SRG - Seritage Growth Properties

[BTShine]

Could be both.  Sears leaving allows for more capex and therefore capital to be invested at attractive rates of return.   If SHLD was strong and kept stores open then SRG wouldn't have much redevelopment opportunity because SRG can only reclaim 50% of each property.   I think the ROI on reclaiming 50% of a location for redevelopment is much lower that a full redevelopment. 

[Foreign Tuffett]

1 million square feet of office space planned for Dallas.

https://www.dmagazine.com/commercial-real-estate/2017/12/former-sears-at-valley-view-mall-to-become-office-campus/

Wow, that's quite a change going from around 235k gla to around 1 million.

Has anyone looked through the portfolio or asked management about how many massive Sq Footage expansion opportunities exist such as this example?

I'm not aware of any others of the same scale. Here are some smaller scale redevelopments and possible redevelopments:

* Phase 1 of the "Esplanade at Adventura" redevelopment will expand SRG's sq footage somewhat. They are planning to do an additional 2nd phase that will add significantly more. This has probably already been mentioned in this thread, but Adventura is one of the highest quality enclosed malls in the country on a sales per sq foot basis.

* There have been news articles about SRG redeveloping the Hicksville, NY store into a mixed use development with a 300+ unit apartment complex. Note the 30 acres of land SRG controls here. Nothing I have seen indicates that any plans have been finalized. Type I (full recapture) property.

* The Westfield UTC luxury mall in San Diego is just finishing up a $600M redevelopment. I believe the Sears store has already closed, or is scheduled to close in the near future. SRG controls over 12 acres here.

* SRG owns over 18 acres at the Town Center at Boca Raton mall. The mall is in the midst of a "significant, multi-million-dollar renovation slated for completion by the end of 2018." The quote is from a local news article I found on the web.

* SRG owns almost 15 acres at the Overlake Fashion Plaza in Redmond, WA. I believe development renderings are floating around, but nothing is official yet.

* SRG owns approximately 18 acres at the Landmark Mall in Alexandria, VA. The Sears store is still open, despite the entirety of the rest of the mall being closed. HHC has a long term plan to redevelop the mall into an open air shopping center complex. I think at some point the Sears store will close, at which point I wouldn't be surprised to see SRG sell out to HHC, which is known to like to have full control of its developments.
 
IMO over time we will see more of these sorts of sq footage expansions and "densifications", especially as outparcels are redeveloped.

I believe SRG has many more redevelopment opportunities than they have capital, but management is taking steps to address the company's capital constraints.

[LongTermView]

saw the shelf registration today and prospectus for preferred. looks like they are starting the process of restructuring the capitalization

Could be spun either way: i) good opportunities to allocate capital @ a rate above the cost of preferred equity, positive sign; or ii) need capital to expedite re-tenanting due to Sears closures - it just depends on how Mr. Market feels. Given the tough REIT environment, I wonder what the market appetite will be for the preferred and what kind of a rate they'll be able to issue them at.

Yeah, it's hard to say how Mr. Market will react.

[BTShine]

They're offering Preferred Shares @ 7%

$70 million worth

http://ir.seritage.com/Cache/391382302.pdf

[HalfMeasure]

They're offering Preferred Shares @ 7%

$70 million worth

http://ir.seritage.com/Cache/391382302.pdf

Spread trade I guess, redevelop @ 10-12% and pay prefs @ 7%.

[scorpioncapital]

I see it more as the spark to light the fire of self-sustaining development. So yeah, 11%-7% or 3% to start, if you pay it off, then you get the full cash-flows later on. And it's for a subset of costs. If income starts coming in at a fast enough pace, then you won't need it - the so-called goal of reaching the perpetual motion machine phase.

[BTShine]

If you consider the entire company ‘greenfield’ (assuming zero lease income from SHLD) and the only avenue forward is via 3rd party leases on redevelopment, the returns are more like 15%+.  I say this from a pessimistic perspective assuming all buildings are dark.   From that angle, this financing is much more attractive and the spreads more like 15-7%.

It’s not just the value creation, it’s also the value retention by replacing the Sears lease with a stable 3rd party. 

[SlowAppreciation]

https://www.wsj.com/articles/shopping-mall-operator-westfield-valued-at-15-7-billion-in-takeover-offer-1513061175

[frommi]

https://www.wsj.com/articles/shopping-mall-operator-westfield-valued-at-15-7-billion-in-takeover-offer-1513061175

Am i right that this was a 4.7% caprate?
My NAV estimation for the end of 2018 for SRG is somewhere around ~53$ (with a 5.7% caprate) based on the latest 10-Q, growing at ~15% the years after. Can`t find a better long term investment at the moment, if my assumptions are correct. (Has someone good/better caprate estimations for the SRG portfolio?)

Wouldn`t it be best to just develop the malls, then sell them immediately at private market valuations and reuse the capital to develop the next ones or buy back shares at current prices? Are there tax consequences or other reasons to hold onto the developed properties?

[OnTheShouldersOfGiants]

Where did you find NOI numbers for Westfield?