Author Topic: SRG - Seritage Growth Properties  (Read 535337 times)

Foreign Tuffett

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Re: SRG - Seritage Growth Properties
« Reply #160 on: November 07, 2016, 09:59:36 PM »
Does anyone have the recent Boenning & Scattergood report on Seritage?
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scorpioncapital

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Re: SRG - Seritage Growth Properties
« Reply #161 on: November 07, 2016, 10:17:07 PM »

aceskc

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Re: SRG - Seritage Growth Properties
« Reply #162 on: November 09, 2016, 10:18:08 AM »
The capital raise concerns and equity dilution baked into their model seem considerably overblown...Berkowitz/Buffett/Lampert all have sizable stakes in SRG and wont allow it...besides SRG's growing NOI/FFO  seems adequate to fund recap expenditures all of which have been sized in their Q3 Earnings release

Foreign Tuffett

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Re: SRG - Seritage Growth Properties
« Reply #163 on: November 10, 2016, 07:59:34 PM »
The capital raise concerns and equity dilution baked into their model seem considerably overblown...Berkowitz/Buffett/Lampert all have sizable stakes in SRG and wont allow it...besides SRG's growing NOI/FFO  seems adequate to fund recap expenditures all of which have been sized in their Q3 Earnings release

I'm inclined to agree with you. They are making substantial progress transforming the portfolio and should be able to raise more cash on decent terms given their existing pipeline (see attached - Q4 2015 to Q3 2016) of signed leases.

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SlowAppreciation

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Re: SRG - Seritage Growth Properties
« Reply #164 on: December 13, 2016, 05:55:02 PM »
Seems like Seritage adds back D&A, G&A, and acquisition-related expenses to operating income to get to NOI. But this seems like a legitimate operating expense to me?

BG2008

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Re: SRG - Seritage Growth Properties
« Reply #165 on: December 13, 2016, 09:31:26 PM »
Seems like Seritage adds back D&A, G&A, and acquisition-related expenses to operating income to get to NOI. But this seems like a legitimate operating expense to me?

I've found that this is the norm in the real estate space.  Almost all RE assets trade on this NOI figure with D&A, SG&A, and acquisition related expense.  The truth is that that's how private buyers will price each individual asset in arms length transaction.  Depending on the asset type, some D&A will be true expenses while others won't.   

SlowAppreciation

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Re: SRG - Seritage Growth Properties
« Reply #166 on: December 14, 2016, 06:14:58 AM »
Seems like Seritage adds back D&A, G&A, and acquisition-related expenses to operating income to get to NOI. But this seems like a legitimate operating expense to me?

I've found that this is the norm in the real estate space.  Almost all RE assets trade on this NOI figure with D&A, SG&A, and acquisition related expense.  The truth is that that's how private buyers will price each individual asset in arms length transaction.  Depending on the asset type, some D&A will be true expenses while others won't.

Should have clarified that I meant the G&A was an operating expense (I understand the reasoning for adding back D&A and Acq-relate charges). I just don't see how G&A isn't an operating expense...

"Our primary cash expenses consist of our property operating expenses, general and administrative expenses, interest expense and construction and development related costs. Property operating expenses include: real estate taxes, repairs and maintenance, management expenses, insurance, ground lease costs and utilities; general and administrative expenses include payroll, office expenses, professional fees, and other administrative expenses; and interest expense is primarily on our mortgage loan payable."

KJP

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Re: SRG - Seritage Growth Properties
« Reply #167 on: December 14, 2016, 06:37:50 AM »
Seems like Seritage adds back D&A, G&A, and acquisition-related expenses to operating income to get to NOI. But this seems like a legitimate operating expense to me?

I've found that this is the norm in the real estate space.  Almost all RE assets trade on this NOI figure with D&A, SG&A, and acquisition related expense.  The truth is that that's how private buyers will price each individual asset in arms length transaction.  Depending on the asset type, some D&A will be true expenses while others won't.

Should have clarified that I meant the G&A was an operating expense (I understand the reasoning for adding back D&A and Acq-relate charges). I just don't see how G&A isn't an operating expense...

"Our primary cash expenses consist of our property operating expenses, general and administrative expenses, interest expense and construction and development related costs. Property operating expenses include: real estate taxes, repairs and maintenance, management expenses, insurance, ground lease costs and utilities; general and administrative expenses include payroll, office expenses, professional fees, and other administrative expenses; and interest expense is primarily on our mortgage loan payable."

I assume you mean they are adding back the "general and administrative expenses" referred to in your quote, but not the "property operating expenses."  As BG mentioned, you see this alot with RE companies.  They ask investors to focus on NOI (which only includes property-level expenses, not corporate) because assets are bought and sold based on NOI, and ignore the significant corporate expenses that skim off the top and ultimately create a significant drag on investor returns if the underlying RE assets aren't sold in a relatively short period of time. 

The companies are not alone in this.  Many investment pitches for RE companies do the same thing -- they purport to value the company's assets, but ignore significant corporate overhead.  That's understandable if the thesis is the company is going to be sold (and thus G&A eliminated by the buyer), but it doesn't make sense to me if there's no reasonable expectation of a sale.  The lengthy recent writeups of FRP Holdings are an example of this. 

glorysk87

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Re: SRG - Seritage Growth Properties
« Reply #168 on: December 14, 2016, 07:11:40 AM »
Should have clarified that I meant the G&A was an operating expense (I understand the reasoning for adding back D&A and Acq-relate charges). I just don't see how G&A isn't an operating expense...

"Our primary cash expenses consist of our property operating expenses, general and administrative expenses, interest expense and construction and development related costs. Property operating expenses include: real estate taxes, repairs and maintenance, management expenses, insurance, ground lease costs and utilities; general and administrative expenses include payroll, office expenses, professional fees, and other administrative expenses; and interest expense is primarily on our mortgage loan payable."

G&A is an operating expense of course, but NOI is a measure of property level income. It allows for investors to get an idea of the performance of the portfolio at the property level, insulating the performance of the actual real estate from the impacts of corporate expenses. It's not intended to be used to value the company as a whole. Make sense?

BTShine

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Re: SRG - Seritage Growth Properties
« Reply #169 on: December 14, 2016, 08:59:44 AM »
In the case of SRG, they have significantly increased their employee count to help in the leasing and redevelopment of properties, which is appropriate to remove in their calculation of stable NOI. 

In a company where all properties are stable they would require less manpower, thereby having a lower S,G&A.