.

this is the worst case.

the best case is that their properties are in fact as good as Simon and Macerich on the whole, and will command quite high rents, like those already seen at San Diego, and soon to be seen at Aventura, Hicksville, Valley View and others.

but a lot of SRG value will be proven through JVs with residential sales, as seen already at Redmond and Hicksville.  SRG is a different beast than Simon or Macerich or GGP.  I mean, GGP was sold to BPY because they realized they were screwed and couldn't change to mixed use in a public environment.

the situation is more nuanced than just picking headline rent numbers and saying x >y.







Candyman1

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Re: SRG - Seritage Growth Properties
« Reply #777 on: October 14, 2018, 11:04:15 AM »
You said SRG got the best stores/locations, well wouldn't one expect then rents to be higher than even the ones advertized by 50% of SPG numbers?

no!

the thesis, through a margin of safety lens, is that SRG can undercut these inflated rent levels, release space at 17 (or 25$ a square foot if you look to projected stabilized numbers) and still make 4-5x off their rents at acquisition.

this is the worst case.

the best case is that their properties are in fact as good as Simon and Macerich on the whole, and will command quite high rents, like those already seen at San Diego, and soon to be seen at Aventura, Hicksville, Valley View and others.

but a lot of SRG value will be proven through JVs with residential sales, as seen already at Redmond and Hicksville.  SRG is a different beast than Simon or Macerich or GGP.  I mean, GGP was sold to BPY because they realized they were screwed and couldn't change to mixed use in a public environment.

the situation is more nuanced than just picking headline rent numbers and saying x >y.

One clue ... $1,200,000,000
« Last Edit: October 14, 2018, 11:19:37 AM by Candyman1 »

Shane

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Re: SRG - Seritage Growth Properties
« Reply #778 on: October 15, 2018, 05:56:57 AM »
You said SRG got the best stores/locations, well wouldn't one expect then rents to be higher than even the ones advertized by 50% of SPG numbers?

no!

the thesis, through a margin of safety lens, is that SRG can undercut these inflated rent levels, release space at 17 (or 25$ a square foot if you look to projected stabilized numbers) and still make 4-5x off their rents at acquisition.

this is the worst case.

the best case is that their properties are in fact as good as Simon and Macerich on the whole, and will command quite high rents, like those already seen at San Diego, and soon to be seen at Aventura, Hicksville, Valley View and others.

but a lot of SRG value will be proven through JVs with residential sales, as seen already at Redmond and Hicksville.  SRG is a different beast than Simon or Macerich or GGP.  I mean, GGP was sold to BPY because they realized they were screwed and couldn't change to mixed use in a public environment.

the situation is more nuanced than just picking headline rent numbers and saying x >y.

One clue ... $1,200,000,000

COBF can be a great place for a thoughtful discussion, but it doesn't seem like that is what you are seeking here.

peridotcapital

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Re: SRG - Seritage Growth Properties
« Reply #779 on: October 15, 2018, 08:25:27 AM »
"In malls where leases were signed decades ago, Sears rents could be as low as $4 a square foot. New tenants in the same space could bring as much as six times that amount."

https://www.wsj.com/articles/sears-exit-would-leave-big-holes-in-malls-some-landlords-welcome-that-1539342000

I don't think we see this situation again. There's not another Sears going under with these kind of goofy low rents. And SRG owns the best and the most.

JC Penney is next. Their debt load + free cash flow breakeven during a banner retail year like 2018 does not bode well for the future. They can last a few years maybe, but that's it.