SRG - Seritage Growth Properties

[frommi]

Where did you find NOI numbers for Westfield?

Annual report? https://westfieldcorp.staging.carbonhouse.com/assets/doc/AR16-Westfield-Corp-Financials_D9-474c90164f.pdf
"Net property income".
For SRG i calculated the caprate SRG used to value the joint ventures on the balance sheet. I hope i didn`t make a mistake in my calculations.

[koshigoe]

Some big projects in the works:

https://www.redmond.gov/common/pages/UserFile.aspx?fileId=217828

also:

http://www.citizen-times.com/story/news/local/2017/12/29/proposed-asheville-mall-redevelopment-sears-movie-theater-restaurants-housing-apartments/989873001/

[SlowAppreciation]

https://www.reit.com/news/videos/seritage-ceo-says-leasing-activity-accelerated-2017

[CorpRaider]

Drink from the fire hose?

http://fortune.com/2018/01/04/sears-stores-closing-2/

[LongTermView]

Drink from the fire hose?

http://fortune.com/2018/01/04/sears-stores-closing-2/

Has anyone gone through this http://searsholdings.com/docs/010418-store-closing-list.pdf 103 store list to identify which ones are part of the Seritage portfolio?

[Foreign Tuffett]

Drink from the fire hose?

http://fortune.com/2018/01/04/sears-stores-closing-2/

Has anyone gone through this http://searsholdings.com/docs/010418-store-closing-list.pdf 103 store list to identify which ones are part of the Seritage portfolio?

I've skimmed it and found four:

Hicksville, NY (SRG planning a large mixed use development)
Boca Raton, FL (Town Center at Boca Raton is a very high quality mall)
Westminster, CA (not a particularly high quality mall)
Austin, TX (this store was already on SRG's redevelopment list, with an estimated completion in Q3 2019)

There may be some that I missed. My guess is that these weren't SHLD termination properties, they were SRG wanting to recapture the space for redevelopment.

[LongTermView]

1/18/2018 Release: http://ir.seritage.com/file/Index?KeyFile=391812307


Cliffs:

Signed new leases totaling over 870,000 sf in 4Q17.

Leased GLA is now 4.83 million with $86 million in annual rent compared to leased GLA of 3.96 million with annual rent of $71 million in the 3Q17 supplemental.

Development is now 6.20 million sf with projected annual income of $157 million compared to 4.95 million sf with projected annual income of $105 million in the 3Q17 supplemental.

[scorpioncapital]

I was wondering if someone understood the REIT dividend requirements on SRG. For example, in 2016 they earned $92 million after adding back depreciation to a net loss. The dividend on the 25 or so million shares would be $25 million or 27% of the total cash flow. Now this seems like a cool trick of redevelopment that you can pay out only 27% instead of the usual 90% that REITS must pay out. I looked at another Berkshire investment STOR capital and over there, the company is literally paying out 70% of their AFFO in 2016. Is there something hiding - temporarily for a longer while - the ability to retain more earnings than other REITs? This is obviously better in terms of the need to issue equity and debt if you can retain more earnings to self-finance yourself when other REITs must continue to raise capital with debt/equity to grow their business. Or in SRG's case, this situation will at some point change and it too will be paying out 90%?

[frommi]

I was wondering if someone understood the REIT dividend requirements on SRG. For example, in 2016 they earned $92 million after adding back depreciation to a net loss. The dividend on the 25 or so million shares would be $25 million or 27% of the total cash flow. Now this seems like a cool trick of redevelopment that you can pay out only 27% instead of the usual 90% that REITS must pay out. I looked at another Berkshire investment STOR capital and over there, the company is literally paying out 70% of their AFFO in 2016. Is there something hiding - temporarily for a longer while - the ability to retain more earnings than other REITs? This is obviously better in terms of the need to issue equity and debt if you can retain more earnings to self-finance yourself when other REITs must continue to raise capital with debt/equity to grow their business. Or in SRG's case, this situation will at some point change and it too will be paying out 90%?

REITs have to distribute 90% of their taxable earnings.

https://seekingalpha.com/article/3062776-reits-the-90-percent-rule-isnt-that-big-a-deal

[scorpioncapital]

Great article, thanks. I take it as long as net income is negative, there is no obligation to pay any dividend.

The article asks a good question: why are some REITs so generous when they are not obligated to pay anything due to a negative net income, they pay something.

For example, SRG just floated a 7% preferred security to raise 70 to 100m. That is just a little under the dividend and operating partner unit distributions paid from inception to the end of 2017. If they didn't pay me a 2.8% dividend yield over this period, they could have paid me a 7% dividend by NOT taking this loan. Another way to look at it, if new redevelopment is yielding unlevered 10-11%, then every dollar of dividend paid seems a lower return than the company can generate with those funds. I don't get - in this particular situation anyway - why they pay a single penny in dividend when all of their return, debt and equity yields 7 to 10% and they are not obligated to pay anything until their taxable income turns positive.