Seritage Growth Properties (SRG) Q2 2024 earnings summary

Executive summary

• The company is executing a Plan of Sale to monetize its real estate portfolio, with 22 properties and 352 acres remaining as of June 30, 2024, and accepted offers totaling over $150 million in gross proceeds as of August 14, 2024.

• Asset sales are prioritized to pay down debt and maintain liquidity, with ongoing operating cash outflows and reliance on alternative financing.

• Challenging market conditions and macroeconomic uncertainty are impacting asset pricing, sale timing, and transaction volume.

• A class action lawsuit was filed in July 2024 alleging inadequate internal controls and misleading disclosures regarding asset impairments and valuations.

Financial highlights

• Net loss attributable to common shareholders was $102.5 million for Q2 2024, or $(1.82) per share, compared to $96.9 million, or $(1.73) per share, in Q2 2023.

• Q2 2024 rental income was $4.2 million, down from $5.5 million in Q2 2023, mainly due to property sales; six-month rental income was $9.9 million, up from $5.9 million due to timing of sales.

• Impairment charges on real estate assets totaled $86.4 million in Q2 2024, primarily related to the Aventura, FL property, and $87.5 million for the six months.

• General and administrative expenses decreased to $6.9 million in Q2 2024 from $10.1 million in Q2 2023.

• Cash and cash equivalents plus restricted cash totaled $100.5 million at June 30, 2024, and $87.2 million as of August 13, 2024.

Outlook and guidance

• Obligations are expected to continue exceeding rental income, with costs funded through asset sales, cash on hand, and potential financing.

• Pipeline of accepted offers and assets under contract for sale totals over $150 million in gross proceeds, with additional assets being marketed.

• Management has concluded that substantial doubt remains about the company's ability to continue as a going concern until sufficient asset sales or financing are secured.