Author Topic: SRG - Seritage Growth Properties  (Read 535879 times)

HalfMeasure

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Re: SRG - Seritage Growth Properties
« Reply #200 on: January 04, 2017, 07:57:45 AM »
New 8K - Sears terminating leases on 19 stores or 1.9m sqft. Anyone know if this is incremental to the terminations announced in September, or an updated number? Any idea how to get lookthrough into which locations were terminated?


Picasso

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Re: SRG - Seritage Growth Properties
« Reply #201 on: January 04, 2017, 08:25:22 AM »
Seems likely that SRG will do some kind of rights offering to buy more assets off SHLD.  I'll be curious if Buffett participates in that kind of situation.

It will be hard for anyone else to buy SHLD properties ahead of the potential for massive supply hitting the market.  SRG has some interest in keeping SHLD as a viable tenant for a couple more years so I imagine they would be the highest bidder for anything getting peeled off SHLD.

That loan to SRG was surprisingly expensive too.  These cash commitments from ESL are really adding up...

SlowAppreciation

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Re: SRG - Seritage Growth Properties
« Reply #202 on: January 04, 2017, 09:23:38 AM »
Quote
The aggregate annual base rent at these stores is approximately $5.9 million, or 2.7% of the Company’s total annual base rent

CorpRaider

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Re: SRG - Seritage Growth Properties
« Reply #203 on: January 04, 2017, 10:33:56 AM »
Seems likely that SRG will do some kind of rights offering to buy more assets off SHLD.  I'll be curious if Buffett participates in that kind of situation.

It will be hard for anyone else to buy SHLD properties ahead of the potential for massive supply hitting the market.  SRG has some interest in keeping SHLD as a viable tenant for a couple more years so I imagine they would be the highest bidder for anything getting peeled off SHLD.

That loan to SRG was surprisingly expensive too.  These cash commitments from ESL are really adding up...

Yeah the loan was puzzling to me too.  They couldn't arrange more attractive (or equivalent) financing from an unrelated party?  I don't get what he's playing at.  You would think he wouldn't be that eager to lend even more $$$, especially if it wasn't required.  Agree, sort of always figured some dilution was coming down the pike (perhaps a couple of tranches) and waiting for that and/or SHLD filing to really look at getting long. 
« Last Edit: January 04, 2017, 10:48:07 AM by CorpRaider »

beaufort

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Re: SRG - Seritage Growth Properties
« Reply #204 on: January 04, 2017, 11:15:41 AM »
"You would think he wouldn't be that eager to lend even more $$$, especially if it wasn't required."

My guess is that the money is required.  We just don't know it yet.


Picasso

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Re: SRG - Seritage Growth Properties
« Reply #205 on: January 04, 2017, 11:17:48 AM »
I actually think there's a way for SRG to issue equity and buy SHLD properties in a way that is good for both SRG and SHLD.  If it's done in a way similar to the current master lease, then I'd say maybe not that great.  But if they're getting the ability to take 100% instead of 50% with various termination fees on better development yields, then you could say that SRG is an entity that can pay a bit more for these assets.  1) it would drive returns at SRG (and Lampert would benefit through his portion of a rights offering), 2) it would give SRG more time to work on the existing redevelopment (they clearly need more time to avoid triggering debt yield covenants), 3) anything credit positive at SHLD (such as large asset sales) is a positive for SRG (at least for the next couple or few years).  So say Lampert puts up a block of assets for sale, SRG could easily be the highest bidder, it's very possible that SRG would react favorably to this, any rights offering would be oversubbed and Lampert wouldn't need to foot the bill for another $1 billion on his own.

It might better explain the harsh unsecured loan to SRG.  Without ESL backstopping with asset sales or redevelopment capital it's hard to get anyone else to participate or jump in the water first.  Part of me thinks this unsecured loan would make me nervous as an equity holder of SRG, the other part of me thinks its just the first step to a more positive transaction.

Plus Lampert's incentives are now moving closer into the debt of SHLD and equity of SRG.  SHLD equity has become a call option (just based on $ value at ESL) and it's clear that he's got much more capital in other assets that are more reliant on the passing of time and slowing the bleed.  Will be interesting to see what happens.

HalfMeasure

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Re: SRG - Seritage Growth Properties
« Reply #206 on: January 04, 2017, 11:31:46 AM »
I actually think there's a way for SRG to issue equity and buy SHLD properties in a way that is good for both SRG and SHLD.  If it's done in a way similar to the current master lease, then I'd say maybe not that great.  But if they're getting the ability to take 100% instead of 50% with various termination fees on better development yields, then you could say that SRG is an entity that can pay a bit more for these assets.  1) it would drive returns at SRG (and Lampert would benefit through his portion of a rights offering), 2) it would give SRG more time to work on the existing redevelopment (they clearly need more time to avoid triggering debt yield covenants), 3) anything credit positive at SHLD (such as large asset sales) is a positive for SRG (at least for the next couple or few years).  So say Lampert puts up a block of assets for sale, SRG could easily be the highest bidder, it's very possible that SRG would react favorably to this, any rights offering would be oversubbed and Lampert wouldn't need to foot the bill for another $1 billion on his own.

I guess the question would be how much SRG can pay before it gets dilutive, and how much debt they can put on the assets they would be buying and at what cost. The problem would be that they would need capital not just to buy the assets but also to redevelop the assets immediately if they recapture 100% immediately.

scorpioncapital

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Re: SRG - Seritage Growth Properties
« Reply #207 on: January 04, 2017, 11:47:44 AM »
I think in any investment if you don't invest , you are returning capital, eventually it catches up and you're in run-off. Guess what we have here is at least the possibility of an opportunity to invest in development,  somewhere where large amounts of capital can be put to work. I see it as no sin to raise money to invest, depending on the price of the offering and the prospects of the investment. It may be that in the final analysis all will hinge on the success of redeveloping large amounts of space in former malls and retail spots and the new properties being successful, whether they end up being retail or something else. Apparently it was worth a bet of about 1/10th of 1% of Buffet's wealth...Is it worth your bet?
« Last Edit: January 04, 2017, 11:50:51 AM by scorpioncapital »

BTShine

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Re: SRG - Seritage Growth Properties
« Reply #208 on: January 04, 2017, 02:50:42 PM »
CBRE gave an update on U.S. Retail Real Estate last month:

http://www.cbre.us/research/2016-U-S-Reports/Pages/Q3-2016-US-Retail-MarketView-Snapshot.aspx
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Q3 2016 U.S. Retail MarketView Snapshot

December 8, 2016

Despite the highest GDP growth recorded in two years, consumer sentiment showed a slight decline in Q3. This drop, though small, is partly attributed to uncertainty during the run-up to November’s presidential election.

Total retail and food service sales increased by 2.5% year-over-year in Q3 2016. Core sales, which exclude gasoline stations and motor vehicle & parts dealers, grew at a higher 3.5%. However, both indices showed a slight deceleration from the growth seen in Q2.

Demand for retail space throughout the nation remained steady in Q3, with 16.9 million sq. ft. of positive net absorption. Year-to-date, absorption totals 55.7 million sq. ft. —8% higher than the same period in 2015.

Retail completions remain subdued since the recession nearly eight years ago. However, the rolling 12-month total had been on a continuous upward trend between Q1 2011 and Q1 2016.

The overall U.S. retail market has seen availability either drop or stay the same for 23 consecutive quarters. The last time overall availability increased was in Q1 2011 when it was near the peak of 10.1%.

The U.S. has now experienced 11 consecutive quarters of positive year-over-year rent growth. Net asking retail rent averaged $16.44 per sq. ft. nationally in Q3—up 4.1% from Q3 2015 and 7.3% from the cycle low of $15.32 per sq. ft. in Q4 2013.

Acquisitions of U.S. retail properties remained very active in Q3, but at slightly lower levels compared with last year and earlier in 2016.

The healthy labor market and increased traction in wage and income growth are boosting consumer confidence, which bodes well for continued improvement in U.S. retail market fundamentals.

CorpRaider

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Re: SRG - Seritage Growth Properties
« Reply #209 on: January 04, 2017, 04:47:10 PM »
It seems like Macys and BAM are going to be dumping a lot of SF on the market too.  I really can't see why a department store would exist anymore unless it is in a convenient urban location (you know like they were originally).
« Last Edit: January 04, 2017, 04:49:55 PM by CorpRaider »