Seritage Growth Properties Reports Mixed Results Amid Strategic Asset Sales
SRG reports a net loss of $3.8 million in Q3 2023 but continues progress on asset sales with over $156 million grossed.
Significant debt reduction with $150 million in principal repayments on the Term Loan Facility.
Strategic sales and leasing activities aim to streamline portfolio and enhance value.
Challenging market conditions persist, potentially impacting future sales and shareholder distributions.
On November 8, 2023, Seritage Growth Properties (NYSE:SRG) announced its financial and operating results for the third quarter of 2023, revealing a net loss attributable to common shareholders of $3.8 million, or $0.07 per share. Despite the loss, SRG made notable progress in its strategic asset sales, grossing over $156 million during the quarter. The company's CEO, Andrea L. Olshan, highlighted the operational discipline that has led to reduced general and administrative expenses, with expectations for this trend to continue into 2024.
Asset Sales and Financial Position
SRG's asset sales during the quarter included two income-producing Multi-Tenant Retail assets and two Non-Core assets, among others, contributing to a significant cash position of $114.8 million as of September 30, 2023. The company also made substantial debt repayments, reducing the balance of its Term Loan Facility to $400 million by the end of the quarter, with a further reduction to $360 million subsequent to the quarter end.
Leasing and Operational Highlights
The company signed three leases covering 12 thousand square feet at an average projected annual net rent of $55.94 per square foot. Five tenants were opened, totaling approximately 41 thousand square feet at an average net rent of $65.36 per square foot. SRG's portfolio optimization efforts are evident in its leasing activities and the opening of new tenants.
Future Sales Projections and Market Conditions
SRG provided projections for future sales, indicating a range of anticipated gross proceeds for assets in Gateway and Primary Markets, among others. However, the company cautioned that challenging market conditions could materially affect these projections and the timing and amounts of distributions to shareholders.
Dividends and Strategic Review
The company declared preferred stock dividends throughout 2023 but does not expect to declare dividends on its common shares until the Term Loan Facility is repaid in full. SRG's strategic review process, including a Plan of Sale approved by shareholders, remains ongoing as the company seeks to maximize value.
Financial Summary
The financial summary table provided by SRG shows a comparison of net loss and Total Net Operating Income (Total NOI) for the three and nine months ended September 30, 2023, and 2022. The Total NOI for the third quarter of 2023 was $1.1 million, reflecting the impact of sold properties.
SRG's focus on asset sales, debt repayment, and operational efficiency reflects its commitment to strengthening the balance sheet and optimizing its portfolio. However, the company faces ongoing challenges due to market conditions, which may impact future sales proceeds and shareholder value. SRG's strategic initiatives and disciplined approach to financial management will be key factors in navigating these challenges and achieving long-term success.
For more detailed information, please refer to the full earnings report and financial statements available on Seritage's website.
Explore the complete 8-K earnings release (here) from Seritage Growth Properties for further details.
This article first appeared on GuruFocus.
