– Provides Update on Leasing, Development
and Transaction Activity –
Seritage Growth Properties (NYSE:SRG) (“Seritage” or the
“Company”) today commemorated the third anniversary of its listing
on the New York Stock Exchange (NYSE) with an update on the
Company’s leasing, development and transaction activity from its
formation and public listing on July 7, 2015 through June 30,
2018.
“As we mark the completion of our first three years as a public
company, and on the heels of strong leasing, development and
transaction activity in the first half of 2018, we are confident
that our platform, scale and control over well-located real estate
will continue to position us as a preferred partner for growing
retailers, mixed-use developers and institutional capital
providers,” said Benjamin Schall, President and Chief Executive
Officer. “Based on the strength of our national platform and
dedicated team members, we have now executed 6.1 million square
feet of new leasing at average rents of approximately $17.50 PSF
and a 4.1x re-leasing multiple, and completed or commenced 88
redevelopment projects totaling $1.3 billion of estimated capital
investment at unlevered returns on cost of approximately 11%.”
Mr. Schall continued, “Over the past three years, we have
established a consistent track record of generating value upon
redevelopment, while also substantially diversifying our tenant
base. As of June 30th, Sears Holdings was no longer the primary
tenant at 129 of our 249 assets, and we remain on track to have
Sears Holdings account for less than 35% of our contractual rental
income by the end of 2018, down meaningfully from nearly 80% when
we started. As we look forward, we are increasingly focused on our
larger value creation opportunities, including a number of
significant densification and mixed-use projects, and further
establishing Seritage as a leading growth platform in a
transforming industry.”
Leasing Activity During First 3
Years
- Signed new leases totaling 6.1 million
square feet year since formation, encompassing 231 new leases with
over 120 unique tenants, including 853,000 square feet in the
second quarter of 2018.
- Established the Company as a preferred
partner for high growth tenants in entertainment, food and beverage
(over 35% of lease activity since formation), everyday uses such as
gyms and grocers (over 20%), off price retail (15%), home
furnishings and goods (over 10%) and other growing retail and
service categories.
- Achieved an average releasing multiple
of 4.1x for space currently or formerly occupied by Sears Holdings
Corporation (“Sears”), with new rents averaging approximately
$17.60 PSF compared to approximately $4.30 PSF paid by Sears.
- Increased diversified, non-Sears rental
income to 57% of total rental income from 22% at inception, based
on signed leases, and decreased Sears rental income to 43% of total
rental income from 78% at inception.
- Increased diversified, non-Sears rental
income by 190% to over $127 million, based on signed leases and
after the impact of the joint venture and asset sale activity
described below.
- Including recently submitted recapture
and termination notices, Sears Holdings is no longer the primary
tenant at 129 of the Company’s properties, up from 19 properties at
formation.
The table below summarizes the Company’s leasing activity since
inception through June 30, 2018:
(in thousands except number of leases and PSF data)
Total Release of Sears Holdings Space
Leases
LeasedGLA
AnnualRent
AnnualRent PSF
Leases
LeasedGLA
AnnualRent
AnnualRent PSF
ReleasingMultiple
2H 2015 9 154 $ 4,650 $ 30.28 6 130 $ 3,820 $ 29.41 4.4x
2016
65 2,070 36,600 17.68 59 1,882 33,610 17.86 4.5x 2017 94 2,606
44,717 17.16 86 2,476 43,299 17.49 4.0x Q1 2018 20 391 7,915 20.24
19 389 7,891 20.29 4.1x Q2 2018 43 853 12,100 14.19
43 853 12,100 14.19 3.6x 1H 2018 63 1,244
20,015 16.09 62 1,242 19,991 16.10 3.8x
Total 231 6,074 $ 105,982
$ 17.45 213 5,730 $
100,720 $ 17.58 4.1x
Development Activity During First 3
Years
- Completed or commenced 88 wholly-owned
redevelopment projects with projected cost of $1.3 billion since
the Company’s formation, including five new projects commenced in
the second quarter of 2018 with a total investment of approximately
$58 million.
- Projected unlevered returns on cost of
approximately 11% on 73 new projects initiated solely on the
Seritage platform.
The table below summarizes the Company’s development activity
since inception through June 30, 2018:
(in thousands except number of properties and yields)
EstimatedDevelopmentCosts
(1)
EstimatedProjectCosts
(1)
Quarter
Numberof Projects
ProjectSquare Feet
Acquired (2) 15 - $ 63,600 $ 63,600 2H 2015 5 352 51,500 64,200
2016 (3) 28 2,677 353,600 370,700
2017 (3)
30 3,517 650,000 693,600 Q1 2018 5 822 96,900 99,300 Q2 2018 5 547
53,400 53,400 1H 2018 10 1,369 150,300 152,700
Total 88 7,915 $ 1,269,000
$ 1,344,800
(1) Total estimated development costs exclude, and total
estimated project costs include, termination fees to recapture 100%
of certain properties.(2) Projects were in various stages of
development when acquired by the Company in July 2015.(3) Project
square feet, development costs and project costs include expansions
to previously announced projects.
Transaction Activity During First 3
Years
- Generated nearly $650 million of cash
proceeds since the Company’s formation through select asset
monetization, strategic joint ventures and opportunistic capital
markets activity, including over $140 million in cash proceeds year
to date in 2018.
- Includes new partnerships with Invesco
Real Estate at projects in Santa Monica and La Jolla (UTC), CA and
First Washington Realty in West Hartford, CT, and the disposition
of certain original joint venture interests to the Company’s
partners and a number of assets located in smaller markets to end
users and local developers.
- Announced three mixed-use partnerships
for an office development in Dallas (Valley View), TX and
multifamily developments in Newark, CA and Redmond, WA.
About Seritage Growth
Properties
Seritage Growth Properties is a publicly-traded,
self-administered and self-managed REIT with 225 wholly-owned
properties and 24 joint venture properties totaling approximately
39 million square feet of space across 49 states and Puerto Rico.
The Company was formed to unlock the underlying real estate value
of a high-quality retail portfolio it acquired from Sears Holdings
in July 2015. Pursuant to a master lease, the Company has the right
to recapture certain space from Sears Holdings for retenanting or
redevelopment purposes. The Company’s mission is to create and own
revitalized shopping, dining, entertainment and mixed-use
destinations that provide enriched experiences for consumers and
local communities, and create long-term value for our
shareholders.
Forward-Looking
Statements
This document contains forward-looking statements, which are
based on the current beliefs and expectations of management and are
subject to significant risks, assumptions and uncertainties that
may cause our actual results, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied by these forward-looking
statements. Factors that could cause or contribute to such
differences include, but are not limited to: competition in the
real estate and retail industries; our exposure to Sears Holdings;
Sears Holdings’ termination and other rights under its master lease
with us; risks relating to our recapture and redevelopment
activities; contingencies to the commencement of rent under leases;
the terms of our indebtedness; restrictions with which we are
required to comply in order to maintain REIT status and other legal
requirements to which we are subject; and our relatively limited
history as an operating company. For additional discussion of these
and other applicable risks, assumptions and uncertainties, see the
“Risk Factors” and forward-looking statement disclosure contained
in filings with the Securities and Exchange Commission. While we
believe that our forecasts and assumptions are reasonable, we
caution that actual results may differ materially. We intend the
forward-looking statements to speak only as of the time made and do
not undertake to update or revise them as more information becomes
available, except as required by law.
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Seritage Growth Properties646-277-1268IR@Seritage.com
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