Maryland
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001-37420
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38-3976287
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(State or Other Jurisdiction of Incorporation)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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500 Fifth Avenue, Suite 1530
New York, New York |
10110
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(Address of principal executive offices)
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(Zip code)
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☐
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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☐
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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SERITAGE GROWTH PROPERTIES
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By:
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/s/ Matthew Fernand
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Name:
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Matthew Fernand
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Title:
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Executive Vice President, General
Counsel & Secretary
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● |
Leasing Activity: since inception, the Company has signed approximately 7.9 million square feet of new leases at an average rent of $16.63 PSF. Retail re-leasing multiples have averaged 4.1x for space occupied by Sears Holdings Corporation
(“Sears Holdings” or “Sears”), with new retail rents averaging $17.72 PSF compared to $4.36 PSF paid by Sears Holdings.
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($ in thousands, except PSF amounts)
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Q4 2018
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FY2018
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Since Inception
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Leases
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31
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119
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287
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Square Feet
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878,000
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3,055,000
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7,885,000
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Annual Base Rent
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$
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15,830
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$
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45,197
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$
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131,164
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Annual Base Rent PSF (1)
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$
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20.98
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$
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17.30
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$
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17.64
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Re-leasing Multiple (1)(2)
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4.0
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x
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3.9
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x
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4.1
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x
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(1) |
Reflects retail leases only; excludes certain
self storage, auto dealership, medical office and ground leases.
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(2) |
Excludes densification square footage (e.g. new outparcel
developments) and backfill of vacant space not previously occupied by Sears Holdings.
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Rental Income:
since inception, the Company has increased annual base rent from diversified, non-Sears tenants by over 235% to $147 million, including all signed leases and the impact of all asset monetization activity. Including the remaining lease
up of announced projects, the Company expects diversified, non-Sears income of over $225 million before any further activation of the portfolio.
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(in thousands, except number of leases and PSF data)
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Number of
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Leased
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% of Total
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Annual
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% of Total
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Annual
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Tenant
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Leases
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GLA
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Leased GLA
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Rent
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Annual Rent
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Rent PSF
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Sears Holdings (1)
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96
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11,545
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54
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%
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$
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56,467
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28
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%
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$
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4.89
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In-place diversified, non-Sears leases
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234
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5,009
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24
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%
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65,777
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32
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%
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13.13
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SNO diversified, non-Sears leases (2)
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167
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4,703
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22
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%
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81,282
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40
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%
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17.30
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Total diversified, non-Sears leases
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401
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9,712
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46
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%
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147,059
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72
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%
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15.15
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Total
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497
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21,257
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100
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%
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$
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203,526
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100
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%
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$
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9.58
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(1)
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Number of leases reflects number of properties
subject to the Master Lease and JV Master Leases. Metrics include the effect of four properties subject to previously exercised recapture or termination notices, and five properties under contract for sale, for which Sears was still
making rental payments as of December 31, 2018.
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(2)
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SNO = signed but not yet open
leases.
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Announced Projects: since inception, the Company has substantially completed 47 new redevelopments and has an additional 50 projects currently under development. These 97 projects, which upon completion will provide stable cash flow from a diverse set of retailers under long-term leases, represent $1.5
billion of projected capital investment at targeted incremental returns of approximately 11.0% on an unlevered basis.
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(in thousands, except number of projects and
percentages)
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Estimated
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Estimated
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Estimated
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Number
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Project
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Development
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Project
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Projected Annual
Income (2)
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Incremental
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Estimated Project
Costs (1)
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of Projects
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Square Feet
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Costs (1)
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Costs (1)
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Total
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Existing
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Incremental
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Yield (3)
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< $10,000
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28
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2,182
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$
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125,600
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$
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127,900
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$
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23,400
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$
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5,700
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$
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17,700
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$10,001 - $20,000 (4)
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32
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3,721
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439,000
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458,900
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63,200
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15,300
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47,900
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> $20,001
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22
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3,738
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803,100
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861,900
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115,000
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23,100
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91,900
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Announced projects
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82
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9,641
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$
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1,367,700
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$
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1,448,700
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$
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201,600
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$
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44,100
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$
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157,500
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10.5-11.5%
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Acquired projects
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15
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63,600
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63,600
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Total projects
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97
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$
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1,431,300
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$
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1,512,300
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(1) |
Total estimated development costs exclude, and total estimated project
costs include, termination fees to recapture 100% of certain properties.
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(2) |
Projected annual income includes assumptions on
stabilized rents to be achieved for space under redevelopment. There can be no assurance that stabilized rent targets will be achieved.
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(3) |
Projected incremental annual income divided by total estimated project
costs.
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(4) |
Includes Saugus, MA project which has been temporarily postponed while
the Company identifies a new lead tenant.
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Development Pipeline: the
Company believes it is well-positioned to continue its value creation activities with a robust pipeline of redevelopment projects, including significant mixed-use and densification opportunities.
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Premier and Larger
Scale: the Company has identified 36 assets totaling 7.4
million square feet of existing space that it believes can be expanded and densified by integrating retail, residential, office and other uses. As of December 31, 2018, the Company had announced select phases of projects at nine of these
36 properties.:
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Suburban Retail: the Company has identified 162 assets totaling 25.4 million square feet of
existing space that it expects to redevelop into first-class, multi-tenant retail centers. As of December 31, 2018, the Company had completed or commenced projects at 83 of these 162 properties, and expects to continue activating these
assets as the Company builds on its preferred relationships with growing retailers and other users around the country.
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Capital
Activities: the Company has raised approximately
$550 million of gross proceeds from the sale or joint venture of interests in 42 properties over the last 18 months. Proceeds have primarily been reinvested into redevelopment projects, as well as used to repay debt under the Company’s
original mortgage facility which was repaid in full in July 2018.
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Strategic
Equity Joint Ventures: in 2018, the Company
contributed its assets in Santa Monica (CA), La Jolla (CA) and West Hartford (CT) into three joint ventures with institutional capital partners representing a total transaction value of $362 million, or $744 PSF, and generated $117.0
million of gross proceeds.
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Development
Joint Ventures: in 2018, the Company announced two
agreements to form joint ventures with institutional-quality residential developers to lead the multifamily components of mixed-use projects in Redmond (WA) and Newark (CA), at values of $16.0 million for 2.5 acres and $20.0 million for
4.5 acres, respectively.
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Opportunistic
and Smaller Market Dispositions: in 2018, the
Company sold 21 properties totaling 2.1 million square feet
that generated gross proceeds of $114.3 million, or $54 PSF. The Company monetized these assets, which were generally located in smaller markets, in order to focus its human and capital resources on larger value creation opportunities.
These transactions included five dispositions in the fourth quarter that generated gross proceeds of $47.3 million, or $78 PSF.
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New Term
Loan Facility: in July 2018, the Company entered
into a new $2.0 billion term loan facility with Berkshire Hathaway Life Insurance Company (the “Term Loan Facility”). The Term Loan Facility, which matures on July 31, 2023, provided for an initial funding of $1.6 billion at closing and
includes a committed $400 million incremental funding facility, subject to certain conditions.
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Liquidity
Position: as of December 31, 2018, the Company was
positioned with nearly $1.0 billion of liquidity, including:
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$537 million of cash on hand to fund on-going
development activities, as well as to mitigate possible adverse impacts to operating cash flow that may result from potential reductions of rental income under the Master Lease with Sears Holdings.
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Committed $400 million incremental funding
facility under the Term Loan Facility that is also available, subject to certain conditions, to fund announced and future redevelopment activities.
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13 smaller market assets under contract for sale
for anticipated gross proceeds of $59.8 million. Assets under contract for sale are subject to customary closing conditions and there can be no assurance that such transactions will be consummated.
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