Seritage Growth Properties (SRG) Q3 2024 earnings summary

Executive summary

• Executing a Plan of Sale to monetize all assets and dissolve the company, with ongoing strategic review and asset sales since October 2022.

• Portfolio as of September 30, 2024 included interests in 21 properties (2.7 million sq. ft. GLA, 342 acres), with 12 consolidated and 9 unconsolidated properties.

• No longer a REIT as of January 1, 2022, now a taxable C Corporation for greater flexibility in asset sales and cash use.

• Focused on simplifying portfolio, improving balance sheet, and addressing July 2025 term loan maturity through refinancing, extension, or strategic alternatives.

• Ongoing asset sales and continued reduction of debt, with multiple assets sold or under contract.

Financial highlights

• Net loss attributable to common shareholders was $23.2 million for Q3 2024, compared to $2.1 million in Q3 2023; net loss for the nine months ended September 30, 2024 was $145.9 million, down from $162.3 million year-over-year.

• Total revenue for Q3 2024 was $3.3 million, down from $5.0 million in Q3 2023; nine-month revenue was $13.2 million, up from $11.6 million year-over-year.

• Rental income for Q3 2024 was $2.9 million, a decrease from $4.5 million in Q3 2023, primarily due to property sales and rent relief negotiations.

• NOI - cash basis at share was ($0.9) million for Q3 2024, reflecting a ($0.5) million impact from sold properties.

• Generated $24.0 million from sale of an income-producing asset at an 8.5% cap rate; $17.1 million from a vacant asset post-quarter.

Outlook and guidance

• Five assets under contract for anticipated gross proceeds of $87.9 million; additional offer accepted for $29.9 million.

• Future sales projections for remaining assets range from under $5 million to $200 million per asset, with timing dependent on market conditions.

• The company expects obligations to continue to exceed property rental income and plans to fund costs through cash on hand, asset sales, and potential financing.

• Challenging market conditions expected to impact asset sale proceeds and timing of distributions.

• Substantial doubt remains about the company's ability to continue as a going concern due to the upcoming maturity of the Term Loan Facility in July 2025 and lack of secured alternative financing.