0001564590-20-024344.txt : 20200511 0001564590-20-024344.hdr.sgml : 20200511 20200511170620 ACCESSION NUMBER: 0001564590-20-024344 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 82 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200511 DATE AS OF CHANGE: 20200511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Seritage Growth Properties CENTRAL INDEX KEY: 0001628063 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 383976287 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37420 FILM NUMBER: 20865916 BUSINESS ADDRESS: STREET 1: 500 FIFTH AVENUE STREET 2: SUITE 1530 CITY: NEW YORK STATE: NY ZIP: 10110 BUSINESS PHONE: 2123557800 MAIL ADDRESS: STREET 1: 500 FIFTH AVENUE STREET 2: SUITE 1530 CITY: NEW YORK STATE: NY ZIP: 10110 FORMER COMPANY: FORMER CONFORMED NAME: Seritage Growth Properties, Inc. DATE OF NAME CHANGE: 20141215 10-Q 1 srg-10q_20200331.htm 10-Q srg-10q_20200331.htm
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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, 2020

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbols

Name of each exchange on which registered

Class A common shares of beneficial interest, par value $0.01 per share

SRG

New York Stock Exchange

7.00% Series A cumulative redeemable preferred shares of beneficial interest, par value $0.01 per share

SRG-PA

New York Stock Exchange

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 every Interactive Data File required to be submitted 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 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

 

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 May 1, 2020, the registrant had the following common shares outstanding:

 

Class

Shares Outstanding

Class A common shares of beneficial interest, par value $0.01 per share

38,622,102

Class B common shares of beneficial interest, par value $0.01 per share

0

Class C common shares of beneficial interest, par value $0.01 per share

0

 

 


SERITAGE GROWTH PROPERTIES

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED MARCH 31, 2020

TABLE OF CONTENTS

 

PART I.

FINANCIAL INFORMATION

 

 

 

Page

 

 

 

Item 1.

Condensed Consolidated Financial Statements (unaudited)

3

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

3

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019

4

 

Condensed Consolidated Statements of Equity for the three months ended March 31, 2020 and 2019

5

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019

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

40

 

 

 

Item 4.

Controls and Procedures

40

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

41

 

 

 

Item 1A.

Risk Factors

41

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

43

 

 

 

Item 3.

Defaults upon Senior Securities

43

 

 

 

Item 4.

Mine Safety Disclosures

43

 

 

 

Item 5.

Other Information

43

 

 

 

Item 6.

Exhibits

44

 

 

 

SIGNATURES

 

45

 

 

 


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, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Investment in real estate

 

 

 

 

 

 

 

 

Land

 

$

654,698

 

 

$

667,004

 

Buildings and improvements

 

 

1,133,636

 

 

 

1,112,653

 

Accumulated depreciation

 

 

(156,023

)

 

 

(147,696

)

 

 

 

1,632,311

 

 

 

1,631,961

 

Construction in progress

 

 

412,222

 

 

 

338,672

 

Net investment in real estate

 

 

2,044,533

 

 

 

1,970,633

 

Real estate held for sale

 

 

3,204

 

 

 

5,275

 

Investment in unconsolidated joint ventures

 

 

459,646

 

 

 

445,077

 

Cash and cash equivalents

 

 

96,737

 

 

 

139,260

 

Tenant and other receivables, net

 

 

48,602

 

 

 

54,470

 

Lease intangible assets, net

 

 

44,121

 

 

 

68,153

 

Prepaid expenses, deferred expenses and other assets, net

 

 

67,525

 

 

 

67,744

 

Total assets

 

$

2,764,368

 

 

$

2,750,612

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Term Loan Facility, net

 

$

1,598,593

 

 

$

1,598,487

 

Accounts payable, accrued expenses and other liabilities

 

 

153,407

 

 

 

108,755

 

Total liabilities

 

 

1,752,000

 

 

 

1,707,242

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

Class A common shares $0.01 par value; 100,000,000 shares authorized;

   38,622,102 and 36,897,364 shares issued and outstanding

   as of March 31, 2020 and December 31, 2019, respectively

 

 

386

 

 

 

369

 

Class B common shares $0.01 par value; 5,000,000 shares authorized;

   0 and 1,242,536 shares issued and outstanding

   as of March 31, 2020 and December 31, 2019, respectively

 

 

 

 

 

12

 

Series A preferred shares $0.01 par value; 10,000,000 shares authorized;

   2,800,000 shares issued and outstanding as of March 31, 2020 and

   December 31, 2019; liquidation preference of $70,000

 

 

28

 

 

 

28

 

Additional paid-in capital

 

 

1,177,553

 

 

 

1,149,721

 

Accumulated deficit

 

 

(440,600

)

 

 

(418,711

)

Total shareholders' equity

 

 

737,367

 

 

 

731,419

 

Non-controlling interests

 

 

275,001

 

 

 

311,951

 

Total equity

 

 

1,012,368

 

 

 

1,043,370

 

Total liabilities and equity

 

$

2,764,368

 

 

$

2,750,612

 

 

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,

 

 

 

2020

 

 

2019

 

REVENUE

 

 

 

 

 

 

 

 

Rental income

 

$

33,110

 

 

$

43,578

 

Management and other fee income

 

 

207

 

 

 

282

 

Total revenue

 

 

33,317

 

 

 

43,860

 

EXPENSES

 

 

 

 

 

 

 

 

Property operating

 

 

10,301

 

 

 

10,237

 

Real estate taxes

 

 

9,225

 

 

 

10,192

 

Depreciation and amortization

 

 

34,097

 

 

 

26,216

 

General and administrative

 

 

9,420

 

 

 

9,759

 

Total expenses

 

 

63,043

 

 

 

56,404

 

Gain on sale of real estate, net

 

 

20,788

 

 

 

21,261

 

Equity in (loss) income of unconsolidated joint ventures

 

 

(894

)

 

 

1,222

 

Interest and other income

 

 

333

 

 

 

2,598

 

Interest expense

 

 

(21,513

)

 

 

(23,454

)

Loss before taxes

 

 

(31,012

)

 

 

(10,917

)

Provision for taxes

 

 

37

 

 

 

23

 

Net loss

 

 

(30,975

)

 

 

(10,894

)

Net loss attributable to non-controlling interests

 

 

10,311

 

 

 

3,927

 

Net loss attributable to Seritage

 

$

(20,664

)

 

$

(6,967

)

Preferred dividends

 

 

(1,225

)

 

 

(1,225

)

Net loss attributable to Seritage common shareholders

 

$

(21,889

)

 

$

(8,192

)

 

 

 

 

 

 

 

 

 

Net loss per share attributable to Seritage Class A

   and Class C common shareholders - Basic

 

$

(0.59

)

 

$

(0.23

)

Net loss per share attributable to Seritage Class A

   and Class C common shareholders - Diluted

 

$

(0.59

)

 

$

(0.23

)

Weighted average Class A and Class C common shares

   outstanding - Basic

 

 

37,232

 

 

 

35,671

 

Weighted average Class A and Class C common shares

   outstanding - Diluted

 

 

37,232

 

 

 

35,671

 

 

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)

 

 

 

 

Class A

Common

 

 

Class B

Common

 

 

Class C

Common

 

 

Series A

Preferred

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Non-

Controlling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interests

 

 

Equity

 

Balance at January 1, 2019

 

 

35,668

 

 

$

357

 

 

 

1,322

 

 

$

13

 

 

 

 

 

$

 

 

 

2,800

 

 

$

28

 

 

$

1,124,504

 

 

$

(344,132

)

 

$

369,688

 

 

 

1,150,458

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,967

)

 

 

(3,927

)

 

 

(10,894

)

Cumulative effect of accounting

   change (see Note 2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,286

)

 

 

 

 

 

(1,286

)

Common dividends and

   distributions declared

   ($0.25 per share and unit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,996

)

 

 

(5,030

)

 

 

(14,026

)

Preferred dividends

   declared ($0.4375 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,225

)

 

 

 

 

 

 

(1,225

)

Vesting of restricted share units

 

 

(23

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,613

)

 

 

 

 

 

 

 

 

(1,613

)

Share-based compensation

 

 

45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,566

 

 

 

 

 

 

 

 

 

1,566

 

Balance at March 31, 2019

 

 

35,690

 

 

$

357

 

 

 

1,322

 

 

$

13

 

 

 

 

 

$

 

 

 

2,800

 

 

$

28

 

 

$

1,124,457

 

 

$

(362,606

)

 

$

360,731

 

 

$

1,122,980

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2020

 

 

36,897

 

 

$

369

 

 

 

1,243

 

 

$

12

 

 

 

 

 

$

 

 

 

2,800

 

 

$

28

 

 

$

1,149,721

 

 

$

(418,711

)

 

$

311,951

 

 

 

1,043,370

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,664

)

 

 

(10,311

)

 

 

(30,975

)

Preferred dividends

   declared ($0.4375 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,225

)

 

 

 

 

 

(1,225

)

Vesting of restricted share

   units

 

 

75

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,198

 

 

 

 

 

 

 

 

 

1,198

 

Share class surrenders (1,242,536 common shares)

 

 

 

 

 

 

 

 

(1,243

)

 

 

(12

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

 

OP Units exchanges

   (1,650,000 units)

 

 

1,650

 

 

 

16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,623

 

 

 

 

 

 

(26,639

)

 

 

 

Balance at March 31, 2020

 

 

38,622

 

 

$

386

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

2,800

 

 

$

28

 

 

$

1,177,553

 

 

$

(440,600

)

 

$

275,001

 

 

$

1,012,368

 

 

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,

 

 

 

2020

 

 

2019

 

CASH FLOW FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net loss

 

$

(30,975

)

 

$

(10,894

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Equity in loss of unconsolidated joint ventures

 

 

894

 

 

 

(1,222

)

Distributions from unconsolidated joint ventures

 

 

46

 

 

 

781

 

Gain on sale of real estate, net

 

 

(20,788

)

 

 

(21,261

)

Unrealized loss on interest rate cap

 

 

 

 

 

 

Share-based compensation

 

 

1,179

 

 

 

1,532

 

Depreciation and amortization

 

 

34,097

 

 

 

26,216

 

Amortization of deferred financing costs

 

 

106

 

 

 

118

 

Amortization of above and below market leases, net

 

 

(97

)

 

 

(104

)

Straight-line rent adjustment

 

 

2,701

 

 

 

(3,355

)

Change in operating assets and liabilities

 

 

 

 

 

 

 

 

Tenants and other receivables

 

 

(2,300

)

 

 

484

 

Prepaid expenses, deferred expenses and other assets

 

 

(124

)

 

 

(248

)

Accounts payable, accrued expenses and other liabilities

 

 

5,061

 

 

 

(8,818

)

Net cash used in operating activities

 

 

(10,200

)

 

 

(16,771

)

CASH FLOW FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Investment in unconsolidated joint ventures

 

 

(16,894

)

 

 

(9,140

)

Distributions from unconsolidated joint ventures

 

 

1,150

 

 

 

389

 

Net proceeds from sale of real estate

 

 

58,330

 

 

 

37,569

 

Development of real estate

 

 

(73,610

)

 

 

(85,413

)

Net cash used in investing activities

 

 

(31,024

)

 

 

(56,595

)

CASH FLOW FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Purchase of shares related to stock grant recipients' tax withholdings

 

 

(74

)

 

 

(1,613

)

Preferred dividends paid

 

 

(1,225

)

 

 

(1,225

)

Common dividends paid

 

 

 

 

 

(8,998

)

Non-controlling interests distributions paid

 

 

 

 

 

(5,030

)

Net cash used in financing activities

 

 

(1,299

)

 

 

(16,866

)

Net decrease in cash and cash equivalents

 

 

(42,523

)

 

 

(90,232

)

Cash and cash equivalents, beginning of period

 

 

139,260

 

 

 

532,857

 

Cash and cash equivalents, end of period

 

$

96,737

 

 

$

442,625

 

 

- 6 -


SERITAGE GROWTH PROPERTIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited, amounts in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

Cash payments for interest

 

$

28,311

 

 

$

28,000

 

Capitalized interest

 

 

7,914

 

 

 

5,666

 

Income taxes paid

 

 

5

 

 

 

25

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING

   ACTIVITIES

 

 

 

 

 

 

 

 

Development of real estate financed with accounts payable

 

$

57,644

 

 

$

17,438

 

Common dividends and OP units distributions declared and unpaid

 

 

 

 

 

14,026

 

Preferred dividends declared and unpaid

 

 

1,225

 

 

 

1,225

 

Decrease in real estate, net resulting from deconsolidated properties

 

 

 

 

 

 

 

 

Real estate, net

 

 

 

 

 

(14,656

)

Tenants and other receivables, net

 

 

 

 

 

(2

)

Prepaid expenses, deferred expenses and other assets, net

 

 

 

 

 

(84

)

Accounts payable, accrued expenses and other liabilities

 

 

 

 

 

6

 

Transfer to real estate assets held for sale

 

 

(2,071

)