Author Topic: SRG - Seritage Growth Properties  (Read 535517 times)

Foreign Tuffett

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DooDiligence

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Re: SRG - Seritage Growth Properties
« Reply #381 on: August 04, 2017, 08:06:41 AM »
Solid Q2 for SRG.

http://ir.seritage.com/Cache/1001226457.PDFO=PDF&T=&Y=&D=&FID=1001226457&iid=4584761

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spark411

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Re: SRG - Seritage Growth Properties
« Reply #383 on: August 15, 2017, 06:27:07 PM »
I was surprised to find that Guy Spier sold 75% of SRG.   Also Mohnish Pabrai sold out a few quarters ago.   Does anyone have any guesses as to why they sold?   What is the risk here?   

Also, does anyone know if Warren Buffett still owns SRG in his personal account?

Foreign Tuffett

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Re: SRG - Seritage Growth Properties
« Reply #384 on: August 16, 2017, 12:17:11 AM »
I was surprised to find that Guy Spier sold 75% of SRG.   Also Mohnish Pabrai sold out a few quarters ago.   Does anyone have any guesses as to why they sold?   What is the risk here?   

Also, does anyone know if Warren Buffett still owns SRG in his personal account?

Pabrai spoke to Barron's about why he sold. I believe the link to the story is somewhere in this thread. I don't know that Spier has made his reason for selling public. I think Buffett will be required to file is he sells, so he probably still holds. 

With all due respect, if you need to ask "What is the risk here" you really need to read through this thread.

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spark411

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Re: SRG - Seritage Growth Properties
« Reply #385 on: August 16, 2017, 08:47:03 PM »
thanks.   Let me restate my question.   

What has changed in the risk profile of the asset in the last 6 months that Pabrai and Spier has been selling out?   As far as I can see, the re-development and re-tenanting is going well.   Please advise if there are any thoughts.  Thanks

sleepydragon

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Re: SRG - Seritage Growth Properties
« Reply #386 on: August 16, 2017, 08:53:47 PM »
I sold earlier, mainly due to tax related reason.
After I realized that I had to pay personal income tax rate on SRG's dividends, I sold it and was waiting for a good time to buy it back again in my tax-free account...

Greyhound

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Re: SRG - Seritage Growth Properties
« Reply #387 on: August 27, 2017, 11:37:12 AM »
thanks.   Let me restate my question.   

What has changed in the risk profile of the asset in the last 6 months that Pabrai and Spier has been selling out?   As far as I can see, the re-development and re-tenanting is going well.   Please advise if there are any thoughts.  Thanks

Pabrai had indicated that he sold out SRG because of the risk of default from SHLD. He indicated that if SHLD becomes insolvent or files for chapter 11 that SRG wouldn't be able to redevelop their properties because of its large exposure to SHLD. Then came the going concern risk disclosure in the 2016 10K which spooked everyone.

However, if you look at what SHLD has done in the first 2 quarters things are looking good for the company's liqudity - real estate sales, loan renegotiation, pension funding status, Amazon partnership, Kenmore licensing agreements (see this infographic). Q2 saw significantly improved adjusted EBITDA and net income from the same period last year.

SHLD has also been quite successful in re-tenanting SHLD stores. Given the recent strong quarter of SRG, it validates not only the real estate portfolio of SRG but also of SHLD. This validation of real estate should reduce the risk profile to SRG since SHLD does have liquidity options to sell more real estate to fund its ongoing operations. With SHLD having liquidity options, the risk of SHLD going insolvent would be reduced which would then decrease the risk profile of SHLD to SRG.

BTShine

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Re: SRG - Seritage Growth Properties
« Reply #388 on: August 27, 2017, 12:34:44 PM »
The funny thing about SRG is that most people that speak publicly on the company are focusing on the risk of income from SHLD going to zero.  Well, in my opinion that's a variable that's only worth $500 million of the SRG value at this point.  Call it income from SHLD of $150m this year, $120 next, then $95, etc.  the present value of that might be approximated at $500m.

Well, the enterprise value of SRG is around $4 billion.  Therefore $500 million shouldn't be the deciding factor in an investment with a value of $ 4 billion.

The other variable is 'what's the reinvestment (redevelopment) opportunity worth?'  I won't lay out my answer for that here, but I think that's where one should be looking when trying to decide if SRG is a good investment at an enterprise value of $4 billion


« Last Edit: August 27, 2017, 02:23:27 PM by BTShine »

Greyhound

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Re: SRG - Seritage Growth Properties
« Reply #389 on: August 27, 2017, 02:25:49 PM »
That's a great point especially since SRG has been able to reduce its dependence on SHLD .... as noted in its latest quarter:

Increased annual base rent from tenants other than Sears Holdings to 44.0% of total annual base rent from 29.3% in the prior year period, including all signed leases and net of rent attributable to associated space to be recaptured