10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2018

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______to _______

Commission File Number 001-37420

SERITAGE GROWTH PROPERTIES

(Exact name of registrant as specified in its charter)

Maryland	38-3976287
(State of Incorporation)	(I.R.S. Employer Identification No.)

500 Fifth Avenue, Suite 1530, New York, New York	10110
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 355-7800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐    No  ☒

As of April 27, 2018, the registrant had the following common shares outstanding:

Class	Shares Outstanding
Class A common shares of beneficial interest, par value $0.01 per share	35,260,258
Class B common shares of beneficial interest, par value $0.01 per share	1,328,866
Class C common shares of beneficial interest, par value $0.01 per share	320,418

SERITAGE GROWTH PROPERTIES

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED MARCH 31, 2018

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
		Page
Item 1.	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017	4
	Condensed Consolidated Statements of Equity for the three months ended March 31, 2018 and 2017	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	41
Item 4.	Controls and Procedures	41
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
SIGNATURES		44

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

SERITAGE GROWTH PROPERTIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except share and per share amounts)

	March 31, 2018			December 31, 2017
ASSETS
Investment in real estate
Land	$	750,870		$	799,971
Buildings and improvements		851,416			829,168
Accumulated depreciation		(148,926	)		(139,483	)
		1,453,360			1,489,656
Construction in progress		252,350			224,904
Net investment in real estate		1,705,710			1,714,560
Investment in unconsolidated joint ventures		330,322			282,990
Cash and cash equivalents		135,091			241,569
Restricted cash		177,419			175,665
Tenant and other receivables, net		32,021			30,787
Lease intangible assets, net		291,613			310,098
Prepaid expenses, deferred expenses and other assets, net		23,839			20,148
Total assets	$	2,696,015		$	2,775,817
LIABILITIES AND EQUITY
Liabilities
Mortgage loans payable, net	$	1,130,793		$	1,202,314
Unsecured term loan, net		143,590			143,210
Accounts payable, accrued expenses and other liabilities		99,063			109,433
Total liabilities		1,373,446			1,454,957
Commitments and contingencies (Note 9)
Shareholders' Equity
Class A common shares $0.01 par value; 100,000,000 shares authorized;    35,208,666 and 32,415,734 shares issued and outstanding as of    March 31, 2018 and December 31, 2017, respectively		352			324
Class B common shares $0.01 par value; 5,000,000 shares authorized;    1,328,866 and 1,328,866 shares issued and outstanding as of    March 31, 2018 and December 31, 2017, respectively		13			13
Class C common shares $0.01 par value; 50,000,000 shares authorized;    372,010 and 3,151,131 shares issued and outstanding as of    March 31, 2018 and December 31, 2017, respectively		4			31
Series A preferred shares $0.01 par value; 10,000,000 shares authorized;    2,800,000 shares issued and outstanding as of March 31, 2018    and December 31, 2017; liquidation preference of $70,000		28			28
Additional paid-in capital		1,116,841			1,116,060
Accumulated deficit		(229,652	)		(229,760	)
Total shareholders' equity		887,586			886,696
Non-controlling interests		434,983			434,164
Total equity		1,322,569			1,320,860
Total liabilities and equity	$	2,696,015		$	2,775,817

The accompanying notes are an integral part of these condensed consolidated financial statements. 

- 3 -

SERITAGE GROWTH PROPERTIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, amounts in thousands, except per share amounts)

	Three Months Ended March 31,
	2018			2017
REVENUE
Rental income	$	37,079		$	49,174
Tenant reimbursements		16,698			16,224
Total revenue		53,777			65,398
EXPENSES
Property operating		7,241			4,742
Real estate taxes		11,381			12,422
Depreciation and amortization		34,667			58,663
General and administrative		7,797			6,274
Provision for doubtful accounts		61			39
Total expenses		61,147			82,140
Operating loss		(7,370	)		(16,742	)
Equity in (loss) income of unconsolidated joint    ventures		(2,582	)		1,002
Gain on sale of real estate		41,831			—
Interest and other income		680			78
Interest expense		(16,419	)		(16,592	)
Unrealized gain (loss) on interest rate cap		165			(471	)
Income (loss) before income taxes		16,305			(32,725	)
Provision for income taxes		(104	)		(119	)
Net income (loss)		16,201			(32,844	)
Net (income) loss attributable to    non-controlling interests		(5,873	)		13,006
Net income (loss) attributable to Seritage	$	10,328		$	(19,838	)
Preferred dividends		(1,228	)		—
Net income (loss) attributable to Seritage common    shareholders	$	9,100		$	(19,838	)
Net income (loss) per share attributable to Seritage Class A and    Class C common shareholders - Basic	$	0.26		$	(0.59	)
Net income (loss) per share attributable to Seritage Class A and    Class C common shareholders - Diluted	$	0.26		$	(0.59	)
Weighted average Class A and Class C common shares    outstanding - Basic		35,414			33,510
Weighted average Class A and Class C common shares    outstanding - Diluted		35,501			33,510

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 4 -

SERITAGE GROWTH PROPERTIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited, amounts in thousands)

																							Additional						Non-
	Class A Common						Class B Common						Class C Common						Series A Preferred				Paid-In			Accumulated			Controlling			Total
	Shares			Amount			Shares			Amount			Shares			Amount			Shares		Amount		Capital			Deficit			Interests			Equity
Balance at January 1, 2017		25,843		$	258			1,589		$	16			5,755		$	58			—	$	—	$	925,563		$	(121,338	)	$	619,754		$	1,424,311
Net loss		—			—			—			—			—			—			—		—		—			(19,838	)		(13,006	)		(32,844	)
Dividends and    distributions declared    ($0.25 per share and unit)		—			—			—			—			—			—			—		—		—			(8,492	)		(5,477	)		(13,969	)
Vesting of restricted share units		4			0			—			—			—			—			—		—		(0	)		—			—			—
Stock-based compensation		—			—			—			—			—			—			—		—		390			—			—			390
Share class exchanges, net    (24,200 common shares)		(24	)		(0	)		—			—			24			0			—		—		—			—			—			—
Share class surrenders    (149,053 common shares)		—			—			(149	)		(2	)		—			—			—		—		2			—			—			—
OP Unit exchanges    (2,267,821 units)		2,268			23			—			—			—			—			—		—		67,059			—			(67,082	)		—
Balance at March 31, 2017		28,091		$	281			1,440		$	14			5,779		$	58			—	$	—	$	993,014		$	(149,668	)	$	534,189		$	1,377,888
Balance at January 1, 2018		32,416		$	324			1,329		$	13			3,151		$	31			2,800	$	28	$	1,116,060		$	(229,760	)	$	434,164		$	1,320,860
Net income		—			—			—			—			—			—			—		—		—			10,328			5,873			16,201
Common dividends and    distributions declared    ($0.25 per share and unit)		—			—			—			—			—			—			—		—		—			(8,992	)		(5,054	)		(14,046	)
Preferred dividends    declared ($0.4375 per share)		—			—			—			—			—			—			—		—		—			(1,228	)		—			(1,228	)
Vesting of restricted share units		14			0			—			—			—			—			—		—		(0	)		—			—			—
Stock-based compensation		—			—			—			—			—			—			—		—		869			—			—			869
Preferred stock offering costs		—			—			—			—			—			—			—		—		(88	)		—			—			(88	)
Share class exchanges, net    (2,779,121 common shares)		2,779			28			—			—			(2,779	)		(27	)		—		—		—			—			—			1
Balance at March 31, 2018		35,209		$	352			1,329		$	13			372		$	4			2,800	$	28	$	1,116,841		$	(229,652	)	$	434,983		$	1,322,569

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 5 -

SERITAGE GROWTH PROPERTIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

	Three Months Ended March 31,
	2018			2017
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)	$	16,201		$	(32,844	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in loss (income) of unconsolidated joint ventures		2,582			(1,002	)
Gain on sale of real estate		(41,831	)		—
Unrealized (gain) loss on interest rate cap		(165	)		471
Stock-based compensation		869			390
Depreciation and amortization		34,667			58,663
Amortization of deferred financing costs		1,720			1,582
Amortization of above and below market leases, net		(234	)		(195	)
Straight-line rent adjustment		(2,453	)		(1,534	)
Change in operating assets and liabilities
Tenants and other receivables		1,034			419
Prepaid expenses, deferred expenses and other assets		(4,229	)		(687	)
Accounts payable, accrued expenses and other liabilities		(502	)		9,039
Net cash provided by operating activities		7,659			34,302
CASH FLOW FROM INVESTING ACTIVITIES
Investment in unconsolidated joint ventures		(1,616	)		(5,943	)
Distributions from unconsolidated joint ventures		2,110			3,623
Net proceeds from sale of real estate		60,435			—
Development of real estate		(85,983	)		(22,848	)
Net cash used in investing activities		(25,054	)		(25,168	)
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of mortgage loans payable		(73,034	)		—
Proceeds from Future Funding Facility		—			7,011
Payment of deferred financing costs		(363	)		(1,446	)
Common dividends paid		(8,877	)		(8,447	)
Non-controlling interests distributions paid		(5,055	)		(5,477	)
Net cash used in financing activities		(87,329	)		(8,359	)
Net increase (decrease) in cash, cash equivalents, and restricted cash		(104,724	)		775
Cash, cash equivalents, and restricted cash, beginning of period		417,234			139,642
Cash, cash equivalents, and restricted cash, end of period	$	312,510		$	140,417

- 6 -

SERITAGE GROWTH PROPERTIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited, amounts in thousands)

	Three Months Ended March 31,
	2018			2017
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest	$	21,105		$	16,052
Capitalized interest		6,862			1,177
Income taxes paid		104			119
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING    ACTIVITIES
Development of real estate financed with accounts payable	$	19,964		$	5,899
Dividends and distribution declared and unpaid		14,046			13,969
Decrease in real estate, net resulting from deconsolidated properties		(58,190	)		—
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents	$	135,091		$	26,542
Restricted cash		177,419			113,875
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows		312,510			140,417

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 7 -

SERITAGE GROWTH PROPERTIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Organization

Seritage Growth Properties (“Seritage”) was organized in Maryland on June 3, 2015 and was initially capitalized with 100 shares of Class A common shares.  The Company conducts its operations through Seritage Growth Properties, L.P. (the “Operating Partnership”), a Delaware limited partnership that was formed on April 22, 2015.  Unless the context otherwise requires, “Seritage” and the “Company” refer to Seritage, the Operating Partnership, and its subsidiaries.

On June 11, 2015, Sears Holdings Corporation (“Sears Holdings”) effected a rights offering (the “Rights Offering”) to Sears Holdings stockholders to purchase common shares of Seritage in order to fund, in part, the $2.7 billion acquisition of (i) 234 of Sears Holdings’ owned properties and one of its ground leased properties, and (ii) its 50% interests in three joint ventures that collectively owned 28 properties, ground leased one property and leased two properties (the “Transaction”).  The Rights Offering ended on July 2, 2015, and the Company’s Class A common shares were listed on the New York Stock Exchange (“NYSE”) on July 6, 2015.

On July 7, 2015, the Company completed the Transaction with Sears Holdings and commenced operations.  The Company did not have any operations prior to the completion of the Rights Offering and the Transaction.

Seritage is a fully-integrated, self-administered, self-managed real estate investment trust (“REIT”) primarily engaged in the real property business through the Company’s investment in the Operating Partnership.  As of March 31, 2018, the Company’s portfolio consisted of interests in 249 properties totaling approximately 38.9 million square feet of gross leasable area (“GLA”), including 225 wholly owned properties totaling approximately 34.6 million square feet of GLA across 49 states and Puerto Rico (the “Wholly Owned Properties), and interests in 24 joint venture properties totaling over 4.3 million square feet of GLA across 13 states (the “JV Properties”).

As of March 31, 2018, we leased space at 145 Wholly Owned Properties to Sears Holdings pursuant to a master lease agreement (the “Master Lease”), including 81 properties leased only to Sears Holdings and 64 properties leased to both Sears Holdings and one or more third-party tenants.  The remaining 80 Wholly Owned Properties include 54 properties that are leased solely to third-party tenants and do not have any space leased to Sears Holdings, and 26 vacant properties.  As of March 31, 2018, space at 22 JV Properties is also leased to Sears Holdings pursuant to lease agreements similar to the Master Lease (the “JV Master Leases”).  Sears Holdings is the sole tenant at nine JV Properties and 13 JV properties are leased to both Sears Holdings and one or more third-party tenants.  One JV Property is leased solely third-party tenants and one JV Property was vacant as of March 31, 2018.

The Master Lease and the JV Master Leases provide the Company and the JVs with the right to recapture certain space from Sears Holdings at each property for retenanting or redevelopment purposes.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K, as amended, (the “Annual Report”), for the year ended December 31, 2017.  Certain footnote disclosures which would substantially duplicate those contained in our Annual Report have been condensed or omitted from this quarterly report.  In the opinion of management, all adjustments necessary for a fair presentation (which include only normal recurring adjustments) have been included in this quarterly report.  Operating results of three months ended March 31, 2018 may not be indicative of the results that may be expected for any other interim period or for the year ending December 31, 2018.  Capitalized terms used, but not defined in this quarterly report, have the same meanings as set forth in our Annual Report.

The accompanying condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).  The condensed consolidated financial statements include the accounts of the Company, the Operating Partnership, each of their wholly-owned subsidiaries, and all other entities in which they have a controlling financial interest or entities that meet the definition of a variable interest entity (“VIE”) in which the Company has, as a result of ownership, contractual interests or other financial interests, both the power to direct activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.  All intercompany accounts and transactions have been eliminated.

- 8 -

If the Company has an interest in a VIE but it is not determined to be the primary beneficiary, the Company accounts for its interest under the equity method of accounting.  Similarly, for those entities which are not VIEs and over which the Company has the ability to exercise significant influence, but does not have a controlling financial interest, the Company accounts for its interests under the equity method of accounting.  The Company continually reconsiders its determination of whether an entity is a VIE and whether the Company qualifies as its primary beneficiary.

To the extent such variable interests are in entities that cannot be evaluated under the VIE model, the Company evaluates its interests using the voting interest entity model.  As of March 31, 2018, the Company holds a 63.8% interest in the Operating Partnership and is the sole general partner which gives the Company exclusive and complete responsibility for the day-to-day management, authority to make decisions, and control of the Operating Partnership.  Through consideration of consolidation guidance effective for the Company as of January 1, 2016, it has been concluded that the Operating Partnership is a VIE as the limited partners in the Operating Partnership, although entitled to vote on certain matters, do not possess kick-out rights or substantive participating rights.  Accordingly, the Company consolidates its interest in the Operating Partnership.  However, as the Company holds what is deemed a majority voting interest in the Operating Partnership, it qualifies for the exemption from providing certain of the disclosure requirements associated with investments in VIEs.

The portions of consolidated entities not owned by the Company and the Operating Partnership are presented as non-controlling interests as of and during the periods presented.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  The most significant assumptions and estimates relate to fair values of acquired assets and liabilities assumed for purposes of applying the acquisition method of accounting, the useful lives of tangible and intangible assets, real estate impairment assessments, and assessing the recoverability of accounts receivables.  These estimates are based on historical experience and other assumptions which management believes are reasonable under the circumstances.  Management evaluates its estimates on an ongoing basis and makes revisions to these estimates and related disclosures as experience develops or new information becomes known.  Actual results could differ from these estimates.

Segment Reporting

The Company currently operates in a single reportable segment which includes the acquisition, ownership, development, redevelopment, management, and leasing of retail properties.  The Company’s chief operating decision maker, its Chief Executive Officer, assesses and measures the operating and financial results for each property on an individual basis and does not distinguish or group properties based on geography, size, or type. The Company, therefore, aggregates all properties into one reportable segment due to their similarities with regard to the nature and economics of the properties, tenants, and operations.

Accounting for Real Estate Acquisitions

Upon the acquisition of real estate, the Company assesses the fair value of acquired assets and liabilities assumed, including land, buildings, improvements and identified intangibles such as above-market and below-market leases, in-place leases and other items, as applicable, and allocates the purchase price based on these assessments.  In making estimates of fair values, the Company may use a number of sources, including data provided by third parties, as well as information obtained by the Company as a result of its due diligence, including expected future cash flows of the property and various characteristics of the markets where the property is located.

The fair values of tangible assets are determined on an "if vacant" basis. The "if vacant" fair value allocated to land is generally estimated via a market or sales comparison approach with the subject site being compared to similar properties that have sold or are currently listed for sale. The comparable properties are adjusted for dissimilar characteristics such as market conditions, location, access/frontage, size, shape/topography, or intended use, including the impact of any encumbrances on such use.  The "if vacant" value allocated to buildings and site improvements is generally estimated using an income approach and a cost approach that utilizes published guidelines for current replacement cost or actual construction costs for similar, recently developed properties.  Assumptions used in the income approach include capitalization and discount rates, lease-up time, market rents, make-ready costs, land value, and site improvement value.

- 9 -

The estimated fair value of in-place tenant leases includes lease origination costs (the costs the Company would have incurred to lease the property to the current occupancy level) and the lost revenues during the period necessary to lease-up from vacant to the current occupancy level. Such estimates include the fair value of leasing commissions, legal costs and tenant coordination costs that would be incurred to lease the property to this occupancy level. Additionally, the Company evaluates the time period over which such occupancy level would be achieved and includes an estimate of the net operating costs (primarily real estate taxes, insurance and utilities) incurred during the lease-up period, which generally ranges up to one year. The fair value of acquired in-place tenant leases is included in lease intangible assets on the condensed consolidated balance sheets and amortized over the remaining lease term for each tenant.

Identifiable intangible assets and liabilities are calculated for above-market and below-market tenant and ground leases where the Company is either the lessor or the lessee. The difference between the contractual rental rates and the Company’s estimate of market rental rates is measured over a period equal to the remaining non-cancelable term of the leases, including significantly below-market renewal options for which exercise of the renewal option appears to be reasonably assured. Above-market tenant leases and below-market ground leases are included in lease intangible assets on the condensed consolidated balance sheets; below-market tenant leases and above-market ground leases are included in accounts payable, accrued expenses and other liabilities on the condensed consolidated balance sheets.  The values assigned to above-market and below-market tenant leases are amortized as reductions and increases, respectively, to base rental revenue over the remaining term of the respective leases.  The values assigned to below-market and above-market ground leases are amortized as increases and reductions, respectively, to property operating expenses over the remaining term of the respective leases.

The Company expenses transaction costs associated with business combinations in the period incurred; these costs are included in acquisition-related expenses within the condensed consolidated statements of operations. The Company capitalizes transaction costs associated with asset acquisitions; these costs are allocated to the fair values of the net assets acquired, included within the condensed consolidated balance sheets and depreciated or amortized over the remaining life or term of the acquired assets.

Real Estate Investments

Real estate assets are recorded at cost, less accumulated depreciation and amortization.

Expenditures for ordinary repairs and maintenance will be expensed as incurred.  Significant renovations which improve the property or extend the useful life of the assets are capitalized.  As real estate is undergoing redevelopment activities, all amounts directly associated with and attributable to the project, including planning, development and construction costs, interest costs, personnel costs of employees directly involved and other miscellaneous costs incurred during the period of redevelopment, are capitalized.  The capitalization period begins when redevelopment activities are underway and ends when the project is substantially complete.

Depreciation of real estate assets, excluding land, is recognized on a straight-line basis over their estimated useful lives as follows:

Building:	25 – 40 years
Site improvements:	5 – 15 years
Tenant improvements:	shorter of the estimated useful life or non-cancelable term of lease

The Company amortizes identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired, generally the remaining non-cancelable term of a related lease.

On a periodic basis, management assesses whether there are indicators that the value of the Company’s real estate assets (including any related intangible assets or liabilities) may be impaired.  If an indicator is identified, a real estate asset is considered impaired only if management’s estimate of current and projected operating cash flows (undiscounted and unleveraged), taking into account the anticipated and probability weighted holding period, are less than a real estate asset’s carrying value.  Various factors are considered in the estimation process, including expected future operating income, trends and prospects and the effects of demand, competition, and other economic factors.  If management determines that the carrying value of a real estate asset is impaired, a loss will be recorded for the excess of its carrying amount over its estimated fair value.  No such impairment losses were recognized for the three months ended March 31, 2018 or March 31, 2017.

Investments in Unconsolidated Joint Ventures

The Company accounts for its investments in unconsolidated joint ventures using the equity method of accounting as the Company exercises significant influence, but does not control these entities. These investments are initially recorded at cost and are subsequently adjusted for cash contributions, cash distributions, and earnings which are recognized in accordance with the terms of the applicable agreement.

- 10 -

On a periodic basis, management assesses whether there are indicators, including the operating performance of the underlying real estate and general market conditions, that the value of the Company’s investments in unconsolidated joint ventures may be impaired.  An investment’s value is impaired only if management’s estimate of the fair value of the Company’s investment is less than its carrying value and such difference is deemed to be other-than-temporary.  To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over its estimated fair value.  No such impairment losses were recognized for the three months ended March 31, 2018 or March 31, 2017.

Cash and Cash Equivalents

The Company considers instruments with an original maturity of three months or less to be cash and cash equivalents. Cash and cash equivalents balances may, at a limited number of banks and financial institutions, exceed insurable amounts. The Company believes it mitigates this risk by investing in or through major financial institutions and primarily in funds that are insured by the United States federal government.

Restricted Cash

Restricted cash represents cash deposited in escrow accounts which generally can only be used for the payment of real estate taxes, debt service, insurance, and future capital expenditures as required by certain loan and lease agreements, as well as legally restricted tenant security deposits.  As of March 31, 2018, the Company had approximately $177.4 million of restricted cash, including $154.2 million reserved for redevelopment costs, tenant allowances and leasing commissions, deferred maintenance, environmental remediation and other capital expenditures, $ 19.5 million reserved for basic property carrying costs such as real estate taxes, insurance and ground rent, and $ 3.7 million of other restricted cash which consisted primarily of prepaid rental income.

Tenant and Other Receivables

Accounts receivable includes unpaid amounts billed to tenants, accrued revenues for future billings to tenants for property expenses, and amounts arising from the straight-lining of rent.  The Company periodically reviews its receivables for collectability, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates, and economic conditions in the area where the property is located.  In the event that the collectability of a receivable with respect to any tenant is in doubt, a provision for uncollectible amounts will be established or a direct write-off of the specific rent receivable will be made.  For accrued rental revenues related to the straight-line method of reporting rental revenue, the Company performs a periodic review of receivable balances to assess the risk of uncollectible amounts and establish appropriate provisions.

Revenue Recognition

Rental income is recognized on a straight-line basis over the non-cancelable terms of the related leases.  For leases that have fixed and measurable rent escalations, the difference between such rental income earned and the cash rent due under the provisions of the lease is recorded as deferred rent receivable and included as a component of tenant and other receivables on the condensed consolidated balance sheets.

In leasing tenant space, the Company may provide funding to the lessee through a tenant allowance.  In accounting for a tenant allowance, the Company will determine whether the allowance represents funding for the construction of leasehold improvements and evaluate the ownership of such improvements.  If the Company is considered the owner of the improvements for accounting purposes, the Company will capitalize the amount of the tenant allowance and depreciate it over the shorter of the useful life of the improvements or the related lease term.  If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or in the event the Company is not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease incentive and is recognized over the lease term as reduction of rental revenue on a straight-line basis.

The Company commences recognizing revenue based on an evaluation of a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset.  Generally, this occurs on the lease commencement date.

Tenant reimbursement income arises from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property.  This revenue is accrued in the same periods as the expenses are incurred.

- 11 -

Accounting for Recapture and Termination Activity Pursuant to the Master Lease

Seritage 100% Recapture Rights.  The Company generally treats the delivery of a 100% recapture notice as a modification of the Master Lease as of the date of notice.  Such a notice and lease modification result in the following accounting adjustments for the recaptured property:

− Accrued rental revenues related to the straight-line method of reporting rental revenue that are deemed uncollectable as result of the lease modification are amortized over the remaining shortened life of the lease from the date of notice to the date of vacancy.

− Intangible lease assets and liabilities that are deemed to be impacted by the lease modification are amortized over the shorter of the shortened lease term from the date of notice to the date of vacancy or the remaining useful life of the asset or liability.

A 100% recapture will generally occur in conjunction with obtaining a new tenant or a real estate development project.  As such, termination fees, if any, associated with the 100% recapture notice are generally capitalized as either an initial direct cost of obtaining a new lease or a necessary cost of the real estate project and depreciated over the life of the new lease obtained or the real estate asset being constructed or improved.

Seritage 50% Recapture Rights.  The Company generally treats the delivery of a 50% recapture notice as a modification of the Master Lease as of the date of notice.  Such a notice and lease modification result in the following accounting adjustments for the recaptured property:

− The portion of accrued rental revenues related to the straight-line method of reporting rental revenue that are subject to the lease modification are amortized over the remaining shortened life of the lease from the date of notice to the date of vacancy.  The portion of accrued rental revenues related to the straight-line method of reporting rental revenue that is attributable to the retained space is amortized over the remaining life of the Master Lease.

− The portion of intangible lease assets and liabilities that is deemed to be impacted by the lease modification is amortized over the shorter of the shortened lease term from the date of notice to the date of vacancy or the remaining useful life of the asset or liability.  The portion of intangible lease assets and liabilities that is attributable to the retained space is amortized over the remaining useful life of the asset or liability.

Sears Holdings Termination Rights.  The Master Lease provides Sears Holdings with certain rights to terminate the Master Lease with respect to properties that cease to be profitable for operation by Sears Holdings.  Such a termination would generally result in the following accounting adjustments for the terminated property:

− Accrued rental revenues related to the straight-line method of reporting rental revenue that are subject to the termination are amortized over the remaining shortened life of the lease from the date of notice to the date of vacancy.

− Intangible lease assets and liabilities that are deemed to be impacted by the termination are amortized over the shorter of the shortened lease term from the date of notice to the date of vacancy or the remaining useful life of the asset or liability.

− Termination fees required to be paid by Sears Holdings are recognized as follows:

• For the portion of the termination fee attributable to the annual base rent of the subject property, termination income is recognized on a straight-line basis over the shortened life of the lease from the date the termination fee becomes legally binding to the date of vacancy.

• For the portion of the termination fee attributable to estimated real estate taxes and property operating expenses for the subject property, prepaid rental income is recorded in the period such fee is received and recognized as tenant reimbursement revenue in the same periods as the expenses are incurred.

Derivatives

The Company’s use of derivative instruments is limited to the management of interest rate exposure and not for speculative purposes.  In connection with the issuance of the Company’s Mortgage Loans and Future Funding Facility, the Company purchased for $5.0 million an interest rate cap with a term of four years, a notional amount of $1,261 million and a strike rate of 3.5%.  The interest rate cap is measured at fair value and included as a component of prepaid expenses, deferred expenses and other assets on the condensed consolidated balance sheets.  The Company has elected not to utilize hedge accounting, and therefore, the change in fair value is included within change in fair value of interest rate cap on the condensed consolidated statements of operations.  For the three months ended March 31, 2018, the Company recorded a gain of $0.2 million compared to a loss of $0.5 million for the three months ended March 31, 2017

- 12 -

Stock-Based Compensation

The Company generally recognizes equity awards to employees as compensation expense and includes such expense within general and administrative expenses on the condensed consolidated statements of operations.  Compensation expense for equity awards is generally based on the fair value of the common shares at the date of the grant and is recognized (i) ratably over the vesting period for awards with time-based vesting and (ii) for awards with performance-based vesting, at the date the achievement of performance criteria is deemed probable, an amount equal to that which would have been recognized ratably from the date of the grant through the date the achievement of performance criteria is deemed probable, and then ratably from the date the achievement of performance criteria is deemed probable through the remainder of the vesting period.

Concentration of Credit Risk

Concentrations of credit risk arise when a number of operators, tenants, or obligors related to the Company's investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. As of March 31, 2018, a majority of the Company's real estate properties were leased to Sears Holdings, and the majority of Company’s rental revenues were derived from the Master Lease (see Note 5).  Until the Company further diversifies the tenancy of its portfolio, an event that has a material adverse effect on Sears Holdings’ business, financial condition or results of operations could have a material adverse effect on the Company’s business, financial condition or results of operations.  Sears Holdings is a publicly traded company that is subject to the informational filing requirements of the Securities Exchange Act of 1934, as amended, and is required to file periodic reports on Form 10-K and Form 10-Q with the SEC.  Refer to www.sec.gov for Sears Holdings publicly-available financial information.

Other than the Company's tenant concentration, management believes the Company's portfolio was reasonably diversified by geographical location and did not contain any other significant concentrations of credit risk.  As of March 31, 2018, the Company's portfolio of 225 Wholly Owned Properties and 24 JV Properties was diversified by location across 49 states and Puerto Rico.

Earnings per Share

The Company has three classes of common stock.  The rights, including the liquidation and dividend rights, of the holders of the Company’s Class A common shares and Class C non-voting common shares are identical, except with respect to voting. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. The net earnings (loss) per share amounts are the same for Class A and Class C common shares because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.  Class B non-economic common shares are excluded from earnings per share computations as they do not have economic rights.

All outstanding non-vested shares that contain non-forfeitable rights to dividends are considered participating securities and are included in computing earnings per share pursuant to the two-class method which specifies that all outstanding non-vested share-based payment awards that contain non-forfeitable rights to distributions are considered participating securities and should be included in the computation of earnings per share.

Recently Issued Accounting Pronouncements

In February 2017, the Financial Accounting Standards Boards (“FASB”) issued Accounting Standards Update (“ASU”) 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets” to provide guidance for recognizing gains and losses from the transfer of nonfinancial assets. The standard requires a company to derecognize nonfinancial assets once it transfers control of a distinct nonfinancial asset or distinct in substance nonfinancial assets to noncustomers. Additionally, when a company transfers its controlling interest in a nonfinancial asset, but retains a non-controlling ownership interest, the company is required to measure any non-controlling interest it receives or retains at fair value. An entity may elect to apply the amendments in ASU 2017-05 either retrospectively to each period presented in the financial statements (i.e. the retrospective approach) or retrospectively with a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption (i.e. the modified retrospective approach). We adopted this update on January 1, 2018 with no impact to beginning retained earnings/accumulated deficit because there were no open contracts at the time of adoption.

During the three months ended March 31, 2018, the Company entered into a transaction in which it sold a portion of its investment in a consolidated property and retained joint control of the entity. (See Footnote 4 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional disclosure regarding this transaction).

- 13 -

In January 2017, the FASB issued ASU 2017-01 which changes the definition of a business to exclude acquisitions where substantially all of the fair value of the assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets.  While there are various differences between the accounting for an asset acquisition and a business combination, the Company expects that the largest impact will be the capitalization of transaction costs for asset acquisitions which are expensed for business combinations.  ASU 2017-01 is effective, on a prospective basis, for interim and annual periods beginning after January 1, 2019.  The Company adopted the guidance on the issuance date effective January 5, 2017 on a prospective basis and it did not have an impact on the consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 provides classification guidance for eight specific topics including debt extinguishment costs, contingent consideration payments made after a business combination, and distributions received from equity method investees. ASU 2016-15 is effective, on a retrospective basis, for interim and annual periods beginning after December 15, 2017; early adoption is permitted.  The Company adopted ASU 2016-15 on the effective date, January 1, 2018, and applied the cumulative earnings approach to classify distributions received from our equity method investees.  The adoption changes our statements of cash flows so that distributions from unconsolidated joint ventures in excess of cumulative equity in earnings are now classified as inflows from investing activities for each period presented.  These distributions were previously classified as inflows from operating activities.

In February 2016, with a subsequent update made in January 2018 and finalized in March 2018, the FASB issued ASU No. 2016-02 “Leases (Topic 842)” (“ASU 2016-02”) to amend the accounting guidance for leases. The accounting applied by a lessor is largely unchanged under ASU 2016-02. However, the standard requires lessees to recognize lease assets and lease liabilities for leases classified as operating leases on the balance sheet. Lessees will recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it will recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted.

In March 2018, the FASB finalized changes with respect to optional transition relief and approved a practical expedient for lessors that would permit lessors to make an accounting policy election to not separate non-lease components from the associated lease components, by class of underlying asset, if the following two criteria are met: (1) the timing and pattern of transfer of the lease and non-lease components are the same and (2) the lease component would be classified as an operating lease if accounted for separately. For leases where we are the lessor, we currently believe that we will elect the optional transition relief and that we will meet the noted criteria to not be required to bifurcate and separately report non-lease components, such as common area maintenance revenue, for operating leases on our consolidated statements of operations. As a result, we currently believe that leases where we are the lessor will be accounted for in a similar method to existing standards with the underlying leased asset being reported and recognized as a real estate asset. The FASB is expected to issue an Accounting Standards Update codifying these changes in the coming months. We currently expect to adopt ASU 2016-02 using the practical expedients proposed in the standard and the changes approved by the FASB and do not believe that this change will have a material impact on our consolidated financial statements.

In May 2014, with subsequent updates issued in August 2015 and March, April and May 2016, the FASB issued ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”) and the related FASB ASU Nos. 2016-12 and 2016-20, which provide practical expedients, technical corrections, and improvements for certain aspects of ASU 2014- 09.  ASU 2014-09 was developed to enable financial statement users to better understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The update’s core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Companies are to use a five-step contract review model to ensure revenue is recognized, measured and disclosed in accordance with this principle. Those steps include the following: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to each performance obligation in the contract, and (v) recognize revenue when or as the entity satisfies a performance obligation.  The Company estimates the total transaction price, which generally includes a fixed contract price and may also include variable components. Variable components of the contract price are included in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur. The Company recognizes the estimated transaction price as revenue as it satisfies its performance obligations.

The Company adopted ASU 2014-09 on the effective date of January 1, 2018 using the modified retrospective method. Management concluded that the majority of total revenues consist of rental income from leasing arrangements, which is specifically excluded from the standard. As of January 1, 2018, the Company began accounting for the sale of real estate properties under Subtopic 610-20 which provides for revenue recognition based on transfer of ownership.

- 14 -

During the three months ended March 31, 2018, the Company contributed its property located in Santa Monica, CA to a new joint venture and sold a 49.9% interest in the venture.  The Company estimated the total transaction price, which includes fixed and variable components, pursuant to ASC 606. The variable component of the transaction will be re-measured at each reporting date until stabilization. (See Footnote 4 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional disclosure regarding this transaction).

Note 3 – Lease Intangible Assets and Liabilities

Lease intangible assets (acquired in-place leases, above-market leases and below-market ground leases) and liabilities (acquired below-market leases), net of accumulated amortization, were $291.6 million and $13.9 million, respectively, as of March 31, 2018 and $310.1 million and $14.5 million, respectively, as of December 31, 2017.  The following table summarizes the Company’s lease intangible assets and liabilities (in thousands):

March 31, 2018
	Gross		Accumulated
Lease Intangible Assets	Asset		Amortization			Balance
In-place leases, net	$	530,349	$	(255,408	)	$	274,941
Below-market ground leases, net		11,766		(559	)		11,207
Above-market leases, net		8,925		(3,460	)		5,465
Total	$	551,040	$	(259,427	)	$	291,613

	Gross		Accumulated
Lease Intangible Liabilities	Liability		Amortization			Balance
Below-market leases, net	$	19,658	$	(5,713	)	$	13,945
Total	$	19,658	$	(5,713	)	$	13,945

December 31, 2017
	Gross		Accumulated
Lease Intangible Assets	Asset		Amortization			Balance
In-place leases, net	$	542,655	$	(249,569	)	$	293,086
Below-market ground leases, net		11,766		(508	)		11,258
Above-market leases, net		8,925		(3,171	)		5,754
Total	$	563,346	$	(253,248	)	$	310,098

	Gross		Accumulated
Lease Intangible Liabilities	Liability		Amortization			Balance
Below-market leases, net	$	19,658	$	(5,182	)	$	14,476
Total	$	19,658	$	(5,182	)	$	14,476

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in additional rental income of $0.2  million and $0.2 million for the three months ended March 31, 2018 and March 31, 2017, respectively.  Future amortization of these intangibles is estimated to increase rental income as set forth below (in thousands):

Remainder of 2018	$	(738	)
2019		(923	)
2020		(789	)
2021		(775	)
2022		(486	)

- 15 -

Amortization of acquired below-market ground leases resulted in additional property expense of $50 thousand for the three months ended March 31, 2018 and March 31, 2017, respectively.  Future amortization of below-market ground leases is estimated to increase property expenses as set forth below (in thousands):

Remainder of 2018	$	152
2019		203
2020		203
2021		203
2022		203

Amortization of acquired in-place leases resulted in additional depreciation and amortization expense of $18.0  million and $43.8 million for the three months ended March 31, 2018 and March 31, 2017, respectively.  Future estimated amortization of acquired in-place leases is set forth below (in thousands):

Remainder of 2018	$	44,168
2019		37,269
2020		36,822
2021		36,039
2022		35,120

Note 4 – Investments in Unconsolidated Joint Ventures

The Company conducts a portion of its property rental activities through investments in unconsolidated joint ventures for which the Company holds less than a controlling interest.  The Company’s partners in these unconsolidated joint ventures are unrelated real estate entities or commercial enterprises.  The Company and its unconsolidated joint venture partners make initial and/or ongoing capital contributions to these unconsolidated joint ventures.  The obligations to make capital contributions are governed by each unconsolidated joint venture’s respective operating agreement and related governing documents.

As of March 31, 2018, the Company had investments in five unconsolidated joint ventures as follows (in thousands, except number of properties):

		Seritage %			# of		Total		Contribution
Unconsolidated Joint Venture	Joint Venture Partner	Ownership			Properties		GLA		Value (1)
GS Portfolio Holdings II LLC    ("GGP I JV")	GGP Inc.		50.0	%		4		598	$	37,570
GS Portfolio Holdings (2017) LLC    ("GGP II JV")	GGP Inc.		50.0	%		5		1,187		57,500
MS Portfolio LLC ("Macerich JV")	The Macerich Company		50.0	%		9		1,576		150,000
SPS Portfolio Holdings II LLC    ("Simon JV")	Simon Property Group, Inc.		50.0	%		5		872		52,590
Mark 302 JV LLC ("Mark 302 JV")	Invesco Real Estate		50.1	%		1		97		45,000
						24		4,330	$	342,660

(1) Represents the Company’s share of property contribution value at the formation of each JV.

During the three months ended March 31, 2018, the Company contributed its property located in Santa Monica, CA to the Mark 302 JV and sold a 49.9% interest to an investment fund managed by Invesco Real Estate based on a contribution value of $90.0 million (the “Initial Contribution Value”). As a result of the transaction, the Company received cash of approximately $50.1 million and recorded a gain of $40.2 million (the “Initial Gain”) which is included in gain on sale of real estate within the condensed consolidated statements of operations. The Initial Gain is comprised of $20.1 million attributable to the increase in fair value of the retained 50.1% interest due to application of the ASU 2017-05, while the remaining $20.1 million is the gain on sale of the remaining 49.9% interest.

The Mark 302 JV is subject to a revaluation upon the earlier of the first anniversary of project stabilization (as defined in the operating agreement of the Mark 302 JV) or December 31, 2020. Upon revaluation, the primary inputs in determining the Initial Contribution Value, which consist of property operating income and total project costs, will be updated for actual results and a value (the “Final Contribution Value”) will be calculated to yield a pre-determined rate of return to the investment fund managed by Invesco Real Estate.  The Final Contribution Value cannot be more than $105.0 million or less than $60.0 million and will result in a cash settlement between the two parties.

- 16 -

The Company recorded the Initial Gain based on the Initial Contribution Value because it determined it to be the most likely amount in the range of possible amounts. The Company made this determination based on its analysis of the primary inputs that determine both the Initial Contribution Value and Final Contribution Value, which consist of property operating income and total project costs. The gain on sale of real estate based on the Final Contribution Value (the “Final Gain”) will not be more than $55.2 million or less than $10.2 million.

Each unconsolidated joint venture is obligated to maintain financial statements in accordance with GAAP.  The Company shares in the profits and losses of these unconsolidated joint ventures generally in accordance with the Company’s respective equity interests.  In some instances, the Company may recognize profits and losses related to investment in an unconsolidated joint venture that differ from the Company’s equity interest in the unconsolidated joint venture.  This may arise from impairments that the Company recognizes related to its investment that differ from the impairments the unconsolidated joint venture recognizes with respect to its assets; differences between the Company’s basis in assets it has transferred to the unconsolidated joint venture and the unconsolidated joint venture’s basis in those assets; the Company’s deferral of the unconsolidated joint venture’s profits from land sales to the Company; or other items.  There were no joint venture impairment charges for the three months ended March 31, 2018 or March 31, 2017.

The following tables present combined condensed financial data for the Company’s unconsolidated joint ventures (in thousands):

	March 31, 2018			December 31, 2017
ASSETS
Investment in real estate
Land	$	277,306		$	191,853
Buildings and improvements		409,144			388,363
Accumulated depreciation		(53,731	)		(48,306	)
		632,719			531,910
Construction in progress		22,014			21,000
Net investment in real estate		654,733			552,910
Cash and cash equivalents		7,805			4,549
Tenant and other receivables, net		4,045			3,843
Other assets, net		40,976			45,605
Total assets	$	707,559		$	606,907
LIABILITIES AND MEMBERS INTERESTS
Liabilities
Mortgage loans payable, net	$	124,056		$	122,875
Accounts payable, accrued expenses and other    liabilities		32,117			28,201
Total liabilities		156,173			151,076
Members Interest
Additional paid in capital		579,134			473,098
Retained earnings		(27,748	)		(17,267	)
Total members interest		551,386			455,831
Total liabilities and members interest	$	707,559		$	606,907

	Three Months Ended March 31,
	2018			2017
EQUITY IN INCOME OF UNCONSOLIDATED    JOINT VENTURES
Total revenue	$	11,227		$	16,344
Property operating expenses		(1,712	)		(3,322	)
Depreciation and amortization		(7,586	)		(10,972	)
Operating income		1,929			2,050
Other expenses		(7,094	)		(46	)
Net (loss) income	$	(5,165	)	$	2,004
Equity in (loss) income of unconsolidated    joint ventures	$	(2,582	)	$	1,002

- 17 -

Note 5 – Leases

Master Lease

On July 7, 2015, subsidiaries of Seritage and subsidiaries of Sears Holdings entered into the Master Lease.  The Master Lease generally is a triple net lease with respect to all space which is leased thereunder to Sears Holdings, subject to proportional sharing by Sears Holdings for repair and maintenance charges, real property taxes, insurance and other costs and expenses which are common to both the space leased by Sears Holdings and other space occupied by unrelated third-party tenants in the same or other buildings pursuant to third-party leases, space which is recaptured pursuant to the Company recapture rights described below and all other space which is constructed on the properties.  Under the Master Lease, Sears Holdings and/or one or more of its subsidiaries will be required to make all expenditures reasonably necessary to maintain the premises in good appearance, repair and condition for as long as they are in occupancy.

The Master Lease has an initial term of 10 years and contains three options for five-year renewals of the term and a final option for a four-year renewal.  As of March 31, 2018 and March 31, 2017, the annualized base rent paid directly by Sears Holdings and its subsidiaries under the Master Lease was approximately $89.8 million and $124.1 million, respectively.  In each of the initial and first two renewal terms, annual base rent will be increased by 2.0% per annum for each lease year over the rent for the immediately preceding lease year.  For subsequent renewal terms, rent will be set at the commencement of the renewal term at a fair market rent based on a customary third-party appraisal process, taking into account all the terms of the Master Lease and other relevant factors, but in no event will the renewal rent be less than the rent payable in the immediately preceding lease year.

Revenues from the Master Lease for the three months ended March 31, 2018 and March 31, 2017 are as follows (in thousands and excluding straight-line rental income of 0.5 million and $1.0 million for the three months ended March 31, 2018 and March 31, 2017, respectively:

	Three Months Ended March 31,
	2018		2017
Rental income	$	22,531	$	31,651
Termination fee income		174		6,136
Tenant reimbursements		13,268		14,706
Total revenue	$	35,973	$	52,493

The Master Lease provides the Company with the right to recapture up to approximately 50% of the space occupied by Sears Holdings at each of the 224 wholly owned properties initially included in the Master Lease (subject to certain exceptions).  While the Company is permitted to exercise its recapture rights all at once or in stages as to any particular property, it is not permitted to recapture all or substantially all of the space subject to the recapture right at more than 50 properties under Master Lease during any lease year.  In addition, Seritage has the right to recapture any automotive care centers which are free-standing or attached as “appendages” to the properties, all outparcels or outlots and certain portions of the parking areas and common areas.  Upon exercise of these recapture rights, the Company will generally incur certain costs and expenses for the separation of the recaptured space from the remaining Sears Holdings space as it reconfigures and rents the recaptured space to third-party tenants.

The Company also has the right to recapture 100% of the space occupied by Sears Holdings at each of 21 properties initially identified under the Master Lease by making a specified lease termination payment to Sears Holdings, after which the Company can reposition and re-lease those stores.  The lease termination payment is calculated as the greater of an amount specified at the time the Company entered into the Master Lease with Sears Holdings and an amount equal to 10 times the adjusted EBITDA attributable to such space within the Sears Holdings main store which is not attributable to the space subject to the separate 50% recapture right discussed above for the 12-month period ending at the end of the fiscal quarter ending immediately prior to recapturing such space.

- 18 -

As of March 31, 2018, the Company had exercised recapture rights at 62 properties:

Property	Recapture Type	Notice Date(s)
Asheville, NC	100% (1)	March 2018
Chicago, IL	100% (1)	March 2018
Clearwater, FL	100% (1)	March 2018
El Cajon, CA	100% (1)	March 2018
Fairfield, CA	100% (1)	March 2018 / December 2017
Oklahoma City, OK	Out parcel	March 2018
Plantation, FL	100% (1)	March 2018 / December 2017
Redmond, WA	100% (1)	March 2018 / September 2017
Reno, NV	100% (1)	March 2018
Tucson, AZ	100% (1)	March 2018
Anchorage, AK	100%	December 2017
Boca Raton, FL	100%	December 2017
Westminster, CA	100%	December 2017
Hicksville, NY	100%	December 2017
Orland Park, IL	100% (1)	December 2017
Florissant, MO	Out parcel	December 2017
Salem, NH	Out parcel	December 2017
Las Vegas, NV	Partial	December 2017
Yorktown Heights	Partial	December 2017
Austin, TX	100% (1)	December 2017 / September 2017
Ft. Wayne, IN	Out parcel	September 2017 / July 2016
North Little Rock, AR	Auto Center	September 2017
St. Clair Shores, MI	100%	September 2017
Canton, OH	Partial	June 2017
Dayton, OH	Auto center	June 2017
North Riverside, IL	Partial	June 2017
Roseville, CA	Auto center	June 2017
Temecula, CA	Partial	June 2017
Watchung, NJ	100%	June 2017
Anderson, SC	100% (1)	April 2017 / July 2016
Aventura, FL	100%	April 2017
Carson, CA	100% (1)	April 2017 / December 2016
Charleston, SC	100% (1)	April 2017 / October 2016
Hialeah, FL	100% (1)	April 2017
San Diego, CA	100% (1)	April 2017
Valley View, TX	100%	April 2017
Cockeysville, MD	Partial	March 2017
North Miami, FL	100%	March 2017
Olean, NY	Partial	March 2017
Guaynabo, PR	Partial	December 2016
Santa Cruz, CA	Partial	December 2016
Santa Monica, CA (2)	100%	December 2016
Saugus, MA	Partial	December 2016
Roseville, MI	Partial	November 2016
Troy, MI	Partial	November 2016
Rehoboth Beach, DE	Partial	October 2016
St. Petersburg, FL	100%	October 2016
Warwick, RI	Auto center	October 2016
West Hartford, CT	100%	October 2016
Madison, WI	Partial	July 2016
North Hollywood, CA	Partial	July 2016
Orlando, FL	100%	July 2016
West Jordan, UT	Partial+ auto center	July 2016
Albany, NY	Auto center	May 2016
Bowie, MD	Auto center	May 2016
Fairfax, VA	Partial + autocenter	May 2016
Hagerstown, MD	Auto center	May 2016
Wayne, NJ (3)	Partial + auto center	May 2016
San Antonio, TX	Auto center	March 2016
Braintree, MA	100%	November 2015
Honolulu, HI	100%	December 2015
Memphis, TN	100%	December 2015

(1) The Company converted partial recapture rights at this property to 100% recapture rights and exercised such rights.

(2) In March 2018, the Company contributed this asset to the Mark 302 JV and retained a 50.1% interest in the joint venture.

- 19 -

(3) In July 2017, the Company contributed this asset to the GGP II JV and retained a 50.0% interest in the joint venture.

The Master Lease also provides for certain rights to Sears Holdings to terminate the Master Lease with respect to wholly owned properties that cease to be profitable for operation by Sears Holdings.  In order to terminate the Master Lease with respect to a certain property, Sears Holdings must make a payment to the Company of an amount equal to one year of rent (together with taxes and other expenses) with respect to such property.  Sears Holdings must provide notice of not less than 90 days of their intent to exercise such termination right and such termination right will be limited so that it will not have the effect of reducing the fixed rent under the Master Lease by more than 20% per annum.

As of March 31, 2018, Sears Holdings had terminated the Master Lease with respect to 56 stores totaling 7.4 million square feet of gross leasable area.  The aggregate base rent at these stores at the time of termination was approximately $23.6 million.  Sears Holdings continued to pay the Company rent until it vacated the stores and also paid aggregate termination fees of approximately $45.1 million, amounts equal to one year of aggregate annual base rent plus one year of estimated real estate taxes and operating expense.

Subsequent to March 31, 2018, Sears Holdings provided notice that it intended to exercise its rights to terminate the Master Lease with respect to nine additional stores totaling 1.5 million square feet of gross leasable area.  The aggregate annual base rent at these stores is approximately $5.8 million, or 2.7% of the Company’s total annual base rent as of March 31, 2018, including all signed leases.  Sears Holdings will continue to pay Seritage rent until it vacates the stores which is expected to occur in August 2018.  The termination fee is approximately $11.5 million, an amount equal to one year of the aggregate annual base rent, plus one year of estimated annual operating expenses.

As of March 31, 2018, the Company had announced redevelopment projects at 22 of the terminated properties and will continue to announce redevelopment activity as new leases are signed to occupy the space formerly occupied by Sears Holdings.  During the three months ended March 31, 2018, the Company sold four of the terminated properties for a total of $13.5 million and recorded a gain of $2.1 million which is included in gain on sale of real estate within the condensed consolidated statements of operations.

					Announced
Property	Square Feet		Notice	Termination	Redevelopment
Alpena, MI		118,200	September 2016	January 2017
Chicago, IL (S Kedzie)		118,800	September 2016	January 2017
Cullman, AL		98,500	September 2016	January 2017	Q2 2017
Deming, NM		96,600	September 2016	January 2017
Elkhart, IN		86,500	September 2016	January 2017	Q4 2016
Harlingen, TX		91,700	September 2016	January 2017	Sold
Houma, LA		96,700	September 2016	January 2017	Sold
Kearney, NE		86,500	September 2016	January 2017	Q3 2016
Manistee, MI		87,800	September 2016	January 2017
Merrillville, IN		108,300	September 2016	January 2017	Q4 2016
New Iberia, LA		91,700	September 2016	January 2017	Q2 2017
Riverton, WY		94,800	September 2016	January 2017
Sault Sainte Marie, MI		92,700	September 2016	January 2017
Sierra Vista, AZ		86,100	September 2016	January 2017	Sold
Springfield, IL		84,200	September 2016	January 2017	Q3 2016
Thornton, CO		190,200	September 2016	January 2017	Q1 2017
Yakima, WA		97,300	September 2016	January 2017	Sold
Chapel Hill, OH		187,179	January 2017	April 2017
Concord, NC		137,499	January 2017	April 2017
Detroit Lakes, MN		79,102	January 2017	April 2017
El Paso, TX		103,657	January 2017	April 2017
Elkins, WV		94,885	January 2017	April 2017
Henderson, NV		122,823	January 2017	April 2017	Q1 2017
Hopkinsville, KY		70,326	January 2017	April 2017	Q1 2018
Jefferson City, MO		92,016	January 2017	April 2017	Q2 2017
Kenton, OH		96,066	January 2017	April 2017
Kissimmee, FL		112,505	January 2017	April 2017
Layton, UT		90,010	January 2017	April 2017
Leavenworth, KS		76,853	January 2017	April 2017
Mount Pleasant, PA		83,536	January 2017	April 2017
Muskogee, OK		87,500	January 2017	April 2017
Owensboro, KY		68,334	January 2017	April 2017
Paducah, KY		108,244	January 2017	April 2017	Q3 2017
Platteville, WI		94,841	January 2017	April 2017
Riverside, CA		94,500	January 2017	April 2017

- 20 -

					Announced
Property	Square Feet		Notice	Termination	Redevelopment
Sioux Falls, SD		72,511	January 2017	April 2017
Albany, NY		216,200	June 2017	October 2017	Q1 2016
Burnsville, MN		161,700	June 2017	October 2017
Chicago, IL (N Harlem)		293,700	June 2017	October 2017
Cockeysville, MD		83,900	June 2017	October 2017	Q1 2017
East Northport, NY		187,000	June 2017	October 2017	Q2 2017
Friendswood, TX		166,000	June 2017	November 2017 (1)
Greendale, WI		238,400	June 2017	October 2017	Q4 2017
Hagerstown, MD		107,300	June 2017	October 2017	Q1 2016
Johnson City, NY		155,100	June 2017	October 2017
Lafayette, LA		194,900	June 2017	October 2017
Mentor, OH		208,700	June 2017	October 2017
Middleburg Heights, OH		351,600	June 2017	October 2017
Olean, NY		75,100	June 2017	October 2017	Q1 2017
Overland Park, KS		215,000	June 2017	October 2017
Roseville, MI		277,000	June 2017	October 2017	Q3 2016
Sarasota, FL		204,500	June 2017	October 2017
Toledo, OH		209,900	June 2017	October 2017
Warwick, RI		169,200	June 2017	October 2017	Q3 2016 / Q3 2017
Westwood, TX		215,000	June 2017	January 2018 (1)
York, PA		82,000	June 2017	October 2017
Cedar Rapids, IA		141,100	April 2018	August 2018
Citrus Heights, CA		280,700	April 2018	August 2018
Gainesville, FL		140,500	April 2018	August 2018
Maplewood, MN		168,500	April 2018	August 2018
Pensacola, FL		212,300	April 2018	August 2018
Rochester, NY		128,500	April 2018	August 2018
Roseville, CA		121,000	April 2018	August 2018	Q2 2017 / Q1 2018
San Antonio, TX		187,800	April 2018	August 2018	Q4 2015
Warrenton, NJ		113,900	April 2018	August 2018	Q1 2018
Total square feet		8,905,487

(1) The Company and Sears Holdings agreed to extend occupancy beyond October 2017 under the existing Master Lease terms.

Note 6 – Debt

Mortgage Loans Payable

On July 7, 2015, pursuant to the Transaction, the Company entered into a mortgage loan agreement (the “Mortgage Loan Agreement”) and mezzanine loan agreement (collectively, the “Loan Agreements”), providing for term loans in an initial principal amount of approximately $1,161 million (collectively, the “Mortgage Loans”) and a $100 million future funding facility (the “Future Funding Facility”).  Pursuant to the terms of the Loan Agreements, amounts available under the Future Funding Facility were fully drawn by the Company on June 30, 2017.  Such amounts were deposited into a redevelopment reserve and will be used to fund redevelopment activity at the Company’s properties.

During the three months ended March 31, 2018, the Company reduced mortgage loans payable by $73.0 million as a result of the sale of a 50% joint venture interest in The Mark 302 and the disposition of four other assets.

As of March 31, 2018, the aggregate principal amount outstanding under the Mortgage Loans and the Future Funding Facility was $1,137 million.

Interest under the Mortgage Loans is due and payable on the payment dates, and all outstanding principal amounts are due when the loan matures on the payment date in July 2019, pursuant to the Loan Agreements.  The Company has two one-year extension options subject to the payment of an extension fee and satisfaction of certain other conditions.  Borrowings under the Mortgage Loans bear interest at the London Interbank Offered Rates (“LIBOR”) plus, as of March 31, 2018, a weighted-average spread of 478 basis points; payments are made monthly on an interest-only basis.  The weighted-average interest rates for the Mortgage Loans and Future Funding Facility for the three months ended March 31, 2018 and March 31, 2017 were 6.40% and 5.54%, respectively.

- 21 -

The Mortgage Loans and Future Funding Facility are secured by all of the Company’s Wholly Owned Properties and a pledge of its equity in the JVs.  The Loan Agreements contain customary covenants for a real estate financing, including restrictions that limit the Company’s ability to grant liens on its assets, incur additional indebtedness, or transfer or sell assets, as well as those that may require the Company to obtain lender approval for certain major tenant leases or significant redevelopment projects.  Such restrictions also include cash flow sweep provisions based upon certain measures of the Company’s and Sears Holdings’ financial and operating performance, including (a) where the “Debt Yield” (the ratio of net operating income for the mortgage borrowers to their debt) is less than 11.0%, (b) if the performance of Sears Holdings at the stores subject to the Master Lease with Sears Holdings fails to meet specified rent ratio thresholds, (c) if the Company fails to meet specified tenant diversification tests and (d) upon the occurrence of a bankruptcy or insolvency action with respect to Sears Holdings or if there is a payment default under the Master Lease with Sears Holdings, in each case, subject to cure rights, including providing specified amounts of cash collateral or satisfying tenant diversification thresholds.

In November 2016, the Company and the servicer for its Mortgage Loans entered into amendments to the Loan Agreements to resolve a disagreement regarding one of the cash flow sweep provisions in the Loan Agreements.  The principal terms of these amendments are that the Company (i) posted $30.0 million, and will post $3.3 million on a monthly basis, to a redevelopment project reserve account, which amounts may be used by the Company to fund redevelopment activity and (ii) extended the spread maintenance provision for prepayment of the loan by two months through March 9, 2018 (with the spread maintenance premium for the second month at a reduced amount).  As a result of this agreement and the resolution of the related disagreement, no cash flow sweep was imposed.

All obligations under the Loan Agreements are non-recourse to the borrowers and the pledgors of the JV Interests and the guarantors thereunder, except that (i) the borrowers and the guarantors will be liable, on a joint and several basis, for losses incurred by the lenders in respect of certain matters customary for commercial real estate loans, including misappropriation of funds and certain environmental liabilities and (ii) the indebtedness under the Loan Agreements will be fully recourse to the borrowers and guarantors upon the occurrence of certain events customary for commercial real estate loans, including without limitation prohibited transfers, prohibited voluntary liens, and bankruptcy.  Additionally the guarantors delivered a limited completion guaranty with respect to future redevelopments undertaken by the borrowers at the properties, and the Company must maintain (i) a net worth of not less than $1.0 billion and (ii) a minimum liquidity of not less than $50.0 million, throughout the term of the Loan Agreements.

The Company believes it is currently in compliance with all material terms and conditions of the Loan Agreements.

The Company incurred $22.3 million of debt issuance costs related to the Mortgage Loans and Future Funding Facility which are recorded as a direct deduction from the carrying amount of the Mortgage Loans and Future Funding Facility and amortized over the term of the Loan Agreements.  As of March 31, 2018, the unamortized balance of the Company’s debt issuance costs was $6.7 million as compared to $8.5 million as December 31, 2017.

Unsecured Term Loan

On February 23, 2017, the Operating Partnership, as borrower, and the Company, as guarantor, entered into a $200 million senior unsecured delayed draw term loan facility (the “Unsecured Delayed Draw Term Loan”) with JPP, LLC and JPP II, LLC as lenders (collectively, the “Original Lenders”) and JPP, LLC as administrative agent.

The total commitment of the Lenders under the Unsecured Delayed Draw Term Loan was $200 million and the maturity date was December 31, 2017.

The principal amount of loans outstanding under the Unsecured Delayed Draw Term Loan bore a base annual interest rate of 6.50%.  If a cash flow sweep period were to have occurred and been continuing under the Company’s Mortgage Loan Agreement (i) the interest rate on any outstanding advances would have increased from and after such date by 1.5% per annum above the base interest rate and (ii) the interest rate on any advances made after such date would have increased by 3.5% per annum above the base interest rate.  Accrued and unpaid interest was payable in cash, except that during the continuance of a cash flow sweep period under the Company’s Mortgage Loan Agreement, the Operating Partnership could elect to defer the payment of interest which deferred amount would be added to the outstanding principal balance of the loans.

On February 23, 2017, the Operating Partnership paid to the Original Lenders an upfront commitment fee equal to $1.0 million.  On May 24, 2017, the Operating Partnership paid to the Original Lenders an additional, and final, commitment fee of $1.0 million.  

The Unsecured Delayed Draw Term Loan required that the Company at all times maintain (i) a net worth of not less than $1.0 billion, and (ii) a leverage ratio not to exceed 60.0%.

- 22 -

The Unsecured Delayed Draw Term Loan included customary representations and warranties, covenants and indemnities.  The Unsecured Delayed Draw Term Loan also had customary events of default, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representation or warranty, and bankruptcy or insolvency proceedings.  If there was an event of default, the Lenders could declare all or any portion of the outstanding indebtedness to be immediately due and payable, exercise any rights they might have under any of the Unsecured Delayed Draw Term Loan documents, and require the Operating Partnership to pay a default interest rate on overdue amounts equal to 1.50% in excess of the applicable base interest rate.

Mr. Edward S. Lampert, the Company’s Chairman, is the Chairman and Chief Executive Officer of ESL, which controls JPP, LLC and JPP II, LLC.  The terms of the Unsecured Delayed Draw Term Loan were approved by the Company’s Audit Committee and the Company’s Board of Trustees (with Mr. Edward S. Lampert recusing himself).

On December 27, 2017, the Operating Partnership, as borrower, and the Company, as guarantor, refinanced the Unsecured Delayed Draw Term Loan with a new $200 million unsecured term loan facility (the “Unsecured Term Loan”).  The principal amount outstanding under the Unsecured Delayed Draw Term Loan at termination was $85 million. No prepayment penalties were triggered and the Unsecured Delayed Draw Term Loan terminated in accordance with its terms.

The lenders under the Unsecured Delayed Draw Term Loan, JPP, LLC and JPP II, LLC, maintained their funding of $85 million in the Unsecured Term Loan, with JPP, LLC appointed as administrative agent under the Unsecured Term Loan.  An affiliate of Empyrean Capital Partners, L.P., a Delaware limited partnership (and together with JPP, LLC and JPP II LLC, each an “Initial Lender” and collectively, the “Initial Lenders”), funded $60 million under the Unsecured Term Loan, resulting in a total of $145 million committed and funded under the Unsecured Term Loan at closing.  Under an accordion feature, the Company has the right to increase the total commitments up to $200 million and place an additional $55 million of incremental loans with the Initial Lenders or new lenders. The Initial Lenders under the Unsecured Term Loan are not obligated to make all or any portion of the incremental loans.

The Company used the proceeds of the Unsecured Term Loan, among other things, to refinance the Unsecured Delayed Draw Term Loan, to fund redevelopment projects and for other general corporate purposes.  Loans under the Unsecured Term Loan are guaranteed by the Company.

The Unsecured Term Loan matures on the earlier of (i) December 31, 2018 and (ii) the date on which the outstanding indebtedness under the Company’s existing mortgage and mezzanine facilities are repaid in full.  The Unsecured Term Loan may be prepaid at any time in whole or in part, without any penalty or premium.  Amounts drawn under the Unsecured Term Loan and repaid may not be redrawn.

The principal amount of loans outstanding under the Unsecured Term Loan bears a base annual interest rate of 6.75%.  Accrued and unpaid interest is payable in cash.

On December 27, 2017, the Borrower paid to each Initial Lender an upfront fee in an aggregate amount equal to 1.00% of the principal amount of the loan made by such Initial Lender.

The Unsecured Term Loan requires that the Company at all times maintain (i) a net worth of not less than $1.0 billion, and (ii) a leverage ratio not to exceed 60.0%.

The Unsecured Term Loan includes customary representations and warranties, covenants and indemnities.  The Unsecured Term Loan also has customary events of default, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representations or warranties, and bankruptcy or insolvency proceedings.  If there is an event of default, the lenders may declare all or any portion of the outstanding indebtedness to be immediately due and payable, exercise any rights they might have under any of the Unsecured Term Loan documents, and require the Borrower to pay a default interest rate on overdue amounts equal to 1.50% in excess of the then applicable interest rate.

The Company believes it is currently in compliance with all material terms and conditions of the Unsecured Term Loan.

The Company incurred $1.8 million of debt issuance costs related to the Unsecured Term Loan which are recorded as a direct deduction from the carrying amount of the Unsecured Term Loan and amortized over the term of the loan.  As of March 31, 2018, the unamortized balance of the Company’s debt issuance costs was $1.4 million as compared to $1.5 million as December 31, 2017.

Mr. Edward S. Lampert, the Company’s Chairman, is the sole stockholder, chief executive officer and director of ESL Investments, Inc. (“ESL”), which controls JPP, LLC and JPP II, LLC. The terms of the Unsecured Term Loan were approved by the Company’s Audit Committee and the Company’s Board of Trustees (with Mr. Edward S. Lampert recusing himself).

- 23 -

Note 7 – Income Taxes

The Company has elected to be taxed as a REIT as defined under Section 856(c) of the Code for federal income tax purposes and expects to continue to operate to qualify as a REIT.  To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to currently distribute at least 90% of its adjusted REIT taxable income to its shareholders.

As a REIT, the Company generally will not be subject to federal income tax on taxable income that is distributed to its shareholders.  If the Company fails to qualify as a REIT or does not distribute 100% of its taxable income in any taxable year, it will be subject to federal taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years.

Even if the Company qualifies for taxation as a REIT, the Company is subject to certain state, local and Puerto Rico taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income.

On December 22, 2017, H.R. 1, known as the Tax Cuts and Jobs Act (the “TCJA”) was signed into law and included wide-scale changes to individual, pass-through and corporation tax laws, including those that impact the real estate industry, the ownership of real estate and real estate investments, and REITs. We have reviewed the provisions of the law that pertain to the Company and have determined them to have no material income tax effect for financial statement purposes.

Note 8 – Fair Value Measurements

ASC 820, Fair Value Measurement, defines fair value and establishes a framework for measuring fair value.  The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the “exit price”).  ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:

Level 1 - quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities

Level 2 - observable prices based on inputs not quoted in active markets, but corroborated by market data

Level 3 - unobservable inputs used when little or no market data is available

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.  In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.  The Company also considers counterparty credit risk in its assessment of fair value.

Financial Assets and Liabilities Measured at Fair Value on a Recurring or Non-Recurring Basis

All derivative instruments are carried at fair value and are valued using Level 2 input.  The Company’s derivative instruments as of March 31, 2018 and December 31, 2017 consisted of a single interest rate cap.  The Company utilizes an independent third party and interest rate market pricing models to assist management in determining the fair value of this instrument.

The fair value of the Company’s interest rate cap at March 31, 2018 and December 31, 2017 was $0.2 million and less than $0.1 million, respectively, and is included as a component of prepaid expenses, deferred expenses and other assets on the condensed consolidated balance sheets.

The Company has elected not to utilize hedge accounting, and therefore, the change in fair value is included within change in fair value of interest rate cap on the condensed consolidated statements of operations.  For the three months ended March 31, 2018, the Company recorded a gain of $0.2 million compared to a loss of $0.5 million for the three months ended March 31, 2017.  

Financial Assets and Liabilities not Measured at Fair Value

Financial assets and liabilities that are not measured at fair value on the condensed consolidated balance sheets include cash equivalents and debt obligations.  The fair value of cash equivalents is classified as Level 1 and the fair value of debt obligations is classified as Level 2.

- 24 -

Cash equivalents are carried at cost, which approximates fair value.  The fair value of debt obligations is calculated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit ratings.  As of March 31, 2018 and December 31, 2017, the estimated fair values of the Company’s debt obligations were $1.28 billion and $1.36 billion, respectively, which approximated the carrying value at such dates as the current risk-adjusted rate approximates the stated rates on the Company’s debt obligations.

Note 9 – Commitments and Contingencies

Insurance

The Company maintains general liability insurance and all-risk property and rental value, with sub-limits for certain perils such as floods and earthquakes on each of the Company’s properties.  The Company also maintains coverage for terrorism acts as defined by Terrorism Risk Insurance Program Reauthorization Act, which expires in December 2020.

Insurance premiums are charged directly to each of the retail properties.  The Company or its tenants may be responsible for deductibles and losses in excess of insurance coverage, which losses could be material, subject to the terms of the respective tenant leases.  The Company continues to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism.  However, the Company cannot anticipate what coverage will be available on commercially reasonable terms in the future.

Environmental Matters

Under various federal, state and local laws, ordinances and regulations, the Company may be considered an owner or operator of real property or may have arranged for the disposal or treatment of hazardous or toxic substances. As a result, the Company may be liable for certain costs, including removal, remediation, government fines, and injuries to persons and property.  The Company does not believe that any resulting liability from such matters will have a material effect on the condensed consolidated financial position, results of operations, or liquidity of the Company.  Under the Master Lease, Sears Holdings has indemnified the Company from certain environmental liabilities at the Wholly Owned Properties existing before, or caused by Sears Holdings during, the period in which each Wholly Owned Property is leased to Sears Holdings, including removal and remediation of all affected facilities and equipment constituting the automotive care center facilities (and each JV Master Lease includes a similar requirement of Sears Holdings).  As of March 31, 2018 and December 31, 2017, the Company had approximately $10.6 million and $10.8 million, respectively, of restricted cash in a lender reserve account to fund potential environmental costs that were identified during due diligence related to the Transaction.

Litigation and Other Matters

In accordance with accounting standards regarding loss contingencies, the Company accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and the Company discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued or disclose the fact that such a range of loss cannot be estimated. The Company does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. In such cases, the Company discloses the nature of the contingency, and an estimate of the possible loss, range of loss, or disclose the fact that an estimate cannot be made.

The Company is subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business.  While the resolution of such matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material effect on the condensed consolidated financial position, results of operations, cash flows or liquidity of the Company.

Note 10 – Related Party Disclosure

Edward S. Lampert

Edward S. Lampert is Chairman and Chief Executive Officer of Sears Holdings and is the Chairman and Chief Executive Officer of ESL.  Mr. Lampert beneficially owned approximately  73.3 % of Sears Holdings’ outstanding common stock at March 31, 2018 (per Schedule 13D filed March 23, 2018).  Mr. Lampert is also the Chairman of Seritage.

As of March 31, 2018, Mr. Lampert beneficially owned a 36.2% interest in the Operating Partnership and approximately 2.7% and 100% of the outstanding Class A common shares and Class B non-economic common shares, respectively.

Subsidiaries of Sears Holdings, as lessees, and subsidiaries of the Company, as lessors, are parties to the Master Lease (see Note 5).

- 25 -

Unsecured Term Loan

On December 27, 2017, the Operating Partnership, as borrower, and the Company, as guarantor, entered into a $200.0 million senior unsecured term loan facility with JPP, LLC, JPP II, LLC and an affiliate of Empyrean Capital Partners, L.P. as lenders, and JPP, LLC as administrative agent.

Edward S. Lampert, the Company’s Chairman, is the Chairman and Chief Executive Officer of ESL, which controls JPP, LLC and JPP II, LLC.  The terms of the unsecured delayed draw term loan facility were approved by the Company’s Audit Committee and the Company’s Board of Trustees (with Mr. Edward S. Lampert recusing himself).

Note 11 – Non-Controlling Interests

Partnership Agreement

On July 7, 2015, Seritage and ESL entered into the agreement of limited partnership of the Operating Partnership (the “Partnership Agreement”).  Pursuant to the Partnership Agreement, as the sole general partner of the Operating Partnership, Seritage exercises exclusive and complete responsibility and discretion in its day-to-day management, authority to make decisions, and control of the Operating Partnership, and may not be removed as general partner by the limited partners.

As of March 31, 2018, the Company held a 63.8% interest in the Operating Partnership and ESL held a 36.2% interest.  The portions of consolidated entities not owned by the Company are presented as non-controlling interest as of and during the periods presented.

Note 12 – Shareholders’ Equity

Class A Common Shares

During the three months ended March 31, 2018, 2,779,121 net Class C non-voting common shares were converted to Class A common shares.

As of March 31, 2018, 35,208,666 Class A common shares were issued and outstanding.

Subsequent to March 31, 2018, 51,592 net Class C non-voting common shares were converted to Class A common shares.

Class B Non-Economic Common Shares

As of March 31, 2017, 1,328,866 Class B non-economic common shares were issued and outstanding.  The Class B non-economic common shares have voting rights, but do not have economic rights and, as such, do not receive dividends and are not included in earnings per share computations.

Class C Non-Voting Common Shares

During the three months ended March 31, 2018, 2,779,121 net Class C non-voting common shares were converted to Class A common shares.

As of March 31, 2018, 372,010 Class C non-voting common shares were issued and outstanding.  The Class C non-voting common shares have economic rights, but do not have voting rights.  Upon any transfer of a Class C non-voting common share to any person other than an affiliate of the holder of such share, such share shall automatically convert into one Class A common share.

Subsequent to March 31, 2018, 51,592 net Class C non-voting common shares were converted to Class A common shares.

Series A Preferred Shares

In December 2017, the Company issued 2,800,000 7.00% Series A Cumulative Redeemable Preferred Shares (the “Series A Preferred Shares”) in a public offering at $25.00 per share.  The Company received net proceeds from the offering of approximately $66.7 million, after deducting payment of the underwriting discount and offering expenses, which it used the proceeds to fund its redevelopment pipeline and for general corporate purposes.

We may not redeem the Series A Preferred Shares before December 14, 2022 except to preserve our status as a REIT or upon the occurrence of a Change of Control, as defined in the Trust Agreement addendum designating the Series A Preferred Shares.  On and after December 14, 2022, we may redeem any or all of the Series A Preferred Shares at $25.00 per share plus any accrued and unpaid

- 26 -

dividends. In addition, upon the occurrence of a Change of Control, we may redeem any or all of the Series A Preferred Shares for cash within 120 days after the first date on which such Change of Control occurred at $25.00 per share plus any accrued and unpaid dividends. The Series A Preferred Shares have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless we redeem or otherwise repurchase them or they are converted.

Dividends and Distributions

The Company’s Board of Trustees declared the following common stock dividends during 2018 and 2017, with holders of Operating Partnership units entitled to an equal distribution per Operating Partnership unit held on the record date:

			Dividends per
			Class A and Class C
Declaration Date	Record Date	Payment Date	Common Share
2018
April 24	June 29	July 12	$	0.25
February 20	March 30	April 12		0.25
2017
October 24	December 29	January 11, 2018	$	0.25
July 25	September 29	October 12		0.25
April 25	June 30	July 13		0.25
February 28	March 31	April 13		0.25

The Company’s Board of Trustees declared the following preferred stock dividends during 2018:

			Series A
Declaration Date	Record Date	Payment Date	Preferred Share
2018
April 24	June 29	July 16	$	0.43750
February 20	March 30	April 16		0.43750
February 20 (1)	March 30	April 16		0.15556

(1) This dividend covers the period from, and including, December 14, 2017 to December 31, 2017.

Note 13 – Earnings per Share

The table below provides a reconciliation of net income (loss) and the number of common shares used in the computations of “basic” earnings per share (“EPS”), which utilizes the weighted-average number of common shares outstanding without regard to dilutive potential common shares, and “diluted” EPS, which includes all such shares.  Potentially dilutive securities consist of shares of non-vested restricted stock and the redeemable non-controlling interests in the Operating Partnership.

All outstanding non-vested shares that contain non-forfeitable rights to dividends are considered participating securities and are included in computing EPS pursuant to the two-class method which specifies that all outstanding non-vested share-based payment awards that contain non-forfeitable rights to distributions are considered participating securities and should be included in the computation of EPS.

- 27 -

Earnings per share has not been presented for Class B shareholders, as they do not have economic rights.

(in thousands except per share amounts)	Three Months Ended March 31,
	2018			2017
Numerator
Net income (loss)	$	16,201		$	(32,844	)
Net (income) loss attributable to non-controlling interests		(5,873	)		13,006
Preferred dividends		(1,228	)		—
Net income (loss) attributable to common shareholders	$	9,100		$	(19,838	)
Earnings allocated to unvested participating securities		(22	)		—
Net income (loss) available to common shareholders - Basic and diluted	$	9,078		$	(19,838	)
Denominator
Weighted average Class A common shares outstanding		33,673			27,748
Weighted average Class C common shares outstanding		1,741			5,762
Weighted average Class A and Class C common shares outstanding - Basic		35,414			33,510
Restricted shares and share units		87			—
Weighted average Class A and Class C common shares outstanding - Diluted		35,501			33,510

No adjustments were made to the numerator for the three months ended March 31, 2017 because the Company generated a net loss.  During periods of net loss, undistributed losses are not allocated to the participating securities as they are not required to absorb losses.

No adjustments were made to the denominator for the three months ended March 31, 2017 because (i) the inclusion of outstanding non-vested restricted shares would have had an anti-dilutive effect and (ii) including the non-controlling interest in the Operating Partnership would also require that the share of the Operating Partnership loss attributable to such interests be added back to net loss, therefore, resulting in no effect on earnings per share.

As of March 31, 2018 and December 31, 2017, there were 312,951 and 245,570 shares, respectively, of non-vested restricted shares and share units outstanding.

Note 14 – Stock Based Compensation

On July 7, 2015, the Company adopted the Seritage Growth Properties 2015 Share Plan (the “Plan”). The number of shares of common stock reserved for issuance under the Plan is 3,250,000. The Plan provides for grants of restricted shares, share units, other share-based awards, options, and share appreciation rights, each as defined in the Plan (collectively, the "Awards"). Directors, officers, other employees, and consultants of the Company and its subsidiaries and affiliates are eligible for Awards.

Restricted Shares and Share Units

Pursuant to the Plan, the Company has periodically made grants of restricted shares or share units. The vesting terms of these grants are specific to the individual grant and vary in that a portion of the restricted shares and share units vest in equal annual amounts over the subsequent three years (time-based vesting) and a portion of the restricted shares and share units vest on the third anniversary of the grants subject to the achievement of certain performance criteria (performance-based vesting).

In general, participating employees are required to remain employed for vesting to occur (subject to certain limited exceptions). Restricted shares and share units that do not vest are forfeited. Dividends on restricted shares and share units with time-based vesting are paid to holders of such shares and share units and are not returnable, even if the underlying shares or share units do not ultimately vest.  Dividends on restricted shares and share units with performance-based vesting are accrued when declared and paid to holders of such shares on the third anniversary of the initial grant subject to the vesting of the underlying shares.

- 28 -

The following table summarizes restricted share activity for the three months ended March 31, 2018:

	Three Months Ended March 31, 2018
				Weighted-
				Average Grant
	Shares			Date Fair Value
Unvested restricted shares at beginning of period		245,570		$	41.33
Restricted shares granted		81,595			36.17
Restricted shares vested		(14,214	)		47.08
Unvested restricted shares at end of period		312,951		$	39.73

The Company recognized $0.9 million and $0.4 million in compensation expense related to the restricted shares for the three months ended March 31, 2018 and March 31, 2017.Such expenses are included in general and administrative expenses on the Company's condensed consolidated statements of operations.  As of March 31, 2018, there were approximately $6.8 million of total unrecognized compensation costs related to the outstanding restricted shares.

Note 15 – Accounts Payable, Accrued Expenses and Other Liabilities

The following table summarizes the significant components of accounts payable, accrued expenses and other liabilities as of March 31, 2018 and December 31, 2017 (in thousands):

	March 31, 2018		December 31, 2017
Accrued development expenditures	$	19,964	$	21,449
Dividends payable		15,910		14,559
Accrued real estate taxes		14,920		17,091
Below-market leases		13,945		14,476
Environmental reserve		10,846		11,322
Unearned tenant reimbursements		6,335		10,522
Accounts payable and accrued expenses		5,648		9,588
Prepaid rental income		5,127		4,156
Accrued interest		3,787		3,689
Deferred maintenance		2,581		2,581
Total accounts payable, accrued expenses and other    liabilities	$	99,063	$	109,433

Note 16 – Subsequent Events

Subsequent to the three months ended March 31, 2018, the Company:

− Entered into an agreement with a residential developer to pursue a multi-family development on 2.5 acres of the 15-acre former Sears site owned by Seritage at Overlake Plaza in Redmond, WA.  The agreement values the 2.5-acre parcel at $16.0 million.

− Entered into an agreement with the adjacent mall owner to pursue a multi-family development on 4.5 acres of the 10-acre Sears site owned by Seritage at NewPark Mall in Newark, CA.  The agreement values the 4.5-acre parcel at $20.0 million.

− Entered into an agreement to sell the Sears store and parcel at Tanforan Mall in San Bruno, CA to the adjacent mall owner for gross consideration of $42.0 million.

- 29 -

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “projects,” “will,” “would,” “may” or other similar expressions in this Quarterly Report on Form 10-Q.  Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017.  For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q.  All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.  We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.  The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Part 1 of this Quarterly Report.

Overview

Seritage Growth Properties (NYSE: SRG), a Maryland real estate investment trust formed on June 3, 2015, is a fully integrated, self-administered and self-managed real estate investment trust (“REIT”) as defined under Section 856(c) of the Internal Revenue Code (the “Code”).  Seritage’s assets are held by and its operations are primarily conducted through, directly or indirectly, 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”, “we,” “us,” and “our” as used herein refer to Seritage, the Operating Partnership, and its owned and controlled subsidiaries.

We are principally engaged in the acquisition, ownership, development, redevelopment, management, and leasing of diversified retail real estate throughout the United States.  As of March 31, 2018, our portfolio included approximately 39.0 million square feet of gross leasable area (“GLA”), consisting of 225 Wholly Owned Properties totaling 34.6 million square feet of GLA across 49 states and Puerto Rico, and interests in 24 JV Properties totaling approximately 4.3 million square feet of GLA across 13 states.

As of March 31, 2018, we leased space at 145 Wholly Owned Properties to Sears Holdings under the Master Lease, including 81 properties leased only to Sears Holdings and 64 properties leased to both Sears Holdings and one or more third-party tenants.  The remaining 80 Wholly Owned Properties include 54 properties that are leased solely to third-party tenants and do not have any space leased to Sears Holdings, and 26 vacant properties.  As of March 31, 2018, space at 22 JV Properties is also leased to Sears Holdings under the JV Master Leases.  Sears Holdings is the sole tenant at nine JV Properties and 13 JV properties are leased to both Sears Holdings and one or more third-party tenants.  One JV Property is leased solely third-party tenants and one JV Property was vacant as of March 31, 2018.

We generate revenues primarily by leasing our properties to tenants, including both Sears Holdings and third-party tenants, who operate retail stores (and potentially other uses) in the leased premises, a business model common to many publicly traded REITs.  In addition to revenues generated under the Master Lease through rent payments from Sears Holdings, we generate revenue through leases to third-party tenants under existing and future leases for space at our properties.

The Master Lease provides us with the right to recapture up to approximately 50% of the space occupied by Sears Holdings at each of the 224 Wholly Owned Properties initially included in the Master Lease (subject to certain exceptions and limitations).  In addition, Seritage has the right to recapture any automotive care centers which are free-standing or attached as “appendages” to the properties, and all outparcels or outlots and certain portions of parking areas and common areas.  Upon exercise of this recapture right, we will generally incur certain costs and expenses for the separation of the recaptured space from the remaining Sears Holdings space and can reconfigure and rent the recaptured space to third-party tenants on potentially superior terms determined by us and for our own account.  We also have the right to recapture 100% of the space occupied by Sears Holdings at each of 21 identified Wholly Owned Properties by making a specified lease termination payment to Sears Holdings, after which we expect to be able to reposition and re-lease those stores on potentially superior terms determined by us and for our own account.

As of March 31, 2018, we had exercised recapture rights at 62 properties, including 18 properties at which we exercised partial recapture rights, 32 properties at which we exercised 100% recapture rights (16 of which were converted from partial recapture properties), and 14 properties at which we exercised our rights to recapture only automotive care centers or outparcels.

- 30 -

Critical Accounting Policies

A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2017 in Management’s Discussion and Analysis of Financial Condition and Results of Operations. For the three months ended March 31, 2018, there were no material changes to these policies, other than the adoption of the Accounting Standards Codification Topic 606, Revenue from Contracts with Customers and revised Sub-topic 610-20 Other Income – Gains and Losses From the Derecognition of Nonfinancial Assets, described in Note 2 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q.

Results of Operations

We derive substantially all of our revenue from rents received from tenants under existing leases at each of our properties. This revenue generally includes fixed base rents and recoveries of expenses that we have incurred and that we pass through to the individual tenants, in each case as provided in the respective leases.

Our primary cash expenses consist of our property operating expenses, general and administrative expenses, interest expense, and construction and development related costs.  Property operating expenses include: real estate taxes, repairs and maintenance, management expenses, insurance, ground lease costs and utilities; general and administrative expenses include payroll, office expenses, professional fees, and other administrative expenses; and interest expense is primarily on our mortgage loans payable.  In addition, we incur substantial non-cash charges for depreciation and amortization on our properties and related intangible assets and liabilities resulting from the Transaction.

We did not have any revenues or expenses until we completed the Transaction on July 7, 2015.

Rental Income

For the three months ended March 31, 2018, the Company recognized total rental income of $37.1 million as compared to $49.2 million for the three months ended March 31, 2017.  The $12.1 million decrease was driven primarily by (i) reduced rental income under the Master Lease of $9.1 million and (ii) lower termination fee income of $6.0 million, offset by (i) increased third-party rental income of $2.0 million and increased straight-line rent of $1.0 million.

Rental income attributable to Sears Holdings was $22.5 million (excluding straight-line rental income of $0.5 million and termination fee income of $0.2 million), or 65.8% of total rental income earned in the period.  For the prior year period, the comparable rental income attributable to Sears Holdings was $31.7 million, or approximately 76.6% of total rental income earned in the period.

Rental income attributable to third-party tenants was $11.7 million (excluding straight-line rental income of $1.9 million), or 34.2% of total rental income earned in the period.  For the prior year period, the comparable rental income attributable to third-party tenants was $9.7 million, or approximately 23.4% of total rental income earned in the period.

Straight-line rent was $2.5 million as compared to $1.5 million for the prior year period. The prior year period was lower primarily due to the amortization of accrued rental revenues related to the straight-line method of reporting that were deemed uncollectable as result of recapture and termination activity under the Master Lease.

On an annual basis, and taking into account all signed leases, including those which have not yet commenced rental payments, rental income attributable to third-party tenants would have represented approximately 54.3% of total annual base rental income as of March 31, 2018.

The increase in rental income attributable to third-party tenants, and the reduction in rental income attributable directly to Sears Holdings, are driven by the Company’s leasing and redevelopment activity, including signing leases with new, third-party tenants and recapturing space from Sears Holdings.

Tenant Reimbursements and Property Operating Expenses

Pursuant to the provisions of the Master Lease and many third-party leases, the Company is entitled to be reimbursed for certain property related expenses.  For the three months ended March 31, 2018, the Company recorded tenant reimbursement income of $16.7 million compared to property operating and real estate tax expenses totaling $18.6 million, an expense recovery rate of 89.7%.  For the three months ended March 31, 2017, the Company recorded tenant reimbursement income of $16.2 million compared to property operating and real estate tax expenses totaling $17.2 million, an expense recovery rate of 94.5%.

- 31 -

The $1.4 million increase in property operating and real estate taxes was primarily due to an increase in utility and certain common area maintenance expenses related to properties for which Sears Holdings paid such expenses directly during the prior year period, but for which the Company now incurs the expenses, a portion of which is reimbursed by other tenants.

The 480 bps reduction in expense recovery rate was primarily due to an increase in the amount of unleased space, including unleased space for which the Company was previously recording tenant reimbursement income as a result of termination payments under the Master Lease.

Depreciation and Amortization Expenses

Depreciation and amortization expenses consist of depreciation of real property, depreciation of furniture, fixtures and equipment, and amortization of certain lease intangible assets.

For the three months ended March 31, 2018, the Company incurred depreciation and amortization expenses of $34.7 million as compared to depreciation and amortization expenses of $58.7 million in the prior year period.  The decrease of $24.0 million was due primarily to (i) a reduction of $18.1 million in accelerated amortization attributable to certain lease intangible assets and (ii) approximately $9.3 million of lower scheduled amortization resulting from an increase in fully-amortized lease intangibles, offset by $3.2 million of accelerated depreciation attributable to certain buildings that were demolished for redevelopment.

Accelerated amortization results from the recapture of space from, or the termination of space by, Sears Holdings.  Such recaptures and terminations are deemed lease modifications and require related lease intangibles to be amortized over the shorter of the shortened lease term or the remaining useful life of the asset.

General and Administrative Expenses

General and administrative expenses consist of personnel costs, including stock-based compensation, professional fees, office expenses and overhead expenses.

For the three months ended March 31, 2018, the Company incurred general and administrative expenses of $7.8 million compared to general and administrative expenses of $6.3 million for the prior year period.  The $1.5 million increase was driven primarily by (i) increased personnel costs related to 2017 annual incentive compensation and (ii) the write-off of certain transaction-related expenses; the Company does not expect to incur either expense for the remainder of 2018.

Gain on Sale of Real Estate

In March 2018, the Company contributed its property located in Santa Monica, CA to the Mark 302 JV and sold a 49.9% interest to an investment fund managed by Invesco Real Estate based on an Initial Contribution Value of $90.0 million. As a result of the transaction, the Company recorded an Initial Gain of $40.2 million which is included in gain on sale of real estate within the condensed consolidated statements of operations.

The Mark 302 JV is subject to a revaluation upon the earlier of the first anniversary of project stabilization (as defined in the operating agreement of the Mark 302 JV) or December 31, 2020. Upon revaluation, the primary inputs in determining the Initial Contribution Value, which consist of property operating income and total project costs, will be updated for actual results and a Final Contribution Value will be calculated to yield a pre-determined rate of return to the investment fund managed by Invesco Real Estate.  The Final Contribution Value cannot be more than $105.0 million or less than $60.0 million and will result in a cash settlement between the two parties.

The Company recorded the Initial Gain based on the Initial Contribution Value because it determined it to be the most likely amount in the range of possible amounts. The Company made this determination based on its analysis of the primary inputs that determine both the Initial Contribution Value and Final Contribution Value, which consist of property operating income and total project costs. The Final Gain will not be more than $61.1 million or less than $16.1 million.

In March 2018, the Company also sold four former Kmart stores located in Harlingen, TX, Houma, LA, Sierra Vista, AZ and Yakima, WA for $13.5 million and recorded a gain of $2.1 million which is included in gain on the sale of real estate within the condensed consolidated statements of operations.

- 32 -

Interest Expense

For the three months ended March 31, 2018, the Company incurred $16.4 million of interest expense (net of amounts capitalized) as compared to interest expense of $16.6 million for the prior year period.  The change in interest expense was driven by higher average borrowings and higher average LIBOR rates, offset by an increase in amounts capitalized as a result of a greater amount of construction in process.

Unrealized Loss on Interest Rate Cap

For the three months ended March 31, 2018, the Company recorded a gain of $0.2 million compared to a loss of $0.5 million in the prior year period.

Liquidity and Capital Resources

Property rental income is our primary source of cash and is dependent on a number of factors, including occupancy levels and rental rates, as well as our tenants’ ability to pay rent.  Our primary uses of cash include payment of operating expenses, debt service, reinvestment in and redevelopment of properties, and distributions to shareholders and unitholders.  We believe that we currently have sufficient liquidity to fund such uses in the form of, as of March 31, 2018, (i) $135.1 million of unrestricted cash, (ii) $177.4 million of restricted cash, (iii) anticipated cash provided by operations and (iv) $55.0 million of permitted, but uncommitted, borrowing capacity under our Unsecured Term Loan.  We may also raise additional capital through the public or private issuance of debt securities, common or preferred equity or other instruments convertible into or exchangeable for common or preferred equity, as well as through asset sales or joint ventures.

In November 2016, the Company and the servicer for our Mortgage Loans entered into amendments to our Loan Agreements to resolve a disagreement regarding one of the cash flow sweep provisions in our Loan Agreements.  The principal terms of these amendments are that the Company has (i) posted $30.0 million, and will post $3.3 million on a monthly basis, to a redevelopment project reserve account, which amounts may be used by the Company to fund redevelopment activity and (ii) extended the spread maintenance provision for prepayment of the loan by two months through March 9, 2018 (with the spread maintenance premium for the second month at a reduced amount).

Summary of Cash Flows

Net cash provided by operating activities was $7.7 million for the three months ended March 31, 2018 compared to $34.3 million for the three months ended March 31, 2017.  Significant changes in the components of net cash provided by operating activities include:

− In 2018, a decrease in operating cash inflows due to net reductions in rental income under the Master Lease and an increase in unleased properties, offset by additional third-party rental income; and

− In 2017 an increase in operating cash inflows due to termination fee income.

Net cash used by investing activities was $25.1 million for the three months ended March 31, 2018 compared $25.2 million for the three months ended March 31, 2017.  Significant components of net cash used in investing activities include:

− In 2018, net proceeds from the sale of real estate, $60.4 million;

− In 2018, development of real estate and property improvements, ($86.0) million;

− In 2017, development of real estate and property improvements, ($22.8) million; and

− In 2017, investments in unconsolidated joint ventures, ($5.9) million.

Net cash used by financing activities was $87.3 million for the three months ended March 31, 2018 compared to $8.4 million for the three months ended March 31, 2017. Significant components of net cash used in financings activities include:

− In 2018, repayment of mortgage loan payables, ($73.0) million;

− In 2018, cash distributions to common stockholders and holders of Operating Partnership units, ($13.9) million;

− In 2017, proceeds from the Future Funding Facility, $7.0 million; and

− In 2017, cash distributions to common stockholders and holders of Operating Partnership units, ($13.9) million.

- 33 -

Dividends and Distributions

The Company’s Board of Trustees declared the following common stock dividends during 2018 and 2017, with holders of Operating Partnership units entitled to an equal distribution per Operating Partnership unit held on the record date:

			Dividends per
			Class A and Class C
Declaration Date	Record Date	Payment Date	Common Share
2018
April 24	June 29	July 12	$	0.25
February 20	March 30	April 12		0.25
2017
October 24	December 29	January 11, 2018	$	0.25
July 25	September 29	October 12		0.25
April 25	June 30	July 13		0.25
February 28	March 31	April 13		0.25

The Company’s Board of Trustees declared the following preferred stock dividends during 2018:

			Series A
Declaration Date	Record Date	Payment Date	Preferred Share
2018
April 24	June 29	July 16	$	0.43750
February 20	March 30	April 16		0.43750
February 20 (1)	March 30	April 16		0.15556

(1) This dividend covers the period from, and including, December 14, 2017 to December 31, 2017.

Litigation and Other Matters

In accordance with accounting standards regarding loss contingencies, the Company accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and the Company discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued or disclose the fact that such a range of loss cannot be estimated. The Company does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. In such cases, the Company discloses the nature of the contingency, and an estimate of the possible loss, range of loss, or disclose the fact that an estimate cannot be made.

The Company is subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business.  While the resolution of such matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material effect on the condensed consolidated financial position, results of operations, cash flows or liquidity of the Company.

Off-Balance Sheet Arrangements

The Company accounts for its investments in joint ventures that it does not have a controlling interest or is not the primary beneficiary using the equity method of accounting and those investments are reflected on the condensed consolidated balance sheets of the Company as investments in unconsolidated joint ventures.  As of March 31, 2018 and December 31, 2017, we did not have any off-balance sheet financing arrangements.

Retenanting and Redevelopment Projects

We are currently retenanting or redeveloping several properties primarily to convert single-tenant buildings occupied by Sears Holdings into multi-tenant properties occupied by a diversity of retailers and related concepts.  The table below provides a brief description of each of the 68 new redevelopment projects originated on the Seritage platform as of March 31, 2018.  These projects represent an estimated total investment of $1.2 billion, of which approximately $895 million remained to be spent.

- 34 -

Total Project Costs under $10 Million
		Total		Estimated	Estimated
		Project		Construction	Substantial
Property	Description	Square Feet		Start	Completion
King of Prussia, PA	Repurpose former auto center space for Outback Steakhouse, Yard House and small shop retail		29,100	Complete
Merrillville, IN	Termination property; redevelop existing store for At Home, Powerhouse Gym and small shop retail		132,000	Complete
Elkhart, IN	Termination property; existing store has been released to Big R Stores		86,500	Complete
San Antonio, TX	Recapture and repurpose auto center space for Orvis, Jared's Jeweler, Shake Shack and small shop retail		18,900	Complete
Bowie, MD	Recapture and repurpose auto center space for BJ's Brewhouse		8,200	Complete
Troy, MI	Partial recapture; redevelop existing store for At Home		100,000	Complete
Roseville, MI	Partial recapture; redevelop existing store for At Home		100,400	Complete
Rehoboth Beach, DE	Partial recapture; redevelop existing store for Christmas Tree Shops andThat! and PetSmart		56,700	Complete
Henderson, NV	Termination property; redevelop existing store for At Home, Seafood City and additional retail		144,400	Complete
Cullman, AL	Termination property; redevelop existing store for Bargain Hunt, Tractor Supply and Planet Fitness		99,000	Complete
Albany, NY	Recapture and repurpose auto center space for BJ's Brewhouse, Ethan Allen and additional small shop retail		28,000	Substantially complete
Hagerstown, MD	Recapture and repurpose auto center space for BJ's Brewhouse, Verizon and additional restaurants		15,400	Substantially complete
Jefferson City, MO	Termination property; redevelop existing store for Orscheln Farm and Home		96,000	Delivered to tenant
Kearney, NE	Termination property; redevelop existing store for Marshall's, PetSmart and additional junior anchors		92,500	Delivered to tenants
Ft. Wayne, IN	Site densification; new outparcels for BJ's Brewhouse (substantially complete) and Chick-Fil-A (project expansion)		12,000	Delivered to tenant
Olean, NY	Partial recapture; redevelop existing store for Marshall's and additional retail		45,000	Underway	Q2 2018
Guaynabo, PR	Partial recapture; redevelop existing store for Planet Fitness and Capri		56,100	Underway	Q3 2018
Florissant, MO	Site densification; new outparcel for Chick-Fil-A		5,000	Underway	Q3 2018
Dayton, OH	Recapture and repurpose auto center space for Outback Steakhouse and additional restaurants		14,100	Underway	Q4 2018
New Iberia, LA	Termination property; redevelop existing store for Rouses Supermarkets, Hobby Lobby and small shop retail		93,100	Underway	Q1 2019
North Little Rock, AR	Recapture and repurpose auto center space for LongHorn Steakhouse and additional small shop retail		17,300	Q2 2018	Q2 2019
St. Clair Shores, MI	100% recapture; demolish existing store and develop site for new Kroger store		107,200	Q2 2018	Q2 2019
Hopkinsville, KY	Termination property; redevelop existing store for Bargain Hunt, additional junior anchors and small shop retail		87,900	Q2 2018	Q2 2019
Oklahoma City, OK	Site densification; new fitness center for Vasa Fitness		59,500	Q3 2018	Q3 2019

- 35 -

Total Project Costs $10 - $20 Million
		Total		Estimated	Estimated
		Project		Construction	Substantial
Property	Description	Square Feet		Start	Completion
Braintree, MA	100% recapture; redevelop existing store for Nordstrom Rack, Saks OFF 5th and additional retail		90,000	Complete
Honolulu, HI	100% recapture; redevelop existing store for Longs Drugs (CVS), PetSmart and Ross Dress for Less		79,000	Complete
Anderson, SC	100% recapture (project expansion); redevelop existing store for Burlington Stores, Gold's Gym, Sportsman's Warehouse, additional retail and restaurants		111,300	Complete
West Jordan, UT	Partial recapture; redevelop existing store and attached auto center for Burlington Stores and additional retail		81,400	Substantially complete
Madison, WI	Partial recapture; redevelop existing store for Dave & Busters, Total Wine & More, additional retail and restaurants		75,300	Substantially complete
Thornton, CO	Termination property; redevelop existing store for Vasa Fitness and additional junior anchors		191,600	Delivered to tenant
Springfield, IL	Termination property; redevelop existing store for Burlington Stores, Binny's Beverage Depot, Orangetheory Fitness, Outback Steakhouse, CoreLife Eatery, additional junior anchors and small shop retail		133,400	Underway	Q2 2018
Orlando, FL	100% recapture; demolish and construct new buildings for Floor & Décor, Orchard Supply Hardware, LongHorn Steakhouse, Olive Garden, additional small shop retail and restaurants		139,200	Underway	Q2 2018
Cockeysville, MD	Partial recapture; redevelop existing store for HomeGoods, Michael's Stores, additional junior anchors and restaurants		83,500	Underway	Q2 2018
Charleston, SC	100% recapture (project expansion); redevelop existing store and detached auto center for Burlington Stores and additional retail		126,700	Underway	Q3 2018
NorthHollywood, CA	Partial recapture; redevelop existing store for Burlington Stores, Ross Dress for Less and additional junior anchors		79,800	Underway	Q3 2018
Salem, NH	Site densification; new theatre for Cinemark Recapture and repurpose auto center for restaurant space		71,200	Underway	Q3 2018
Paducah, KY	Termination property; redevelop existing store for Burlington Stores and additional retail		102,300	Underway	Q3 2018
Fairfax, VA	Partial recapture; redevelop existing store and attached auto center for Dave & Busters, Seasons 52, additional junior anchors and restaurants		110,300	Underway	Q4 2018
North Miami, FL	100% recapture; redevelop existing store for Burlington Stores, Michael's, PetSmart and Ross Dress for Less		124,300	Underway	Q4 2018
Hialeah, FL	100% recapture; redevelop existing store for Bed, Bath & Beyond, Ross Dress for Less and dd's Discounts to join current tenant, Aldi		88,400	Underway	Q4 2018
Warwick, RI	Termination property; repurpose auto center space for BJ's Brewhouse and additional retail Redevelop existing store for At Home and Raymour & Flanigan (project expansion)		190,700	Underway	Q4 2018
Temecula, CA	Partial recapture; redevelop existing store and detached auto center for Round One, small shop retail and restaurants		65,100	Underway	Q4 2018
Canton, OH	Partial recapture; redevelop existing store for Dave & Busters and restaurants		83,900	Underway	Q2 2019
North Riverside, IL	Partial recapture; redevelop existing store and detached auto center for Round One, additional junior anchors, small shop retail and restaurants		103,900	Underway	Q2 2019
Las Vegas, NV	Partial recapture; redevelop existing store for Round One and additional retail		78,800	Q3 2018	Q3 2019
Yorktown Heights, NY	Partial recapture; redevelop existing store for 24 Hour Fitness and additional retail		85,200	Q3 2018	Q4 2019
Santa Cruz, CA	Partial recapture; redevelop existing store for TJ Maxx, HomeGoods and additional junior anchors		62,200	Q4 2018	Q4 2019
Warrenton, VA	Termination property; redevelop existing store for Homegoods and additional retail		97,300	Q1 2019	Q3 2019
Saugus, MA	Partial recapture; redevelop existing store and detached auto center NOTE: project which has been temporarily postponed while the Company identifies a new lead tenant		99,000	To be determined

- 36 -

Total Project Costs over $20 Million
		Total		Estimated	Estimated
		Project		Construction	Substantial
Property	Description	Square Feet		Start	Completion
Memphis, TN	100% recapture; demolish and construct new buildings for LA Fitness, Nordstrom Rack, Ulta Beauty, Hopdoddy Burger Bar, additional junior anchors, restaurants and small shop retail		135,200	Substantially complete
WestHartford, CT	100% recapture; redevelop existing store and detached auto center for Buy Buy Baby, Cost Plus World Market, REI, Saks OFF Fifth, other junior anchors, Shake Shack and additional small shop retail		147,600	Delivered to tenants
St. Petersburg, FL	100% recapture; demolish and construct new buildings for Dick's Sporting Goods, Lucky's Market, PetSmart, Five Below, Chili's Grill & Bar, Pollo Tropical, LongHorn Steakhouse and additional small shop retail and restaurants		142,400	Delivered to tenants
Wayne, NJ	Partial recapture; redevelop existing store for Dave & Busters, additional junior anchors and restaurants Recapture and repurpose detached auto center for Cinemark (project expansion) NOTE: contributed to GGP II JV in July 2017		156,700	Underway	Q3 2018
Carson, CA	100% recapture (project expansion); redevelop existing store for Burlington Stores, Ross Dress for Less and additional retail		163,800	Underway	Q1 2019
Watchung, NJ	100% recapture; demolish full-line store and construct new buildings for HomeSense, Sierra Trading Post, Ulta Beauty and additional small shop retail and restaurants Demolish detached auto center and construct a freestanding Cinemark theater		126,700	Underway	Q2 2019
Santa Monica, CA	100% recapture; redevelop existing building into premier, mixed-use asset featuring unique, small-shop retail and creative office space NOTE: contributed to The Mark 302 JV in March 2018		96,500	Underway	Q4 2019
Aventura, FL	100% recapture; demolish existing store and construct new, multi-level open air retail destination featuring a leading collection of experiential shopping, dining and entertainment concepts alongside a treelined esplanade and activated plazas		216,600	Underway	Q4 2019
San Diego, CA	100% recapture; redevelop existing store into two highly-visible, multi-level buildings with exterior facing retail representing a premier mix of experiential shopping, dining, and entertainment concepts		206,000	Underway	Q4 2019
Roseville, CA	Termination property; repurpose auto center space for AAA Auto Repair Center Redevelop existing store for Cinemark, Round One and restaurants (project expansion)		147,400	Underway	Q2 2020
Austin, TX	100% recapture (project expansion); redevelop existing store for AMC Theatres, additional junior anchors and restaurants		177,400	Q2 2018	Q3 2019
Greendale, WI	Termination property; redevelop existing store and attached auto center for Dick's Sporting Goods, Round One, additional junior anchors and restaurants		223,800	Q2 2018	Q4 2019
Anchorage, AK	100% recapture; redevelop existing store for Guitar Center, Safeway, Planet Fitness and additional retail to join current tenant, Nordstrom Rack		142,500	Q2 2018	Q4 2019
East Northport, NY	Termination property; redevelop existing store and attached auto center for AMC Theatres, 24 Hour Fitness, Floor & Decor and small shop retail		179,700	Q2 2018	Q4 2019
El Cajon, CA	100% recapture; redevelop existing store and auto center for Bob's Discount Furniture, Burlington Stores, additional retail and restaurants		242,700	Q3 2018	Q3 2019
Tucson, AZ	100% recapture; redevelop existing store and auto center for Round One and additional retail		224,300	Q3 2018	Q4 2019
Reno, NV	100% recapture; redevelop existing store and auto center for Round One and additional retail		169,800	Q3 2018	Q4 2019
Fairfield, CA	100% recapture (project expansion); redevelop existing store and auto center for Dave & Busters, additional retail and office		146,500	Q3 2018	Q1 2020
Plantation, FL	100% recapture (project expansion); redevelop existing store and auto center for GameTime, Powerhouse Gym, additional retail and restaurants		184,400	Q4 2018	Q1 2020

- 37 -

Non-GAAP Supplemental Financial Measures and Definitions

The Company makes reference to NOI, Total NOI, FFO, Company FFO, EBITDA and Adjusted EBITDA which are considered non-GAAP measures.

Net Operating Income ("NOI") and Total NOI

We define NOI as income from property operations less property operating expenses.  Other REITs may use different methodologies for calculating NOI, and accordingly, the Company's depiction of NOI may not be comparable to other REITs.  We believe NOI provides useful information regarding the Company, its financial condition, and results of operations because it reflects only those income and expense items that are incurred at the property level.

The Company also uses Total NOI, which includes its proportional share of unconsolidated properties.  We believe this form of presentation offers insights into the financial performance and condition of the Company as a whole given our ownership of unconsolidated properties that are accounted for under GAAP using the equity method.  We also consider Total NOI to be a helpful supplemental measure of our operating performance because it excludes from NOI variable items such as termination fee income, as well as non-cash items such as straight-line rent and amortization of lease intangibles.

Due to the adjustments noted, NOI and Total NOI should only be used as an alternative measure of the Company's financial performance.

Earnings before Interest Expense, Income Tax, Depreciation, and Amortization for Real Estate ("EBITDAre") and Company EBITDA

We define EBITDAre using the definition set forth by the National Association of Real Estate Investment Trusts ("NAREIT"), which may not be comparable to measures calculated by other companies who do not use the NAREIT definition of EBITDAre.  EBITDAreis calculated as net income computed in accordance with GAAP, excluding interest expense, income tax expense, depreciation and amortization, gains (or losses) from property sales and impairment charges on depreciable real estate assets.  We believe EBITDAre provides useful information to investors regarding our results of operations because it removes the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).  Management also believes the use of EBITDAre facilitates comparisons between us and other equity REITs and real property owners that are not REITs.

The Company makes certain adjustments to EBITDAre, which it refers to as Company EBITDA, to account for certain non-cash and non-comparable items, such as termination fee income, unrealized loss on interest rate cap, litigation charges, acquisition-related expenses and certain up-front-hiring and personnel costs that it does not believe are representative of ongoing operating results.

Due to the adjustments noted, EBITDAre and Company EBITDA should only be used as an alternative measure of the Company's financial performance

Funds from Operations ("FFO") and Company FFO

We define FFO using the definition set forth by NAREIT, which may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO.  FFO is calculated as net income computed in accordance with GAAP, excluding gains (or losses) from property sales, real estate related depreciation and amortization, and impairment charges on depreciable real estate assets.

We consider FFO a helpful supplemental measure of the operating performance for equity REITs and a complement to GAAP measures because it is a recognized measure of performance by the real estate industry.  FFO facilitates an understanding of the operating performance of our properties between periods because it does not give effect to real estate depreciation and amortization which are calculated to allocate the cost of a property over its useful life.  Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, the Company believes that FFO provides investors with a clearer view of the Company's operating performance.

The Company makes certain adjustments to FFO, which it refers to as Company FFO, to account for certain non-cash and non-comparable items, such as termination fee income, unrealized loss on interest rate cap, litigations charges, acquisition-related expenses, amortization of deferred financing costs and up-front-hiring and personnel costs, that it does not believe are representative of ongoing operating results.  The Company previously referred to this metric as Normalized FFO; the definition and calculation remain the same.

Due to the adjustments noted, FFO and Company FFO should only be used as an alternative measure of the Company's financial performance.

- 38 -

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

None of NOI, Total NOI, EBITDAre, Adjusted EBITDAre, FFO and Company FFO are measures that (i) represent cash flow from operations as defined by GAAP; (ii) are indicative of cash available to fund all cash flow needs, including the ability to make distributions; (iii) are alternatives to cash flow as a measure of liquidity; or (iv) should be considered alternatives to net income (which is determined in accordance with GAAP) for purposes of evaluating the Company’s operating performance.  Reconciliations of these measures to the respective GAAP measures we deem most comparable are presented below on a comparative basis for all periods.

The following table reconciles NOI and Total NOI to GAAP net income (loss) for the three months ended March 31, 2018 and March 31, 2017 (in thousands):

	Three Months Ended March 31,
NOI and Total NOI	2018			2017
Net income (loss)	$	16,201		$	(32,844	)
Termination fee income		(174	)		(6,136	)
Depreciation and amortization		34,667			58,663
General and administrative expenses		7,797			6,274
Equity in loss (income) of unconsolidated joint    ventures		2,582			(1,002	)
Gain on sale of real estate		(41,831	)		—
Interest and other income		(680	)		(78	)
Interest expense		16,419			16,592
Unrealized (gain) loss on interest rate cap		(165	)		471
Provision for income taxes		104			119
NOI	$	34,920		$	42,059
NOI of unconsolidated joint ventures		4,758			6,511
Straight-line rent adjustment (1)		(2,568	)		(1,449	)
Above/below market rental income/expense (1)		(231	)		(231	)
Total NOI	$	36,879		$	46,890

(1) Includes adjustments for unconsolidated joint ventures.

The following table reconciles EBITDAre and Adjusted EBITDAre to GAAP net income (loss) for the three months ended March 31, 2018 and March 31, 2017 (in thousands):

	Three Months Ended March 31,
EBITDAre and Company EBITDA	2018			2017
Net income (loss)	$	16,201		$	(32,844	)
Interest expense		16,419			16,592
Provision for income and other taxes		104			119
Depreciation and amortization		34,667			58,663
Depreciation and amortization (unconsolidated    joint ventures)		3,793			5,486
Gain on sale of real estate		(41,831	)		—
EBITDAre	$	29,353		$	48,016
Termination fee income		(174	)		(6,136	)
Unrealized (gain) loss on interest rate cap		(165	)		471
Company EBITDA	$	29,014		$	42,351

- 39 -

The following table reconciles FFO and Company FFO to GAAP net income (loss) for the three months ended March 31, 2018 and March 31, 2017 (in thousands):

	Three Months Ended March 31,
FFO and Company FFO	2018			2017
Net income (loss)	$	16,201		$	(32,844	)
Real estate depreciation and amortization    (consolidated properties)		34,113			58,404
Real estate depreciation and amortization    (unconsolidated joint ventures)		3,793			5,486
Gain on sale of real estate		(41,831	)		—
Dividends on preferred shares		(1,228	)		—
FFO attributable to common shareholders    and unitholders	$	11,048		$	31,046
Termination fee income		(174	)		(6,136	)
Unrealized (gain) loss on interest rate cap		(165	)		471
Amortization of deferred financing costs		1,720			1,582
Company FFO attributable to common    shareholders and unitholders	$	12,429		$	26,963
FFO per diluted common share and unit	$	0.20		$	0.56
Company FFO per diluted common share and unit	$	0.22		$	0.48
Weighted Average Common Shares and Units Outstanding
Weighted average common shares outstanding		35,501			33,510
Weighted average OP units outstanding		20,218			22,086
Weighted average common shares and    units outstanding		55,719			55,596

- 40 -

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Except as discussed below, there were no material changes in the Quantitative and Qualitative Disclosures about Market Risk set forth in our 2017 Annual Report on Form 10-K.

Interest Rate Fluctuations

As of March 31, 2018, we had $1.28 billion of consolidated debt, including $1.14 billion outstanding under our variable-rate Mortgage Loans and Future Funding Facility.  The interest rate on the loans is the 30-day LIBOR rate plus, as of March 31, 2018, a weighted average spread of 478 basis points.  We have purchased a LIBOR interest rate cap that has a LIBOR strike rate of 3.5% and a term of four years.  We are subject to market risk with respect to changes in the LIBOR rate.  An immediate 100 basis point change in interest rates would have affected annual pretax funding costs by approximately $11.4 million.

Fair Value of Debt

As of March 31, 2018, the estimated fair value of our consolidated debt was $1.28 billion.  The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date.

Changes in Internal Controls.

There were no changes in our internal control over financial reporting that occurred during the period ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

- 41 -

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this Item is incorporated by reference to Note 9 of the condensed consolidated financial statements included herein.

Item 1A. Risk Factors

Information regarding risk factors appears in our 2017 Annual Report on Form 10-K in Part I, Item 1A. Risk Factors.  Other than as noted, there have been no material changes from the risk factors previously disclosed in our 2017 Annual Report on Form 10-K.

Cybersecurity incidents could cause a disruption to our operations, a compromise of confidential information and damage to our business relationships, all of which could negatively impact our business, financial condition and operating results.

Seritage is susceptible to cybersecurity risks that include, among other things, theft, unauthorized monitoring, release, misuse, loss, destruction or corruption of confidential and highly restricted data; denial of service attacks; unauthorized access to relevant systems, compromises to networks or devices; or operational disruption or failures in the physical infrastructure or operating systems of Seritage’s information systems.  Seritage’s information systems are essential to the operation of our business and our ability to perform day-to-day operations, including for the secure processing, storage and transmission of confidential and personal information.  Seritage must continuously monitor and develop its systems to protect its technology infrastructure and data from misappropriation, corruption and disruption.  Cybersecurity risks may also impact properties in which we invest on behalf of clients and tenants of those properties, which could result in a loss of value in our clients’ investment.  In addition, due to Seritage’s interconnectivity with third-party service providers and other entities with which Seritage conducts business, Seritage could be adversely impacted if any of them is subject to a successful cyber incident.  Although we and our service providers have implemented processes, procedures and controls to help mitigate these risks, there can be no assurance that these measures will be effective or that security breaches or disruptions will not occur.  The result of these incidents may include disrupted operations, liability for loss or misappropriation of data, stolen assets or information, increased cybersecurity protection and insurance costs, increased compliance costs, litigation, regulatory enforcement actions and damage to our reputation or business relationships.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

- 42 -

Item 6. Exhibits

Exhibit No.	Description	SEC Document Reference
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350	Filed herewith.
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350	Filed herewith.
101.INS	XBRL Instance Document	Filed herewith.
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith.

- 43 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SERITAGE GROWTH PROPERTIES
Dated: May 4, 2018	/s/ Benjamin Schall
	By:	Benjamin Schall
	President and Chief Executive Officer
Dated: May 4, 2018	/s/ Brian Dickman
	By:	Brian Dickman
	Executive Vice President and Chief Financial Officer

- 44 -

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Benjamin Schall, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Seritage Growth Properties;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Benjamin Schall	Date:  May 4, 2018
Benjamin Schall
President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Brian Dickman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Seritage Growth Properties;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Brian Dickman	Date:  May 4, 2018
Brian Dickman
Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Seritage Growth Properties, a Maryland real estate investment trust (the “Company”), on Form 10-Q for the quarter ended March 31, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Benjamin Schall, President and Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Benjamin Schall

Benjamin Schall

President and Chief Executive Officer

May 4, 2018

A signed original of this written statement required by Section 906 has been provided to Seritage Growth Properties and will be retained by Seritage Growth Properties and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Seritage Growth Properties, a Maryland real estate investment trust (the “Company”), on Form 10-Q for the quarter ended March 31, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Brian Dickman, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Brian Dickman

Brian Dickman

Executive Vice President and Chief Financial Officer

May 4, 2018

A signed original of this written statement required by Section 906 has been provided to Seritage Growth Properties and will be retained by Seritage Growth Properties and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 27, 2018
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Trading Symbol	SRG
Entity Registrant Name	SERITAGE GROWTH PROPERTIES
Entity Central Index Key	0001628063
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Class A Common Shares [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		35,260,258
Class B Common Shares [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		1,328,866
Class C Common Shares [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		320,418

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Investment in real estate
Land	$ 750,870	$ 799,971
Buildings and improvements	851,416	829,168
Accumulated depreciation	(148,926)	(139,483)
Real Estate Investment Property, at Cost, Total	1,453,360	1,489,656
Construction in progress	252,350	224,904
Net investment in real estate	1,705,710	1,714,560
Investment in unconsolidated joint ventures	330,322	282,990
Cash and cash equivalents	135,091	241,569
Restricted cash	177,419	175,665
Tenant and other receivables, net	32,021	30,787
Lease intangible assets, net	291,613	310,098
Prepaid expenses, deferred expenses and other assets, net	23,839	20,148
Total assets	2,696,015	2,775,817
Liabilities
Mortgage loans payable, net	1,130,793	1,202,314
Unsecured term loan, net	143,590	143,210
Accounts payable, accrued expenses and other liabilities	99,063	109,433
Total liabilities	1,373,446	1,454,957
Commitments and contingencies (Note 9)
Shareholders' Equity
Additional paid-in capital	1,116,841	1,116,060
Accumulated deficit	(229,652)	(229,760)
Total shareholders' equity	887,586	886,696
Non-controlling interests	434,983	434,164
Total equity	1,322,569	1,320,860
Total liabilities and equity	2,696,015	2,775,817
Class A Common Shares [Member]
Shareholders' Equity
Common shares	352	324
Total equity	352	324
Class B Common Shares [Member]
Shareholders' Equity
Common shares	13	13
Total equity	13	13
Class C Common Shares [Member]
Shareholders' Equity
Common shares	4	31
Total equity	4	31
Series A Preferred Shares [Member]
Shareholders' Equity
Preferred shares	28	28
Total equity	$ 28	$ 28

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Class A Common Shares [Member]
Common shares, par value	$ 0.01	$ 0.01
Common shares, authorized	100,000,000	100,000,000
Common shares, outstanding	35,208,666	32,415,734
Common shares, issued	35,208,666	32,415,734
Class B Common Shares [Member]
Common shares, par value	$ 0.01	$ 0.01
Common shares, authorized	5,000,000	5,000,000
Common shares, outstanding	1,328,866	1,328,866
Common shares, issued	1,328,866	1,328,866
Class C Common Shares [Member]
Common shares, par value	$ 0.01	$ 0.01
Common shares, authorized	50,000,000	50,000,000
Common shares, outstanding	372,010	3,151,131
Common shares, issued	372,010	3,151,131
Series A Preferred Shares [Member]
Common shares, outstanding	2,800,000	2,800,000
Preferred shares, par value	$ 0.01	$ 0.01
Preferred shares, authorized	10,000,000	10,000,000
Preferred shares, outstanding	2,800,000	2,800,000
Preferred shares, issued	2,800,000	2,800,000
Preferred shares, liquidation preference	$ 70,000	$ 70,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
REVENUE
Rental income	$ 37,079	$ 49,174
Tenant reimbursements	16,698	16,224
Total revenue	53,777	65,398
EXPENSES
Property operating	7,241	4,742
Real estate taxes	11,381	12,422
Depreciation and amortization	34,667	58,663
General and administrative	7,797	6,274
Provision for doubtful accounts	61	39
Total expenses	61,147	82,140
Operating loss	(7,370)	(16,742)
Equity in (loss) income of unconsolidated joint ventures	(2,582)	1,002
Gain on sale of real estate	41,831
Interest and other income	680	78
Interest expense	(16,419)	(16,592)
Unrealized gain (loss) on interest rate cap	165	(471)
Income (loss) before income taxes	16,305	(32,725)
Provision for income taxes	(104)	(119)
Net income (loss)	16,201	(32,844)
Net (income) loss attributable to non-controlling interests	(5,873)	13,006
Net income (loss) attributable to Seritage	10,328	(19,838)
Preferred dividends	(1,228)
Net income (loss) attributable to Seritage common shareholders	$ 9,100	$ (19,838)
Net income (loss) per share attributable to Seritage Class A and Class C common shareholders - Basic	$ 0.26	$ (0.59)
Net income (loss) per share attributable to Seritage Class A and Class C common shareholders - Diluted	$ 0.26	$ (0.59)
Weighted average Class A and Class C common shares outstanding - Basic	35,414	33,510
Weighted average Class A and Class C common shares outstanding - Diluted	35,501	33,510

XML

CONDENSED CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Thousands	Total	Class A Common Shares [Member]	Class B Common Shares [Member]	Class C Common Shares [Member]	Series A Preferred Shares [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Non-Controlling Interest [Member]
Beginning balance at Dec. 31, 2016	$ 1,424,311	$ 258	$ 16	$ 58		$ 925,563	$ (121,338)	$ 619,754
Beginning balance, shares at Dec. 31, 2016		25,843,000	1,589,000	5,755,000
Net income (loss)	(32,844)						(19,838)	(13,006)
Dividends and distributions declared	(13,969)						(8,492)	(5,477)
Vesting of restricted share units, shares		4,000
Vesting of restricted share units		$ 0				0
Stock-based compensation	390					390
Stock issued in conversion of securities				$ 0
Stock issued in conversion securities, shares				24,200
Stock sold in conversion of securities		$ 0
Stock sold in conversion of securities, shares		(24,000)
Share class surrenders			$ (2)			2
Share class surrenders, shares			(149,000)
OP Unit exchanges		$ 23				67,059		(67,082)
OP Unit exchanges, shares		2,267,821
Ending balance at Mar. 31, 2017	1,377,888	$ 281	$ 14	$ 58		993,014	(149,668)	534,189
Ending balance, shares at Mar. 31, 2017		28,091,000	1,440,000	5,779,000
Beginning balance at Dec. 31, 2017	1,320,860	$ 324	$ 13	$ 31	$ 28	1,116,060	(229,760)	434,164
Beginning balance, shares at Dec. 31, 2017		32,415,734	1,328,866	3,151,131	2,800,000
Net income (loss)	16,201						10,328	5,873
Dividends and distributions declared	(14,046)						(8,992)	(5,054)
Preferred dividends declared	(1,228)						(1,228)
Vesting of restricted share units, shares		14,000
Vesting of restricted share units		$ 0				0
Stock-based compensation	869					869
Preferred stock offering costs	(88)					(88)
Stock issued in conversion of securities	1	$ 28
Stock issued in conversion securities, shares		2,779,121
Stock sold in conversion of securities				$ (27)
Stock sold in conversion of securities, shares				(2,779,000)
Ending balance at Mar. 31, 2018	$ 1,322,569	$ 352	$ 13	$ 4	$ 28	$ 1,116,841	$ (229,652)	$ 434,983
Ending balance, shares at Mar. 31, 2018		35,208,666	1,328,866	372,010	2,800,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical)	3 Months Ended
	Mar. 31, 2017 $ / shares shares
Dividends and distributions declared, per share | $ / shares	$ 0.25
Class A Common Shares [Member]
OP Unit exchanges, shares	2,267,821
Class C Common Shares [Member]
Share class exchanges, common shares	24,200
Class B Common Shares [Member]
Share class surrenders, shares	149,053

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)	$ 16,201	$ (32,844)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in loss (income) of unconsolidated joint ventures	2,582	(1,002)
Gain on sale of real estate	(41,831)
Unrealized (gain) loss on interest rate cap	(165)	471
Stock-based compensation	869	390
Depreciation and amortization	34,667	58,663
Amortization of deferred financing costs	1,720	1,582
Amortization of above and below market leases, net	(234)	(195)
Straight-line rent adjustment	(2,453)	(1,534)
Change in operating assets and liabilities
Tenants and other receivables	1,034	419
Prepaid expenses, deferred expenses and other assets	(4,229)	(687)
Accounts payable, accrued expenses and other liabilities	(502)	9,039
Net cash provided by operating activities	7,659	34,302
CASH FLOW FROM INVESTING ACTIVITIES
Investment in unconsolidated joint ventures	(1,616)	(5,943)
Distributions from unconsolidated joint ventures	2,110	3,623
Net proceeds from sale of real estate	60,435
Development of real estate	(85,983)	(22,848)
Net cash used in investing activities	(25,054)	(25,168)
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of mortgage loans payable	(73,034)
Proceeds from Future Funding Facility		7,011
Payment of deferred financing costs	(363)	(1,446)
Common dividends paid	(8,877)	(8,447)
Non-controlling interests distributions paid	(5,055)	(5,477)
Net cash used in financing activities	(87,329)	(8,359)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(104,724)	775
Cash, cash equivalents, and restricted cash, beginning of period	417,234	139,642
Cash, cash equivalents, and restricted cash, end of period	312,510	140,417
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest	21,105	16,052
Capitalized interest	6,862	1,177
Income taxes paid	104	119
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Development of real estate financed with accounts payable	19,964	5,899
Dividends and distribution declared and unpaid	14,046	13,969
Decrease in real estate, net resulting from deconsolidated properties	(58,190)
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents	135,091	26,542
Restricted cash	177,419	113,875
Cash, cash equivalents, and restricted cash, end of period	$ 312,510	$ 140,417

XML

Organization

3 Months Ended

Mar. 31, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization

Note 1 – Organization

Seritage Growth Properties (“Seritage”) was organized in Maryland on June 3, 2015 and was initially capitalized with 100 shares of Class A common shares.  The Company conducts its operations through Seritage Growth Properties, L.P. (the “Operating Partnership”), a Delaware limited partnership that was formed on April 22, 2015.  Unless the context otherwise requires, “Seritage” and the “Company” refer to Seritage, the Operating Partnership, and its subsidiaries.

On June 11, 2015, Sears Holdings Corporation (“Sears Holdings”) effected a rights offering (the “Rights Offering”) to Sears Holdings stockholders to purchase common shares of Seritage in order to fund, in part, the $2.7 billion acquisition of (i) 234 of Sears Holdings’ owned properties and one of its ground leased properties, and (ii) its 50% interests in three joint ventures that collectively owned 28 properties, ground leased one property and leased two properties (the “Transaction”).  The Rights Offering ended on July 2, 2015, and the Company’s Class A common shares were listed on the New York Stock Exchange (“NYSE”) on July 6, 2015.

On July 7, 2015, the Company completed the Transaction with Sears Holdings and commenced operations.  The Company did not have any operations prior to the completion of the Rights Offering and the Transaction.

Seritage is a fully-integrated, self-administered, self-managed real estate investment trust (“REIT”) primarily engaged in the real property business through the Company’s investment in the Operating Partnership.  As of March 31, 2018, the Company’s portfolio consisted of interests in 249 properties totaling approximately 38.9 million square feet of gross leasable area (“GLA”), including 225 wholly owned properties totaling approximately 34.6 million square feet of GLA across 49 states and Puerto Rico (the “Wholly Owned Properties), and interests in 24 joint venture properties totaling over 4.3 million square feet of GLA across 13 states (the “JV Properties”).

As of March 31, 2018, we leased space at 145 Wholly Owned Properties to Sears Holdings pursuant to a master lease agreement (the “Master Lease”), including 81 properties leased only to Sears Holdings and 64 properties leased to both Sears Holdings and one or more third-party tenants.  The remaining 80 Wholly Owned Properties include 54 properties that are leased solely to third-party tenants and do not have any space leased to Sears Holdings, and 26 vacant properties.  As of March 31, 2018, space at 22 JV Properties is also leased to Sears Holdings pursuant to lease agreements similar to the Master Lease (the “JV Master Leases”).  Sears Holdings is the sole tenant at nine JV Properties and 13 JV properties are leased to both Sears Holdings and one or more third-party tenants.  One JV Property is leased solely third-party tenants and one JV Property was vacant as of March 31, 2018.

The Master Lease and the JV Master Leases provide the Company and the JVs with the right to recapture certain space from Sears Holdings at each property for retenanting or redevelopment purposes.

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K, as amended, (the “Annual Report”), for the year ended December 31, 2017.  Certain footnote disclosures which would substantially duplicate those contained in our Annual Report have been condensed or omitted from this quarterly report.  In the opinion of management, all adjustments necessary for a fair presentation (which include only normal recurring adjustments) have been included in this quarterly report.  Operating results of three months ended March 31, 2018 may not be indicative of the results that may be expected for any other interim period or for the year ending December 31, 2018.  Capitalized terms used, but not defined in this quarterly report, have the same meanings as set forth in our Annual Report.

The accompanying condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).  The condensed consolidated financial statements include the accounts of the Company, the Operating Partnership, each of their wholly-owned subsidiaries, and all other entities in which they have a controlling financial interest or entities that meet the definition of a variable interest entity (“VIE”) in which the Company has, as a result of ownership, contractual interests or other financial interests, both the power to direct activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.  All intercompany accounts and transactions have been eliminated.

If the Company has an interest in a VIE but it is not determined to be the primary beneficiary, the Company accounts for its interest under the equity method of accounting.  Similarly, for those entities which are not VIEs and over which the Company has the ability to exercise significant influence, but does not have a controlling financial interest, the Company accounts for its interests under the equity method of accounting.  The Company continually reconsiders its determination of whether an entity is a VIE and whether the Company qualifies as its primary beneficiary.

To the extent such variable interests are in entities that cannot be evaluated under the VIE model, the Company evaluates its interests using the voting interest entity model.  As of March 31, 2018, the Company holds a 63.8% interest in the Operating Partnership and is the sole general partner which gives the Company exclusive and complete responsibility for the day-to-day management, authority to make decisions, and control of the Operating Partnership.  Through consideration of consolidation guidance effective for the Company as of January 1, 2016, it has been concluded that the Operating Partnership is a VIE as the limited partners in the Operating Partnership, although entitled to vote on certain matters, do not possess kick-out rights or substantive participating rights.  Accordingly, the Company consolidates its interest in the Operating Partnership.  However, as the Company holds what is deemed a majority voting interest in the Operating Partnership, it qualifies for the exemption from providing certain of the disclosure requirements associated with investments in VIEs.

The portions of consolidated entities not owned by the Company and the Operating Partnership are presented as non-controlling interests as of and during the periods presented.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  The most significant assumptions and estimates relate to fair values of acquired assets and liabilities assumed for purposes of applying the acquisition method of accounting, the useful lives of tangible and intangible assets, real estate impairment assessments, and assessing the recoverability of accounts receivables.  These estimates are based on historical experience and other assumptions which management believes are reasonable under the circumstances.  Management evaluates its estimates on an ongoing basis and makes revisions to these estimates and related disclosures as experience develops or new information becomes known.  Actual results could differ from these estimates.

Segment Reporting

The Company currently operates in a single reportable segment which includes the acquisition, ownership, development, redevelopment, management, and leasing of retail properties.  The Company’s chief operating decision maker, its Chief Executive Officer, assesses and measures the operating and financial results for each property on an individual basis and does not distinguish or group properties based on geography, size, or type. The Company, therefore, aggregates all properties into one reportable segment due to their similarities with regard to the nature and economics of the properties, tenants, and operations.

Accounting for Real Estate Acquisitions

Upon the acquisition of real estate, the Company assesses the fair value of acquired assets and liabilities assumed, including land, buildings, improvements and identified intangibles such as above-market and below-market leases, in-place leases and other items, as applicable, and allocates the purchase price based on these assessments.  In making estimates of fair values, the Company may use a number of sources, including data provided by third parties, as well as information obtained by the Company as a result of its due diligence, including expected future cash flows of the property and various characteristics of the markets where the property is located.

The fair values of tangible assets are determined on an "if vacant" basis. The "if vacant" fair value allocated to land is generally estimated via a market or sales comparison approach with the subject site being compared to similar properties that have sold or are currently listed for sale. The comparable properties are adjusted for dissimilar characteristics such as market conditions, location, access/frontage, size, shape/topography, or intended use, including the impact of any encumbrances on such use.  The "if vacant" value allocated to buildings and site improvements is generally estimated using an income approach and a cost approach that utilizes published guidelines for current replacement cost or actual construction costs for similar, recently developed properties.  Assumptions used in the income approach include capitalization and discount rates, lease-up time, market rents, make-ready costs, land value, and site improvement value.

The estimated fair value of in-place tenant leases includes lease origination costs (the costs the Company would have incurred to lease the property to the current occupancy level) and the lost revenues during the period necessary to lease-up from vacant to the current occupancy level. Such estimates include the fair value of leasing commissions, legal costs and tenant coordination costs that would be incurred to lease the property to this occupancy level. Additionally, the Company evaluates the time period over which such occupancy level would be achieved and includes an estimate of the net operating costs (primarily real estate taxes, insurance and utilities) incurred during the lease-up period, which generally ranges up to one year. The fair value of acquired in-place tenant leases is included in lease intangible assets on the condensed consolidated balance sheets and amortized over the remaining lease term for each tenant.

Identifiable intangible assets and liabilities are calculated for above-market and below-market tenant and ground leases where the Company is either the lessor or the lessee. The difference between the contractual rental rates and the Company’s estimate of market rental rates is measured over a period equal to the remaining non-cancelable term of the leases, including significantly below-market renewal options for which exercise of the renewal option appears to be reasonably assured. Above-market tenant leases and below-market ground leases are included in lease intangible assets on the condensed consolidated balance sheets; below-market tenant leases and above-market ground leases are included in accounts payable, accrued expenses and other liabilities on the condensed consolidated balance sheets.  The values assigned to above-market and below-market tenant leases are amortized as reductions and increases, respectively, to base rental revenue over the remaining term of the respective leases.  The values assigned to below-market and above-market ground leases are amortized as increases and reductions, respectively, to property operating expenses over the remaining term of the respective leases.

The Company expenses transaction costs associated with business combinations in the period incurred; these costs are included in acquisition-related expenses within the condensed consolidated statements of operations. The Company capitalizes transaction costs associated with asset acquisitions; these costs are allocated to the fair values of the net assets acquired, included within the condensed consolidated balance sheets and depreciated or amortized over the remaining life or term of the acquired assets.

Real Estate Investments

Real estate assets are recorded at cost, less accumulated depreciation and amortization.

Expenditures for ordinary repairs and maintenance will be expensed as incurred.  Significant renovations which improve the property or extend the useful life of the assets are capitalized.  As real estate is undergoing redevelopment activities, all amounts directly associated with and attributable to the project, including planning, development and construction costs, interest costs, personnel costs of employees directly involved and other miscellaneous costs incurred during the period of redevelopment, are capitalized.  The capitalization period begins when redevelopment activities are underway and ends when the project is substantially complete.

Depreciation of real estate assets, excluding land, is recognized on a straight-line basis over their estimated useful lives as follows:

Building:	25 – 40 years
Site improvements:	5 – 15 years
Tenant improvements:	shorter of the estimated useful life or non-cancelable term of lease

The Company amortizes identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired, generally the remaining non-cancelable term of a related lease.

On a periodic basis, management assesses whether there are indicators that the value of the Company’s real estate assets (including any related intangible assets or liabilities) may be impaired.  If an indicator is identified, a real estate asset is considered impaired only if management’s estimate of current and projected operating cash flows (undiscounted and unleveraged), taking into account the anticipated and probability weighted holding period, are less than a real estate asset’s carrying value.  Various factors are considered in the estimation process, including expected future operating income, trends and prospects and the effects of demand, competition, and other economic factors.  If management determines that the carrying value of a real estate asset is impaired, a loss will be recorded for the excess of its carrying amount over its estimated fair value.  No such impairment losses were recognized for the three months ended March 31, 2018 or March 31, 2017.

Investments in Unconsolidated Joint Ventures

The Company accounts for its investments in unconsolidated joint ventures using the equity method of accounting as the Company exercises significant influence, but does not control these entities. These investments are initially recorded at cost and are subsequently adjusted for cash contributions, cash distributions, and earnings which are recognized in accordance with the terms of the applicable agreement.

On a periodic basis, management assesses whether there are indicators, including the operating performance of the underlying real estate and general market conditions, that the value of the Company’s investments in unconsolidated joint ventures may be impaired.  An investment’s value is impaired only if management’s estimate of the fair value of the Company’s investment is less than its carrying value and such difference is deemed to be other-than-temporary.  To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over its estimated fair value.  No such impairment losses were recognized for the three months ended March 31, 2018 or March 31, 2017.

Cash and Cash Equivalents

The Company considers instruments with an original maturity of three months or less to be cash and cash equivalents. Cash and cash equivalents balances may, at a limited number of banks and financial institutions, exceed insurable amounts. The Company believes it mitigates this risk by investing in or through major financial institutions and primarily in funds that are insured by the United States federal government.

Restricted Cash

Restricted cash represents cash deposited in escrow accounts which generally can only be used for the payment of real estate taxes, debt service, insurance, and future capital expenditures as required by certain loan and lease agreements, as well as legally restricted tenant security deposits.  As of March 31, 2018, the Company had approximately $177.4 million of restricted cash, including $154.2 million reserved for redevelopment costs, tenant allowances and leasing commissions, deferred maintenance, environmental remediation and other capital expenditures, $ 19.5 million reserved for basic property carrying costs such as real estate taxes, insurance and ground rent, and $ 3.7 million of other restricted cash which consisted primarily of prepaid rental income.

Tenant and Other Receivables

Accounts receivable includes unpaid amounts billed to tenants, accrued revenues for future billings to tenants for property expenses, and amounts arising from the straight-lining of rent.  The Company periodically reviews its receivables for collectability, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates, and economic conditions in the area where the property is located.  In the event that the collectability of a receivable with respect to any tenant is in doubt, a provision for uncollectible amounts will be established or a direct write-off of the specific rent receivable will be made.  For accrued rental revenues related to the straight-line method of reporting rental revenue, the Company performs a periodic review of receivable balances to assess the risk of uncollectible amounts and establish appropriate provisions.

Revenue Recognition

Rental income is recognized on a straight-line basis over the non-cancelable terms of the related leases.  For leases that have fixed and measurable rent escalations, the difference between such rental income earned and the cash rent due under the provisions of the lease is recorded as deferred rent receivable and included as a component of tenant and other receivables on the condensed consolidated balance sheets.

In leasing tenant space, the Company may provide funding to the lessee through a tenant allowance.  In accounting for a tenant allowance, the Company will determine whether the allowance represents funding for the construction of leasehold improvements and evaluate the ownership of such improvements.  If the Company is considered the owner of the improvements for accounting purposes, the Company will capitalize the amount of the tenant allowance and depreciate it over the shorter of the useful life of the improvements or the related lease term.  If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or in the event the Company is not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease incentive and is recognized over the lease term as reduction of rental revenue on a straight-line basis.

The Company commences recognizing revenue based on an evaluation of a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset.  Generally, this occurs on the lease commencement date.

Tenant reimbursement income arises from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property.  This revenue is accrued in the same periods as the expenses are incurred.

Accounting for Recapture and Termination Activity Pursuant to the Master Lease

Seritage 100% Recapture Rights.  The Company generally treats the delivery of a 100% recapture notice as a modification of the Master Lease as of the date of notice.  Such a notice and lease modification result in the following accounting adjustments for the recaptured property:

− Accrued rental revenues related to the straight-line method of reporting rental revenue that are deemed uncollectable as result of the lease modification are amortized over the remaining shortened life of the lease from the date of notice to the date of vacancy.

− Intangible lease assets and liabilities that are deemed to be impacted by the lease modification are amortized over the shorter of the shortened lease term from the date of notice to the date of vacancy or the remaining useful life of the asset or liability.

A 100% recapture will generally occur in conjunction with obtaining a new tenant or a real estate development project.  As such, termination fees, if any, associated with the 100% recapture notice are generally capitalized as either an initial direct cost of obtaining a new lease or a necessary cost of the real estate project and depreciated over the life of the new lease obtained or the real estate asset being constructed or improved.

Seritage 50% Recapture Rights.  The Company generally treats the delivery of a 50% recapture notice as a modification of the Master Lease as of the date of notice.  Such a notice and lease modification result in the following accounting adjustments for the recaptured property:

− The portion of accrued rental revenues related to the straight-line method of reporting rental revenue that are subject to the lease modification are amortized over the remaining shortened life of the lease from the date of notice to the date of vacancy.  The portion of accrued rental revenues related to the straight-line method of reporting rental revenue that is attributable to the retained space is amortized over the remaining life of the Master Lease.

− The portion of intangible lease assets and liabilities that is deemed to be impacted by the lease modification is amortized over the shorter of the shortened lease term from the date of notice to the date of vacancy or the remaining useful life of the asset or liability.  The portion of intangible lease assets and liabilities that is attributable to the retained space is amortized over the remaining useful life of the asset or liability.

Sears Holdings Termination Rights.  The Master Lease provides Sears Holdings with certain rights to terminate the Master Lease with respect to properties that cease to be profitable for operation by Sears Holdings.  Such a termination would generally result in the following accounting adjustments for the terminated property:

− Accrued rental revenues related to the straight-line method of reporting rental revenue that are subject to the termination are amortized over the remaining shortened life of the lease from the date of notice to the date of vacancy.

− Intangible lease assets and liabilities that are deemed to be impacted by the termination are amortized over the shorter of the shortened lease term from the date of notice to the date of vacancy or the remaining useful life of the asset or liability.

− Termination fees required to be paid by Sears Holdings are recognized as follows:

• For the portion of the termination fee attributable to the annual base rent of the subject property, termination income is recognized on a straight-line basis over the shortened life of the lease from the date the termination fee becomes legally binding to the date of vacancy.

• For the portion of the termination fee attributable to estimated real estate taxes and property operating expenses for the subject property, prepaid rental income is recorded in the period such fee is received and recognized as tenant reimbursement revenue in the same periods as the expenses are incurred.

Derivatives

The Company’s use of derivative instruments is limited to the management of interest rate exposure and not for speculative purposes.  In connection with the issuance of the Company’s Mortgage Loans and Future Funding Facility, the Company purchased for $5.0 million an interest rate cap with a term of four years, a notional amount of $1,261 million and a strike rate of 3.5%.  The interest rate cap is measured at fair value and included as a component of prepaid expenses, deferred expenses and other assets on the condensed consolidated balance sheets.  The Company has elected not to utilize hedge accounting, and therefore, the change in fair value is included within change in fair value of interest rate cap on the condensed consolidated statements of operations.  For the three months ended March 31, 2018, the Company recorded a gain of $0.2 million compared to a loss of $0.5 million for the three months ended March 31, 2017

Stock-Based Compensation

The Company generally recognizes equity awards to employees as compensation expense and includes such expense within general and administrative expenses on the condensed consolidated statements of operations.  Compensation expense for equity awards is generally based on the fair value of the common shares at the date of the grant and is recognized (i) ratably over the vesting period for awards with time-based vesting and (ii) for awards with performance-based vesting, at the date the achievement of performance criteria is deemed probable, an amount equal to that which would have been recognized ratably from the date of the grant through the date the achievement of performance criteria is deemed probable, and then ratably from the date the achievement of performance criteria is deemed probable through the remainder of the vesting period.

Concentration of Credit Risk

Concentrations of credit risk arise when a number of operators, tenants, or obligors related to the Company's investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. As of March 31, 2018, a majority of the Company's real estate properties were leased to Sears Holdings, and the majority of Company’s rental revenues were derived from the Master Lease (see Note 5).  Until the Company further diversifies the tenancy of its portfolio, an event that has a material adverse effect on Sears Holdings’ business, financial condition or results of operations could have a material adverse effect on the Company’s business, financial condition or results of operations.  Sears Holdings is a publicly traded company that is subject to the informational filing requirements of the Securities Exchange Act of 1934, as amended, and is required to file periodic reports on Form 10-K and Form 10-Q with the SEC.  Refer to www.sec.gov for Sears Holdings publicly-available financial information.

Other than the Company's tenant concentration, management believes the Company's portfolio was reasonably diversified by geographical location and did not contain any other significant concentrations of credit risk.  As of March 31, 2018, the Company's portfolio of 225 Wholly Owned Properties and 24 JV Properties was diversified by location across 49 states and Puerto Rico.

Earnings per Share

The Company has three classes of common stock.  The rights, including the liquidation and dividend rights, of the holders of the Company’s Class A common shares and Class C non-voting common shares are identical, except with respect to voting. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. The net earnings (loss) per share amounts are the same for Class A and Class C common shares because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.  Class B non-economic common shares are excluded from earnings per share computations as they do not have economic rights.

All outstanding non-vested shares that contain non-forfeitable rights to dividends are considered participating securities and are included in computing earnings per share pursuant to the two-class method which specifies that all outstanding non-vested share-based payment awards that contain non-forfeitable rights to distributions are considered participating securities and should be included in the computation of earnings per share.

Recently Issued Accounting Pronouncements

In February 2017, the Financial Accounting Standards Boards (“FASB”) issued Accounting Standards Update (“ASU”) 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets” to provide guidance for recognizing gains and losses from the transfer of nonfinancial assets. The standard requires a company to derecognize nonfinancial assets once it transfers control of a distinct nonfinancial asset or distinct in substance nonfinancial assets to noncustomers. Additionally, when a company transfers its controlling interest in a nonfinancial asset, but retains a non-controlling ownership interest, the company is required to measure any non-controlling interest it receives or retains at fair value. An entity may elect to apply the amendments in ASU 2017-05 either retrospectively to each period presented in the financial statements (i.e. the retrospective approach) or retrospectively with a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption (i.e. the modified retrospective approach). We adopted this update on January 1, 2018 with no impact to beginning retained earnings/accumulated deficit because there were no open contracts at the time of adoption.

During the three months ended March 31, 2018, the Company entered into a transaction in which it sold a portion of its investment in a consolidated property and retained joint control of the entity. (See Footnote 4 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional disclosure regarding this transaction).

In January 2017, the FASB issued ASU 2017-01 which changes the definition of a business to exclude acquisitions where substantially all of the fair value of the assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets.  While there are various differences between the accounting for an asset acquisition and a business combination, the Company expects that the largest impact will be the capitalization of transaction costs for asset acquisitions which are expensed for business combinations.  ASU 2017-01 is effective, on a prospective basis, for interim and annual periods beginning after January 1, 2019.  The Company adopted the guidance on the issuance date effective January 5, 2017 on a prospective basis and it did not have an impact on the consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 provides classification guidance for eight specific topics including debt extinguishment costs, contingent consideration payments made after a business combination, and distributions received from equity method investees. ASU 2016-15 is effective, on a retrospective basis, for interim and annual periods beginning after December 15, 2017; early adoption is permitted.  The Company adopted ASU 2016-15 on the effective date, January 1, 2018, and applied the cumulative earnings approach to classify distributions received from our equity method investees.  The adoption changes our statements of cash flows so that distributions from unconsolidated joint ventures in excess of cumulative equity in earnings are now classified as inflows from investing activities for each period presented.  These distributions were previously classified as inflows from operating activities.

In February 2016, with a subsequent update made in January 2018 and finalized in March 2018, the FASB issued ASU No. 2016-02 “Leases (Topic 842)” (“ASU 2016-02”) to amend the accounting guidance for leases. The accounting applied by a lessor is largely unchanged under ASU 2016-02. However, the standard requires lessees to recognize lease assets and lease liabilities for leases classified as operating leases on the balance sheet. Lessees will recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it will recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted.

In March 2018, the FASB finalized changes with respect to optional transition relief and approved a practical expedient for lessors that would permit lessors to make an accounting policy election to not separate non-lease components from the associated lease components, by class of underlying asset, if the following two criteria are met: (1) the timing and pattern of transfer of the lease and non-lease components are the same and (2) the lease component would be classified as an operating lease if accounted for separately. For leases where we are the lessor, we currently believe that we will elect the optional transition relief and that we will meet the noted criteria to not be required to bifurcate and separately report non-lease components, such as common area maintenance revenue, for operating leases on our consolidated statements of operations. As a result, we currently believe that leases where we are the lessor will be accounted for in a similar method to existing standards with the underlying leased asset being reported and recognized as a real estate asset. The FASB is expected to issue an Accounting Standards Update codifying these changes in the coming months. We currently expect to adopt ASU 2016-02 using the practical expedients proposed in the standard and the changes approved by the FASB and do not believe that this change will have a material impact on our consolidated financial statements.

In May 2014, with subsequent updates issued in August 2015 and March, April and May 2016, the FASB issued ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”) and the related FASB ASU Nos. 2016-12 and 2016-20, which provide practical expedients, technical corrections, and improvements for certain aspects of ASU 2014- 09.  ASU 2014-09 was developed to enable financial statement users to better understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The update’s core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Companies are to use a five-step contract review model to ensure revenue is recognized, measured and disclosed in accordance with this principle. Those steps include the following: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to each performance obligation in the contract, and (v) recognize revenue when or as the entity satisfies a performance obligation.  The Company estimates the total transaction price, which generally includes a fixed contract price and may also include variable components. Variable components of the contract price are included in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur. The Company recognizes the estimated transaction price as revenue as it satisfies its performance obligations.

The Company adopted ASU 2014-09 on the effective date of January 1, 2018 using the modified retrospective method. Management concluded that the majority of total revenues consist of rental income from leasing arrangements, which is specifically excluded from the standard. As of January 1, 2018, the Company began accounting for the sale of real estate properties under Subtopic 610-20 which provides for revenue recognition based on transfer of ownership.

During the three months ended March 31, 2018, the Company contributed its property located in Santa Monica, CA to a new joint venture and sold a 49.9% interest in the venture.  The Company estimated the total transaction price, which includes fixed and variable components, pursuant to ASC 606. The variable component of the transaction will be re-measured at each reporting date until stabilization. (See Footnote 4 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional disclosure regarding this transaction).

XML

Lease Intangible Assets and Liabilities

3 Months Ended

Mar. 31, 2018

Real Estate [Abstract]

Lease Intangible Assets and Liabilities

Note 3 – Lease Intangible Assets and Liabilities

Lease intangible assets (acquired in-place leases, above-market leases and below-market ground leases) and liabilities (acquired below-market leases), net of accumulated amortization, were $291.6 million and $13.9 million, respectively, as of March 31, 2018 and $310.1 million and $14.5 million, respectively, as of December 31, 2017.  The following table summarizes the Company’s lease intangible assets and liabilities (in thousands):

March 31, 2018
	Gross		Accumulated
Lease Intangible Assets	Asset		Amortization			Balance
In-place leases, net	$	530,349	$	(255,408	)	$	274,941
Below-market ground leases, net		11,766		(559	)		11,207
Above-market leases, net		8,925		(3,460	)		5,465
Total	$	551,040	$	(259,427	)	$	291,613

	Gross		Accumulated
Lease Intangible Liabilities	Liability		Amortization			Balance
Below-market leases, net	$	19,658	$	(5,713	)	$	13,945
Total	$	19,658	$	(5,713	)	$	13,945

December 31, 2017
	Gross		Accumulated
Lease Intangible Assets	Asset		Amortization			Balance
In-place leases, net	$	542,655	$	(249,569	)	$	293,086
Below-market ground leases, net		11,766		(508	)		11,258
Above-market leases, net		8,925		(3,171	)		5,754
Total	$	563,346	$	(253,248	)	$	310,098

	Gross		Accumulated
Lease Intangible Liabilities	Liability		Amortization			Balance
Below-market leases, net	$	19,658	$	(5,182	)	$	14,476
Total	$	19,658	$	(5,182	)	$	14,476

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in additional rental income of $0.2 million and $0.2 million for the three months ended March 31, 2018 and March 31, 2017, respectively.  Future amortization of these intangibles is estimated to increase rental income as set forth below (in thousands):

Remainder of 2018	$	(738	)
2019		(923	)
2020		(789	)
2021		(775	)
2022		(486	)

Amortization of acquired below-market ground leases resulted in additional property expense of $50 thousand for the three months ended March 31, 2018 and March 31, 2017, respectively. Future amortization of below-market ground leases is estimated to increase property expenses as set forth below (in thousands):

Remainder of 2018	$	152
2019		203
2020		203
2021		203
2022		203

Amortization of acquired in-place leases resulted in additional depreciation and amortization expense of $18.0 million and $43.8 million for the three months ended March 31, 2018 and March 31, 2017, respectively.  Future estimated amortization of acquired in-place leases is set forth below (in thousands):

Remainder of 2018	$	44,168
2019		37,269
2020		36,822
2021		36,039
2022		35,120

XML

Investments in Unconsolidated Joint Ventures

3 Months Ended

Mar. 31, 2018

Equity Method Investments And Joint Ventures [Abstract]

Investments in Unconsolidated Joint Ventures

Note 4 – Investments in Unconsolidated Joint Ventures

The Company conducts a portion of its property rental activities through investments in unconsolidated joint ventures for which the Company holds less than a controlling interest.  The Company’s partners in these unconsolidated joint ventures are unrelated real estate entities or commercial enterprises.  The Company and its unconsolidated joint venture partners make initial and/or ongoing capital contributions to these unconsolidated joint ventures.  The obligations to make capital contributions are governed by each unconsolidated joint venture’s respective operating agreement and related governing documents.

As of March 31, 2018, the Company had investments in five unconsolidated joint ventures as follows (in thousands, except number of properties):

		Seritage %			# of		Total		Contribution
Unconsolidated Joint Venture	Joint Venture Partner	Ownership			Properties		GLA		Value (1)
GS Portfolio Holdings II LLC    ("GGP I JV")	GGP Inc.		50.0	%		4		598	$	37,570
GS Portfolio Holdings (2017) LLC    ("GGP II JV")	GGP Inc.		50.0	%		5		1,187		57,500
MS Portfolio LLC ("Macerich JV")	The Macerich Company		50.0	%		9		1,576		150,000
SPS Portfolio Holdings II LLC    ("Simon JV")	Simon Property Group, Inc.		50.0	%		5		872		52,590
Mark 302 JV LLC ("Mark 302 JV")	Invesco Real Estate		50.1	%		1		97		45,000
						24		4,330	$	342,660

(1) Represents the Company’s share of property contribution value at the formation of each JV.

During the three months ended March 31, 2018, the Company contributed its property located in Santa Monica, CA to the Mark 302 JV and sold a 49.9% interest to an investment fund managed by Invesco Real Estate based on a contribution value of $90.0 million (the “Initial Contribution Value”). As a result of the transaction, the Company received cash of approximately $50.1 million and recorded a gain of $40.2 million (the “Initial Gain”) which is included in gain on sale of real estate within the condensed consolidated statements of operations. The Initial Gain is comprised of $20.1 million attributable to the increase in fair value of the retained 50.1% interest due to application of the ASU 2017-05, while the remaining $20.1 million is the gain on sale of the remaining 49.9% interest.

The Mark 302 JV is subject to a revaluation upon the earlier of the first anniversary of project stabilization (as defined in the operating agreement of the Mark 302 JV) or December 31, 2020. Upon revaluation, the primary inputs in determining the Initial Contribution Value, which consist of property operating income and total project costs, will be updated for actual results and a value (the “Final Contribution Value”) will be calculated to yield a pre-determined rate of return to the investment fund managed by Invesco Real Estate.  The Final Contribution Value cannot be more than $105.0 million or less than $60.0 million and will result in a cash settlement between the two parties.

The Company recorded the Initial Gain based on the Initial Contribution Value because it determined it to be the most likely amount in the range of possible amounts. The Company made this determination based on its analysis of the primary inputs that determine both the Initial Contribution Value and Final Contribution Value, which consist of property operating income and total project costs. The gain on sale of real estate based on the Final Contribution Value (the “Final Gain”) will not be more than $55.2 million or less than $10.2 million.

Each unconsolidated joint venture is obligated to maintain financial statements in accordance with GAAP.  The Company shares in the profits and losses of these unconsolidated joint ventures generally in accordance with the Company’s respective equity interests.  In some instances, the Company may recognize profits and losses related to investment in an unconsolidated joint venture that differ from the Company’s equity interest in the unconsolidated joint venture.  This may arise from impairments that the Company recognizes related to its investment that differ from the impairments the unconsolidated joint venture recognizes with respect to its assets; differences between the Company’s basis in assets it has transferred to the unconsolidated joint venture and the unconsolidated joint venture’s basis in those assets; the Company’s deferral of the unconsolidated joint venture’s profits from land sales to the Company; or other items.  There were no joint venture impairment charges for the three months ended March 31, 2018 or March 31, 2017.

The following tables present combined condensed financial data for the Company’s unconsolidated joint ventures (in thousands):

	March 31, 2018			December 31, 2017
ASSETS
Investment in real estate
Land	$	277,306		$	191,853
Buildings and improvements		409,144			388,363
Accumulated depreciation		(53,731	)		(48,306	)
		632,719			531,910
Construction in progress		22,014			21,000
Net investment in real estate		654,733			552,910
Cash and cash equivalents		7,805			4,549
Tenant and other receivables, net		4,045			3,843
Other assets, net		40,976			45,605
Total assets	$	707,559		$	606,907
LIABILITIES AND MEMBERS INTERESTS
Liabilities
Mortgage loans payable, net	$	124,056		$	122,875
Accounts payable, accrued expenses and other    liabilities		32,117			28,201
Total liabilities		156,173			151,076
Members Interest
Additional paid in capital		579,134			473,098
Retained earnings		(27,748	)		(17,267	)
Total members interest		551,386			455,831
Total liabilities and members interest	$	707,559		$	606,907

	Three Months Ended March 31,
	2018			2017
EQUITY IN INCOME OF UNCONSOLIDATED    JOINT VENTURES
Total revenue	$	11,227		$	16,344
Property operating expenses		(1,712	)		(3,322	)
Depreciation and amortization		(7,586	)		(10,972	)
Operating income		1,929			2,050
Other expenses		(7,094	)		(46	)
Net (loss) income	$	(5,165	)	$	2,004
Equity in (loss) income of unconsolidated    joint ventures	$	(2,582	)	$	1,002

XML

Leases

3 Months Ended

Mar. 31, 2018

Leases [Abstract]

Leases

Note 5 – Leases

Master Lease

On July 7, 2015, subsidiaries of Seritage and subsidiaries of Sears Holdings entered into the Master Lease.  The Master Lease generally is a triple net lease with respect to all space which is leased thereunder to Sears Holdings, subject to proportional sharing by Sears Holdings for repair and maintenance charges, real property taxes, insurance and other costs and expenses which are common to both the space leased by Sears Holdings and other space occupied by unrelated third-party tenants in the same or other buildings pursuant to third-party leases, space which is recaptured pursuant to the Company recapture rights described below and all other space which is constructed on the properties.  Under the Master Lease, Sears Holdings and/or one or more of its subsidiaries will be required to make all expenditures reasonably necessary to maintain the premises in good appearance, repair and condition for as long as they are in occupancy.

The Master Lease has an initial term of 10 years and contains three options for five-year renewals of the term and a final option for a four-year renewal.  As of March 31, 2018 and March 31, 2017, the annualized base rent paid directly by Sears Holdings and its subsidiaries under the Master Lease was approximately $89.8 million and $124.1 million, respectively.  In each of the initial and first two renewal terms, annual base rent will be increased by 2.0% per annum for each lease year over the rent for the immediately preceding lease year.  For subsequent renewal terms, rent will be set at the commencement of the renewal term at a fair market rent based on a customary third-party appraisal process, taking into account all the terms of the Master Lease and other relevant factors, but in no event will the renewal rent be less than the rent payable in the immediately preceding lease year.

Revenues from the Master Lease for the three months ended March 31, 2018 and March 31, 2017 are as follows (in thousands and excluding straight-line rental income of 0.5 million and $1.0 million for the three months ended March 31, 2018 and March 31, 2017, respectively:

	Three Months Ended March 31,
	2018		2017
Rental income	$	22,531	$	31,651
Termination fee income		174		6,136
Tenant reimbursements		13,268		14,706
Total revenue	$	35,973	$	52,493

The Master Lease provides the Company with the right to recapture up to approximately 50% of the space occupied by Sears Holdings at each of the 224 wholly owned properties initially included in the Master Lease (subject to certain exceptions).  While the Company is permitted to exercise its recapture rights all at once or in stages as to any particular property, it is not permitted to recapture all or substantially all of the space subject to the recapture right at more than 50 properties under Master Lease during any lease year.  In addition, Seritage has the right to recapture any automotive care centers which are free-standing or attached as “appendages” to the properties, all outparcels or outlots and certain portions of the parking areas and common areas.  Upon exercise of these recapture rights, the Company will generally incur certain costs and expenses for the separation of the recaptured space from the remaining Sears Holdings space as it reconfigures and rents the recaptured space to third-party tenants.

The Company also has the right to recapture 100% of the space occupied by Sears Holdings at each of 21 properties initially identified under the Master Lease by making a specified lease termination payment to Sears Holdings, after which the Company can reposition and re-lease those stores.  The lease termination payment is calculated as the greater of an amount specified at the time the Company entered into the Master Lease with Sears Holdings and an amount equal to 10 times the adjusted EBITDA attributable to such space within the Sears Holdings main store which is not attributable to the space subject to the separate 50% recapture right discussed above for the 12-month period ending at the end of the fiscal quarter ending immediately prior to recapturing such space.

As of March 31, 2018, the Company had exercised recapture rights at 62 properties:

Property	Recapture Type	Notice Date(s)
Asheville, NC	100% (1)	March 2018
Chicago, IL	100% (1)	March 2018
Clearwater, FL	100% (1)	March 2018
El Cajon, CA	100% (1)	March 2018
Fairfield, CA	100% (1)	March 2018 / December 2017
Oklahoma City, OK	Out parcel	March 2018
Plantation, FL	100% (1)	March 2018 / December 2017
Redmond, WA	100% (1)	March 2018 / September 2017
Reno, NV	100% (1)	March 2018
Tucson, AZ	100% (1)	March 2018
Anchorage, AK	100%	December 2017
Boca Raton, FL	100%	December 2017
Westminster, CA	100%	December 2017
Hicksville, NY	100%	December 2017
Orland Park, IL	100% (1)	December 2017
Florissant, MO	Out parcel	December 2017
Salem, NH	Out parcel	December 2017
Las Vegas, NV	Partial	December 2017
Yorktown Heights	Partial	December 2017
Austin, TX	100% (1)	December 2017 / September 2017
Ft. Wayne, IN	Out parcel	September 2017 / July 2016
North Little Rock, AR	Auto Center	September 2017
St. Clair Shores, MI	100%	September 2017
Canton, OH	Partial	June 2017
Dayton, OH	Auto center	June 2017
North Riverside, IL	Partial	June 2017
Roseville, CA	Auto center	June 2017
Temecula, CA	Partial	June 2017
Watchung, NJ	100%	June 2017
Anderson, SC	100% (1)	April 2017 / July 2016
Aventura, FL	100%	April 2017
Carson, CA	100% (1)	April 2017 / December 2016
Charleston, SC	100% (1)	April 2017 / October 2016
Hialeah, FL	100% (1)	April 2017
San Diego, CA	100% (1)	April 2017
Valley View, TX	100%	April 2017
Cockeysville, MD	Partial	March 2017
North Miami, FL	100%	March 2017
Olean, NY	Partial	March 2017
Guaynabo, PR	Partial	December 2016
Santa Cruz, CA	Partial	December 2016
Santa Monica, CA (2)	100%	December 2016
Saugus, MA	Partial	December 2016
Roseville, MI	Partial	November 2016
Troy, MI	Partial	November 2016
Rehoboth Beach, DE	Partial	October 2016
St. Petersburg, FL	100%	October 2016
Warwick, RI	Auto center	October 2016
West Hartford, CT	100%	October 2016
Madison, WI	Partial	July 2016
North Hollywood, CA	Partial	July 2016
Orlando, FL	100%	July 2016
West Jordan, UT	Partial+ auto center	July 2016
Albany, NY	Auto center	May 2016
Bowie, MD	Auto center	May 2016
Fairfax, VA	Partial + autocenter	May 2016
Hagerstown, MD	Auto center	May 2016
Wayne, NJ (3)	Partial + auto center	May 2016
San Antonio, TX	Auto center	March 2016
Braintree, MA	100%	November 2015
Honolulu, HI	100%	December 2015
Memphis, TN	100%	December 2015

(1) The Company converted partial recapture rights at this property to 100% recapture rights and exercised such rights.

(2) In March 2018, the Company contributed this asset to the Mark 302 JV and retained a 50.1% interest in the joint venture.

(3) In July 2017, the Company contributed this asset to the GGP II JV and retained a 50.0% interest in the joint venture.

The Master Lease also provides for certain rights to Sears Holdings to terminate the Master Lease with respect to wholly owned properties that cease to be profitable for operation by Sears Holdings.  In order to terminate the Master Lease with respect to a certain property, Sears Holdings must make a payment to the Company of an amount equal to one year of rent (together with taxes and other expenses) with respect to such property.  Sears Holdings must provide notice of not less than 90 days of their intent to exercise such termination right and such termination right will be limited so that it will not have the effect of reducing the fixed rent under the Master Lease by more than 20% per annum.

As of March 31, 2018, Sears Holdings had terminated the Master Lease with respect to 56 stores totaling 7.4 million square feet of gross leasable area.  The aggregate base rent at these stores at the time of termination was approximately $23.6 million.  Sears Holdings continued to pay the Company rent until it vacated the stores and also paid aggregate termination fees of approximately $45.1 million, amounts equal to one year of aggregate annual base rent plus one year of estimated real estate taxes and operating expense.

Subsequent to March 31, 2018, Sears Holdings provided notice that it intended to exercise its rights to terminate the Master Lease with respect to nine additional stores totaling 1.5 million square feet of gross leasable area.  The aggregate annual base rent at these stores is approximately $5.8 million, or 2.7% of the Company’s total annual base rent as of March 31, 2018, including all signed leases.  Sears Holdings will continue to pay Seritage rent until it vacates the stores which is expected to occur in August 2018.  The termination fee is approximately $11.5 million, an amount equal to one year of the aggregate annual base rent, plus one year of estimated annual operating expenses.

As of March 31, 2018, the Company had announced redevelopment projects at 22 of the terminated properties and will continue to announce redevelopment activity as new leases are signed to occupy the space formerly occupied by Sears Holdings.  During the three months ended March 31, 2018, the Company sold four of the terminated properties for a total of $13.5 million and recorded a gain of $2.1 million which is included in gain on sale of real estate within the condensed consolidated statements of operations.

					Announced
Property	Square Feet		Notice	Termination	Redevelopment
Alpena, MI		118,200	September 2016	January 2017
Chicago, IL (S Kedzie)		118,800	September 2016	January 2017
Cullman, AL		98,500	September 2016	January 2017	Q2 2017
Deming, NM		96,600	September 2016	January 2017
Elkhart, IN		86,500	September 2016	January 2017	Q4 2016
Harlingen, TX		91,700	September 2016	January 2017	Sold
Houma, LA		96,700	September 2016	January 2017	Sold
Kearney, NE		86,500	September 2016	January 2017	Q3 2016
Manistee, MI		87,800	September 2016	January 2017
Merrillville, IN		108,300	September 2016	January 2017	Q4 2016
New Iberia, LA		91,700	September 2016	January 2017	Q2 2017
Riverton, WY		94,800	September 2016	January 2017
Sault Sainte Marie, MI		92,700	September 2016	January 2017
Sierra Vista, AZ		86,100	September 2016	January 2017	Sold
Springfield, IL		84,200	September 2016	January 2017	Q3 2016
Thornton, CO		190,200	September 2016	January 2017	Q1 2017
Yakima, WA		97,300	September 2016	January 2017	Sold
Chapel Hill, OH		187,179	January 2017	April 2017
Concord, NC		137,499	January 2017	April 2017
Detroit Lakes, MN		79,102	January 2017	April 2017
El Paso, TX		103,657	January 2017	April 2017
Elkins, WV		94,885	January 2017	April 2017
Henderson, NV		122,823	January 2017	April 2017	Q1 2017
Hopkinsville, KY		70,326	January 2017	April 2017	Q1 2018
Jefferson City, MO		92,016	January 2017	April 2017	Q2 2017
Kenton, OH		96,066	January 2017	April 2017
Kissimmee, FL		112,505	January 2017	April 2017
Layton, UT		90,010	January 2017	April 2017
Leavenworth, KS		76,853	January 2017	April 2017
Mount Pleasant, PA		83,536	January 2017	April 2017
Muskogee, OK		87,500	January 2017	April 2017
Owensboro, KY		68,334	January 2017	April 2017
Paducah, KY		108,244	January 2017	April 2017	Q3 2017
Platteville, WI		94,841	January 2017	April 2017
Riverside, CA		94,500	January 2017	April 2017
Sioux Falls, SD		72,511	January 2017	April 2017
Albany, NY		216,200	June 2017	October 2017	Q1 2016
Burnsville, MN		161,700	June 2017	October 2017
Chicago, IL (N Harlem)		293,700	June 2017	October 2017
Cockeysville, MD		83,900	June 2017	October 2017	Q1 2017
East Northport, NY		187,000	June 2017	October 2017	Q2 2017
Friendswood, TX		166,000	June 2017	November 2017 (1)
Greendale, WI		238,400	June 2017	October 2017	Q4 2017
Hagerstown, MD		107,300	June 2017	October 2017	Q1 2016
Johnson City, NY		155,100	June 2017	October 2017
Lafayette, LA		194,900	June 2017	October 2017
Mentor, OH		208,700	June 2017	October 2017
Middleburg Heights, OH		351,600	June 2017	October 2017
Olean, NY		75,100	June 2017	October 2017	Q1 2017
Overland Park, KS		215,000	June 2017	October 2017
Roseville, MI		277,000	June 2017	October 2017	Q3 2016
Sarasota, FL		204,500	June 2017	October 2017
Toledo, OH		209,900	June 2017	October 2017
Warwick, RI		169,200	June 2017	October 2017	Q3 2016 / Q3 2017
Westwood, TX		215,000	June 2017	January 2018 (1)
York, PA		82,000	June 2017	October 2017
Cedar Rapids, IA		141,100	April 2018	August 2018
Citrus Heights, CA		280,700	April 2018	August 2018
Gainesville, FL		140,500	April 2018	August 2018
Maplewood, MN		168,500	April 2018	August 2018
Pensacola, FL		212,300	April 2018	August 2018
Rochester, NY		128,500	April 2018	August 2018
Roseville, CA		121,000	April 2018	August 2018	Q2 2017 / Q1 2018
San Antonio, TX		187,800	April 2018	August 2018	Q4 2015
Warrenton, NJ		113,900	April 2018	August 2018	Q1 2018
Total square feet		8,905,487

(1) The Company and Sears Holdings agreed to extend occupancy beyond October 2017 under the existing Master Lease terms.

XML

Debt

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Debt

Note 6 – Debt

Mortgage Loans Payable

On July 7, 2015, pursuant to the Transaction, the Company entered into a mortgage loan agreement (the “Mortgage Loan Agreement”) and mezzanine loan agreement (collectively, the “Loan Agreements”), providing for term loans in an initial principal amount of approximately $1,161 million (collectively, the “Mortgage Loans”) and a $100 million future funding facility (the “Future Funding Facility”).  Pursuant to the terms of the Loan Agreements, amounts available under the Future Funding Facility were fully drawn by the Company on June 30, 2017.  Such amounts were deposited into a redevelopment reserve and will be used to fund redevelopment activity at the Company’s properties.

During the three months ended March 31, 2018, the Company reduced mortgage loans payable by $73.0 million as a result of the sale of a 50% joint venture interest in The Mark 302 and the disposition of four other assets.

As of March 31, 2018, the aggregate principal amount outstanding under the Mortgage Loans and the Future Funding Facility was $1,137 million.

Interest under the Mortgage Loans is due and payable on the payment dates, and all outstanding principal amounts are due when the loan matures on the payment date in July 2019, pursuant to the Loan Agreements.  The Company has two one-year extension options subject to the payment of an extension fee and satisfaction of certain other conditions.  Borrowings under the Mortgage Loans bear interest at the London Interbank Offered Rates (“LIBOR”) plus, as of March 31, 2018, a weighted-average spread of 478 basis points; payments are made monthly on an interest-only basis.  The weighted-average interest rates for the Mortgage Loans and Future Funding Facility for the three months ended March 31, 2018 and March 31, 2017 were 6.40% and 5.54%, respectively.

The Mortgage Loans and Future Funding Facility are secured by all of the Company’s Wholly Owned Properties and a pledge of its equity in the JVs.  The Loan Agreements contain customary covenants for a real estate financing, including restrictions that limit the Company’s ability to grant liens on its assets, incur additional indebtedness, or transfer or sell assets, as well as those that may require the Company to obtain lender approval for certain major tenant leases or significant redevelopment projects.  Such restrictions also include cash flow sweep provisions based upon certain measures of the Company’s and Sears Holdings’ financial and operating performance, including (a) where the “Debt Yield” (the ratio of net operating income for the mortgage borrowers to their debt) is less than 11.0%, (b) if the performance of Sears Holdings at the stores subject to the Master Lease with Sears Holdings fails to meet specified rent ratio thresholds, (c) if the Company fails to meet specified tenant diversification tests and (d) upon the occurrence of a bankruptcy or insolvency action with respect to Sears Holdings or if there is a payment default under the Master Lease with Sears Holdings, in each case, subject to cure rights, including providing specified amounts of cash collateral or satisfying tenant diversification thresholds.

In November 2016, the Company and the servicer for its Mortgage Loans entered into amendments to the Loan Agreements to resolve a disagreement regarding one of the cash flow sweep provisions in the Loan Agreements.  The principal terms of these amendments are that the Company (i) posted $30.0 million, and will post $3.3 million on a monthly basis, to a redevelopment project reserve account, which amounts may be used by the Company to fund redevelopment activity and (ii) extended the spread maintenance provision for prepayment of the loan by two months through March 9, 2018 (with the spread maintenance premium for the second month at a reduced amount).  As a result of this agreement and the resolution of the related disagreement, no cash flow sweep was imposed.

All obligations under the Loan Agreements are non-recourse to the borrowers and the pledgors of the JV Interests and the guarantors thereunder, except that (i) the borrowers and the guarantors will be liable, on a joint and several basis, for losses incurred by the lenders in respect of certain matters customary for commercial real estate loans, including misappropriation of funds and certain environmental liabilities and (ii) the indebtedness under the Loan Agreements will be fully recourse to the borrowers and guarantors upon the occurrence of certain events customary for commercial real estate loans, including without limitation prohibited transfers, prohibited voluntary liens, and bankruptcy.  Additionally the guarantors delivered a limited completion guaranty with respect to future redevelopments undertaken by the borrowers at the properties, and the Company must maintain (i) a net worth of not less than $1.0 billion and (ii) a minimum liquidity of not less than $50.0 million, throughout the term of the Loan Agreements.

The Company believes it is currently in compliance with all material terms and conditions of the Loan Agreements.

The Company incurred $22.3 million of debt issuance costs related to the Mortgage Loans and Future Funding Facility which are recorded as a direct deduction from the carrying amount of the Mortgage Loans and Future Funding Facility and amortized over the term of the Loan Agreements.  As of March 31, 2018, the unamortized balance of the Company’s debt issuance costs was $6.7 million as compared to $8.5 million as December 31, 2017.

Unsecured Term Loan

On February 23, 2017, the Operating Partnership, as borrower, and the Company, as guarantor, entered into a $200 million senior unsecured delayed draw term loan facility (the “Unsecured Delayed Draw Term Loan”) with JPP, LLC and JPP II, LLC as lenders (collectively, the “Original Lenders”) and JPP, LLC as administrative agent.

The total commitment of the Lenders under the Unsecured Delayed Draw Term Loan was $200 million and the maturity date was December 31, 2017.

The principal amount of loans outstanding under the Unsecured Delayed Draw Term Loan bore a base annual interest rate of 6.50%.  If a cash flow sweep period were to have occurred and been continuing under the Company’s Mortgage Loan Agreement (i) the interest rate on any outstanding advances would have increased from and after such date by 1.5% per annum above the base interest rate and (ii) the interest rate on any advances made after such date would have increased by 3.5% per annum above the base interest rate.  Accrued and unpaid interest was payable in cash, except that during the continuance of a cash flow sweep period under the Company’s Mortgage Loan Agreement, the Operating Partnership could elect to defer the payment of interest which deferred amount would be added to the outstanding principal balance of the loans.

On February 23, 2017, the Operating Partnership paid to the Original Lenders an upfront commitment fee equal to $1.0 million.  On May 24, 2017, the Operating Partnership paid to the Original Lenders an additional, and final, commitment fee of $1.0 million.  

The Unsecured Delayed Draw Term Loan required that the Company at all times maintain (i) a net worth of not less than $1.0 billion, and (ii) a leverage ratio not to exceed 60.0%.

The Unsecured Delayed Draw Term Loan included customary representations and warranties, covenants and indemnities.  The Unsecured Delayed Draw Term Loan also had customary events of default, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representation or warranty, and bankruptcy or insolvency proceedings.  If there was an event of default, the Lenders could declare all or any portion of the outstanding indebtedness to be immediately due and payable, exercise any rights they might have under any of the Unsecured Delayed Draw Term Loan documents, and require the Operating Partnership to pay a default interest rate on overdue amounts equal to 1.50% in excess of the applicable base interest rate.

Mr. Edward S. Lampert, the Company’s Chairman, is the Chairman and Chief Executive Officer of ESL, which controls JPP, LLC and JPP II, LLC.  The terms of the Unsecured Delayed Draw Term Loan were approved by the Company’s Audit Committee and the Company’s Board of Trustees (with Mr. Edward S. Lampert recusing himself).

On December 27, 2017, the Operating Partnership, as borrower, and the Company, as guarantor, refinanced the Unsecured Delayed Draw Term Loan with a new $200 million unsecured term loan facility (the “Unsecured Term Loan”).  The principal amount outstanding under the Unsecured Delayed Draw Term Loan at termination was $85 million. No prepayment penalties were triggered and the Unsecured Delayed Draw Term Loan terminated in accordance with its terms.

The lenders under the Unsecured Delayed Draw Term Loan, JPP, LLC and JPP II, LLC, maintained their funding of $85 million in the Unsecured Term Loan, with JPP, LLC appointed as administrative agent under the Unsecured Term Loan.  An affiliate of Empyrean Capital Partners, L.P., a Delaware limited partnership (and together with JPP, LLC and JPP II LLC, each an “Initial Lender” and collectively, the “Initial Lenders”), funded $60 million under the Unsecured Term Loan, resulting in a total of $145 million committed and funded under the Unsecured Term Loan at closing.  Under an accordion feature, the Company has the right to increase the total commitments up to $200 million and place an additional $55 million of incremental loans with the Initial Lenders or new lenders. The Initial Lenders under the Unsecured Term Loan are not obligated to make all or any portion of the incremental loans.

The Company used the proceeds of the Unsecured Term Loan, among other things, to refinance the Unsecured Delayed Draw Term Loan, to fund redevelopment projects and for other general corporate purposes.  Loans under the Unsecured Term Loan are guaranteed by the Company.

The Unsecured Term Loan matures on the earlier of (i) December 31, 2018 and (ii) the date on which the outstanding indebtedness under the Company’s existing mortgage and mezzanine facilities are repaid in full.  The Unsecured Term Loan may be prepaid at any time in whole or in part, without any penalty or premium.  Amounts drawn under the Unsecured Term Loan and repaid may not be redrawn.

The principal amount of loans outstanding under the Unsecured Term Loan bears a base annual interest rate of 6.75%.  Accrued and unpaid interest is payable in cash.

On December 27, 2017, the Borrower paid to each Initial Lender an upfront fee in an aggregate amount equal to 1.00% of the principal amount of the loan made by such Initial Lender.

The Unsecured Term Loan requires that the Company at all times maintain (i) a net worth of not less than $1.0 billion, and (ii) a leverage ratio not to exceed 60.0%.

The Unsecured Term Loan includes customary representations and warranties, covenants and indemnities.  The Unsecured Term Loan also has customary events of default, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representations or warranties, and bankruptcy or insolvency proceedings.  If there is an event of default, the lenders may declare all or any portion of the outstanding indebtedness to be immediately due and payable, exercise any rights they might have under any of the Unsecured Term Loan documents, and require the Borrower to pay a default interest rate on overdue amounts equal to 1.50% in excess of the then applicable interest rate.

The Company believes it is currently in compliance with all material terms and conditions of the Unsecured Term Loan.

The Company incurred $1.8 million of debt issuance costs related to the Unsecured Term Loan which are recorded as a direct deduction from the carrying amount of the Unsecured Term Loan and amortized over the term of the loan.  As of March 31, 2018, the unamortized balance of the Company’s debt issuance costs was $1.4 million as compared to $1.5 million as December 31, 2017.

Mr. Edward S. Lampert, the Company’s Chairman, is the sole stockholder, chief executive officer and director of ESL Investments, Inc. (“ESL”), which controls JPP, LLC and JPP II, LLC. The terms of the Unsecured Term Loan were approved by the Company’s Audit Committee and the Company’s Board of Trustees (with Mr. Edward S. Lampert recusing himself).

XML

Income Taxes

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Note 7 – Income Taxes

The Company has elected to be taxed as a REIT as defined under Section 856(c) of the Code for federal income tax purposes and expects to continue to operate to qualify as a REIT.  To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to currently distribute at least 90% of its adjusted REIT taxable income to its shareholders.

As a REIT, the Company generally will not be subject to federal income tax on taxable income that is distributed to its shareholders.  If the Company fails to qualify as a REIT or does not distribute 100% of its taxable income in any taxable year, it will be subject to federal taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years.

Even if the Company qualifies for taxation as a REIT, the Company is subject to certain state, local and Puerto Rico taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income.

On December 22, 2017, H.R. 1, known as the Tax Cuts and Jobs Act (the “TCJA”) was signed into law and included wide-scale changes to individual, pass-through and corporation tax laws, including those that impact the real estate industry, the ownership of real estate and real estate investments, and REITs. We have reviewed the provisions of the law that pertain to the Company and have determined them to have no material income tax effect for financial statement purposes.

XML

Fair Value Measurements

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 8 – Fair Value Measurements

ASC 820, Fair Value Measurement, defines fair value and establishes a framework for measuring fair value.  The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the “exit price”).  ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:

Level 1 - quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities

Level 2 - observable prices based on inputs not quoted in active markets, but corroborated by market data

Level 3 - unobservable inputs used when little or no market data is available

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.  In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.  The Company also considers counterparty credit risk in its assessment of fair value.

Financial Assets and Liabilities Measured at Fair Value on a Recurring or Non-Recurring Basis

All derivative instruments are carried at fair value and are valued using Level 2 input.  The Company’s derivative instruments as of March 31, 2018 and December 31, 2017 consisted of a single interest rate cap.  The Company utilizes an independent third party and interest rate market pricing models to assist management in determining the fair value of this instrument.

The fair value of the Company’s interest rate cap at March 31, 2018 and December 31, 2017 was $0.2 million and less than $0.1 million, respectively, and is included as a component of prepaid expenses, deferred expenses and other assets on the condensed consolidated balance sheets.

The Company has elected not to utilize hedge accounting, and therefore, the change in fair value is included within change in fair value of interest rate cap on the condensed consolidated statements of operations.  For the three months ended March 31, 2018, the Company recorded a gain of $0.2 million compared to a loss of $0.5 million for the three months ended March 31, 2017.  

Financial Assets and Liabilities not Measured at Fair Value

Financial assets and liabilities that are not measured at fair value on the condensed consolidated balance sheets include cash equivalents and debt obligations.  The fair value of cash equivalents is classified as Level 1 and the fair value of debt obligations is classified as Level 2.

Cash equivalents are carried at cost, which approximates fair value.  The fair value of debt obligations is calculated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit ratings.  As of March 31, 2018 and December 31, 2017, the estimated fair values of the Company’s debt obligations were $1.28 billion and $1.36 billion, respectively, which approximated the carrying value at such dates as the current risk-adjusted rate approximates the stated rates on the Company’s debt obligations.

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 9 – Commitments and Contingencies

Insurance

The Company maintains general liability insurance and all-risk property and rental value, with sub-limits for certain perils such as floods and earthquakes on each of the Company’s properties.  The Company also maintains coverage for terrorism acts as defined by Terrorism Risk Insurance Program Reauthorization Act, which expires in December 2020.

Insurance premiums are charged directly to each of the retail properties.  The Company or its tenants may be responsible for deductibles and losses in excess of insurance coverage, which losses could be material, subject to the terms of the respective tenant leases.  The Company continues to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism.  However, the Company cannot anticipate what coverage will be available on commercially reasonable terms in the future.

Environmental Matters

Under various federal, state and local laws, ordinances and regulations, the Company may be considered an owner or operator of real property or may have arranged for the disposal or treatment of hazardous or toxic substances. As a result, the Company may be liable for certain costs, including removal, remediation, government fines, and injuries to persons and property.  The Company does not believe that any resulting liability from such matters will have a material effect on the condensed consolidated financial position, results of operations, or liquidity of the Company.  Under the Master Lease, Sears Holdings has indemnified the Company from certain environmental liabilities at the Wholly Owned Properties existing before, or caused by Sears Holdings during, the period in which each Wholly Owned Property is leased to Sears Holdings, including removal and remediation of all affected facilities and equipment constituting the automotive care center facilities (and each JV Master Lease includes a similar requirement of Sears Holdings).  As of March 31, 2018 and December 31, 2017, the Company had approximately $10.6 million and $10.8 million, respectively, of restricted cash in a lender reserve account to fund potential environmental costs that were identified during due diligence related to the Transaction.

Litigation and Other Matters

In accordance with accounting standards regarding loss contingencies, the Company accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and the Company discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued or disclose the fact that such a range of loss cannot be estimated. The Company does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. In such cases, the Company discloses the nature of the contingency, and an estimate of the possible loss, range of loss, or disclose the fact that an estimate cannot be made.

The Company is subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business.  While the resolution of such matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material effect on the condensed consolidated financial position, results of operations, cash flows or liquidity of the Company.

XML

Related Party Disclosure

3 Months Ended

Mar. 31, 2018

Related Party Transactions [Abstract]

Related Party Disclosure

Note 10 – Related Party Disclosure

Edward S. Lampert

Edward S. Lampert is Chairman and Chief Executive Officer of Sears Holdings and is the Chairman and Chief Executive Officer of ESL.  Mr. Lampert beneficially owned approximately 73.3 % of Sears Holdings’ outstanding common stock at March 31, 2018 (per Schedule 13D filed March 23, 2018).  Mr. Lampert is also the Chairman of Seritage.

As of March 31, 2018, Mr. Lampert beneficially owned a 36.2% interest in the Operating Partnership and approximately 2.7% and 100% of the outstanding Class A common shares and Class B non-economic common shares, respectively.

Subsidiaries of Sears Holdings, as lessees, and subsidiaries of the Company, as lessors, are parties to the Master Lease (see Note 5).

Unsecured Term Loan

On December 27, 2017, the Operating Partnership, as borrower, and the Company, as guarantor, entered into a $200.0 million senior unsecured term loan facility with JPP, LLC, JPP II, LLC and an affiliate of Empyrean Capital Partners, L.P. as lenders, and JPP, LLC as administrative agent.

Edward S. Lampert, the Company’s Chairman, is the Chairman and Chief Executive Officer of ESL, which controls JPP, LLC and JPP II, LLC.  The terms of the unsecured delayed draw term loan facility were approved by the Company’s Audit Committee and the Company’s Board of Trustees (with Mr. Edward S. Lampert recusing himself).

XML

Non-Controlling Interests

3 Months Ended

Mar. 31, 2018

Noncontrolling Interest [Abstract]

Non-Controlling Interests

Note 11 – Non-Controlling Interests

Partnership Agreement

On July 7, 2015, Seritage and ESL entered into the agreement of limited partnership of the Operating Partnership (the “Partnership Agreement”).  Pursuant to the Partnership Agreement, as the sole general partner of the Operating Partnership, Seritage exercises exclusive and complete responsibility and discretion in its day-to-day management, authority to make decisions, and control of the Operating Partnership, and may not be removed as general partner by the limited partners.

As of March 31, 2018, the Company held a 63.8% interest in the Operating Partnership and ESL held a 36.2% interest.  The portions of consolidated entities not owned by the Company are presented as non-controlling interest as of and during the periods presented.

XML

Shareholders' Equity

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Shareholders' Equity

Note 12 – Shareholders’ Equity

Class A Common Shares

During the three months ended March 31, 2018, 2,779,121 net Class C non-voting common shares were converted to Class A common shares.

As of March 31, 2018, 35,208,666 Class A common shares were issued and outstanding.

Subsequent to March 31, 2018, 51,592 net Class C non-voting common shares were converted to Class A common shares.

Class B Non-Economic Common Shares

As of March 31, 2017, 1,328,866 Class B non-economic common shares were issued and outstanding.  The Class B non-economic common shares have voting rights, but do not have economic rights and, as such, do not receive dividends and are not included in earnings per share computations.

Class C Non-Voting Common Shares

During the three months ended March 31, 2018, 2,779,121 net Class C non-voting common shares were converted to Class A common shares.

As of March 31, 2018, 372,010 Class C non-voting common shares were issued and outstanding.  The Class C non-voting common shares have economic rights, but do not have voting rights.  Upon any transfer of a Class C non-voting common share to any person other than an affiliate of the holder of such share, such share shall automatically convert into one Class A common share.

Subsequent to March 31, 2018, 51,592 net Class C non-voting common shares were converted to Class A common shares.

Series A Preferred Shares

In December 2017, the Company issued 2,800,000 7.00% Series A Cumulative Redeemable Preferred Shares (the “Series A Preferred Shares”) in a public offering at $25.00 per share.  The Company received net proceeds from the offering of approximately $66.7 million, after deducting payment of the underwriting discount and offering expenses, which it used the proceeds to fund its redevelopment pipeline and for general corporate purposes.

We may not redeem the Series A Preferred Shares before December 14, 2022 except to preserve our status as a REIT or upon the occurrence of a Change of Control, as defined in the Trust Agreement addendum designating the Series A Preferred Shares.  On and after December 14, 2022, we may redeem any or all of the Series A Preferred Shares at $25.00 per share plus any accrued and unpaid dividends. In addition, upon the occurrence of a Change of Control, we may redeem any or all of the Series A Preferred Shares for cash within 120 days after the first date on which such Change of Control occurred at $25.00 per share plus any accrued and unpaid dividends. The Series A Preferred Shares have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless we redeem or otherwise repurchase them or they are converted.

Dividends and Distributions

The Company’s Board of Trustees declared the following common stock dividends during 2018 and 2017, with holders of Operating Partnership units entitled to an equal distribution per Operating Partnership unit held on the record date:

			Dividends per
			Class A and Class C
Declaration Date	Record Date	Payment Date	Common Share
2018
April 24	June 29	July 12	$	0.25
February 20	March 30	April 12		0.25
2017
October 24	December 29	January 11, 2018	$	0.25
July 25	September 29	October 12		0.25
April 25	June 30	July 13		0.25
February 28	March 31	April 13		0.25

The Company’s Board of Trustees declared the following preferred stock dividends during 2018:

			Series A
Declaration Date	Record Date	Payment Date	Preferred Share
2018
April 24	June 29	July 16	$	0.43750
February 20	March 30	April 16		0.43750
February 20 (1)	March 30	April 16		0.15556

(1) This dividend covers the period from, and including, December 14, 2017 to December 31, 2017.

XML

Earnings per Share

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Earnings per Share

Note 13 – Earnings per Share

The table below provides a reconciliation of net income (loss) and the number of common shares used in the computations of “basic” earnings per share (“EPS”), which utilizes the weighted-average number of common shares outstanding without regard to dilutive potential common shares, and “diluted” EPS, which includes all such shares.  Potentially dilutive securities consist of shares of non-vested restricted stock and the redeemable non-controlling interests in the Operating Partnership.

All outstanding non-vested shares that contain non-forfeitable rights to dividends are considered participating securities and are included in computing EPS pursuant to the two-class method which specifies that all outstanding non-vested share-based payment awards that contain non-forfeitable rights to distributions are considered participating securities and should be included in the computation of EPS.

Earnings per share has not been presented for Class B shareholders, as they do not have economic rights.

(in thousands except per share amounts)	Three Months Ended March 31,
	2018			2017
Numerator
Net income (loss)	$	16,201		$	(32,844	)
Net (income) loss attributable to non-controlling interests		(5,873	)		13,006
Preferred dividends		(1,228	)		—
Net income (loss) attributable to common shareholders	$	9,100		$	(19,838	)
Earnings allocated to unvested participating securities		(22	)		—
Net income (loss) available to common shareholders - Basic and diluted	$	9,078		$	(19,838	)
Denominator
Weighted average Class A common shares outstanding		33,673			27,748
Weighted average Class C common shares outstanding		1,741			5,762
Weighted average Class A and Class C common shares outstanding - Basic		35,414			33,510
Restricted shares and share units		87			—
Weighted average Class A and Class C common shares outstanding - Diluted		35,501			33,510

No adjustments were made to the numerator for the three months ended March 31, 2017 because the Company generated a net loss.  During periods of net loss, undistributed losses are not allocated to the participating securities as they are not required to absorb losses.

No adjustments were made to the denominator for the three months ended March 31, 2017 because (i) the inclusion of outstanding non-vested restricted shares would have had an anti-dilutive effect and (ii) including the non-controlling interest in the Operating Partnership would also require that the share of the Operating Partnership loss attributable to such interests be added back to net loss, therefore, resulting in no effect on earnings per share.

As of March 31, 2018 and December 31, 2017, there were 312,951 and 245,570 shares, respectively, of non-vested restricted shares and share units outstanding.

XML

Stock Based Compensation

3 Months Ended

Mar. 31, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Based Compensation

Note 14 – Stock Based Compensation

On July 7, 2015, the Company adopted the Seritage Growth Properties 2015 Share Plan (the “Plan”). The number of shares of common stock reserved for issuance under the Plan is 3,250,000. The Plan provides for grants of restricted shares, share units, other share-based awards, options, and share appreciation rights, each as defined in the Plan (collectively, the "Awards"). Directors, officers, other employees, and consultants of the Company and its subsidiaries and affiliates are eligible for Awards.

Restricted Shares and Share Units

Pursuant to the Plan, the Company has periodically made grants of restricted shares or share units. The vesting terms of these grants are specific to the individual grant and vary in that a portion of the restricted shares and share units vest in equal annual amounts over the subsequent three years (time-based vesting) and a portion of the restricted shares and share units vest on the third anniversary of the grants subject to the achievement of certain performance criteria (performance-based vesting).

In general, participating employees are required to remain employed for vesting to occur (subject to certain limited exceptions). Restricted shares and share units that do not vest are forfeited. Dividends on restricted shares and share units with time-based vesting are paid to holders of such shares and share units and are not returnable, even if the underlying shares or share units do not ultimately vest.  Dividends on restricted shares and share units with performance-based vesting are accrued when declared and paid to holders of such shares on the third anniversary of the initial grant subject to the vesting of the underlying shares.

The following table summarizes restricted share activity for the three months ended March 31, 2018:

	Three Months Ended March 31, 2018
				Weighted-
				Average Grant
	Shares			Date Fair Value
Unvested restricted shares at beginning of period		245,570		$	41.33
Restricted shares granted		81,595			36.17
Restricted shares vested		(14,214	)		47.08
Unvested restricted shares at end of period		312,951		$	39.73

The Company recognized $0.9 million and $0.4 million in compensation expense related to the restricted shares for the three months ended March 31, 2018 and March 31, 2017.Such expenses are included in general and administrative expenses on the Company's condensed consolidated statements of operations.  As of March 31, 2018, there were approximately $6.8 million of total unrecognized compensation costs related to the outstanding restricted shares.

XML

Accounts Payable, Accrued Expenses and Other Liabilities

3 Months Ended

Mar. 31, 2018

Payables And Accruals [Abstract]

Accounts Payable, Accrued Expenses and Other Liabilities

Note 15 – Accounts Payable, Accrued Expenses and Other Liabilities

The following table summarizes the significant components of accounts payable, accrued expenses and other liabilities as of March 31, 2018 and December 31, 2017 (in thousands):

	March 31, 2018		December 31, 2017
Accrued development expenditures	$	19,964	$	21,449
Dividends payable		15,910		14,559
Accrued real estate taxes		14,920		17,091
Below-market leases		13,945		14,476
Environmental reserve		10,846		11,322
Unearned tenant reimbursements		6,335		10,522
Accounts payable and accrued expenses		5,648		9,588
Prepaid rental income		5,127		4,156
Accrued interest		3,787		3,689
Deferred maintenance		2,581		2,581
Total accounts payable, accrued expenses and other    liabilities	$	99,063	$	109,433

XML

Subsequent Events

3 Months Ended

Mar. 31, 2018

Subsequent Events [Abstract]

Subsequent Events

Note 16 – Subsequent Events

Subsequent to the three months ended March 31, 2018, the Company:

− Entered into an agreement with a residential developer to pursue a multi-family development on 2.5 acres of the 15-acre former Sears site owned by Seritage at Overlake Plaza in Redmond, WA.  The agreement values the 2.5-acre parcel at $16.0 million.

− Entered into an agreement with the adjacent mall owner to pursue a multi-family development on 4.5 acres of the 10-acre Sears site owned by Seritage at NewPark Mall in Newark, CA.  The agreement values the 4.5-acre parcel at $20.0 million.

− Entered into an agreement to sell the Sears store and parcel at Tanforan Mall in San Bruno, CA to the adjacent mall owner for gross consideration of $42.0 million.

XML

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K, as amended, (the “Annual Report”), for the year ended December 31, 2017.  Certain footnote disclosures which would substantially duplicate those contained in our Annual Report have been condensed or omitted from this quarterly report.  In the opinion of management, all adjustments necessary for a fair presentation (which include only normal recurring adjustments) have been included in this quarterly report.  Operating results of three months ended March 31, 2018 may not be indicative of the results that may be expected for any other interim period or for the year ending December 31, 2018.  Capitalized terms used, but not defined in this quarterly report, have the same meanings as set forth in our Annual Report.

The accompanying condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).  The condensed consolidated financial statements include the accounts of the Company, the Operating Partnership, each of their wholly-owned subsidiaries, and all other entities in which they have a controlling financial interest or entities that meet the definition of a variable interest entity (“VIE”) in which the Company has, as a result of ownership, contractual interests or other financial interests, both the power to direct activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.  All intercompany accounts and transactions have been eliminated.

If the Company has an interest in a VIE but it is not determined to be the primary beneficiary, the Company accounts for its interest under the equity method of accounting.  Similarly, for those entities which are not VIEs and over which the Company has the ability to exercise significant influence, but does not have a controlling financial interest, the Company accounts for its interests under the equity method of accounting.  The Company continually reconsiders its determination of whether an entity is a VIE and whether the Company qualifies as its primary beneficiary.

To the extent such variable interests are in entities that cannot be evaluated under the VIE model, the Company evaluates its interests using the voting interest entity model.  As of March 31, 2018, the Company holds a 63.8% interest in the Operating Partnership and is the sole general partner which gives the Company exclusive and complete responsibility for the day-to-day management, authority to make decisions, and control of the Operating Partnership.  Through consideration of consolidation guidance effective for the Company as of January 1, 2016, it has been concluded that the Operating Partnership is a VIE as the limited partners in the Operating Partnership, although entitled to vote on certain matters, do not possess kick-out rights or substantive participating rights.  Accordingly, the Company consolidates its interest in the Operating Partnership.  However, as the Company holds what is deemed a majority voting interest in the Operating Partnership, it qualifies for the exemption from providing certain of the disclosure requirements associated with investments in VIEs.

The portions of consolidated entities not owned by the Company and the Operating Partnership are presented as non-controlling interests as of and during the periods presented.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  The most significant assumptions and estimates relate to fair values of acquired assets and liabilities assumed for purposes of applying the acquisition method of accounting, the useful lives of tangible and intangible assets, real estate impairment assessments, and assessing the recoverability of accounts receivables.  These estimates are based on historical experience and other assumptions which management believes are reasonable under the circumstances.  Management evaluates its estimates on an ongoing basis and makes revisions to these estimates and related disclosures as experience develops or new information becomes known.  Actual results could differ from these estimates.

Segment Reporting

Segment Reporting

The Company currently operates in a single reportable segment which includes the acquisition, ownership, development, redevelopment, management, and leasing of retail properties.  The Company’s chief operating decision maker, its Chief Executive Officer, assesses and measures the operating and financial results for each property on an individual basis and does not distinguish or group properties based on geography, size, or type. The Company, therefore, aggregates all properties into one reportable segment due to their similarities with regard to the nature and economics of the properties, tenants, and operations.

Accounting for Real Estate Acquisitions

Accounting for Real Estate Acquisitions

Upon the acquisition of real estate, the Company assesses the fair value of acquired assets and liabilities assumed, including land, buildings, improvements and identified intangibles such as above-market and below-market leases, in-place leases and other items, as applicable, and allocates the purchase price based on these assessments.  In making estimates of fair values, the Company may use a number of sources, including data provided by third parties, as well as information obtained by the Company as a result of its due diligence, including expected future cash flows of the property and various characteristics of the markets where the property is located.

The fair values of tangible assets are determined on an "if vacant" basis. The "if vacant" fair value allocated to land is generally estimated via a market or sales comparison approach with the subject site being compared to similar properties that have sold or are currently listed for sale. The comparable properties are adjusted for dissimilar characteristics such as market conditions, location, access/frontage, size, shape/topography, or intended use, including the impact of any encumbrances on such use.  The "if vacant" value allocated to buildings and site improvements is generally estimated using an income approach and a cost approach that utilizes published guidelines for current replacement cost or actual construction costs for similar, recently developed properties.  Assumptions used in the income approach include capitalization and discount rates, lease-up time, market rents, make-ready costs, land value, and site improvement value.

The estimated fair value of in-place tenant leases includes lease origination costs (the costs the Company would have incurred to lease the property to the current occupancy level) and the lost revenues during the period necessary to lease-up from vacant to the current occupancy level. Such estimates include the fair value of leasing commissions, legal costs and tenant coordination costs that would be incurred to lease the property to this occupancy level. Additionally, the Company evaluates the time period over which such occupancy level would be achieved and includes an estimate of the net operating costs (primarily real estate taxes, insurance and utilities) incurred during the lease-up period, which generally ranges up to one year. The fair value of acquired in-place tenant leases is included in lease intangible assets on the condensed consolidated balance sheets and amortized over the remaining lease term for each tenant.

Identifiable intangible assets and liabilities are calculated for above-market and below-market tenant and ground leases where the Company is either the lessor or the lessee. The difference between the contractual rental rates and the Company’s estimate of market rental rates is measured over a period equal to the remaining non-cancelable term of the leases, including significantly below-market renewal options for which exercise of the renewal option appears to be reasonably assured. Above-market tenant leases and below-market ground leases are included in lease intangible assets on the condensed consolidated balance sheets; below-market tenant leases and above-market ground leases are included in accounts payable, accrued expenses and other liabilities on the condensed consolidated balance sheets.  The values assigned to above-market and below-market tenant leases are amortized as reductions and increases, respectively, to base rental revenue over the remaining term of the respective leases.  The values assigned to below-market and above-market ground leases are amortized as increases and reductions, respectively, to property operating expenses over the remaining term of the respective leases.

The Company expenses transaction costs associated with business combinations in the period incurred; these costs are included in acquisition-related expenses within the condensed consolidated statements of operations. The Company capitalizes transaction costs associated with asset acquisitions; these costs are allocated to the fair values of the net assets acquired, included within the condensed consolidated balance sheets and depreciated or amortized over the remaining life or term of the acquired assets.

Real Estate Investments

Real Estate Investments

Real estate assets are recorded at cost, less accumulated depreciation and amortization.

Expenditures for ordinary repairs and maintenance will be expensed as incurred.  Significant renovations which improve the property or extend the useful life of the assets are capitalized.  As real estate is undergoing redevelopment activities, all amounts directly associated with and attributable to the project, including planning, development and construction costs, interest costs, personnel costs of employees directly involved and other miscellaneous costs incurred during the period of redevelopment, are capitalized.  The capitalization period begins when redevelopment activities are underway and ends when the project is substantially complete.

Depreciation of real estate assets, excluding land, is recognized on a straight-line basis over their estimated useful lives as follows:

Building:	25 – 40 years
Site improvements:	5 – 15 years
Tenant improvements:	shorter of the estimated useful life or non-cancelable term of lease

The Company amortizes identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired, generally the remaining non-cancelable term of a related lease.

On a periodic basis, management assesses whether there are indicators that the value of the Company’s real estate assets (including any related intangible assets or liabilities) may be impaired.  If an indicator is identified, a real estate asset is considered impaired only if management’s estimate of current and projected operating cash flows (undiscounted and unleveraged), taking into account the anticipated and probability weighted holding period, are less than a real estate asset’s carrying value.  Various factors are considered in the estimation process, including expected future operating income, trends and prospects and the effects of demand, competition, and other economic factors.  If management determines that the carrying value of a real estate asset is impaired, a loss will be recorded for the excess of its carrying amount over its estimated fair value.  No such impairment losses were recognized for the three months ended March 31, 2018 or March 31, 2017.

Investments in Unconsolidated Joint Ventures

Investments in Unconsolidated Joint Ventures

The Company accounts for its investments in unconsolidated joint ventures using the equity method of accounting as the Company exercises significant influence, but does not control these entities. These investments are initially recorded at cost and are subsequently adjusted for cash contributions, cash distributions, and earnings which are recognized in accordance with the terms of the applicable agreement.

On a periodic basis, management assesses whether there are indicators, including the operating performance of the underlying real estate and general market conditions, that the value of the Company’s investments in unconsolidated joint ventures may be impaired.  An investment’s value is impaired only if management’s estimate of the fair value of the Company’s investment is less than its carrying value and such difference is deemed to be other-than-temporary.  To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over its estimated fair value.  No such impairment losses were recognized for the three months ended March 31, 2018 or March 31, 2017.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers instruments with an original maturity of three months or less to be cash and cash equivalents. Cash and cash equivalents balances may, at a limited number of banks and financial institutions, exceed insurable amounts. The Company believes it mitigates this risk by investing in or through major financial institutions and primarily in funds that are insured by the United States federal government.

Restricted Cash

Restricted Cash

Restricted cash represents cash deposited in escrow accounts which generally can only be used for the payment of real estate taxes, debt service, insurance, and future capital expenditures as required by certain loan and lease agreements, as well as legally restricted tenant security deposits.  As of March 31, 2018, the Company had approximately $177.4 million of restricted cash, including $154.2 million reserved for redevelopment costs, tenant allowances and leasing commissions, deferred maintenance, environmental remediation and other capital expenditures, $ 19.5 million reserved for basic property carrying costs such as real estate taxes, insurance and ground rent, and $ 3.7 million of other restricted cash which consisted primarily of prepaid rental income.

Tenant and Other Receivables

Tenant and Other Receivables

Accounts receivable includes unpaid amounts billed to tenants, accrued revenues for future billings to tenants for property expenses, and amounts arising from the straight-lining of rent.  The Company periodically reviews its receivables for collectability, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates, and economic conditions in the area where the property is located.  In the event that the collectability of a receivable with respect to any tenant is in doubt, a provision for uncollectible amounts will be established or a direct write-off of the specific rent receivable will be made.  For accrued rental revenues related to the straight-line method of reporting rental revenue, the Company performs a periodic review of receivable balances to assess the risk of uncollectible amounts and establish appropriate provisions.

Revenue Recognition

Revenue Recognition

Rental income is recognized on a straight-line basis over the non-cancelable terms of the related leases.  For leases that have fixed and measurable rent escalations, the difference between such rental income earned and the cash rent due under the provisions of the lease is recorded as deferred rent receivable and included as a component of tenant and other receivables on the condensed consolidated balance sheets.

In leasing tenant space, the Company may provide funding to the lessee through a tenant allowance.  In accounting for a tenant allowance, the Company will determine whether the allowance represents funding for the construction of leasehold improvements and evaluate the ownership of such improvements.  If the Company is considered the owner of the improvements for accounting purposes, the Company will capitalize the amount of the tenant allowance and depreciate it over the shorter of the useful life of the improvements or the related lease term.  If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or in the event the Company is not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease incentive and is recognized over the lease term as reduction of rental revenue on a straight-line basis.

The Company commences recognizing revenue based on an evaluation of a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset.  Generally, this occurs on the lease commencement date.

Tenant reimbursement income arises from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property.  This revenue is accrued in the same periods as the expenses are incurred.

Accounting for Recapture and Termination Activity Pursuant to the Master Lease

Accounting for Recapture and Termination Activity Pursuant to the Master Lease

Seritage 100% Recapture Rights.  The Company generally treats the delivery of a 100% recapture notice as a modification of the Master Lease as of the date of notice.  Such a notice and lease modification result in the following accounting adjustments for the recaptured property:

− Accrued rental revenues related to the straight-line method of reporting rental revenue that are deemed uncollectable as result of the lease modification are amortized over the remaining shortened life of the lease from the date of notice to the date of vacancy.

− Intangible lease assets and liabilities that are deemed to be impacted by the lease modification are amortized over the shorter of the shortened lease term from the date of notice to the date of vacancy or the remaining useful life of the asset or liability.

A 100% recapture will generally occur in conjunction with obtaining a new tenant or a real estate development project.  As such, termination fees, if any, associated with the 100% recapture notice are generally capitalized as either an initial direct cost of obtaining a new lease or a necessary cost of the real estate project and depreciated over the life of the new lease obtained or the real estate asset being constructed or improved.

Seritage 50% Recapture Rights.  The Company generally treats the delivery of a 50% recapture notice as a modification of the Master Lease as of the date of notice.  Such a notice and lease modification result in the following accounting adjustments for the recaptured property:

− The portion of accrued rental revenues related to the straight-line method of reporting rental revenue that are subject to the lease modification are amortized over the remaining shortened life of the lease from the date of notice to the date of vacancy.  The portion of accrued rental revenues related to the straight-line method of reporting rental revenue that is attributable to the retained space is amortized over the remaining life of the Master Lease.

− The portion of intangible lease assets and liabilities that is deemed to be impacted by the lease modification is amortized over the shorter of the shortened lease term from the date of notice to the date of vacancy or the remaining useful life of the asset or liability.  The portion of intangible lease assets and liabilities that is attributable to the retained space is amortized over the remaining useful life of the asset or liability.

Sears Holdings Termination Rights.  The Master Lease provides Sears Holdings with certain rights to terminate the Master Lease with respect to properties that cease to be profitable for operation by Sears Holdings.  Such a termination would generally result in the following accounting adjustments for the terminated property:

− Accrued rental revenues related to the straight-line method of reporting rental revenue that are subject to the termination are amortized over the remaining shortened life of the lease from the date of notice to the date of vacancy.

− Intangible lease assets and liabilities that are deemed to be impacted by the termination are amortized over the shorter of the shortened lease term from the date of notice to the date of vacancy or the remaining useful life of the asset or liability.

− Termination fees required to be paid by Sears Holdings are recognized as follows:

• For the portion of the termination fee attributable to the annual base rent of the subject property, termination income is recognized on a straight-line basis over the shortened life of the lease from the date the termination fee becomes legally binding to the date of vacancy.

• For the portion of the termination fee attributable to estimated real estate taxes and property operating expenses for the subject property, prepaid rental income is recorded in the period such fee is received and recognized as tenant reimbursement revenue in the same periods as the expenses are incurred.

Derivatives

Derivatives

The Company’s use of derivative instruments is limited to the management of interest rate exposure and not for speculative purposes.  In connection with the issuance of the Company’s Mortgage Loans and Future Funding Facility, the Company purchased for $5.0 million an interest rate cap with a term of four years, a notional amount of $1,261 million and a strike rate of 3.5%.  The interest rate cap is measured at fair value and included as a component of prepaid expenses, deferred expenses and other assets on the condensed consolidated balance sheets.  The Company has elected not to utilize hedge accounting, and therefore, the change in fair value is included within change in fair value of interest rate cap on the condensed consolidated statements of operations.  For the three months ended March 31, 2018, the Company recorded a gain of $0.2 million compared to a loss of $0.5 million for the three months ended March 31, 2017

Stock-Based Compensation

Stock-Based Compensation

The Company generally recognizes equity awards to employees as compensation expense and includes such expense within general and administrative expenses on the condensed consolidated statements of operations.  Compensation expense for equity awards is generally based on the fair value of the common shares at the date of the grant and is recognized (i) ratably over the vesting period for awards with time-based vesting and (ii) for awards with performance-based vesting, at the date the achievement of performance criteria is deemed probable, an amount equal to that which would have been recognized ratably from the date of the grant through the date the achievement of performance criteria is deemed probable, and then ratably from the date the achievement of performance criteria is deemed probable through the remainder of the vesting period.

Concentration of Credit Risk

Concentration of Credit Risk

Concentrations of credit risk arise when a number of operators, tenants, or obligors related to the Company's investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. As of March 31, 2018, a majority of the Company's real estate properties were leased to Sears Holdings, and the majority of Company’s rental revenues were derived from the Master Lease (see Note 5).  Until the Company further diversifies the tenancy of its portfolio, an event that has a material adverse effect on Sears Holdings’ business, financial condition or results of operations could have a material adverse effect on the Company’s business, financial condition or results of operations.  Sears Holdings is a publicly traded company that is subject to the informational filing requirements of the Securities Exchange Act of 1934, as amended, and is required to file periodic reports on Form 10-K and Form 10-Q with the SEC.  Refer to www.sec.gov for Sears Holdings publicly-available financial information.

Other than the Company's tenant concentration, management believes the Company's portfolio was reasonably diversified by geographical location and did not contain any other significant concentrations of credit risk.  As of March 31, 2018, the Company's portfolio of 225 Wholly Owned Properties and 24 JV Properties was diversified by location across 49 states and Puerto Rico.

Earnings per Share

Earnings per Share

The Company has three classes of common stock.  The rights, including the liquidation and dividend rights, of the holders of the Company’s Class A common shares and Class C non-voting common shares are identical, except with respect to voting. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. The net earnings (loss) per share amounts are the same for Class A and Class C common shares because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.  Class B non-economic common shares are excluded from earnings per share computations as they do not have economic rights.

All outstanding non-vested shares that contain non-forfeitable rights to dividends are considered participating securities and are included in computing earnings per share pursuant to the two-class method which specifies that all outstanding non-vested share-based payment awards that contain non-forfeitable rights to distributions are considered participating securities and should be included in the computation of earnings per share.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In February 2017, the Financial Accounting Standards Boards (“FASB”) issued Accounting Standards Update (“ASU”) 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets” to provide guidance for recognizing gains and losses from the transfer of nonfinancial assets. The standard requires a company to derecognize nonfinancial assets once it transfers control of a distinct nonfinancial asset or distinct in substance nonfinancial assets to noncustomers. Additionally, when a company transfers its controlling interest in a nonfinancial asset, but retains a non-controlling ownership interest, the company is required to measure any non-controlling interest it receives or retains at fair value. An entity may elect to apply the amendments in ASU 2017-05 either retrospectively to each period presented in the financial statements (i.e. the retrospective approach) or retrospectively with a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption (i.e. the modified retrospective approach). We adopted this update on January 1, 2018 with no impact to beginning retained earnings/accumulated deficit because there were no open contracts at the time of adoption.

During the three months ended March 31, 2018, the Company entered into a transaction in which it sold a portion of its investment in a consolidated property and retained joint control of the entity. (See Footnote 4 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional disclosure regarding this transaction).

In January 2017, the FASB issued ASU 2017-01 which changes the definition of a business to exclude acquisitions where substantially all of the fair value of the assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets.  While there are various differences between the accounting for an asset acquisition and a business combination, the Company expects that the largest impact will be the capitalization of transaction costs for asset acquisitions which are expensed for business combinations.  ASU 2017-01 is effective, on a prospective basis, for interim and annual periods beginning after January 1, 2019.  The Company adopted the guidance on the issuance date effective January 5, 2017 on a prospective basis and it did not have an impact on the consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 provides classification guidance for eight specific topics including debt extinguishment costs, contingent consideration payments made after a business combination, and distributions received from equity method investees. ASU 2016-15 is effective, on a retrospective basis, for interim and annual periods beginning after December 15, 2017; early adoption is permitted.  The Company adopted ASU 2016-15 on the effective date, January 1, 2018, and applied the cumulative earnings approach to classify distributions received from our equity method investees.  The adoption changes our statements of cash flows so that distributions from unconsolidated joint ventures in excess of cumulative equity in earnings are now classified as inflows from investing activities for each period presented.  These distributions were previously classified as inflows from operating activities.

In February 2016, with a subsequent update made in January 2018 and finalized in March 2018, the FASB issued ASU No. 2016-02 “Leases (Topic 842)” (“ASU 2016-02”) to amend the accounting guidance for leases. The accounting applied by a lessor is largely unchanged under ASU 2016-02. However, the standard requires lessees to recognize lease assets and lease liabilities for leases classified as operating leases on the balance sheet. Lessees will recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it will recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted.

In March 2018, the FASB finalized changes with respect to optional transition relief and approved a practical expedient for lessors that would permit lessors to make an accounting policy election to not separate non-lease components from the associated lease components, by class of underlying asset, if the following two criteria are met: (1) the timing and pattern of transfer of the lease and non-lease components are the same and (2) the lease component would be classified as an operating lease if accounted for separately. For leases where we are the lessor, we currently believe that we will elect the optional transition relief and that we will meet the noted criteria to not be required to bifurcate and separately report non-lease components, such as common area maintenance revenue, for operating leases on our consolidated statements of operations. As a result, we currently believe that leases where we are the lessor will be accounted for in a similar method to existing standards with the underlying leased asset being reported and recognized as a real estate asset. The FASB is expected to issue an Accounting Standards Update codifying these changes in the coming months. We currently expect to adopt ASU 2016-02 using the practical expedients proposed in the standard and the changes approved by the FASB and do not believe that this change will have a material impact on our consolidated financial statements.

In May 2014, with subsequent updates issued in August 2015 and March, April and May 2016, the FASB issued ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”) and the related FASB ASU Nos. 2016-12 and 2016-20, which provide practical expedients, technical corrections, and improvements for certain aspects of ASU 2014- 09.  ASU 2014-09 was developed to enable financial statement users to better understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The update’s core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Companies are to use a five-step contract review model to ensure revenue is recognized, measured and disclosed in accordance with this principle. Those steps include the following: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to each performance obligation in the contract, and (v) recognize revenue when or as the entity satisfies a performance obligation.  The Company estimates the total transaction price, which generally includes a fixed contract price and may also include variable components. Variable components of the contract price are included in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur. The Company recognizes the estimated transaction price as revenue as it satisfies its performance obligations.

The Company adopted ASU 2014-09 on the effective date of January 1, 2018 using the modified retrospective method. Management concluded that the majority of total revenues consist of rental income from leasing arrangements, which is specifically excluded from the standard. As of January 1, 2018, the Company began accounting for the sale of real estate properties under Subtopic 610-20 which provides for revenue recognition based on transfer of ownership.

During the three months ended March 31, 2018, the Company contributed its property located in Santa Monica, CA to a new joint venture and sold a 49.9% interest in the venture.  The Company estimated the total transaction price, which includes fixed and variable components, pursuant to ASC 606. The variable component of the transaction will be re-measured at each reporting date until stabilization. (See Footnote 4 to the Notes to the Company’s Condensed Consolidated Financial Statements for additional disclosure regarding this transaction).

XML

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Summary of Estimated Useful Lives

Depreciation of real estate assets, excluding land, is recognized on a straight-line basis over their estimated useful lives as follows:

Building:	25 – 40 years
Site improvements:	5 – 15 years
Tenant improvements:	shorter of the estimated useful life or non-cancelable term of lease

XML

Lease Intangible Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2018

Summary of Lease Intangible Assets

The following table summarizes the Company’s lease intangible assets and liabilities (in thousands):

March 31, 2018
	Gross		Accumulated
Lease Intangible Assets	Asset		Amortization			Balance
In-place leases, net	$	530,349	$	(255,408	)	$	274,941
Below-market ground leases, net		11,766		(559	)		11,207
Above-market leases, net		8,925		(3,460	)		5,465
Total	$	551,040	$	(259,427	)	$	291,613

December 31, 2017
	Gross		Accumulated
Lease Intangible Assets	Asset		Amortization			Balance
In-place leases, net	$	542,655	$	(249,569	)	$	293,086
Below-market ground leases, net		11,766		(508	)		11,258
Above-market leases, net		8,925		(3,171	)		5,754
Total	$	563,346	$	(253,248	)	$	310,098

Summary of Lease Intangible Liabilities

The following table summarizes the Company’s lease intangible assets and liabilities (in thousands):

	Gross		Accumulated
Lease Intangible Liabilities	Liability		Amortization			Balance
Below-market leases, net	$	19,658	$	(5,713	)	$	13,945
Total	$	19,658	$	(5,713	)	$	13,945

	Gross		Accumulated
Lease Intangible Liabilities	Liability		Amortization			Balance
Below-market leases, net	$	19,658	$	(5,182	)	$	14,476
Total	$	19,658	$	(5,182	)	$	14,476

Schedule of Future Amortization for Below-Market Ground Leases

Future amortization of below-market ground leases is estimated to increase property expenses as set forth below (in thousands):

Remainder of 2018	$	152
2019		203
2020		203
2021		203
2022		203

Above-Market Leases, Net [Member]

Schedule of Future Amortization of Leases

Future amortization of these intangibles is estimated to increase rental income as set forth below (in thousands):

Remainder of 2018	$	(738	)
2019		(923	)
2020		(789	)
2021		(775	)
2022		(486	)

In-Place Leases, Net [Member]

Schedule of Future Amortization of Leases

Future estimated amortization of acquired in-place leases is set forth below (in thousands):

Remainder of 2018	$	44,168
2019		37,269
2020		36,822
2021		36,039
2022		35,120

XML

Investments in Unconsolidated Joint Ventures (Tables)

3 Months Ended

Mar. 31, 2018

Equity Method Investments And Joint Ventures [Abstract]

Summary of Company's Investments in Unconsolidated Joint Ventures

As of March 31, 2018, the Company had investments in five unconsolidated joint ventures as follows (in thousands, except number of properties):

		Seritage %			# of		Total		Contribution
Unconsolidated Joint Venture	Joint Venture Partner	Ownership			Properties		GLA		Value (1)
GS Portfolio Holdings II LLC    ("GGP I JV")	GGP Inc.		50.0	%		4		598	$	37,570
GS Portfolio Holdings (2017) LLC    ("GGP II JV")	GGP Inc.		50.0	%		5		1,187		57,500
MS Portfolio LLC ("Macerich JV")	The Macerich Company		50.0	%		9		1,576		150,000
SPS Portfolio Holdings II LLC    ("Simon JV")	Simon Property Group, Inc.		50.0	%		5		872		52,590
Mark 302 JV LLC ("Mark 302 JV")	Invesco Real Estate		50.1	%		1		97		45,000
						24		4,330	$	342,660

Summary of Combined Condensed Financial Data of Unconsolidated Joint Ventures

The following tables present combined condensed financial data for the Company’s unconsolidated joint ventures (in thousands):

	March 31, 2018			December 31, 2017
ASSETS
Investment in real estate
Land	$	277,306		$	191,853
Buildings and improvements		409,144			388,363
Accumulated depreciation		(53,731	)		(48,306	)
		632,719			531,910
Construction in progress		22,014			21,000
Net investment in real estate		654,733			552,910
Cash and cash equivalents		7,805			4,549
Tenant and other receivables, net		4,045			3,843
Other assets, net		40,976			45,605
Total assets	$	707,559		$	606,907
LIABILITIES AND MEMBERS INTERESTS
Liabilities
Mortgage loans payable, net	$	124,056		$	122,875
Accounts payable, accrued expenses and other    liabilities		32,117			28,201
Total liabilities		156,173			151,076
Members Interest
Additional paid in capital		579,134			473,098
Retained earnings		(27,748	)		(17,267	)
Total members interest		551,386			455,831
Total liabilities and members interest	$	707,559		$	606,907

	Three Months Ended March 31,
	2018			2017
EQUITY IN INCOME OF UNCONSOLIDATED    JOINT VENTURES
Total revenue	$	11,227		$	16,344
Property operating expenses		(1,712	)		(3,322	)
Depreciation and amortization		(7,586	)		(10,972	)
Operating income		1,929			2,050
Other expenses		(7,094	)		(46	)
Net (loss) income	$	(5,165	)	$	2,004
Equity in (loss) income of unconsolidated    joint ventures	$	(2,582	)	$	1,002

XML

Leases (Tables)

3 Months Ended

Mar. 31, 2018

Leases [Abstract]

Summary of Revenue from Master Lease

Revenues from the Master Lease for the three months ended March 31, 2018 and March 31, 2017 are as follows (in thousands and excluding straight-line rental income of 0.5 million and $1.0 million for the three months ended March 31, 2018 and March 31, 2017, respectively:

	Three Months Ended March 31,
	2018		2017
Rental income	$	22,531	$	31,651
Termination fee income		174		6,136
Tenant reimbursements		13,268		14,706
Total revenue	$	35,973	$	52,493

Summary of Recapture Rights Exercised by the Company

As of March 31, 2018, the Company had exercised recapture rights at 62 properties:

Property	Recapture Type	Notice Date(s)
Asheville, NC	100% (1)	March 2018
Chicago, IL	100% (1)	March 2018
Clearwater, FL	100% (1)	March 2018
El Cajon, CA	100% (1)	March 2018
Fairfield, CA	100% (1)	March 2018 / December 2017
Oklahoma City, OK	Out parcel	March 2018
Plantation, FL	100% (1)	March 2018 / December 2017
Redmond, WA	100% (1)	March 2018 / September 2017
Reno, NV	100% (1)	March 2018
Tucson, AZ	100% (1)	March 2018
Anchorage, AK	100%	December 2017
Boca Raton, FL	100%	December 2017
Westminster, CA	100%	December 2017
Hicksville, NY	100%	December 2017
Orland Park, IL	100% (1)	December 2017
Florissant, MO	Out parcel	December 2017
Salem, NH	Out parcel	December 2017
Las Vegas, NV	Partial	December 2017
Yorktown Heights	Partial	December 2017
Austin, TX	100% (1)	December 2017 / September 2017
Ft. Wayne, IN	Out parcel	September 2017 / July 2016
North Little Rock, AR	Auto Center	September 2017
St. Clair Shores, MI	100%	September 2017
Canton, OH	Partial	June 2017
Dayton, OH	Auto center	June 2017
North Riverside, IL	Partial	June 2017
Roseville, CA	Auto center	June 2017
Temecula, CA	Partial	June 2017
Watchung, NJ	100%	June 2017
Anderson, SC	100% (1)	April 2017 / July 2016
Aventura, FL	100%	April 2017
Carson, CA	100% (1)	April 2017 / December 2016
Charleston, SC	100% (1)	April 2017 / October 2016
Hialeah, FL	100% (1)	April 2017
San Diego, CA	100% (1)	April 2017
Valley View, TX	100%	April 2017
Cockeysville, MD	Partial	March 2017
North Miami, FL	100%	March 2017
Olean, NY	Partial	March 2017
Guaynabo, PR	Partial	December 2016
Santa Cruz, CA	Partial	December 2016
Santa Monica, CA (2)	100%	December 2016
Saugus, MA	Partial	December 2016
Roseville, MI	Partial	November 2016
Troy, MI	Partial	November 2016
Rehoboth Beach, DE	Partial	October 2016
St. Petersburg, FL	100%	October 2016
Warwick, RI	Auto center	October 2016
West Hartford, CT	100%	October 2016
Madison, WI	Partial	July 2016
North Hollywood, CA	Partial	July 2016
Orlando, FL	100%	July 2016
West Jordan, UT	Partial+ auto center	July 2016
Albany, NY	Auto center	May 2016
Bowie, MD	Auto center	May 2016
Fairfax, VA	Partial + autocenter	May 2016
Hagerstown, MD	Auto center	May 2016
Wayne, NJ (3)	Partial + auto center	May 2016
San Antonio, TX	Auto center	March 2016
Braintree, MA	100%	November 2015
Honolulu, HI	100%	December 2015
Memphis, TN	100%	December 2015

(1) The Company converted partial recapture rights at this property to 100% recapture rights and exercised such rights.

(2) In March 2018, the Company contributed this asset to the Mark 302 JV and retained a 50.1% interest in the joint venture.

(3) In July 2017, the Company contributed this asset to the GGP II JV and retained a 50.0% interest in the joint venture.

Summary of Redevelopment Properties

As of March 31, 2018, the Company had announced redevelopment projects at 22 of the terminated properties and will continue to announce redevelopment activity as new leases are signed to occupy the space formerly occupied by Sears Holdings.  During the three months ended March 31, 2018, the Company sold four of the terminated properties for a total of $13.5 million and recorded a gain of $2.1 million which is included in gain on sale of real estate within the condensed consolidated statements of operations.

					Announced
Property	Square Feet		Notice	Termination	Redevelopment
Alpena, MI		118,200	September 2016	January 2017
Chicago, IL (S Kedzie)		118,800	September 2016	January 2017
Cullman, AL		98,500	September 2016	January 2017	Q2 2017
Deming, NM		96,600	September 2016	January 2017
Elkhart, IN		86,500	September 2016	January 2017	Q4 2016
Harlingen, TX		91,700	September 2016	January 2017	Sold
Houma, LA		96,700	September 2016	January 2017	Sold
Kearney, NE		86,500	September 2016	January 2017	Q3 2016
Manistee, MI		87,800	September 2016	January 2017
Merrillville, IN		108,300	September 2016	January 2017	Q4 2016
New Iberia, LA		91,700	September 2016	January 2017	Q2 2017
Riverton, WY		94,800	September 2016	January 2017
Sault Sainte Marie, MI		92,700	September 2016	January 2017
Sierra Vista, AZ		86,100	September 2016	January 2017	Sold
Springfield, IL		84,200	September 2016	January 2017	Q3 2016
Thornton, CO		190,200	September 2016	January 2017	Q1 2017
Yakima, WA		97,300	September 2016	January 2017	Sold
Chapel Hill, OH		187,179	January 2017	April 2017
Concord, NC		137,499	January 2017	April 2017
Detroit Lakes, MN		79,102	January 2017	April 2017
El Paso, TX		103,657	January 2017	April 2017
Elkins, WV		94,885	January 2017	April 2017
Henderson, NV		122,823	January 2017	April 2017	Q1 2017
Hopkinsville, KY		70,326	January 2017	April 2017	Q1 2018
Jefferson City, MO		92,016	January 2017	April 2017	Q2 2017
Kenton, OH		96,066	January 2017	April 2017
Kissimmee, FL		112,505	January 2017	April 2017
Layton, UT		90,010	January 2017	April 2017
Leavenworth, KS		76,853	January 2017	April 2017
Mount Pleasant, PA		83,536	January 2017	April 2017
Muskogee, OK		87,500	January 2017	April 2017
Owensboro, KY		68,334	January 2017	April 2017
Paducah, KY		108,244	January 2017	April 2017	Q3 2017
Platteville, WI		94,841	January 2017	April 2017
Riverside, CA		94,500	January 2017	April 2017
Sioux Falls, SD		72,511	January 2017	April 2017
Albany, NY		216,200	June 2017	October 2017	Q1 2016
Burnsville, MN		161,700	June 2017	October 2017
Chicago, IL (N Harlem)		293,700	June 2017	October 2017
Cockeysville, MD		83,900	June 2017	October 2017	Q1 2017
East Northport, NY		187,000	June 2017	October 2017	Q2 2017
Friendswood, TX		166,000	June 2017	November 2017 (1)
Greendale, WI		238,400	June 2017	October 2017	Q4 2017
Hagerstown, MD		107,300	June 2017	October 2017	Q1 2016
Johnson City, NY		155,100	June 2017	October 2017
Lafayette, LA		194,900	June 2017	October 2017
Mentor, OH		208,700	June 2017	October 2017
Middleburg Heights, OH		351,600	June 2017	October 2017
Olean, NY		75,100	June 2017	October 2017	Q1 2017
Overland Park, KS		215,000	June 2017	October 2017
Roseville, MI		277,000	June 2017	October 2017	Q3 2016
Sarasota, FL		204,500	June 2017	October 2017
Toledo, OH		209,900	June 2017	October 2017
Warwick, RI		169,200	June 2017	October 2017	Q3 2016 / Q3 2017
Westwood, TX		215,000	June 2017	January 2018 (1)
York, PA		82,000	June 2017	October 2017
Cedar Rapids, IA		141,100	April 2018	August 2018
Citrus Heights, CA		280,700	April 2018	August 2018
Gainesville, FL		140,500	April 2018	August 2018
Maplewood, MN		168,500	April 2018	August 2018
Pensacola, FL		212,300	April 2018	August 2018
Rochester, NY		128,500	April 2018	August 2018
Roseville, CA		121,000	April 2018	August 2018	Q2 2017 / Q1 2018
San Antonio, TX		187,800	April 2018	August 2018	Q4 2015
Warrenton, NJ		113,900	April 2018	August 2018	Q1 2018
Total square feet		8,905,487

(1) The Company and Sears Holdings agreed to extend occupancy beyond October 2017 under the existing Master Lease terms.

XML

Shareholders' Equity (Tables)

3 Months Ended

Mar. 31, 2018

Class A and Class C Common Share [Member]

Class of Stock [Line Items]

Summary of Dividends and Distributions

The Company’s Board of Trustees declared the following common stock dividends during 2018 and 2017, with holders of Operating Partnership units entitled to an equal distribution per Operating Partnership unit held on the record date:

			Dividends per
			Class A and Class C
Declaration Date	Record Date	Payment Date	Common Share
2018
April 24	June 29	July 12	$	0.25
February 20	March 30	April 12		0.25
2017
October 24	December 29	January 11, 2018	$	0.25
July 25	September 29	October 12		0.25
April 25	June 30	July 13		0.25
February 28	March 31	April 13		0.25

Series A Preferred Shares [Member]

Class of Stock [Line Items]

Summary of Dividends and Distributions

The Company’s Board of Trustees declared the following preferred stock dividends during 2018:

			Series A
Declaration Date	Record Date	Payment Date	Preferred Share
2018
April 24	June 29	July 16	$	0.43750
February 20	March 30	April 16		0.43750
February 20 (1)	March 30	April 16		0.15556

(1) This dividend covers the period from, and including, December 14, 2017 to December 31, 2017.

XML

Earnings per Share (Tables)

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Reconciliation of Net Income (Loss) and Number of Common Shares Used in Computations of Basic Earnings Per Share

The table below provides a reconciliation of net income (loss) and the number of common shares used in the computations of “basic” earnings per share (“EPS”), which utilizes the weighted-average number of common shares outstanding without regard to dilutive potential common shares, and “diluted” EPS, which includes all such shares.  Potentially dilutive securities consist of shares of non-vested restricted stock and the redeemable non-controlling interests in the Operating Partnership.

All outstanding non-vested shares that contain non-forfeitable rights to dividends are considered participating securities and are included in computing EPS pursuant to the two-class method which specifies that all outstanding non-vested share-based payment awards that contain non-forfeitable rights to distributions are considered participating securities and should be included in the computation of EPS.

Earnings per share has not been presented for Class B shareholders, as they do not have economic rights.

(in thousands except per share amounts)	Three Months Ended March 31,
	2018			2017
Numerator
Net income (loss)	$	16,201		$	(32,844	)
Net (income) loss attributable to non-controlling interests		(5,873	)		13,006
Preferred dividends		(1,228	)		—
Net income (loss) attributable to common shareholders	$	9,100		$	(19,838	)
Earnings allocated to unvested participating securities		(22	)		—
Net income (loss) available to common shareholders - Basic and diluted	$	9,078		$	(19,838	)
Denominator
Weighted average Class A common shares outstanding		33,673			27,748
Weighted average Class C common shares outstanding		1,741			5,762
Weighted average Class A and Class C common shares outstanding - Basic		35,414			33,510
Restricted shares and share units		87			—
Weighted average Class A and Class C common shares outstanding - Diluted		35,501			33,510

XML

Stock Based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Restricted Share

The following table summarizes restricted share activity for the three months ended March 31, 2018:

	Three Months Ended March 31, 2018
				Weighted-
				Average Grant
	Shares			Date Fair Value
Unvested restricted shares at beginning of period		245,570		$	41.33
Restricted shares granted		81,595			36.17
Restricted shares vested		(14,214	)		47.08
Unvested restricted shares at end of period		312,951		$	39.73

XML

Accounts Payable, Accrued Expenses and Other Liabilities (Tables)

3 Months Ended

Mar. 31, 2018

Payables And Accruals [Abstract]

Components of Accounts Payable, Accrued Expenses and Other Liabilities

The following table summarizes the significant components of accounts payable, accrued expenses and other liabilities as of March 31, 2018 and December 31, 2017 (in thousands):

	March 31, 2018		December 31, 2017
Accrued development expenditures	$	19,964	$	21,449
Dividends payable		15,910		14,559
Accrued real estate taxes		14,920		17,091
Below-market leases		13,945		14,476
Environmental reserve		10,846		11,322
Unearned tenant reimbursements		6,335		10,522
Accounts payable and accrued expenses		5,648		9,588
Prepaid rental income		5,127		4,156
Accrued interest		3,787		3,689
Deferred maintenance		2,581		2,581
Total accounts payable, accrued expenses and other    liabilities	$	99,063	$	109,433

XML

Organization - Additional Information (Detail) $ in Billions			3 Months Ended
	Jun. 11, 2015 USD ($) Property JointVenture RetailFacility	Jun. 03, 2015 shares	Mar. 31, 2018 ft² Property JointVenture State
Organization And Basis Of Presentation [Line Items]
Number of joint venture acquired | JointVenture			24
Operations Commenced Date			Jul. 07, 2015
Area of real estate property (in square feet) | ft²			8,905,487
Number of states in properties located | State			49
Number of properties			24
Real Estate Investment Trust [Member]
Organization And Basis Of Presentation [Line Items]
Number of properties interested in the portfolio			249
Area of real estate property (in square feet) | ft²			38,900,000
Real Estate Investment Trust [Member] | Wholly Owned Properties [Member]
Organization And Basis Of Presentation [Line Items]
Area of real estate property (in square feet) | ft²			34,600,000
Number of wholly owned properties			225
Number of states in properties located | State			49
Real Estate Investment Trust [Member] | Joint Venture Properties [Member]
Organization And Basis Of Presentation [Line Items]
Area of real estate property (in square feet) | ft²			4,300,000
Number of states in properties located | State			13
Number of properties			24
Third Party Tenants [Member]
Organization And Basis Of Presentation [Line Items]
Number of properties leased to third party tenants			54
Third Party Tenants [Member] | Wholly Owned Properties [Member]
Organization And Basis Of Presentation [Line Items]
Remaining wholly owned properties			80
Sears Holdings Corporation [Member]
Organization And Basis Of Presentation [Line Items]
Business acquisition fair value, purchase price | $	$ 2.7
Number of real estate properties acquired	234
Number of ground leased properties acquired	1
Interests in joint ventures acquired	50.00%
Number of joint venture acquired | JointVenture	3
Number of properties leased			81
Number of vacant properties			26
Number of properties leased to under master leases			22
Primary tenant JV properties leased			9
Primary tenant JV properties vacant			1
Sears Holdings Corporation [Member] | Wholly Owned Properties [Member]
Organization And Basis Of Presentation [Line Items]
Number of wholly owned properties			145
Sears Holdings Corporation [Member] | Joint Venture [Member]
Organization And Basis Of Presentation [Line Items]
Number of retail facilities | RetailFacility	28
Number of retail facilities subject to ground lease | RetailFacility	1
Number of retail facilities subject to lease | RetailFacility	2
Sears Holdings Corporation [Member] | Third Party Tenants [Member]
Organization And Basis Of Presentation [Line Items]
Number of properties leased			64
Primary tenant JV properties leased			13
Class A Common Shares [Member]
Organization And Basis Of Presentation [Line Items]
Number of shares initially capitalized | shares		100

XML

Summary of Significant Accounting Policies - Additional Information (Detail)		3 Months Ended
	Jun. 11, 2015 JointVenture	Mar. 31, 2018 USD ($) Property JointVenture State Segment	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Number of reportable segments | Segment		1
Impairment loss on real estate assets		$ 0	$ 0
Impairment loss		0	0
Restricted cash		177,419,000	113,875,000	$ 175,665,000
Prepaid rental income		$ 3,700,000
Number of wholly owned properties acquired | Property		225
Number of joint venture properties acquired | JointVenture		24
Number of states in properties located | State		49
Santa Monica, CA [Member] | ASU 2014-09 [Member]
Summary Of Significant Accounting Policies [Line Items]
Percentage of interest sold		49.90%
Interest Rate Cap [Member]
Summary Of Significant Accounting Policies [Line Items]
Interest rate caps purchased		$ 5,000,000
Derivative, term of contract		4 years
Notional amount		$ 1,261,000,000
Derivative strike rate		3.50%
Derivative gain (losses)		$ 200,000	$ (500,000)
Master Lease [Member]
Summary Of Significant Accounting Policies [Line Items]
Right to recapture property space		50.00%
Sears Holdings Corporation [Member]
Summary Of Significant Accounting Policies [Line Items]
Right to recapture property space		100.00%
Number of joint venture properties acquired | JointVenture	3
Sears Holdings Corporation [Member] | Master Lease [Member]
Summary Of Significant Accounting Policies [Line Items]
Right to recapture property space		100.00%
Restricted Cash Reserves [Member]
Summary Of Significant Accounting Policies [Line Items]
Restricted cash		$ 154,200,000
Basic Property Carrying Costs [Member]
Summary Of Significant Accounting Policies [Line Items]
Restricted cash		$ 19,500,000
Operating Partnership [Member] | ESL [Member]
Summary Of Significant Accounting Policies [Line Items]
Percentage of operating partnership interest held by parent		63.80%

XML

Summary of Significant Accounting Policies - Summary of Estimated Useful Lives (Detail)	3 Months Ended
	Mar. 31, 2018
Minimum [Member] | Building [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	25 years
Minimum [Member] | Site Improvement [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	5 years
Maximum [Member] | Building [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	40 years
Maximum [Member] | Site Improvement [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	15 years

XML

Lease Intangible Assets and Liabilities - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, net of accumulated amortization	$ 291,613		$ 310,098
Identified intangible liability, net of accumulated amortization	13,945		14,476
Amortization of below-market leases, net of above-market leases	200	$ 200
Additional property expense	50	50
In-Place Leases, Net [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, net of accumulated amortization	274,941		$ 293,086
Amortization expense of intangible assets	$ 18,000	$ 43,800

XML

Lease Intangible Assets and Liabilities - Summary of Lease Intangible Assets (Detail) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Gross Asset	$ 551,040	$ 563,346
Accumulated Amortization	(259,427)	(253,248)
Balance	291,613	310,098
In-Place Leases, Net [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Asset	530,349	542,655
Accumulated Amortization	(255,408)	(249,569)
Balance	274,941	293,086
Below-Market Ground Leases, Net [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Asset	11,766	11,766
Accumulated Amortization	(559)	(508)
Balance	11,207	11,258
Above-Market Leases, Net [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Asset	8,925	8,925
Accumulated Amortization	(3,460)	(3,171)
Balance	$ 5,465	$ 5,754

XML

Lease Intangible Assets and Liabilities - Summary of Lease Intangible Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Below Market Lease Net [Abstract]
Gross Liability	$ 19,658	$ 19,658
Accumulated Amortization	(5,713)	(5,182)
Balance	$ 13,945	$ 14,476

XML

Lease Intangible Assets and Liabilities - Schedule of Future Annual Amortization of Below Market Leases (Detail) - Above-Market Leases, Net [Member] $ in Thousands	Mar. 31, 2018 USD ($)
Finite-Lived Intangible Assets [Line Items]
Remainder of 2018	$ (738)
2019	(923)
2020	(789)
2021	(775)
2022	$ (486)

XML

Lease Intangible Assets and Liabilities - Schedule of Future Amortization for Below-Market Ground Leases (Detail) - Leases Acquired In-Place Market Adjustment [Member] $ in Thousands	Mar. 31, 2018 USD ($)
Finite-Lived Intangible Assets [Line Items]
Remainder of 2018	$ 152
2019	203
2020	203
2021	203
2022	$ 203

XML

Lease Intangible Assets and Liabilities - Schedule of Future Estimated Annual Amortization of Acquired In Place Leases (Detail) - In-Place Leases, Net [Member] $ in Thousands	Mar. 31, 2018 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
Remainder of 2018	$ 44,168
2019	37,269
2020	36,822
2021	36,039
2022	$ 35,120

XML

Investments in Unconsolidated Joint Ventures - Summary of Company's Investments in Unconsolidated Joint Ventures (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($) ft² Property
Income Statement Equity Method Investments [Line Items]
Number of properties | Property	24
Total GLA | ft²	4,330
Initial Value | $	$ 342,660
General Growth Properties, Inc. I [Member]
Income Statement Equity Method Investments [Line Items]
Seritage % Ownership	50.00%
Number of properties | Property	4
Total GLA | ft²	598
Initial Value | $	$ 37,570
General Growth Properties, Inc. II [Member]
Income Statement Equity Method Investments [Line Items]
Seritage % Ownership	50.00%
Number of properties | Property	5
Total GLA | ft²	1,187
Initial Value | $	$ 57,500
The Macerich Company [Member]
Income Statement Equity Method Investments [Line Items]
Seritage % Ownership	50.00%
Number of properties | Property	9
Total GLA | ft²	1,576
Initial Value | $	$ 150,000
Simon Property Group Inc [Member]
Income Statement Equity Method Investments [Line Items]
Seritage % Ownership	50.00%
Number of properties | Property	5
Total GLA | ft²	872
Initial Value | $	$ 52,590
Invesco Real Estate [Member]
Income Statement Equity Method Investments [Line Items]
Seritage % Ownership	50.10%
Number of properties | Property	1
Total GLA | ft²	97
Initial Value | $	$ 45,000

XML

Investments in Unconsolidated Joint Ventures - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Schedule Of Equity Method Investments [Line Items]
Initial contribution value	$ 342,660,000
Cash proceeds from sale of real estate	60,435,000
Gain on sale of real estate	41,831,000
Joint venture impairment charges	0	$ 0
Invesco Real Estate [Member]
Schedule Of Equity Method Investments [Line Items]
Initial contribution value	$ 45,000,000
Real estate investment, ownerhip interest retained percentage	50.10%
Invesco Real Estate [Member] | Santa Monica, CA [Member]
Schedule Of Equity Method Investments [Line Items]
Percentage of interest sold	49.90%
Initial contribution value	$ 90,000,000
Cash proceeds from sale of real estate	50,100,000
Gain on sale of real estate	$ 40,200,000
Real estate investment, ownerhip interest retained percentage	50.10%
Gain on sale of real estate investment, ownership interest	$ 20,100,000
Invesco Real Estate [Member] | Santa Monica, CA [Member] | ASU 2017-05 [Member]
Schedule Of Equity Method Investments [Line Items]
Real estate investment, gain from increase in fair value	$ 20,100,000
Invesco Real Estate [Member] | Santa Monica, CA [Member] | Maximum [Member]
Schedule Of Equity Method Investments [Line Items]
Investment in joint venture revaluation date	Dec. 31, 2020
Final contribution value	$ 105,000,000
Gain on sale of real estate based on final contribution value	55,200,000
Invesco Real Estate [Member] | Santa Monica, CA [Member] | Minimum [Member]
Schedule Of Equity Method Investments [Line Items]
Final contribution value	60,000,000
Gain on sale of real estate based on final contribution value	$ 10,200,000

XML

Investments in Unconsolidated Joint Ventures - Summary of Combined Condensed Financial Data of Unconsolidated Joint Ventures (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
ASSETS
Land	$ 277,306		$ 191,853
Buildings and improvements	409,144		388,363
Accumulated depreciation	(53,731)		(48,306)
Investment in real estate, gross	632,719		531,910
Construction in progress	22,014		21,000
Net investment in real estate	654,733		552,910
Cash and cash equivalents	7,805		4,549
Tenant and other receivables, net	4,045		3,843
Other assets, net	40,976		45,605
Total assets	707,559		606,907
LIABILITIES AND MEMBERS INTERESTS
Mortgage loans payable, net	124,056		122,875
Accounts payable, accrued expenses and other liabilities	32,117		28,201
Total liabilities	156,173		151,076
Members Interest
Additional paid in capital	579,134		473,098
Retained earnings	(27,748)		(17,267)
Total members interest	551,386		455,831
Total liabilities and members interest	707,559		$ 606,907
Total revenue	11,227	$ 16,344
Property operating expenses	(1,712)	(3,322)
Depreciation and amortization	(7,586)	(10,972)
Operating income	1,929	2,050
Other expenses	(7,094)	(46)
Net (loss) income	(5,165)	2,004
Equity in (loss) income of unconsolidated joint ventures	$ (2,582)	$ 1,002

XML

Leases - Additional Information (Detail) $ in Thousands				3 Months Ended
	Apr. 01, 2018 USD ($) ft² Property	Jul. 06, 2015 Lease Option	Jun. 11, 2015 Property	Mar. 31, 2018 USD ($) ft² Property	Mar. 31, 2017 USD ($)	Jul. 07, 2015
Schedule Of Operating Leases Future Minimum Payments Receivable [Line Items]
Base rent paid by Sears Holdings and subsidiaries under master lease				$ 50	$ 50
Number of real estate properties acquisition exercised | Property				62
Gross leasable area | ft²				8,905,487
Number of terminated properties announced for redevelopment | Property				22
Number of terminated properties sold | Property				4
Net proceeds from sale of real estate				$ 60,435
Gain on sale of real estate				$ 41,831
Sears Holdings Corporation [Member]
Schedule Of Operating Leases Future Minimum Payments Receivable [Line Items]
Right to recapture property space				100.00%
Number of real estate properties wholly-owned | Property			234
Net proceeds from sale of real estate				$ 13,500
Gain on sale of real estate				2,100
Master Lease [Member]
Schedule Of Operating Leases Future Minimum Payments Receivable [Line Items]
Lease term		10 years
Number of options for renewal of lease | Option		3
Renewal period of leases		5 years
Final option renewal period		4 years
Base rent paid by Sears Holdings and subsidiaries under master lease				89,800	124,100
Number of renewal term that will be increased | Lease		2
Percentage of increase annual lease rent						2.00%
Straight-line rental income				$ 500	$ 1,000
Right to recapture property space				50.00%
Number of real estate properties wholly-owned | Property				224
Lease termination, description				While the Company is permitted to exercise its recapture rights all at once or in stages as to any particular property, it is not permitted to recapture all or substantially all of the space subject to the recapture right at more than 50 properties under Master Lease during any lease year.
Number of real estate properties wholly-owned | Property				50
Master Lease [Member] | Sears Holdings Corporation [Member]
Schedule Of Operating Leases Future Minimum Payments Receivable [Line Items]
Number of options for renewal of lease | Option		1
Right to recapture property space				100.00%
Number of real estate properties wholly-owned | Property				21
Lease termination, description				The lease termination payment is calculated as the greater of an amount specified at the time the Company entered into the Master Lease with Sears Holdings and an amount equal to 10 times the adjusted EBITDA attributable to such space within the Sears Holdings main store which is not attributable to the space subject to the separate 50% recapture right discussed above for the 12-month period ending at the end of the fiscal quarter ending immediately prior to recapturing such space.
Lease termination notice period				90 days
Percentage of reduction of fixed rent under master lease				20.00%
Master Lease [Member] | Sears Holdings Corporation [Member] | Lease Terminations [Member]
Schedule Of Operating Leases Future Minimum Payments Receivable [Line Items]
Base rent paid by Sears Holdings and subsidiaries under master lease				$ 23,600
Number of unprofitable stores to terminate | Property				56
Gross leasable area | ft²				7,400,000
Lease termination fees paid				$ 45,100
Master Lease [Member] | Sears Holdings Corporation [Member] | Lease Terminations [Member] | Subsequent Event [Member]
Schedule Of Operating Leases Future Minimum Payments Receivable [Line Items]
Base rent paid by Sears Holdings and subsidiaries under master lease	$ 5,800
Number of unprofitable stores to terminate | Property	9
Gross leasable area | ft²	1,500,000
Lease termination fees paid	$ 11,500
Total annual base rent, percentage	2.70%

XML

Leases - Summary of Revenue from Master Lease (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Property Subject to or Available for Operating Lease [Line Items]
Rental income	$ 37,079	$ 49,174
Tenant reimbursements	16,698	16,224
Total revenue	53,777	65,398
Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Rental income	22,531	31,651
Termination fee income	174	6,136
Tenant reimbursements	13,268	14,706
Total revenue	$ 35,973	$ 52,493

XML

Leases - Summary of Recapture Rights Exercised by the Company (Detail)	3 Months Ended
	Mar. 31, 2018
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Asheville, NC [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2018-03
Temecula, CA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2017-06
Cockeysville, MD [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2017-03
Chicago, IL [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2018-03
Ft. Wayne, IN Property 1 [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Out parcel
Notice Date	September 2017 / July 2016
Roseville, CA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Auto center
Notice Date(s)	2017-06
North Miami, FL [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-03
Clearwater, FL [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2018-03
St. Clair Shores, MI [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-09
North Riverside, IL [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2017-06
Olean, NY [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2017-03
El Cajon, CA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2018-03
Austin TX [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date	December 2017 / September 2017
Watchung, NJ [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-06
Carson, CA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date	April 2017 / December 2016
Fairfield, CA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date	March 2018 / December 2017
Redmond WA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date	March 2018 / September 2017
Canton, OH [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2017-06
Saugus, MA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2016-12
Oklahoma City, OK [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Out parcel
Notice Date(s)	2018-03
Dayton, OH [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Auto center
Notice Date(s)	2017-06
Guaynabo, PR [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2016-12
Plantation, FL [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date	March 2018 / December 2017
Santa Cruz, CA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2016-12
San Diego, CA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-04
Santa Monica, CA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2016-12
Reno, NV [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2018-03
Aventura, FL [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-04
Roseville, MI [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2016-11
Tucson, AZ [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2018-03
Hialeah, FL [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-04
Troy, MI [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2016-11
Anchorage, AK [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-12
Charleston, SC [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date	April 2017 / October 2016
Boca Raton, FL [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-12
Rehoboth Beach, DE [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2016-10
Westminster, CA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-12
Valley View, TX [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-04
St. Petersburg, FL [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2016-10
Hicksville, NY [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-12
Warwick, RI [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Auto center
Notice Date(s)	2016-10
Orland Park, IL [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2017-12
West Hartford, CT [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2016-10
Florissant, MO [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Out parcel
Notice Date(s)	2017-12
North Hollywood, CA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2016-07
Salem, NH [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Out parcel
Notice Date(s)	2017-12
Anderson, SC [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date	April 2017 / July 2016
Las Vegas, NV [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2017-12
Yorktown Heights [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2017-12
Madison, WI [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial
Notice Date(s)	2016-07
Orlando, FL [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2016-07
West Jordan, UT [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial + auto center
Notice Date(s)	2016-07
North Little Rock, AR [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Auto Center
Notice Date(s)	2017-09
Albany, NY [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Auto center
Notice Date(s)	2016-05
Bowie, MD [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Auto center
Notice Date(s)	2016-05
Fairfax, VA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial + auto center
Notice Date(s)	2016-05
Hagerstown, MD [member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Auto center
Notice Date(s)	2016-05
Wayne, NJ [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Partial + auto center
Notice Date(s)	2016-05
San Antonio, TX [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type	Auto center
Notice Date(s)	2016-03
Memphis, TN [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2015-12
Honolulu, HI [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2015-12
Braintree, MA [Member]
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
Notice Date(s)	2015-11

XML

Leases - Summary of Recapture Rights Exercised by the Company (Parenthetical) (Detail)	Mar. 31, 2018	Jul. 31, 2017
Property Subject to or Available for Operating Lease [Line Items]
Recapture Type, Percentage	100.00%
TotalMark 302 JV LLC [Member]
Property Subject to or Available for Operating Lease [Line Items]
Percentage of joint ventures ownership interest retained	50.10%
Wayne, NJ [Member]
Property Subject to or Available for Operating Lease [Line Items]
Percentage of joint ventures ownership interest retained		50.00%

XML

Leases - Summary of Redevelopement Properties (Detail)	3 Months Ended
	Mar. 31, 2018 ft²
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	8,905,487
Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	7,400,000
Cullman, AL [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	98,500
Notice	2016-09
Termination	2017-01
Announced Redevelopment	Q2 2017
Chicago, IL (S Kedzie) [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	118,800
Notice	2016-09
Termination	2017-01
Sierra Vista, AZ [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	86,100
Notice	2016-09
Termination	2017-01
Announced Redevelopment	Sold
Thornton, CO [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	190,200
Notice	2016-09
Termination	2017-01
Announced Redevelopment	Q1 2017
Springfield, IL [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	84,200
Notice	2016-09
Termination	2017-01
Announced Redevelopment	Q3 2016
Elkhart, IN [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	86,500
Notice	2016-09
Termination	2017-01
Announced Redevelopment	Q4 2016
Merrillville, IN [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	108,300
Notice	2016-09
Termination	2017-01
Announced Redevelopment	Q4 2016
Houma, LA [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	96,700
Notice	2016-09
Termination	2017-01
Announced Redevelopment	Sold
New Iberia, LA [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	91,700
Notice	2016-09
Termination	2017-01
Announced Redevelopment	Q2 2017
Alpena, MI [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	118,200
Notice	2016-09
Termination	2017-01
Manistee, MI [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	87,800
Notice	2016-09
Termination	2017-01
Sault Sainte Marie, MI [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	92,700
Notice	2016-09
Termination	2017-01
Kearney, NE [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	86,500
Notice	2016-09
Termination	2017-01
Announced Redevelopment	Q3 2016
Deming, NM [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	96,600
Notice	2016-09
Termination	2017-01
Harlingen, TX [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	91,700
Notice	2016-09
Termination	2017-01
Announced Redevelopment	Sold
Yakima, WA [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	97,300
Notice	2016-09
Termination	2017-01
Announced Redevelopment	Sold
Riverton, WY [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	94,800
Notice	2016-09
Termination	2017-01
Riverside, CA [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	94,500
Notice	2017-01
Termination	2017-04
Kissimmee, FL [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	112,505
Notice	2017-01
Termination	2017-04
Leavenworth, KS [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	76,853
Notice	2017-01
Termination	2017-04
Hopkinsville, KY [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	70,326
Notice	2017-01
Termination	2017-04
Announced Redevelopment	Q1 2018
Paducah, KY [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	108,244
Notice	2017-01
Termination	2017-04
Announced Redevelopment	Q3 2017
Owensboro K Y | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	68,334
Notice	2017-01
Termination	2017-04
Detroit Lakes, MN [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	79,102
Notice	2017-01
Termination	2017-04
Jefferson City, MO [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	92,016
Notice	2017-01
Termination	2017-04
Announced Redevelopment	Q2 2017
Henderson, NV [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	122,823
Notice	2017-01
Termination	2017-04
Announced Redevelopment	Q1 2017
Concord, NC [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	137,499
Notice	2017-01
Termination	2017-04
Chapel Hill, OH [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	187,179
Notice	2017-01
Termination	2017-04
Kenton, OH [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	96,066
Notice	2017-01
Termination	2017-04
Muskogee, OK [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	87,500
Notice	2017-01
Termination	2017-04
Mount Pleasant, PA [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	83,536
Notice	2017-01
Termination	2017-04
Sioux Falls, SD [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	72,511
Notice	2017-01
Termination	2017-04
El Paso, TX [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	103,657
Notice	2017-01
Termination	2017-04
Layton, UT [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	90,010
Notice	2017-01
Termination	2017-04
Elkins, WV [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	94,885
Notice	2017-01
Termination	2017-04
Platteville, WI [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	94,841
Notice	2017-01
Termination	2017-04
Sarasota, FL [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	204,500
Notice	2017-06
Termination	2017-10
Chicago, IL (N Harlem) [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	293,700
Notice	2017-06
Termination	2017-10
Overland Park, KS [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	215,000
Notice	2017-06
Termination	2017-10
Lafayette, LA [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	194,900
Notice	2017-06
Termination	2017-10
Cockeysville, MD [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	83,900
Notice	2017-06
Termination	2017-10
Announced Redevelopment	Q1 2017
Hagerstown, MD [member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	107,300
Notice	2017-06
Termination	2017-10
Announced Redevelopment	Q1 2016
Roseville, MI [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	277,000
Notice	2017-06
Termination	2017-10
Announced Redevelopment	Q3 2016
Burnsville, MN [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	161,700
Notice	2017-06
Termination	2017-10
Albany, NY [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	216,200
Notice	2017-06
Termination	2017-10
Announced Redevelopment	Q1 2016
East Northport, NY [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	187,000
Notice	2017-06
Termination	2017-10
Announced Redevelopment	Q2 2017
Johnson City, NY [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	155,100
Notice	2017-06
Termination	2017-10
Olean, NY [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	75,100
Notice	2017-06
Termination	2017-10
Announced Redevelopment	Q1 2017
Mentor, OH [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	208,700
Notice	2017-06
Termination	2017-10
Middleburg Heights, OH [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	351,600
Notice	2017-06
Termination	2017-10
Toledo, OH [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	209,900
Notice	2017-06
Termination	2017-10
York, PA [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	82,000
Notice	2017-06
Termination	2017-10
Warwick, RI [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	169,200
Notice	2017-06
Termination	2017-10
Announced Redevelopment	Q3 2016 / Q3 2017
Friendswood, TX [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	166,000
Notice	2017-06
Termination	2017-11
Westwood, TX [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	215,000
Notice	2017-06
Termination	2018-01
Greendale, WI [Member] | Lease Terminations [Member] | Master Lease [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	238,400
Notice	2017-06
Termination	2017-10
Announced Redevelopment	Q4 2017
Cedar Rapids, IA [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	141,100
Notice	2018-04
Termination	2018-08
Citrus Heights, CA [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	280,700
Notice	2018-04
Termination	2018-08
Gainesville, FL [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	140,500
Notice	2018-04
Termination	2018-08
Maplewood, MN [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	168,500
Notice	2018-04
Termination	2018-08
Pensacola, FL [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	212,300
Notice	2018-04
Termination	2018-08
Rochester, NY [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	128,500
Notice	2018-04
Termination	2018-08
Roseville, CA [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	121,000
Notice	2018-04
Termination	2018-08
Announced Redevelopment	Q2 2017 / Q1 2018
San Antonio, TX [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	187,800
Notice	2018-04
Termination	2018-08
Announced Redevelopment	Q4 2015
Warrenton, NJ [Member] | Lease Terminations [Member] | Master Lease [Member] | Sears Holdings Corporation [Member]
Property Subject to or Available for Operating Lease [Line Items]
Gross leasable area	113,900
Notice	2018-04
Termination	2018-08
Announced Redevelopment	Q1 2018

XML

Debt - Additional Information (Detail)				1 Months Ended	3 Months Ended
	Dec. 27, 2017 USD ($)	May 24, 2017 USD ($)	Feb. 23, 2017 USD ($)	Nov. 30, 2016 USD ($)	Mar. 31, 2018 USD ($) Asset	Mar. 31, 2017	Dec. 31, 2017 USD ($)	Jul. 07, 2015 USD ($)
Debt Instrument [Line Items]
Principal amount outstanding					$ 143,590,000		$ 143,210,000
Amount transferred to redevelopment project reserve				$ 30,000,000
Amount to be transferred to redevelopment project reserve on monthly basis				$ 3,300,000
Principal terms of amendments					Company (i) posted $30.0 million, and will post $3.3 million on a monthly basis, to a redevelopment project reserve account, which amounts may be used by the Company to fund redevelopment activity and (ii) extended the spread maintenance provision for prepayment of the loan by two months through March 9, 2018 (with the spread maintenance premium for the second month at a reduced amount). As a result of this agreement and the resolution of the related disagreement, no cash flow sweep was imposed.
Minimum net worth					$ 1,000,000,000
Minimum liquidity					$ 50,000,000
Debt instrument, base annual interest rate					6.50%
Debt instrument, base interest rate period one					1.50%
Debt instrument, base interest rate period two					3.50%
Debt instrument, interest rate terms					The principal amount of loans outstanding under the Unsecured Delayed Draw Term Loan bore a base annual interest rate of 6.50%. If a cash flow sweep period were to have occurred and been continuing under the Company’s Mortgage Loan Agreement (i) the interest rate on any outstanding advances would have increased from and after such date by 1.5% per annum above the base interest rate and (ii) the interest rate on any advances made after such date would have increased by 3.5% per annum above the base interest rate.
Five Assets [Member]
Debt Instrument [Line Items]
Percentage of interest sold					50.00%
Number of other assets disposed | Asset					4
Mortgage Loans and Future Funding Facility [Member]
Debt Instrument [Line Items]
Principal amount outstanding					$ 1,137,000,000
Mortgage Loans [Member]
Debt Instrument [Line Items]
Reduction of amounts outstanding under mortgage loan					$ (73,000,000)
Mortgage loan agreement, description					The Loan Agreements contain customary covenants for a real estate financing, including restrictions that limit the Company’s ability to grant liens on its assets, incur additional indebtedness, or transfer or sell assets, as well as those that may require the Company to obtain lender approval for certain major tenant leases or significant redevelopment projects. Such restrictions also include cash flow sweep provisions based upon certain measures of the Company’s and Sears Holdings’ financial and operating performance, including (a) where the “Debt Yield” (the ratio of net operating income for the mortgage borrowers to their debt) is less than 11.0%, (b) if the performance of Sears Holdings at the stores subject to the Master Lease with Sears Holdings fails to meet specified rent ratio thresholds, (c) if the Company fails to meet specified tenant diversification tests and (d) upon the occurrence of a bankruptcy or insolvency action with respect to Sears Holdings or if there is a payment default under the Master Lease with Sears Holdings, in each case, subject to cure rights, including providing specified amounts of cash collateral or satisfying tenant diversification thresholds.
Maximum debt yield percentage					11.00%
Unamortized balance of company's debt issuance costs					$ 6,700,000		8,500,000
Mortgage Loans [Member] | Future Funding Facility [Member]
Debt Instrument [Line Items]
Debt issuance and other costs					22,300,000
Unsecured Delayed Draw Term Loan [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum			$ 200,000,000
Line of credit, maturity date			Dec. 31, 2017
Maximum net worth required for loan documentation					1,000,000,000
Amount outstanding at termination					$ 85,000,000
Unsecured Delayed Draw Term Loan [Member] | Maximum [Member]
Debt Instrument [Line Items]
Maximum leverage ratio					60.00%
Unsecured Delayed Draw Term Loan [Member] | Operating Partnership [Member]
Debt Instrument [Line Items]
Principal amount outstanding			$ 200,000,000
Upfront commitment fee			$ 1,000,000
Additional and final commitment fee paid		$ 1,000,000
Default interest rate on overdue amounts excess of base interest rate					1.50%
Unsecured Term Loan [Member]
Debt Instrument [Line Items]
Principal amount outstanding					$ 200,000,000
Unamortized balance of company's debt issuance costs	$ 1,800,000				1,400,000		$ 1,500,000
Line of credit facility, maximum					$ 200,000,000
Line of credit, maturity date					Dec. 31, 2018
Debt instrument, base annual interest rate					6.75%
Debt instrument, interest rate terms					The principal amount of loans outstanding under the Unsecured Term Loan bears a base annual interest rate of 6.75%.
Maximum net worth required for loan documentation					$ 1,000,000,000
Line of credit facility, current funding					85,000,000
Additional Incremental loans					55,000,000
Line of credit facility, fee percentage	1.00%
Unsecured Term Loan [Member] | Empyrean Capital Partners, L.P. [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum					145,000,000
Line of credit facility, current funding					$ 60,000,000
Unsecured Term Loan [Member] | Maximum [Member]
Debt Instrument [Line Items]
Maximum leverage ratio					60.00%
Unsecured Term Loan [Member] | Operating Partnership [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum	$ 200,000,000
Default interest rate on overdue amounts excess of base interest rate					1.50%
Mortgage Loans over $1,000,000 [Member] | Mortgage Loans [Member]
Debt Instrument [Line Items]
Expiration date					Jul. 31, 2019
Interest rate description					Borrowings under the Mortgage Loans bear interest at the London Interbank Offered Rates (“LIBOR”) plus, as of March 31, 2018, a weighted-average spread of 478 basis points; payments are made monthly on an interest-only basis.
Basis spread on variable rate					4.78%
Frequency of interest payment					Monthly
Mortgage Loans over $1,000,000 [Member] | Mortgage Loans [Member] | Term Loans [Member]
Debt Instrument [Line Items]
Loan, face amount								$ 1,161,000,000
Mortgage Loans over $1,000,000 [Member] | Mortgage Loans [Member] | Future Funding Facility [Member]
Debt Instrument [Line Items]
Loan, face amount								$ 100,000,000
Weighted average interest rates					6.40%	5.54%

XML

Income Taxes - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2018
Minimum [Member]
Income Tax Contingency [Line Items]
Distribution of taxable income to qualify as REIT, percent	90.00%

XML

Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt obligations, fair value	$ 1,280.0		$ 1,360.0
Interest Rate Cap [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative gain	0.2
Derivative losses		$ 0.5
Interest Rate Cap [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets, fair value	$ 0.2
Interest Rate Cap [Member] | Fair Value, Inputs, Level 2 [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets, fair value			$ 0.1

XML

Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017
Loss Contingencies [Line Items]
Restricted cash	$ 177,419	$ 175,665	$ 113,875
Environmental Expenses Reserve [Member]
Loss Contingencies [Line Items]
Restricted cash	$ 10,600	$ 10,800

XML

Related Party Disclosure - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2018	Dec. 27, 2017
Unsecured Term Loan [Member]
Schedule of Other Related Party Transactions [Line Items]
Line of credit facility, maximum	$ 200,000,000
Operating Partnership [Member] | Unsecured Term Loan [Member]
Schedule of Other Related Party Transactions [Line Items]
Line of credit facility, maximum		$ 200,000,000
Operating Partnership [Member] | Mr. Lampert [Member]
Schedule of Other Related Party Transactions [Line Items]
Ownership interest percentage held by related party	36.20%
Operating Partnership [Member] | Sears Holdings Corporation [Member] | Mr. Lampert [Member]
Schedule of Other Related Party Transactions [Line Items]
Beneficiary Ownership interest percentage held by related party	73.30%
Ownership interest percentage held by related party	36.20%
Operating Partnership [Member] | Sears Holdings Corporation [Member] | Mr. Lampert [Member] | Class A Common Shares [Member]
Schedule of Other Related Party Transactions [Line Items]
Ownership interest percentage held by related party	2.70%
Operating Partnership [Member] | Sears Holdings Corporation [Member] | Mr. Lampert [Member] | Class B Non-Economic Common Shares [Member]
Schedule of Other Related Party Transactions [Line Items]
Ownership interest percentage held by related party	100.00%

XML

Non-controlling Interests - Additional Information (Detail) - Operating Partnership [Member] - ESL [Member]	Mar. 31, 2018
Noncontrolling Interest [Line Items]
Percentage of operating partnership interest held by parent	63.80%
Ownership interest percentage held by related party	36.20%

XML

Shareholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions			3 Months Ended		6 Months Ended	12 Months Ended
	Dec. 14, 2022	May 04, 2018	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2015	Dec. 31, 2017	Dec. 31, 2016
Class of Stock [Line Items]
Conversion of common shares			2,779,121
Operating Partnership [Member] | Subsequent Event [Member]
Class of Stock [Line Items]
Conversion of units into class A shares		51,592
Class A Common Shares [Member]
Class of Stock [Line Items]
Common shares, issued			35,208,666			32,415,734
Common shares, outstanding			35,208,666	28,091,000		32,415,734	25,843,000
Conversion of units into class A shares				2,267,821
Class B Non-Economic Common Shares [Member] | ESL [Member]
Class of Stock [Line Items]
Common shares, issued				1,328,866
Common shares, outstanding				1,328,866
Class C Non Voting Common Shares [Member]
Class of Stock [Line Items]
Conversion of common shares			2,779,121		372,010
Common shares, issued			372,010
Common shares, outstanding			372,010
Class C Non Voting Common Shares [Member] | Operating Partnership [Member] | Subsequent Event [Member]
Class of Stock [Line Items]
Conversion of units into class A shares		51,592
Series A Cumulative Redeemable Preferred Shares [Member]
Class of Stock [Line Items]
Preferred shares, issued						2,800,000
Percentage of preferred dividend rate						7.00%
Preferred shares public offering price per share						$ 25.00
Net proceeds from public offering						$ 66.7
Series A Cumulative Redeemable Preferred Shares [Member] | Scenario, Forecast [Member]
Class of Stock [Line Items]
Preferred shares redemption price per share plus any accrued and unpaid dividends	$ 25.00
Series A Cumulative Redeemable Preferred Shares [Member] | Scenario, Forecast [Member] | Maximum [Member]
Class of Stock [Line Items]
Preferred shares redemption threshold period	120 days

XML

Shareholders' Equity - Summary of Common Stock Dividends and Distributions (Detail) - $ / shares							3 Months Ended
	Apr. 24, 2018	Feb. 20, 2018	Oct. 24, 2017	Jul. 25, 2017	Apr. 25, 2017	Feb. 28, 2017	Mar. 31, 2018	Mar. 31, 2017
Dividends Payable [Line Items]
Dividends per Class A and Class C Common Share							$ 0.25	$ 0.25
Class A and Class C Common Share [Member]
Dividends Payable [Line Items]
Declaration Date		Feb. 20, 2018	Oct. 24, 2017	Jul. 25, 2017	Apr. 25, 2017	Feb. 28, 2017
Record Date		Mar. 30, 2018	Dec. 29, 2017	Sep. 29, 2017	Jun. 30, 2017	Mar. 31, 2017
Payment Date		Apr. 12, 2018	Jan. 11, 2018	Oct. 12, 2017	Jul. 13, 2017	Apr. 13, 2017
Dividends per Class A and Class C Common Share		$ 0.25	$ 0.25	$ 0.25	$ 0.25	$ 0.25
Subsequent Event [Member] | Class A and Class C Common Share [Member]
Dividends Payable [Line Items]
Declaration Date	Apr. 24, 2018
Record Date	Jun. 29, 2018
Payment Date	Jul. 12, 2018
Dividends per Class A and Class C Common Share	$ 0.25

XML

Shareholders' Equity - Summary of Preferred Stock Dividends and Distributions (Detail) - $ / shares			1 Months Ended	3 Months Ended
	Apr. 24, 2018	Feb. 20, 2018	Dec. 31, 2017	Mar. 31, 2018
Dividends Payable [Line Items]
Series A Preferred Share				$ 0.4375
Series A Preferred Shares [Member]
Dividends Payable [Line Items]
Declaration Date		Feb. 20, 2018	Feb. 20, 2018
Record Date		Mar. 30, 2018	Mar. 30, 2018
Payment Date		Apr. 16, 2018	Apr. 16, 2018
Series A Preferred Share		$ 0.43750	$ 0.15556
Subsequent Event [Member] | Series A Preferred Shares [Member]
Dividends Payable [Line Items]
Declaration Date	Apr. 24, 2018
Record Date	Jun. 29, 2018
Payment Date	Jul. 16, 2018
Series A Preferred Share	$ 0.43750

XML

Earnings per Share - Reconciliation of Net Income (Loss) and Number of Common Shares Used in Computations of Basic Earnings Per Share (Detail) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator
Net income (loss)	$ 16,201	$ (32,844)
Net (income) loss attributable to non-controlling interests	(5,873)	13,006
Preferred dividends	(1,228)
Net income (loss) attributable to Seritage common shareholders	9,100	(19,838)
Earnings allocated to unvested participating securities	(22)
Net income (loss) available to common shareholders - Basic and diluted	$ 9,078	$ (19,838)
Denominator
Weighted average Class A and Class C common shares outstanding - Basic	35,414	33,510
Restricted shares and share units	87
Weighted average Class A and Class C common shares outstanding - Diluted	35,501	33,510
Class A Common Shares [Member]
Denominator
Weighted average Class A and Class C common shares outstanding - Basic	33,673	27,748
Class C Common Shares [Member]
Denominator
Weighted average Class A and Class C common shares outstanding - Basic	1,741	5,762

XML

Earnings Per Share - Additional Information (Detail) - shares	Mar. 31, 2018	Dec. 31, 2017
Time Based Restricted Shares and Share Units [Member]
Earning Per Share [Line Items]
Non-vested restricted stock outstanding	312,951	245,570

XML

Stock Based Compensation - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Jul. 07, 2015
Time Based Restricted Shares and Share Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Restricted Share [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation costs	$ 6.8
Restricted Share [Member] | General and Administrative Expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense recognized	$ 0.9	$ 0.4
Seritage Growth Properties 2015 Share Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock reserved for issuance			3,250,000

XML

Stock Based Compensation - Summary of Restricted Share (Detail) - Restricted Share [Member]	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested restricted shares at beginning of period | shares	245,570
Restricted shares granted | shares	81,595
Restricted shares vested | shares	(14,214)
Unvested restricted shares at end of period | shares	312,951
Weighted-Average Grant Date Fair Value, Unvested restricted shares at beginning of period | $ / shares	$ 41.33
Weighted-Average Grant Date Fair Value, Restricted shares granted | $ / shares	36.17
Weighted-Average Grant Date Fair Value, Restricted shares vested | $ / shares	47.08
Weighted-Average Grant Date Fair Value, Unvested restricted shares at end of period | $ / shares	$ 39.73

XML

Accounts Payable, Accrued Expenses and Other Liabilities - Components of Accounts Payable, Accrued Expenses and Other Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Payables And Accruals [Abstract]
Accrued development expenditures	$ 19,964	$ 21,449
Dividends payable	15,910	14,559
Accrued real estate taxes	14,920	17,091
Below-market leases	13,945	14,476
Environmental reserve	10,846	11,322
Unearned tenant reimbursements	6,335	10,522
Accounts payable and accrued expenses	5,648	9,588
Prepaid rental income	5,127	4,156
Accrued interest	3,787	3,689
Deferred maintenance	2,581	2,581
Total accounts payable, accrued expenses and other liabilities	$ 99,063	$ 109,433

XML

Subsequent Events - Additional Information (Detail) $ in Thousands	May 04, 2018 USD ($) a	Mar. 31, 2018 USD ($) ft²	Dec. 31, 2017 USD ($)
Subsequent Event [Line Items]
Area of real estate property (in square feet) | ft²		8,905,487
Agreement values of real estate property for development | $		$ 1,453,360	$ 1,489,656
Subsequent Event [Member] | Overlake Plaza Redmond, WA [Member]
Subsequent Event [Line Items]
Area of land owned | a	15
Subsequent Event [Member] | Overlake Plaza Redmond, WA [Member] | Multi-family [Member]
Subsequent Event [Line Items]
Area of real estate property (in square feet) | a	2.5
Agreement values of real estate property for development | $	$ 16,000
Subsequent Event [Member] | NewPark Mall Newark CA [Member]
Subsequent Event [Line Items]
Area of land owned | a	10
Subsequent Event [Member] | NewPark Mall Newark CA [Member] | Multi-family [Member]
Subsequent Event [Line Items]
Area of real estate property (in square feet) | a	4.5
Agreement values of real estate property for development | $	$ 20,000
Subsequent Event [Member] | Tanforan Mall San Bruno, CA [Member]
Subsequent Event [Line Items]
Gross consideration | $	$ 42,000