Organization	6 Months Ended
Jun. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization	Note 1 – Organization Seritage Growth Properties (“Seritage”) (NYSE: SRG), a Maryland real estate investment trust formed on June 3, 2015, operated as a fully integrated, self-administered and self-managed real estate investment trust (“REIT”) as defined under Section 856(a) of the Internal Revenue Code (the “Code”) from formation through December 31, 2021. On March 31, 2022, Seritage revoked its REIT election and became a taxable C Corporation effective January 1, 2022. Seritage’s assets are held by and its operations are primarily conducted, directly or indirectly, through Seritage Growth Properties, L.P., a Delaware limited partnership (the “Operating Partnership”). Under the partnership agreement of the Operating Partnership, Seritage, as the sole general partner, has exclusive responsibility and discretion in the management and control of the Operating Partnership. Unless otherwise expressly stated or the context otherwise requires, the “Company” and “Seritage” refer to Seritage, the Operating Partnership and its owned and controlled subsidiaries. Prior to the adoption of the Company’s Plan of Sale (defined below), Seritage was principally engaged in the ownership, development, redevelopment, disposition, management and leasing of diversified retail and mixed-use properties throughout the United States. Seritage will continue to actively manage each remaining location until such time as each property is sold. As of June 30, 2024, the Company’s portfolio consisted of interests in 22 properties comprised of approximately 2.8 million square feet of gross leasable area (“GLA”) or build-to-suit leased area, and 352 acres of land. The portfolio consists of approximately 1.6 million square feet of GLA and 218 acres held by 13 consolidated properties (such properties, the “Consolidated Properties”) and 1.2 million square feet of GLA and 134 acres held by nine unconsolidated properties (such properties, the “Unconsolidated Properties”). The Company commenced operations on July 7, 2015, following a rights offering to the shareholders of Sears Holdings Corporation (“Sears Holdings” or “Sears”) to purchase common shares of Seritage in order to fund, in part, the $2.7 billion acquisition of certain of Sears Holdings’ owned properties and its 50% interests in three joint ventures which were simultaneously leased back to Sears Holdings under a master lease agreement (the “Original Master Lease” and the “Original JV Master Leases,” respectively). As of March 15, 2021, the Company no longer had any remaining properties leased to Transform Holdco LLC (“Holdco”), an affiliate of ESL Investments, Inc. or Sears Holdings. On March 1, 2022, the Company announced that its Board of Trustees had commenced a process to review a broad range of strategic alternatives. The Board of Trustees created a Special Committee (the “Special Committee”) of the Company’s Board of Trustees to oversee the process. The Special Committee retained Barclays as its financial advisor. The agreement with Barclays expired in August 2023. The Company’s strategic review process remains ongoing as the Company executes sales pursuant to the Plan of Sale. The Company remains open minded to pursuing value maximizing alternatives, including a potential sale of the Company. There can be no assurance that the review process will result in any transaction or that the Company will be successful in fully executing the Plan of Sale. The Board of Trustees is currently overseeing the Plan of Sale. As a result of the Company's revocation of its REIT election, the Company is no longer required to operate under REIT rules, including the requirement to distribute at least 90% of REIT taxable income to its stockholders, which provides the Company with greater flexibility to sell its assets and use its free cash flow to make principal repayments on its Term Loan Facility. Effective January 1, 2022, the Company is subject to federal and state income taxes on its taxable income at applicable tax rates and is no longer entitled to a tax deduction for dividends paid. The Company operated as a REIT since inception and through the 2021 tax year, and existing REIT requirements and limitations, including those established by the Company’s organizational documents, remained in place until December 31, 2021. As a result of the Company’s change in corporate structure to a taxable C Corporation in fiscal year 2022, the Company incurred a one-time, non-cash deferred tax benefit of approximately $161.3 million during the three months ended March 31, 2022. The Company also recorded a full valuation allowance against the deferred tax asset pursuant to ASC 740, Income Taxes, as discussed in more detail below. The Company sought a shareholder vote to approve a proposed plan of sale of the Company’s assets and dissolution (the “Plan of Sale”) that would allow the Board to sell all of the Company’s assets, distribute the net proceeds to shareholders and dissolve the Company. The Plan of Sale allows Seritage and potential buyers to enter into and complete value maximizing transactions without subjecting any such transaction to the delay and conditionality associated with having to seek and obtain shareholder approval. On July 6, 2022, Edward Lampert, the Company’s former Chairman, entered into a Voting and Support Agreement under which he exchanged his equity interest in the Operating Partnership for Class A common shares and agreed to vote his shares in favor of the Plan of Sale. As of June 30, 2024, Mr. Lampert owns approximately 24.0% of the Company’s outstanding Class A common shares, and Seritage, including its consolidated subsidiaries, is the sole owner of all outstanding Operating Partnership interests. The affirmative vote of at least two-thirds of all outstanding common shares of the Company was required to approve the Plan of Sale. The 2022 Annual Meeting of Shareholders occurred on October 24, 2022, following the Company's filing of a final proxy statement with the SEC on September 14, 2022. During the meeting, the Plan of Sale was approved by the shareholders. The strategic review process remains ongoing as the Company executes the Plan of Sale, and the Company remains open minded to pursuing value maximizing alternatives, including a potential sale of the Company. There can be no assurance that the review process will result in any transaction or that the Company will be successful in fully executing on the Plan of Sale. Liquidity The Company’s primary uses of cash include the payment of property operating and other expenses, including general and administrative expenses and debt service (collectively, “Obligations”), and certain development expenditures. Property rental income, which is the Company’s primary source of operating cash flow, did not fully fund Obligations and certain development expenditures incurred during the six months ended June 30, 2024 and the Company incurred net operating cash outflows of $24.2 million. Additionally, the Company generated investing cash inflows of $57.4 million during the six months ended June 30, 2024, which were driven by asset sales partially offset by development expenditures and investments in unconsolidated entities. Obligations are projected to continue to exceed property rental income and the Company expects to fund such costs with a combination of capital sources including, but not limited to, cash on hand, sales of Consolidated and Unconsolidated Properties. and potential financing transactions. During the six months ended June 30, 2024, the Company sold nine Consolidated Properties for gross proceeds of $87.7 million and made aggregate principal prepayments of $80.0 million on the Term Loan Facility, reducing the outstanding Term Loan Facility balance to $280.0 million as of June 30, 2024. Going Concern In accordance with ASC 205-40, Presentation of Financial Statements - Going Concern, for each annual and interim reporting period, management evaluates whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. As part of this evaluation, the Company takes into consideration all Obligations due within the subsequent 12 months, as well as cash on hand and expected cash receipts. The Company currently anticipates it will continue to use sales of Consolidated and Unconsolidated Properties as the primary source of capital to fund its Obligations, including the principal payments on the Term Loan Facility, while at the same time pursuing alternative financing arrangements. As of August 14, 2024, there are four Consolidated Properties under contract for aggregate gross proceeds of $98.4 million and there is one Unconsolidated Property under contract at a gross price of $40.2 million at share. Additionally, the Company is currently negotiating sales for aggregate gross proceeds of $13.8 million which are not included in the going concern calculation. The Company intends to use proceeds from sales or alternative financing arrangements to satisfy its Obligations. The Company continues to monetize its assets, however, the timing of sales and the amount of proceeds from future sales are not under the Company's control and therefore, cannot be deemed probable. The anticipated proceeds from the sales of assets under contract and existing cash on hand, would not allow the Company to fund its Obligations because the Term Loan Facility which matures July 31, 2025 is presently a current Obligation. As a result, the Company has concluded that management's plans do not alleviate substantial doubt about the Company's ability to continue as a going concern until assets under contract are sufficient to increase the Company's projected cash flows or alternative financing arrangements have been made such that they exceed the Company's Obligations.

Organization

6 Months Ended

Jun. 30, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Note 1 – Organization

Seritage Growth Properties (“Seritage”) (NYSE: SRG), a Maryland real estate investment trust formed on June 3, 2015, operated as a fully integrated, self-administered and self-managed real estate investment trust (“REIT”) as defined under Section 856(a) of the Internal Revenue Code (the “Code”) from formation through December 31, 2021. On March 31, 2022, Seritage revoked its REIT election and became a taxable C Corporation effective January 1, 2022. Seritage’s assets are held by and its operations are primarily conducted, directly or indirectly, through Seritage Growth Properties, L.P., a Delaware limited partnership (the “Operating Partnership”). Under the partnership agreement of the Operating Partnership, Seritage, as the sole general partner, has exclusive responsibility and discretion in the management and control of the Operating Partnership. Unless otherwise expressly stated or the context otherwise requires, the “Company” and “Seritage” refer to Seritage, the Operating Partnership and its owned and controlled subsidiaries.

Prior to the adoption of the Company’s Plan of Sale (defined below), Seritage was principally engaged in the ownership, development, redevelopment, disposition, management and leasing of diversified retail and mixed-use properties throughout the United States. Seritage will continue to actively manage each remaining location until such time as each property is sold. As of June 30, 2024, the Company’s portfolio consisted of interests in 22 properties comprised of approximately 2.8 million square feet of gross leasable area (“GLA”) or build-to-suit leased area, and 352 acres of land. The portfolio consists of approximately 1.6 million square feet of GLA and 218 acres held by 13 consolidated properties (such properties, the “Consolidated Properties”) and 1.2 million square feet of GLA and 134 acres held by nine unconsolidated properties (such properties, the “Unconsolidated Properties”).

The Company commenced operations on July 7, 2015, following a rights offering to the shareholders of Sears Holdings Corporation (“Sears Holdings” or “Sears”) to purchase common shares of Seritage in order to fund, in part, the $2.7 billion acquisition of certain of Sears Holdings’ owned properties and its 50% interests in three joint ventures which were simultaneously leased back to Sears Holdings under a master lease agreement (the “Original Master Lease” and the “Original JV Master Leases,” respectively).

As of March 15, 2021, the Company no longer had any remaining properties leased to Transform Holdco LLC (“Holdco”), an affiliate of ESL Investments, Inc. or Sears Holdings.

On March 1, 2022, the Company announced that its Board of Trustees had commenced a process to review a broad range of strategic alternatives. The Board of Trustees created a Special Committee (the “Special Committee”) of the Company’s Board of Trustees to oversee the process. The Special Committee retained Barclays as its financial advisor. The agreement with Barclays expired in August 2023. The Company’s strategic review process remains ongoing as the Company executes sales pursuant to the Plan of Sale. The Company remains open minded to pursuing value maximizing alternatives, including a potential sale of the Company. There can be no assurance that the review process will result in any transaction or that the Company will be successful in fully executing the Plan of Sale. The Board of Trustees is currently overseeing the Plan of Sale.

As a result of the Company's revocation of its REIT election, the Company is no longer required to operate under REIT rules, including the requirement to distribute at least 90% of REIT taxable income to its stockholders, which provides the Company with greater flexibility to sell its assets and use its free cash flow to make principal repayments on its Term Loan Facility. Effective January 1, 2022, the Company is subject to federal and state income taxes on its taxable income at applicable tax rates and is no longer entitled to a tax deduction for dividends paid. The Company operated as a REIT since inception and through the 2021 tax year, and existing REIT requirements and limitations, including those established by the Company’s organizational documents, remained in place until December 31, 2021.

As a result of the Company’s change in corporate structure to a taxable C Corporation in fiscal year 2022, the Company incurred a one-time, non-cash deferred tax benefit of approximately $161.3 million during the three months ended March 31, 2022. The Company also recorded a full valuation allowance against the deferred tax asset pursuant to ASC 740, Income Taxes, as discussed in more detail below.

The Company sought a shareholder vote to approve a proposed plan of sale of the Company’s assets and dissolution (the “Plan of Sale”) that would allow the Board to sell all of the Company’s assets, distribute the net proceeds to shareholders and dissolve the Company. The Plan of Sale allows Seritage and potential buyers to enter into and complete value maximizing transactions without subjecting any such transaction to the delay and conditionality associated with having to seek and obtain shareholder approval. On July 6, 2022, Edward Lampert, the Company’s former Chairman, entered into a Voting and Support Agreement under which he exchanged his equity interest in the Operating Partnership for Class A common shares and agreed to vote his shares in favor of the Plan of Sale. As of June 30, 2024, Mr. Lampert owns approximately 24.0% of the Company’s outstanding Class A common shares, and Seritage, including its consolidated subsidiaries, is the sole owner of all outstanding Operating Partnership interests.

The affirmative vote of at least two-thirds of all outstanding common shares of the Company was required to approve the Plan of Sale. The 2022 Annual Meeting of Shareholders occurred on October 24, 2022, following the Company's filing of a final proxy statement with the SEC on September 14, 2022. During the meeting, the Plan of Sale was approved by the shareholders. The strategic review process remains ongoing as the Company executes the Plan of Sale, and the Company remains open minded to pursuing value maximizing alternatives, including a potential sale of the Company. There can be no assurance that the review process will result in any transaction or that the Company will be successful in fully executing on the Plan of Sale.

Liquidity

The Company’s primary uses of cash include the payment of property operating and other expenses, including general and administrative expenses and debt service (collectively, “Obligations”), and certain development expenditures. Property rental income, which is the Company’s primary source of operating cash flow, did not fully fund Obligations and certain development expenditures incurred during the six months ended June 30, 2024 and the Company incurred net operating cash outflows of $24.2 million. Additionally, the Company generated investing cash inflows of $57.4 million during the six months ended June 30, 2024, which were driven by asset sales partially offset by development expenditures and investments in unconsolidated entities.

Obligations are projected to continue to exceed property rental income and the Company expects to fund such costs with a combination of capital sources including, but not limited to, cash on hand, sales of Consolidated and Unconsolidated Properties. and potential financing transactions. During the six months ended June 30, 2024, the Company sold nine Consolidated Properties for gross proceeds of $87.7 million and made aggregate principal prepayments of $80.0 million on the Term Loan Facility, reducing the outstanding Term Loan Facility balance to $280.0 million as of June 30, 2024.

Going Concern

In accordance with ASC 205-40, Presentation of Financial Statements - Going Concern, for each annual and interim reporting period, management evaluates whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. As part of this evaluation, the Company takes into consideration all Obligations due within the subsequent 12 months, as well as cash on hand and expected cash receipts. The Company currently anticipates it will continue to use sales of Consolidated and Unconsolidated Properties as the primary source of capital to fund its Obligations, including the principal payments on the Term Loan Facility, while at the same time pursuing alternative financing arrangements.

As of August 14, 2024, there are four Consolidated Properties under contract for aggregate gross proceeds of $98.4 million and there is one Unconsolidated Property under contract at a gross price of $40.2 million at share. Additionally, the Company is currently negotiating sales for aggregate gross proceeds of $13.8 million which are not included in the going concern calculation. The Company intends to use proceeds from sales or alternative financing arrangements to satisfy its Obligations. The Company continues to monetize its assets, however, the timing of sales and the amount of proceeds from future sales are not under the Company's control and therefore, cannot be deemed probable.

The anticipated proceeds from the sales of assets under contract and existing cash on hand, would not allow the Company to fund its Obligations because the Term Loan Facility which matures July 31, 2025 is presently a current Obligation. As a result, the Company has concluded that management's plans do not alleviate substantial doubt about the Company's ability to continue as a going concern until assets under contract are sufficient to increase the Company's projected cash flows or alternative financing arrangements have been made such that they exceed the Company's Obligations.