SRG - Seritage Growth Properties

[LongTermView]

Found the answer to my question from the other day. Looking at pages 19 and 20 of the 2Q18 supplemental, much of the 18.7% of GLA that is not leased is not under development. Here are the properties with termination dates before August 2018 that are not currently being developed:

Square Feet   Property
   118,200   Alpena, MI
   118,800   Chicago, IL (S Kedzie)
     96,600   Deming, NM
     87,800   Manistee, MI
     94,800   Riverton, WY
     92,700   Sault Sainte Marie, MI
   187,179   Chapel Hill, OH
   137,499   Concord, NC
     79,102   Detroit Lakes, MN
     94,885   Elkins, WV
     96,066   Kenton, OH
   112,505   Kissimmee, FL
     90,010   Layton, UT
     76,853   Leavenworth, KS
     87,500   Muskogee, OK
     68,334   Owensboro, KY
     94,841   Platteville, WI
     94,500   Riverside, CA (Iowa Ave.)
     72,511   Sioux Falls, SD
   161,700   Burnsville, MN
   293,700   Chicago, IL (N Harlem)
   155,100   Johnson City, NY
   194,900   Lafayette, LA
   208,700   Mentor, OH
   351,600   Middleburg Heights, OH
   215,000   Overland Park, KS
   204,500   Sarasota, FL
   209,900   Toledo, OH
     82,000   York, PA
   166,000   Friendswood, TX
   215,000   Westwood, TX
-----------
4,358,785   

4,358,785/36,390,000 is 12%.

[GCA]

Here let me stir up some trouble:  I think this move is overblown... all they did was refinance their debt!  And not on fantastic terms for SRG!  The move is a short squeeze and the price will float back down to the low $40s until some real news comes out.

Please explain how extending the loan 4 years at 0.5% increase in rates, removing the requirement to repay mortgage loans with asset sale proceeds, and closing the liquidity gap needed to fund redevelopments, is not real news. Thank you.

Good points.  It's news, I just never thought that liquidity / ability to obtain financing was the biggest issue with SRG.
I have thought the more impactful news flow items would be around 1) pace of redevelopment 2) economic of redevelopment.

Mostly I just wanted people to stop posting about conflicts of interest

[BTShine]

Here let me stir up some trouble:  I think this move is overblown... all they did was refinance their debt!  And not on fantastic terms for SRG!  The move is a short squeeze and the price will float back down to the low $40s until some real news comes out.

Please explain how extending the loan 4 years at 0.5% increase in rates, removing the requirement to repay mortgage loans with asset sale proceeds, and closing the liquidity gap needed to fund redevelopments, is not real news. Thank you.

Good points.  It's news, I just never thought that liquidity / ability to obtain financing was the biggest issue with SRG.
I have thought the more impactful news flow items would be around 1) pace of redevelopment 2) economic of redevelopment.

Mostly I just wanted people to stop posting about conflicts of interest

I think those two factors you listed were major items, but since there wasn’t good clarity going forward for their financing (where from, what terms/rate/duration) their capital needs and source was the last question mark. Up to this point financings were either from Eddie Lampert at ugly terms for SRG (not ideal) or a small inadequate preferred stock offering that’s trading at a high(ish) yield.  $2B is a huge number and the rate is fine.  It moves SRG in the right direction compared to the preferred and ESL financings.  Also, Buffett is very much an unbiased 3rd party investor in this situation (I know the COI debating people here will disagree. Thaft’s fine).  And his stamp of approval not only removes the financing fears it actually transitions SRG investors into greater confidence since Warren Buffett (or his co-workers) believe in SRG.  Mr. Buffett and his crew have been wrong in the past, but rarely.  Most often they are shrewd and successful.

[GCA]

Found the answer to my question from the other day. Looking at pages 19 and 20 of the 2Q18 supplemental, much of the 18.7% of GLA that is not leased is not under development. Here are the properties with termination dates before August 2018 that are not currently being developed:

Square Feet   Property
   118,200   Alpena, MI
   118,800   Chicago, IL (S Kedzie)
     96,600   Deming, NM
     87,800   Manistee, MI
     94,800   Riverton, WY
     92,700   Sault Sainte Marie, MI
   187,179   Chapel Hill, OH
   137,499   Concord, NC
     79,102   Detroit Lakes, MN
     94,885   Elkins, WV
     96,066   Kenton, OH
   112,505   Kissimmee, FL
     90,010   Layton, UT
     76,853   Leavenworth, KS
     87,500   Muskogee, OK
     68,334   Owensboro, KY
     94,841   Platteville, WI
     94,500   Riverside, CA (Iowa Ave.)
     72,511   Sioux Falls, SD
   161,700   Burnsville, MN
   293,700   Chicago, IL (N Harlem)
   155,100   Johnson City, NY
   194,900   Lafayette, LA
   208,700   Mentor, OH
   351,600   Middleburg Heights, OH
   215,000   Overland Park, KS
   204,500   Sarasota, FL
   209,900   Toledo, OH
     82,000   York, PA
   166,000   Friendswood, TX
   215,000   Westwood, TX
-----------
4,358,785   

4,358,785/36,390,000 is 12%.

Interestingly in addition to "terminated" properties where there is no redevelopment, there are also a growing number of "recaptured" properties where there is no announced redevelopment (and ostensibly no leases either).  Cross reference the recapture list (in the 10-Q) with the project list.  I count this at about 2.2MM GLA.  It includes some of the best properties (Valley View, Hicksville, Boca Raton, Redmond).

This whole situation is rather surprising.  Why "recapture" and kick out a paying tenant if you're not ready to redevelop?  I suspect the answer is that they're actually doing pre-re-development work and they're just not on the list... but they could be ready to go on the redevelopment list at any moment (or rather whenever they do those end of quarter pre-releases).

[LongTermView]

Interestingly in addition to "terminated" properties where there is no redevelopment, there are also a growing number of "recaptured" properties where there is no announced redevelopment (and ostensibly no leases either).  Cross reference the recapture list (in the 10-Q) with the project list.  I count this at about 2.2MM GLA.  It includes some of the best properties (Valley View, Hicksville, Boca Raton, Redmond).

This whole situation is rather surprising.  Why "recapture" and kick out a paying tenant if you're not ready to redevelop?  I suspect the answer is that they're actually doing pre-re-development work and they're just not on the list... but they could be ready to go on the redevelopment list at any moment (or rather whenever they do those end of quarter pre-releases).

I think you're right, GCA. I'm guessing that the planning process can be extensive and that it is much easier to plan redevelopment once Sears is out of the property.

[bci23]

Found the answer to my question from the other day. Looking at pages 19 and 20 of the 2Q18 supplemental, much of the 18.7% of GLA that is not leased is not under development. Here are the properties with termination dates before August 2018 that are not currently being developed:

Square Feet   Property
   118,200   Alpena, MI
   118,800   Chicago, IL (S Kedzie)
     96,600   Deming, NM
     87,800   Manistee, MI
     94,800   Riverton, WY
     92,700   Sault Sainte Marie, MI
   187,179   Chapel Hill, OH
   137,499   Concord, NC
     79,102   Detroit Lakes, MN
     94,885   Elkins, WV
     96,066   Kenton, OH
   112,505   Kissimmee, FL
     90,010   Layton, UT
     76,853   Leavenworth, KS
     87,500   Muskogee, OK
     68,334   Owensboro, KY
     94,841   Platteville, WI
     94,500   Riverside, CA (Iowa Ave.)
     72,511   Sioux Falls, SD
   161,700   Burnsville, MN
   293,700   Chicago, IL (N Harlem)
   155,100   Johnson City, NY
   194,900   Lafayette, LA
   208,700   Mentor, OH
   351,600   Middleburg Heights, OH
   215,000   Overland Park, KS
   204,500   Sarasota, FL
   209,900   Toledo, OH
     82,000   York, PA
   166,000   Friendswood, TX
   215,000   Westwood, TX
-----------
4,358,785   

4,358,785/36,390,000 is 12%.

Interestingly in addition to "terminated" properties where there is no redevelopment, there are also a growing number of "recaptured" properties where there is no announced redevelopment (and ostensibly no leases either).  Cross reference the recapture list (in the 10-Q) with the project list.  I count this at about 2.2MM GLA.  It includes some of the best properties (Valley View, Hicksville, Boca Raton, Redmond).

This whole situation is rather surprising.  Why "recapture" and kick out a paying tenant if you're not ready to redevelop?  I suspect the answer is that they're actually doing pre-re-development work and they're just not on the list... but they could be ready to go on the redevelopment list at any moment (or rather whenever they do those end of quarter pre-releases).

Those 4 you call out are almost certainly going to be very large projects with a "premiere" designation similar to Aventura FL and Dallas Midtown. Obviously those require more time to commence/plan.

[pcm983]

https://seekingalpha.com/article/4196019-seritage-compelling-opportunity-invest-alongside-warren-buffett-amidst-busted-short-thesis

[BTShine]

Is there anything in that article that hasn’t been discussed on here?   There’s a paywall. 

[pcm983]

Sorry about that. I believe there is a paywall for a week then it should be accessible. Not necessarily. Crux of thesis is this worth 80 if you take SPG as a comp and add in the 160 psf development cost. Also explains why srg short thesis has been completely disproven. It is pretty crazy how this stock is still so heavily shorted despite the short thesis being wrong for 3 yrs. SHLD has yet to file and the liquidity concerns have been completely ameliorated.

[BTShine]

Sorry about that. I believe there is a paywall for a week then it should be accessible. Not necessarily. Crux of thesis is this worth 80 if you take SPG as a comp and add in the 160 psf development cost. Also explains why srg short thesis has been completely disproven. It is pretty crazy how this stock is still so heavily shorted despite the short thesis being wrong for 3 yrs. SHLD has yet to file and the liquidity concerns have been completely ameliorated.

Not a problem!  I look forward to reading it when the paywall is removed. 

What cap rate are you using?  And how long do you assume the redevelopment of SRG's land portfolio will take?