Author Topic: SRG - Seritage Growth Properties  (Read 535544 times)

Spekulatius

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Re: SRG - Seritage Growth Properties
« Reply #270 on: March 24, 2017, 01:34:46 PM »
The updated website looks great.  Not sure about lending out shares because IB won't let me do it in Canada.

I am also wondering whether we might see Seritage buy the next 1B in RE that Sears says it is shopping around.  The timeline would presumably be in the next year or so given Sears' cash burn.

I doubt it. They already have I think ~$500 million, going off of memory of development costs in the pipeline that they will need to fund. And you can bet Sears will be closing 100s more stores that they will have on their lap in the next year or two. Don't really have the capital to take on more stores.

I think they will raise equity fairly soon. SRG will do a rights offering and Eddie will backstop it. I actually think they should do it now, before SHLD goes belly up.
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muscleman

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BTShine

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Re: SRG - Seritage Growth Properties
« Reply #272 on: March 31, 2017, 12:23:09 PM »
Shorting a stock that Buffett owns... \_(ツ)_/

Spekulatius

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Re: SRG - Seritage Growth Properties
« Reply #273 on: March 31, 2017, 12:40:57 PM »
Shorting a stock that Buffett owns... \_(ツ)_/

It makes no sense to me either. This stock is owned by deep pocketed investors, not retail. I think folks short this as a derivative play of an SHLD short, because the borrow is way cheaper and there is more liquidity. It's appears a pretty stupid play, because a Sears bankruptcy will in my opinion not impact the investment thesis and in fact even may accelerate the value creation. I would laugh if SRG on the day of SHLD bankruptcy announcement gaps down $3 and then recovers the losses before the day is over. Wouldn't surprise me the least and I don't think there are quite a few in investors willing to step in when SRG shares fall, but what do I know.

disclosure: I don't own SRG
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tylerdurden

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Re: SRG - Seritage Growth Properties
« Reply #274 on: March 31, 2017, 12:50:45 PM »
Shorting a stock that Buffett owns... \_(ツ)_/

It makes no sense to me either. This stock is owned by deep pocketed investors, not retail. I think folks short this as a derivative play of an SHLD short, because the borrow is way cheaper and there is more liquidity. It's appears a pretty stupid play, because a Sears bankruptcy will in my opinion not impact the investment thesis and in fact even may accelerate the value creation. I would laugh if SRG on the day of SHLD bankruptcy announcement gaps down $3 and then recovers the losses before the day is over. Wouldn't surprise me the least and I don't think there are quite a few in investors willing to step in when SRG shares fall, but what do I know.

disclosure: I don't own SRG

Don't you think SRG still needs some time to develop more properties to have the cash flows to stand by its own? If we see a Sears bankruptcy too soon, SRG might have to hold the bag with too many undeveloped properties and their existing costs etc. Perhaps you think SRG is already pass this point, not sure...

Spekulatius

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Re: SRG - Seritage Growth Properties
« Reply #275 on: March 31, 2017, 01:00:24 PM »
Shorting a stock that Buffett owns... \_(ツ)_/

It makes no sense to me either. This stock is owned by deep pocketed investors, not retail. I think folks short this as a derivative play of an SHLD short, because the borrow is way cheaper and there is more liquidity. It's appears a pretty stupid play, because a Sears bankruptcy will in my opinion not impact the investment thesis and in fact even may accelerate the value creation. I would laugh if SRG on the day of SHLD bankruptcy announcement gaps down $3 and then recovers the losses before the day is over. Wouldn't surprise me the least and I don't think there are quite a few in investors willing to step in when SRG shares fall, but what do I know.

disclosure: I don't own SRG

Don't you think SRG still needs some time to develop more properties to have the cash flows to stand by its own? If we see a Sears bankruptcy too soon, SRG might have to hold the bag with too many undeveloped properties and their existing costs etc. Perhaps you think SRG is already pass this point, not sure...

I think they will be fine, even if SHLD were to go bankrupt tomorrow. For one, SHLD going bankrupt does not mean that all the stores will close and stop paying rent at the same time. They will have to close some and probably keep others open to liquidate properly, especially if they are cash positive on a store basis. I also think SRG would raise funds easily with a rights offering. Sure, the stock might go down a little, but even that is not a sure thing. I think Eddie would be happy to pump money into this business and WEB would not have an issue either.
« Last Edit: March 31, 2017, 01:02:10 PM by Spekulatius »
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NBL0303

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Re: SRG - Seritage Growth Properties
« Reply #276 on: March 31, 2017, 01:00:33 PM »
Shorting a stock that Buffett owns... \_(ツ)_/

It makes no sense to me either. This stock is owned by deep pocketed investors, not retail. I think folks short this as a derivative play of an SHLD short, because the borrow is way cheaper and there is more liquidity. It's appears a pretty stupid play, because a Sears bankruptcy will in my opinion not impact the investment thesis and in fact even may accelerate the value creation. I would laugh if SRG on the day of SHLD bankruptcy announcement gaps down $3 and then recovers the losses before the day is over. Wouldn't surprise me the least and I don't think there are quite a few in investors willing to step in when SRG shares fall, but what do I know.

disclosure: I don't own SRG

Don't you think SRG still needs some time to develop more properties to have the cash flows to stand by its own? If we see a Sears bankruptcy too soon, SRG might have to hold the bag with too many undeveloped properties and their existing costs etc. Perhaps you think SRG is already pass this point, not sure...

That is a good point - a Sears bankruptcy would likely impact the short term finances of Seritage and would likely force Seritage to more aggressively obtain funds for development but SRG has many levers it can pull to finance development.  There would be any number of potential joint venture partners who could finance the re-development, that would, of course, entail SRG giving up some of the upside of these but these JV re-development projects would still generate significant value for SRG.  The point is I think the funding concerns that I've heard some institutional investors mention about SRG are not fully warranted.

tylerdurden

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Re: SRG - Seritage Growth Properties
« Reply #277 on: March 31, 2017, 02:01:24 PM »
I might be wrong but If Sears goes bankrupt tomorrow, SRG might end up getting many properties from Sears right away rather than gradually as the way it is set up now. I think they have to pay the costs of all these properties like utilities, property taxes perhaps etc. so that was a potential concern for some contributors on this forum before. In that type of scenario it might also be tougher to find JV partners as well since there will be a lot of properties going into a market which might be already oversupplied because of what's going on with the retail these days.

I agree that they'd do a rights issuing if they need to so long-term it could be still fine even under that scenario. Personally I think Lampert and Berkowitz will play around with Sears and float the company as long as they need in order to make sure SRG becomes independent at the end. Only at that time they'd pull the plug on Sears I think...

scorpioncapital

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Re: SRG - Seritage Growth Properties
« Reply #278 on: March 31, 2017, 03:58:14 PM »
Sears rental income is estimated to be 50% of total rents by end 2017, so extrapolating ... 36% by 2018, 22% by 2019. That would put it at 33 million by then. If total SRG NOI is estimated to be around a 10% yield at the end of this process ($2.4 billion market cap, $240m noi) then 330m or ~$6/share of permanently lost rental income...but the diversification of the end portfolio I think will add more than $330m of value. According to their latest presentation, they show that $64m of incremental 3rd party rents would translate to $481m net value creation. So half of that or 32m would be $250m. $80m difference...or $1.43/share loss.
could take longer. could require more leverage. could be more expensive.

two thoughts -
-the current environment is killer. Would you rather develop at 2% rates or 5%? The more they develop faster the better, as the cost will be somewhat lower.
-if you knew the end result, would you prefer a volatile stock with lots of noise or one that moves up very slowly? Would you prefer to have lots of short sellers who sometimes get their day, and sometimes get clobbered? Buffett I think said at the AGM that SRG will NOT do as well as Berkshire. But here's the difference. Berkshire doesn't have 10-15% down days or even a week. But I've seen SRG go down that amount a few times in just 1.5 years. So even if it may not do as well, I wonder if someone who can play the volatility could in fact do just as well.
« Last Edit: March 31, 2017, 04:00:42 PM by scorpioncapital »

NBL0303

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Re: SRG - Seritage Growth Properties
« Reply #279 on: March 31, 2017, 05:31:31 PM »
I might be wrong but If Sears goes bankrupt tomorrow, SRG might end up getting many properties from Sears right away rather than gradually as the way it is set up now. I think they have to pay the costs of all these properties like utilities, property taxes perhaps etc. so that was a potential concern for some contributors on this forum before. In that type of scenario it might also be tougher to find JV partners as well since there will be a lot of properties going into a market which might be already oversupplied because of what's going on with the retail these days.


According to Simon and Macerich they are just waiting on SRG to do more joint ventures and they are very pleased with the current SRG JVs (the CEOs of both have commented on this publicly) so I don't believe there is a lack of interest from JV partners for SRG re-development projects.  I believe that SRG is trying to avoid going that route and is trying to hold on to all of as many properties as they can.