Author Topic: SRG - Seritage Growth Properties  (Read 536350 times)

namo

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Re: SRG - Seritage Growth Properties
« Reply #440 on: November 02, 2017, 05:21:01 PM »
It could be conversion of some units held by Berkowitz or ESL, no?
If one of their funds distributed units to holders, it would be natural for them to convert them to liquid stock.

But I don't recall off-hand whether / which units are convertible.


LongTermView

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Re: SRG - Seritage Growth Properties
« Reply #441 on: November 02, 2017, 06:04:03 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 ?

Yeah, it looks like the conversion of operating units.

Page 4 of the supplemental shows 55,785,000 shares and units as of 3Q17 and 55,774,000 as of 4Q16.


Foreign Tuffett

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Re: SRG - Seritage Growth Properties
« Reply #443 on: November 03, 2017, 11:51:08 AM »
Contra the market reaction today, I actually think the quarter was pretty good with 600,000 sq feet leased at a 4.6X spread. Some of the financial metrics look bad because of the GGP transaction closing and only one redevelopment project having been completed in Q3. Neither of these should have been surprises for anyone who follows the company closely.

While I'm not entirely pleased with the price they got for the Simon properties, IMO SRG's redevelopment opportunities outweigh its liquidity. Also, Simon and Macerich have been stonewalling SRG about redeveloping their JV properties. As such it probably makes more sense for SRG to sell and redeploy the cash.



 

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Greyhound

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Re: SRG - Seritage Growth Properties
« Reply #444 on: November 03, 2017, 01:57:57 PM »
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.



As far as the dividend is concerned, the reason for the dividend is quite simple. They are required to distribute 90% of its taxable income otherwise the trust will have to pay tax on its income.

https://www.law.cornell.edu/uscode/text/26/857


REIT Qualification
We elected to be treated as a REIT commencing with the taxable year ended December 31, 2015 and expect to continue to operate so as to qualify as a REIT.  So long as we qualify as a REIT, we generally will not be subject to U.S. federal income tax on net taxable income that we distribute annually to our shareholders.  In order to qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, including, but not limited to, the real estate qualification of sources of our income, the composition and values of our assets, the amounts we distribute to our shareholders and the diversity of ownership of our stock.  In order to comply with REIT requirements, we may need to forego otherwise attractive opportunities and limit our expansion opportunities and the manner in which we conduct our operations.  See “Risk Factors—Risks Related to Status as a REIT.”

REIT distribution requirements could adversely affect our ability to execute our business plan.

REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, in order for us to qualify to be taxed as a REIT (assuming that certain other requirements are also satisfied) so that U.S. federal corporate income tax does not apply to earnings that we distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT but distribute less than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains, we will be subject to U.S. federal corporate income tax on our undistributed net taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our shareholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. We intend to, at a minimum, make distributions to our shareholders to comply with the REIT requirements of the Code.


Note 8 – Income Taxes
The Company has elected to be taxed as a REIT as defined under Section 856(c) of the Code for federal income tax purposes and expects to continue to operate to qualify as a REIT.  To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to currently distribute at least 90% of its adjusted REIT taxable income to its shareholders.
As a REIT, the Company generally will not be subject to federal income tax on taxable income that is distributed to its shareholders.  If the Company fails to qualify as a REIT or does not distribute 100% of its taxable income in any taxable year, it will be subject to federal taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years.
Even if the Company qualifies for taxation as a REIT, the Company is subject to certain state, local and Puerto Rico taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income.


http://www.snl.com/Cache/c38312861.html
« Last Edit: November 03, 2017, 02:01:53 PM by Greyhound »

BG2008

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Re: SRG - Seritage Growth Properties
« Reply #445 on: November 04, 2017, 07:32:24 PM »
I haven't read through this whole thread.  Why buy Seritage when you can buy Simon at about 8.6% Cap rate today? 

scorpioncapital

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Re: SRG - Seritage Growth Properties
« Reply #446 on: November 05, 2017, 02:29:51 AM »
Presumably the argument is that Seritage real estate is on an up escalator while the others are flat or - perhaps due to a flood of new development even a down escalator. Currently say an established REIT has rents of $40 per square foot and another has $4 per square foot. If the second reit rents at $15 per square foot, then merchants might think twice to continue renting at $40 and might switch over, pressuring the REIT of the established trust. Also each new incremental dollar of investment would seem easier if rents are below the competitors by a significant amount.

frommi

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Re: SRG - Seritage Growth Properties
« Reply #447 on: November 05, 2017, 03:28:08 AM »
I haven't read through this whole thread.  Why buy Seritage when you can buy Simon at about 8.6% Cap rate today?

Maybe i did the math wrong but by my calcuation its at 7.3%, which is still a huge enough discount. I would argue that both SPG and SRG have similar return prospects at these prices, but SRG is more tax efficient when you have to pay taxes on dividends and plan to hold for a very long time.

BTShine

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Re: SRG - Seritage Growth Properties
« Reply #448 on: November 05, 2017, 06:47:29 AM »
I haven't read through this whole thread.  Why buy Seritage when you can buy Simon at about 8.6% Cap rate today?

I'd recommend reading the presentation SRG released in September
http://ir.seritage.com/Cache/1001227621.PDF?O=PDF&T=&Y=&D=&FID=1001227621&iid=4584761

That's a fine place to better understand this story if you're not up for reading this thread.

Spekulatius

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Re: SRG - Seritage Growth Properties
« Reply #449 on: November 05, 2017, 07:42:26 AM »
I haven't read through this whole thread.  Why buy Seritage when you can buy Simon at about 8.6% Cap rate today?

I am ny sure how you get the 8.6% cape rate. The number is almost certainly incorrect and I think the cap rate should close to 7% the or thereabouts.

It is difficult to calculate cap rate precisely because a lot of their properties are not in majority held JV, so it is difficult to account for the underlying debt in those, which is necessary to calculate the true cap rate.
(Corrected for spelling)
« Last Edit: November 05, 2017, 03:10:57 PM by Spekulatius »
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