Author Topic: SRG - Seritage Growth Properties  (Read 535843 times)

WneverLOSE

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Re: SRG - Seritage Growth Properties
« Reply #430 on: October 31, 2017, 02:24:19 AM »
A) Tax accounting and GAAP accounting are different, so you can't just look at the income statement and make the call that they don't need to pay a dividend

B) They need to pay a decent dividend otherwise the already small investor base they have would vanish and their cost of equity would skyrocket.

regarding A, I would argue tax accounting can't be THAT different from the income statement we all see, since if it was all REITs wouldn't have money to cover the depreciation. Maybe someone has more information about this subject ?

regarding B, the point may be valid but we should look as well at the positive effect of having more equity to deploy thus reducing leverage rate and by so making it more attractive to credit investors (reducing the dividend will be a positive to bond investors  and a negative to "dividend addicts" but what the management should focus on is creating long term value and not raising the stock price by deploying capital in dumb ways, sooner or later if management is creating value investors will enjoy it). Reducing the dividend will also enable to diversify away from sears much faster thus making the investment much more attractive to investors (who fear the sears bankruptcy).


Mephistopheles

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Re: SRG - Seritage Growth Properties
« Reply #431 on: October 31, 2017, 08:07:41 AM »
The dividend question has been brought up before. Someone on this board asked management directly and the answer he got was pretty much "that's the way it is".

1) Maybe it's to keep the stock price up, but that would be silly because they have Eddie Lampert and Bruce Berkowitz as their biggest holders and these guys don't care about their stocks in their portfolios dropping (if you haven't noticed), and they are THE investor base. Oh and not to mention, Warren Buffett. My guess is if they cut the dividend they would have no problem finding enough buyers for their stock. Arguably the stock would go up because they'd be retaining all that capital free of dividend tax.

2) So maybe it's because of tax vs. GAAP accounting. I'm not an expert on this so I really don't know, someone else should chime in.

3) Look at the restricted stock units for management, they don't have access to shares until they vest, but any dividends paid on these shares vest immediately. When in doubt, follow the incentives, that's would Munger would do.

LongTermView

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Re: SRG - Seritage Growth Properties
« Reply #432 on: October 31, 2017, 08:41:42 AM »
This.
3) Look at the restricted stock units for management, they don't have access to shares until they vest, but any dividends paid on these shares vest immediately. When in doubt, follow the incentives, that's would Munger would do.

WneverLOSE

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Re: SRG - Seritage Growth Properties
« Reply #433 on: October 31, 2017, 09:21:47 AM »
3) Look at the restricted stock units for management, they don't have access to shares until they vest, but any dividends paid on these shares vest immediately. When in doubt, follow the incentives, that's would Munger would do.

I would buy you a beer if I could.

I am truly baffled at why would Warren invest, if reinvestment rates are low investors shouldn't expect great returns in the long term, if reinvestment rates are attractive (to me they look very attractive) the dividend is a killer and ruines about 50% of future returns.
I wish I could buy real estate that yields me 12-13%, I would do it all day long but I can't.

scorpioncapital

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Re: SRG - Seritage Growth Properties
« Reply #434 on: October 31, 2017, 09:57:28 AM »
Is anyone factoring in the possible upside to the asset valuation if inflation runs hot in the next few years ? Of course offset somewhat by increasing supply from Sears and everyone else ?

BTShine

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Re: SRG - Seritage Growth Properties
« Reply #435 on: November 02, 2017, 12:57:33 PM »
While the dividend is a large portion of current income (~50%) one could argue it's a fraction of the value SRG is creating every year.  There's a line of thought, which I understand and do not disagree with, that SRG is creating over $500 million of value every year via redevelopment and leasing to 3rd parties.  Anyone that subscribes to this thinking might feel that a $55 million dividend is not much of the 'true earnings' of SRG every year. 


LongTermView

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Re: SRG - Seritage Growth Properties
« Reply #436 on: November 02, 2017, 01:52:54 PM »
3Q17 Operating Results: http://ir.seritage.com/file/Index?KeyFile=390921511

Some parts that stood out to me:
Quote
Increased annual base rent from tenants other than Sears Holdings to 45.4% of total annual base rent from 31.4% in the prior year period, including all signed leases and net of rent attributable to associated space to be recaptured, and after the impact of the GGP transactions.

...

Agreed to sell to Simon Property Group (“Simon”) the Company’s 50% interest in five of the ten assets in the existing joint venture between the two companies for $68.0 million, subject to certain closing conditions.

The supplemental is out too. Why did the total third party annual rent go down from the Q2 supplement to the Q3 supplement? Is it because of the Q3 sales to GGP?

Q2 supplement:
 $47.2 million In-Place Third-Party
 $55.8 million SNO Third-Party
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$103.0 million

Q3 supplement:
 $47.4 million In-Place Third-Party
 $53.9 million SNO Third-Party
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$101.3 million
« Last Edit: November 02, 2017, 02:03:51 PM by LongTermView »

BTShine

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Re: SRG - Seritage Growth Properties
« Reply #437 on: November 02, 2017, 02:02:14 PM »
Sale of JV's?

Edit:  Looks like the sale of GGP JV's reduced annual rent by $7.997 million.
« Last Edit: November 03, 2017, 09:36:17 AM by BTShine »

LongTermView

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Re: SRG - Seritage Growth Properties
« Reply #438 on: November 02, 2017, 02:05:14 PM »
I think you're right, BTShine.

I edited/asked that without seeing that you mentioned it.
« Last Edit: November 02, 2017, 02:07:16 PM by LongTermView »

thinkpad

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Re: SRG - Seritage Growth Properties
« Reply #439 on: November 02, 2017, 02:33:24 PM »
Hello,

did you notice the dilution on class A and C shares ?
" 28,001,411 and 25,843,251 shares issued and outstanding as of  September 30, 2017 and December 31, 2016, respectively"

"5,951,861 and 5,754,685 shares issued and outstanding as of  September 30, 2017 and December 31, 2016, respectively "

do you know where it is coming from ?

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