EX-99.2 3 srg-ex992_6.htm EX-99.2 srg-ex992_6.htm

Exhibit 99.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION      ||     PERIOD ENDED DECEMBER 31, 2020

 

 

 


INTRODUCTION

 

 

 

 

Overview

Seritage Growth Properties (NYSE: SRG) (“Seritage” or the “Company”) is a fully-integrated, self-administered and self-managed REIT that is principally engaged in the acquisition, ownership, development, redevelopment, management, and leasing of diversified retail and mixed-use real estate throughout the United States.

As of December 31, 2020, the Company’s portfolio consisted of interests in 183 properties totaling approximately 26.5 million square feet of gross leasable area, including 158 wholly owned properties totaling approximately 24.5 million square feet of GLA across 41 states and Puerto Rico (the “Wholly Owned Properties”), and interests in 25 properties totaling approximately 1.9 million square feet of GLA across 13 states that are owned in unconsolidated entities (the “Unconsolidated Properties”).

The Company’s primary objective is to create value for its shareholders through the re-leasing and redevelopment of the majority of its Wholly Owned Properties and Unconsolidated Properties.  In doing so, the Company expects to meaningfully grow net operating income while diversifying its tenant base and adding other uses to its properties to more fully realize the value of its portfolio.  In order to achieve its objective, the Company intends to execute the following strategies:

Maximize the value of vast land holdings through accretive densification;

Convert single-tenant buildings into multi-tenant properties at meaningfully higher rents;

Leverage existing and future joint venture relationships with leading real estate and financial partners; and

Maintain a flexible capital structure to support value creation activities.

Background

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

As of December 31, 2020, the Company did not have any remaining properties leased to Holdco or Sears Holdings after giving effect to the pending termination of the last five Wholly Owned Properties which is scheduled to be completed in March 2021.

General Information

Unless the context indicates otherwise, references in this supplemental information package (the "Supplemental") to "Seritage Growth,” “Seritage,” the “Company,” or “SRG” refer to Seritage Growth Properties and its subsidiaries.  Additionally, where reference is made to "GAAP", this refers to accounting principles generally accepted in the United States.


i


INTRODUCTION

 

 

 

COVID-19 Pandemic

The COVID-19 pandemic continues to have a significant impact on the real estate industry in the United States, including the Company’s properties.  As of December 31, 2020, the Company had collected 93% of rental income for the quarter ended December 31, 2020, and agreed to defer an additional 4%.  As of March 5, 2021, the Company had also collected 95% of January and February 2021 rental income, and agreed to defer an additional 2%.  While the Company intends to enforce its contractual rights under its leases, there can be no assurance that tenants will meet their future obligations or that additional rental modification agreements will not be necessary.  

The Company continues to maintain a cautious approach as it responds to the evolving COVID-19 pandemic with an emphasis on managing its cash resources and preserving the value of its assets and its platform.  The Company expects to continue monetizing appropriate assets and selectively allocating capital to the assets with opportunistic risk-adjusted returns.  

As a result of the fluidity and uncertainty surrounding the nation’s response to and limitations as a result of the pandemic, the Company expects that conditions will change, potentially significantly, in future periods and, as such, results for the year ended December 31, 2020 may not be indicative of the impact of the COVID-19 pandemic on the Company’s business for future periods.  As such, the Company cannot reasonably estimate the impact of COVID-19 on its financial condition, results of operations or cash flows over the foreseeable future.  

 

 

ii

 


SUPPLEMENTAL FINANCIAL INFORMATION

 

 

 

 

SERITAGE GROWTH PROPERTIES

SUPPLEMENTAL INFORMATION

PERIOD ENDED DECEMBER 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 


SUPPLEMENTAL FINANCIAL INFORMATION

 

 

 

 

 

Company Contacts

 

 

 

 

 

 

Andrea Olshan

 

President and Chief Executive Officer (1)

 

Kenneth Lombard

 

EVP and Chief Operating Officer

Amanda Lombard

 

EVP and Chief Financial Officer

 

Mary Rottler

 

EVP, Leasing and Operations

Matthew Fernand

 

EVP and General Counsel

 

James Bry

 

EVP, Development and Construction

ir@seritage.com

 

Investor Relations and Communications

 

Andrew Galvin

 

EVP, Investments

 

 

646.277.1268

 

 

 

 

 

 

 

 

 

 

 

(1)Effective March 16, 2021

 

 

 

 

 

4

 


SUPPLEMENTAL FINANCIAL INFORMATION

 

 

 

 

Summary Information

December 31, 2020

(in thousands, except per share and PSF amounts)

 

 

Quarter Ended December 31,

 

 

Year Ended December 31,

 

Financial Results

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss attributable to Seritage

   common shareholders (page 3)

 

$

(35,606

)

 

$

(25,874

)

 

$

(109,926

)

 

$

(64,297

)

Total NOI (page 5)

 

 

8,646

 

 

 

19,083

 

 

 

37,757

 

 

 

72,667

 

FFO (page 6)

 

 

(16,156

)

 

 

(20,059

)

 

 

(80,998

)

 

 

(33,793

)

Company FFO (page 6)

 

 

(17,899

)

 

 

(14,966

)

 

 

(88,583

)

 

 

(33,896

)

Net loss per diluted share attributable

   to Seritage common shareholders (page 3)

 

$

(0.92

)

 

$

(0.70

)

 

$

(2.87

)

 

$

(1.77

)

FFO per diluted share (page 6)

 

 

(0.29

)

 

 

(0.36

)

 

 

(1.45

)

 

 

(0.61

)

Company FFO per diluted share (page 6)

 

 

(0.32

)

 

 

(0.27

)

 

 

(1.59

)

 

 

(0.61

)

Wtd. avg. diluted shares - EPS

 

 

38,675

 

 

 

36,846

 

 

 

38,298

 

 

 

36,413

 

Wtd. avg diluted shares - FFO/share

 

 

55,930

 

 

 

55,802

 

 

 

55,874

 

 

 

55,800

 

Stock trading price range

 

$11.20 to $19.45

 

 

$39.02 to $45.50

 

 

$6.49 to $40.50

 

 

$32.98 to $46.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

As of

 

Financial Ratios (page 4)

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

December 31, 2019

 

Total debt to total market capitalization

 

 

 

 

 

 

 

 

 

 

64.2

%

 

 

41.0

%

Net debt to total real estate investments

 

 

 

 

 

 

 

 

 

 

56.2

%

 

 

52.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

As of

 

Property Data (page 9)

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

December 31, 2019

 

Number of properties

 

 

 

 

 

 

 

 

 

 

183

 

 

 

212

 

Gross leasable area (total / at share)

 

 

 

 

 

 

 

 

 

28,509 / 26,470

 

 

33,371 / 31,046

 

Percentage leased (total / at share)

 

 

 

 

 

 

 

 

 

32.6% / 32.4%

 

 

42.6% / 42.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

% of Total

 

 

 

 

 

Tenant Data (page 9)

 

 

 

 

 

Annual Rent

 

 

Annual Rent

 

 

Annual Rent PSF

 

In-place diversified leases

 

 

 

 

 

$

96,065

 

 

 

63.8

%

 

$

15.50

 

Signed not yet opened ("SNO") diversified leases

 

 

 

 

 

 

54,538

 

 

 

36.2

%

 

 

23.02

 

Sears/Kmart

 

 

 

 

 

 

 

 

 

0.0

%

 

 

 

Total

 

 

 

 

 

$

150,603

 

 

 

100.0

%

 

$

17.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

% of Total

 

 

 

 

 

 

 

 

 

 

 

Annual Rent

 

 

Annual Rent

 

 

Annual Rent PSF

 

In-place diversified leases

 

 

 

 

 

$

97,109

 

 

 

50.6

%

 

$

13.79

 

SNO diversified leases

 

 

 

 

 

 

84,348

 

 

 

43.9

%

 

 

20.06

 

Sears/Kmart

 

 

 

 

 

 

10,577

 

 

 

5.5

%

 

 

5.10

 

Total

 

 

 

 

 

$

192,034

 

 

 

100.0

%

 

$

14.42

 

1

 


SUPPLEMENTAL FINANCIAL INFORMATION

 

 

 

 

Condensed Consolidated Balance Sheets (unaudited)

December 31, 2020

(in thousands, except share and per share amounts)

 

 

December 31, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Investment in real estate

 

 

 

 

 

 

 

 

Land

 

$

592,770

 

 

$

667,004

 

Buildings and improvements

 

 

1,107,532

 

 

 

1,112,653

 

Accumulated depreciation

 

 

(142,206

)

 

 

(147,696

)

 

 

 

1,558,096

 

 

 

1,631,961

 

Construction in progress

 

 

352,776

 

 

 

338,672

 

Net investment in real estate

 

 

1,910,872

 

 

 

1,970,633

 

Real estate held for sale

 

 

1,864

 

 

 

5,275

 

Investment in unconsolidated joint ventures

 

 

457,033

 

 

 

445,077

 

Cash and cash equivalents

 

 

143,728

 

 

 

139,260

 

Restricted cash

 

 

6,526

 

 

 

 

Tenant and other receivables, net

 

 

46,570

 

 

 

54,470

 

Lease intangible assets, net

 

 

18,595

 

 

 

68,153

 

Prepaid expenses, deferred expenses and other assets, net

 

 

63,755

 

 

 

67,744

 

Total assets

 

$

2,648,943

 

 

$

2,750,612

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Term loan facility, net

 

$

1,598,909

 

 

$

1,598,487

 

Sales-leaseback financing obligations

 

 

20,425

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

 

146,882

 

 

 

108,755

 

Total liabilities

 

 

1,766,216

 

 

 

1,707,242

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

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

   38,896,428 and 36,897,364 shares issued and outstanding

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

 

 

389

 

 

 

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 December 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 December 31, 2020 and

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

 

 

28

 

 

 

28

 

Additional paid-in capital

 

 

1,177,260

 

 

 

1,149,721

 

Accumulated deficit

 

 

(528,636

)

 

 

(418,711

)

Total shareholders' equity

 

 

649,041

 

 

 

731,419

 

Non-controlling interests

 

 

233,686

 

 

 

311,951

 

Total equity

 

 

882,727

 

 

 

1,043,370

 

Total liabilities and equity

 

$

2,648,943

 

 

$

2,750,612

 

 

2

 


SUPPLEMENTAL FINANCIAL INFORMATION

 

 

 

Condensed Consolidated Statements of Operations (unaudited)

December 31, 2020

(in thousands, except per share amounts)

 

 

 

Quarter Ended December 31,

 

 

 

Year Ended December 31,

 

 

 

2020

 

 

2019

 

 

 

2020

 

 

2019

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

27,478

 

 

$

37,927

 

 

 

$

116,202

 

 

$

167,035

 

Management and other fee income

 

 

174

 

 

 

(1,293

)

 

 

 

293

 

 

 

1,598

 

Total revenue

 

 

27,652

 

 

 

36,634

 

 

 

 

116,495

 

 

 

168,633

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

Property operating

 

 

11,012

 

 

 

11,122

 

 

 

 

41,164

 

 

 

42,123

 

Real estate taxes

 

 

8,672

 

 

 

9,080

 

 

 

 

36,768

 

 

 

38,595

 

Depreciation and amortization

 

 

14,551

 

 

 

36,578

 

 

 

 

95,997

 

 

 

104,581

 

General and administrative

 

 

(418

)

 

 

12,970

 

 

 

 

28,849

 

 

 

39,156

 

Total expenses

 

 

33,817

 

 

 

69,750

 

 

 

 

202,778

 

 

 

224,455

 

Gain on sale of real estate

 

 

28,596

 

 

 

25,786

 

 

 

 

88,555

 

 

 

71,104

 

Gain on sale of interests in unconsolidated

   joint ventures

 

 

1,758

 

 

 

 

 

 

 

1,758

 

 

 

 

Impairment of real estate assets

 

 

(47,701

)

 

 

 

 

 

 

(64,108

)

 

 

 

Equity in loss of unconsolidated

   joint ventures

 

 

(2,161

)

 

 

(3,656

)

 

 

 

(4,712

)

 

 

(17,994

)

Interest and other income

 

 

934

 

 

 

635

 

 

 

 

3,394

 

 

 

6,824

 

Interest expense

 

 

(24,916

)

 

 

(26,878

)

 

 

 

(91,316

)

 

 

(94,519

)

Loss before income taxes

 

 

(49,655

)

 

 

(37,229

)

 

 

 

(152,712

)

 

 

(90,407

)

Provision for income taxes

 

 

(37

)

 

 

(113

)

 

 

 

(252

)

 

 

(196

)

Net loss

 

 

(49,692

)

 

 

(37,342

)

 

 

 

(152,964

)

 

 

(90,603

)

Net loss attributable to

   non-controlling interests

 

 

15,311

 

 

 

12,693

 

 

 

 

47,938

 

 

 

31,206

 

Net loss attributable to Seritage

 

$

(34,381

)

 

$

(24,649

)

 

 

$

(105,026

)

 

$

(59,397

)

Preferred dividends

 

 

(1,225

)

 

 

(1,225

)

 

 

 

(4,900

)

 

 

(4,900

)

Net loss attributable to Seritage common

   shareholders

 

$

(35,606

)

 

$

(25,874

)

 

 

$

(109,926

)

 

$

(64,297

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to Seritage

   Class A and Class C common shareholders - Basic

 

$

(0.92

)

 

$

(0.70

)

 

 

$

(2.87

)

 

$

(1.77

)

Net loss per share attributable to Seritage

   Class A and Class C common shareholders - Diluted

 

$

(0.92

)

 

$

(0.70

)

 

 

$

(2.87

)

 

$

(1.77

)

Weighted average Class A and Class C common

   shares outstanding - Basic

 

 

38,675

 

 

 

36,846

 

 

 

 

38,298

 

 

 

36,413

 

Weighted average Class A and Class C common

   shares outstanding - Diluted

 

 

38,675

 

 

 

36,846

 

 

 

 

38,298

 

 

 

36,413

 

3

 


SUPPLEMENTAL FINANCIAL INFORMATION

 

 

 

 

 

Market Capitalization and Financial Ratios

December 31, 2020

(in thousands, except per share amounts)

 

 

 

As of

 

 

As of

 

Equity Market Capitalization

 

December 31, 2020

 

 

December 31, 2019

 

Class A common shares outstanding

 

 

38,896

 

 

 

36,897

 

OP units outstanding

 

 

17,003

 

 

 

18,905

 

Total shares & units outstanding

 

 

55,899

 

 

 

55,802

 

Share Price

 

$

14.68

 

 

$

40.08

 

Equity market capitalization

 

$

820,602

 

 

$

2,236,544

 

 

 

 

 

 

 

 

 

 

Total Market Capitalization

 

 

 

 

 

 

 

 

Equity market capitalization

 

$

820,602

 

 

$

2,236,544

 

Preferred equity

 

 

70,000

 

 

 

70,000

 

Total debt

 

 

1,600,000

 

 

 

1,600,000

 

Total market capitalization

 

$

2,490,602

 

 

$

3,906,544

 

 

 

 

 

 

 

 

 

 

Financial Ratios

 

 

 

 

 

 

 

 

Total debt to total market capitalization

 

 

64.2

%

 

 

41.0

%

 

 

 

 

 

 

 

 

 

Total debt

 

$

1,600,000

 

 

$

1,600,000

 

Cash and cash equivalents

 

 

(150,254

)

 

 

(139,260

)

Net Debt

 

$

1,449,746

 

 

$

1,460,740

 

 

 

 

 

 

 

 

 

 

Gross real estate investments

 

$

2,123,760

 

 

$

2,354,787

 

Investment in unconsolidated joint ventures

 

 

457,033

 

 

 

445,077

 

Total real estate investments

 

$

2,580,793

 

 

$

2,799,864

 

 

 

 

 

 

 

 

 

 

Net debt to total real estate investments

 

 

56.2

%

 

 

52.2

%

 

4

 


SUPPLEMENTAL FINANCIAL INFORMATION

 

 

 

Total Net Operating Income

December 31, 2020

(in thousands)

 

 

Quarter Ended December 31,

 

 

Year Ended December 31,

NOI and Total NOI

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

Net loss

 

$

(49,692

)

 

$

(37,342

)

 

$

(152,964

)

 

$

(90,603

)

 

Termination fee income

 

 

(1,314

)

 

 

(20

)

 

 

(7,604

)

 

 

(5,545

)

 

Management and other fee income

 

 

(174

)

 

 

1,293

 

 

 

(293

)

 

 

(1,598

)

 

Depreciation and amortization

 

 

14,551

 

 

 

36,578

 

 

 

95,997

 

 

 

104,581

 

 

General and administrative expenses

 

 

(418

)

 

 

12,970

 

 

 

28,849

 

 

 

39,156

 

 

Equity in loss of unconsolidated

   joint ventures

 

 

2,161

 

 

 

3,656

 

 

 

4,712

 

 

 

17,994

 

 

Gain on sale of interests in unconsolidated

   joint ventures

 

 

(1,758

)

 

 

 

 

 

(1,758

)

 

 

 

 

Gain on sale of real estate

 

 

(28,596

)

 

 

(25,786

)

 

 

(88,555

)

 

 

(71,104

)

 

Impairment on real estate assets

 

 

47,701

 

 

 

 

 

 

64,108

 

 

 

 

 

Interest and other income

 

 

(934

)

 

 

(635

)

 

 

(3,394

)

 

 

(6,824

)

 

Interest expense

 

 

24,916

 

 

 

26,878

 

 

 

91,316

 

 

 

94,519

 

 

Provision for income taxes

 

 

37

 

 

 

113

 

 

 

252

 

 

 

196

 

 

Straight-line rent adjustment

 

 

1,362

 

 

 

35

 

 

 

4,983

 

 

 

(15,590

)

 

Above/below market rental income/expense

 

 

(116

)

 

 

(113

)

 

 

(1,793

)

 

 

(495

)

 

NOI

 

$

7,726

 

 

$

17,627

 

 

$

33,856

 

 

$

64,687

 

 

Unconsolidated entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI of unconsolidated joint ventures

 

 

1,825

 

 

 

1,606

 

 

 

6,122

 

 

 

9,851

 

 

Straight-line rent

 

 

(274

)

 

 

(115

)

 

 

(681

)

 

 

(152

)

 

Above/below market rental income/expense

 

 

(97

)

 

 

(35

)

 

 

(713

)

 

 

(1,719

)

 

Termination fee income

 

 

(534

)

 

 

 

 

 

(827

)

 

 

 

 

Total NOI

 

$

8,646

 

 

$

19,083

 

 

$

37,757

 

 

$

72,667

 

 

5

 


SUPPLEMENTAL FINANCIAL INFORMATION

 

 

 

 

Funds from Operations and Company FFO

December 31, 2020

(in thousands, except per share amounts)

 

 

Quarter Ended December 31,

 

 

Year Ended December 31,

 

FFO and Company FFO

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(49,692

)

 

$

(37,342

)

 

$

(152,964

)

 

$

(90,603

)

Real estate depreciation and amortization

   (consolidated properties)

 

 

14,017

 

 

 

36,053

 

 

 

93,963

 

 

 

102,439

 

Real estate depreciation and amortization

   (unconsolidated joint ventures)

 

 

3,397

 

 

 

8,241

 

 

 

9,108

 

 

 

30,375

 

Gain on sale of interests in unconsolidated

   joint ventures

 

 

(1,758

)

 

 

 

 

 

(1,758

)

 

 

 

Gain on sale of real estate

 

 

(28,596

)

 

 

(25,786

)

 

 

(88,555

)

 

 

(71,104

)

Impairment on real estate assets

 

 

47,701

 

 

 

 

 

 

64,108

 

 

 

 

Dividends on preferred shares

 

 

(1,225

)

 

 

(1,225

)

 

 

(4,900

)

 

 

(4,900

)

FFO attributable to common shareholders

   and unitholders

 

$

(16,156

)

 

$

(20,059

)

 

$

(80,998

)

 

$

(33,793

)

Termination fee income

 

 

(1,314

)

 

 

(20

)

 

 

(7,604

)

 

 

(5,545

)

Unconsolidated entity termination fee income

 

 

(534

)

 

 

 

 

 

(827

)

 

 

 

Amortization of deferred financing costs

 

 

105

 

 

 

105

 

 

 

421

 

 

 

434

 

Mortgage recording costs

 

 

 

 

 

5,008

 

 

 

 

 

 

5,008

 

Severance costs

 

 

 

 

 

 

 

 

425

 

 

 

 

Company FFO attributable to common

   shareholders and unitholders

 

$

(17,899

)

 

$

(14,966

)

 

$

(88,583

)

 

$

(33,896

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per dilu