0001564590-21-042692.txt : 20210809 0001564590-21-042692.hdr.sgml : 20210809 20210809163409 ACCESSION NUMBER: 0001564590-21-042692 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 77 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210809 DATE AS OF CHANGE: 20210809 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: 211157002 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_20210630.htm 10-Q Q221 srg-10q_20210630.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 JUNE 30, 2021

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 August 5, 2021, the registrant had the following common shares outstanding:

 

Class

Shares Outstanding

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

43,631,345

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 June 30, 2021

TABLE OF CONTENTS

 

PART I.

FINANCIAL INFORMATION

 

 

 

Page

 

 

 

Item 1.

Condensed Consolidated Financial Statements (unaudited)

3

 

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

3

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020

4

 

Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2021 and 2020

5

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020

7

 

Notes to Condensed Consolidated Financial Statements

9

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

 

 

 

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

38

 

 

 

Item 4.

Controls and Procedures

38

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

39

 

 

 

Item 1A.

Risk Factors

39

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

39

 

 

 

Item 3.

Defaults upon Senior Securities

39

 

 

 

Item 4.

Mine Safety Disclosures

39

 

 

 

Item 5.

Other Information

39

 

 

 

Item 6.

Exhibits

40

 

 

 

SIGNATURES

 

41

 

 

 


 

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)

 

 

June 30, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

 

 

Investment in real estate

 

 

 

 

 

 

 

 

Land

 

$

525,441

 

 

$

592,770

 

Buildings and improvements

 

 

1,019,293

 

 

 

1,107,532

 

Accumulated depreciation

 

 

(152,340

)

 

 

(142,206

)

 

 

 

1,392,394

 

 

 

1,558,096

 

Construction in progress

 

 

353,178

 

 

 

352,776

 

Net investment in real estate

 

 

1,745,572

 

 

 

1,910,872

 

Real estate held for sale

 

 

30,923

 

 

 

1,864

 

Investment in unconsolidated entities

 

 

468,269

 

 

 

457,033

 

Cash and cash equivalents

 

 

140,058

 

 

 

143,728

 

Restricted cash

 

 

7,150

 

 

 

6,526

 

Tenant and other receivables, net

 

 

31,192

 

 

 

46,570

 

Lease intangible assets, net

 

 

16,840

 

 

 

18,595

 

Prepaid expenses, deferred expenses and other assets, net

 

 

62,529

 

 

 

63,755

 

Total assets

 

$

2,502,533

 

 

$

2,648,943

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Term Loan Facility, net

 

$

1,599,121

 

 

$

1,598,909

 

Sales-leaseback financing obligations

 

 

20,608

 

 

 

20,425

 

Accounts payable, accrued expenses and other liabilities

 

 

107,915

 

 

 

146,882

 

Total liabilities

 

 

1,727,644

 

 

 

1,766,216

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

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

   42,795,267 and 38,896,428 shares issued and outstanding

   as of June 30, 2021 and December 31, 2020, respectively

 

 

428

 

 

 

389

 

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

   2,800,000 shares issued and outstanding as of June 30, 2021

   December 31, 2020; liquidation preference of $70,000

 

 

28

 

 

 

28

 

Additional paid-in capital

 

 

1,230,009

 

 

 

1,177,260

 

Accumulated deficit

 

 

(611,647

)

 

 

(528,637

)

Total shareholders' equity

 

 

618,818

 

 

 

649,040

 

Non-controlling interests

 

 

156,071

 

 

 

233,687

 

Total equity

 

 

774,889

 

 

 

882,727

 

Total liabilities and shareholders' equity

 

$

2,502,533

 

 

$

2,648,943

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

27,595

 

 

$

21,648

 

 

$

58,741

 

 

$

54,758

 

Management and other fee income

 

 

279

 

 

 

171

 

 

 

414

 

 

 

378

 

Total revenue

 

 

27,874

 

 

 

21,819

 

 

 

59,155

 

 

 

55,136

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating

 

 

11,286

 

 

 

8,697

 

 

 

21,929

 

 

 

18,998

 

Real estate taxes

 

 

9,061

 

 

 

9,384

 

 

 

19,216

 

 

 

18,609

 

Depreciation and amortization

 

 

13,328

 

 

 

23,702

 

 

 

26,470

 

 

 

57,799

 

General and administrative

 

 

11,990

 

 

 

8,644

 

 

 

23,222

 

 

 

18,064

 

Total expenses

 

 

45,665

 

 

 

50,427

 

 

 

90,837

 

 

 

113,470

 

Gain on sale of real estate, net

 

 

18,097

 

 

 

53,877

 

 

 

42,305

 

 

 

74,665

 

Impairment of real estate assets

 

 

(64,539

)

 

 

(1,813

)

 

 

(66,239

)

 

 

(1,813

)

Equity in loss of unconsolidated entities

 

 

(2,327

)

 

 

(1,322

)

 

 

(3,489

)

 

 

(2,216

)

Interest and other income

 

 

530

 

 

 

141

 

 

 

8,154

 

 

 

474

 

Interest expense

 

 

(28,976

)

 

 

(22,145

)

 

 

(55,126

)

 

 

(43,658

)

Income / (loss) before taxes

 

 

(95,006

)

 

 

130

 

 

 

(106,077

)

 

 

(30,882

)

Benefit (provision) for taxes

 

 

(298

)

 

 

(26

)

 

 

(160

)

 

 

11

 

Net income / (loss)

 

 

(95,304

)

 

 

104

 

 

 

(106,237

)

 

 

(30,871

)

Net income / (loss) attributable to non-controlling interests

 

 

22,464

 

 

 

(32

)

 

 

25,677

 

 

 

10,279

 

Net income / (loss) attributable to Seritage

 

$

(72,840

)

 

$

72

 

 

$

(80,560

)

 

$

(20,592

)

Preferred dividends

 

 

(1,225

)

 

 

(1,225

)

 

 

(2,450

)

 

 

(2,450

)

Net loss attributable to Seritage common shareholders

 

$

(74,065

)

 

$

(1,153

)

 

$

(83,010

)

 

$

(23,042

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to Seritage Class A

   common shareholders - Basic

 

$

(1.73

)

 

$

(0.03

)

 

$

(2.02

)

 

$

(0.61

)

Net loss per share attributable to Seritage Class A

   common shareholders - Diluted

 

$

(1.73

)

 

$

(0.03

)

 

$

(2.02

)

 

$

(0.61

)

Weighted average Class A common shares

   outstanding - Basic

 

 

42,772

 

 

 

38,634

 

 

 

41,134

 

 

 

37,933

 

Weighted average Class A common shares

   outstanding - Diluted

 

 

42,772

 

 

 

38,634

 

 

 

41,134

 

 

 

37,933

 

 

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, except per share amounts)

 

 

 

 

Class A

Common

 

 

Class B

Common

 

 

Series A

Preferred

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Non-

Controlling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interests

 

 

Equity

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,592

)

 

 

(10,279

)

 

 

(30,871

)

Preferred dividends

   declared ($0.875 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,450

)

 

 

 

 

 

(2,450

)

Vesting of restricted share units

 

 

98

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,913

 

 

 

 

 

 

 

 

 

1,913

 

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 June 30, 2020

 

 

38,645

 

 

$

386

 

 

 

 

 

 

 

 

$

2,800

 

 

$

28

 

 

$

1,178,268

 

 

$

(441,753

)

 

$

275,033

 

 

$

1,011,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

 

 

38,896

 

 

$

389

 

 

 

 

 

$

 

 

 

2,800

 

 

$

28

 

 

$

1,177,260

 

 

$

(528,637

)

 

$

233,687

 

 

$

882,727

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(80,560

)

 

 

(25,677

)

 

 

(106,237

)

Preferred dividends

   declared ($0.875 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,450

)

 

 

 

 

 

(2,450

)

Vesting of restricted share units

 

 

87

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

849

 

 

 

 

 

 

 

 

 

849

 

OP Unit exchanges (3,811,865 units)

 

 

3,812

 

 

 

38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51,901

 

 

 

 

 

 

(51,939

)

 

 

 

Balance at June 30, 2021

 

 

42,795

 

 

$

428

 

 

 

 

 

$

 

 

 

2,800

 

 

$

28

 

 

$

1,230,009

 

 

$

(611,647

)

 

$

156,071

 

 

$

774,889

 

 

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

- 5 -


SERITAGE GROWTH PROPERTIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

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

 

 

 

 

Class A

Common

 

 

Class B

Common

 

 

Series A

Preferred

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Non-

Controlling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interests

 

 

Equity

 

Balance at April 1, 2020

 

 

38,622

 

 

$

386

 

 

 

 

 

$

 

 

 

2,800

 

 

$

28

 

 

$

1,177,553

 

 

$

(440,600

)

 

$

275,001

 

 

 

1,012,368

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72

 

 

 

32

 

 

 

104

 

Preferred dividends

   declared ($0.4375 per

   share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,225

)

 

 

 

 

 

(1,225

)

Vesting of restricted share units

 

 

23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

715

 

 

 

 

 

 

 

 

 

715

 

Balance at June 30, 2020

 

 

38,645

 

 

$

386

 

 

 

 

 

$

 

 

 

2,800

 

 

$

28

 

 

$

1,178,268

 

 

$

(441,753

)

 

$

275,033

 

 

$

1,011,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 1, 2021

 

 

40,587

 

 

$

406

 

 

 

 

 

$

 

 

 

2,800

 

 

$

28

 

 

$

1,200,874

 

 

$

(537,582

)

 

$

207,674

 

 

 

871,400

 

Net loss