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.
