SRG - Seritage Growth Properties

[RetroRanger]

Like always IT still depends one the execution of course but still lot of downside protection from here!

 

[Gregmal]

47 minutes ago, RetroRanger said:

Better Idea, Enrico La Quatra on Twitter offeered a good basic valuation.

 

"SRGs calculation is by far the simplest: I used Mohnish's calculation as a guide. When we take a discount from the median EV/sq.ft. of $186 to $157 as a lot of the current portfolio is not in prime locations we have an EV of 4.08B - Net Debt of 1.48B and MC of 2.6B. (1/2)"

"I used the 38.9mm S/O of Dec 20 (I know, I didn't update the calculation so far because in SRGs case it doesn't move the needle). ->$2.606B / 38.9mm = 67$"

He forgot the OP Units, but this gives us an intrinsic value of about 45$

Not too Bad!

 

 

I'd imagine thats the same pupil, aka Seritage Slayer, slicing and dicing up the dudes Twitter thesis...LOL

Otherwise, its just perplexing how once again, "I used Mohnish's calculation as a guide"...is the guiding factor for all these people. Can anyone do their own work? This continues to have all the hallmarks of a bad investment. I mean even using that poorly put together Twitter thesis, your bull case is what? SRG is worth what it was trading at a couple years ago?? When all the same characters owned it and pounding the table and were banking on more or less than same thesis? 

Can anyone honestly answer why you wouldnt just buy HHC? Deep down, if you truly understand the investment and mechanics necessary for this to work, its almost impossible not to conclude HHC covers all the same bases but gives you a much more favorable risk/reward profile. 

[realassetsvalue]

55 minutes ago, RetroRanger said:

Better Idea, Enrico La Quatra on Twitter offeered a good basic valuation.

 

"SRGs calculation is by far the simplest: I used Mohnish's calculation as a guide. When we take a discount from the median EV/sq.ft. of $186 to $157 as a lot of the current portfolio is not in prime locations we have an EV of 4.08B - Net Debt of 1.48B and MC of 2.6B. (1/2)"

"I used the 38.9mm S/O of Dec 20 (I know, I didn't update the calculation so far because in SRGs case it doesn't move the needle). ->$2.606B / 38.9mm = 67$"

He forgot the OP Units, but this gives us an intrinsic value of about 45$

Not too Bad!

 

 

I couldn't resist replying with this great scene from The Wire in response to this "valuation" exercise. A quick calculation of NOI PSF and implied cap rate for these names will help fill in the gaps. Could also run a quick check on total estimated investment PSF (development cost) for the SRG strip retail developments and the average price PSF they have sold their leased projects for and compare if you are so inclined. 

I agree with you we will see how it turns out. I wish you and the company much luck, an excellent retail leasing environment and plenty of patience from Berkshire in the years to come!

[thepupil]

2 hours ago, Gregmal said:

I'd imagine thats the same pupil, aka Seritage Slayer, slicing and dicing up the dudes Twitter thesis...LOL

Otherwise, its just perplexing how once again, "I used Mohnish's calculation as a guide"...is the guiding factor for all these people. Can anyone do their own work? This continues to have all the hallmarks of a bad investment. I mean even using that poorly put together Twitter thesis, your bull case is what? SRG is worth what it was trading at a couple years ago?? When all the same characters owned it and pounding the table and were banking on more or less than same thesis? 

Can anyone honestly answer why you wouldnt just buy HHC? Deep down, if you truly understand the investment and mechanics necessary for this to work, its almost impossible not to conclude HHC covers all the same bases but gives you a much more favorable risk/reward profile. 

 

Correcting the share count was all I had the strength/patience to do. 

Explaining to that dude how the timeline for an SRG sf to be worth a FRT sf is 15-20 years, if ever, and not 3 years, well that's just a waste of time. anyone who has a top 3 / 11% position in SRG on a "take what Mohnish said and use the wrong sharecount" thesis deserves to impair capital.  

one fascinating thing about the whole thing is SRG bulls continued classification of the investment as low risk. 

All the condescending SRG haters such as myself will have to eat a giant pile of crow if it works out....

Edited May 25, 2021 by thepupil

[BG2008]

Seritage has been written up on VIC 7 different times since 2015 with starting prices in the high 30s low 40s.  5 of these are long thesis and 2 are short.  

[Cicero]

22 minutes ago, BG2008 said:

Seritage has been written up on VIC 7 different times since 2015 with starting prices in the high 30s low 40s.  5 of these are long thesis and 2 are short.  

Is that an argument "for" or "against" ?

Hard to tell 

[BG2008]

14 minutes ago, Cicero said:

Is that an argument "for" or "against" ?

Hard to tell 

Just stating a fact.  I am Switzerland on SRG. No position. 

[Gregmal]

4 hours ago, BG2008 said:

Just stating a fact.  I am Switzerland on SRG. No position. 

Come on man, you want to/might have put on some kind of short on SPG but you're neutral on SRG?

Never short best of breed, even within a crappy sector. Short the junk. Not saying SRG is junk...not saying it isnt either!

[thepupil]

So it turns out, i was overly aggressive and wrong on one aspect of my SRG hate. 

upon close review of the 10-k, per some input from a Sam Harris on Twitter, SRG owns 70% of the OP units, so the real share count is not 55mm. 

its lower and in fact much closer to the guy I was hating in for using the wrong share count. 
 

this is why you should not snarking tell people to correct the share count and reduce their price target by $20.

it is puzzling to me that it took this long for this to come out. took me like months of SRG hating and diligence to get the right share count. 

 

Edited May 26, 2021 by thepupil

[peridotcapital]

1 hour ago, thepupil said:

So it turns out, i was overly aggressive and wrong on one aspect of my SRG hate. 

upon close review of the 10-k, per some input from a Sam Harris on Twitter, SRG owns 70% of the OP units, so the real share count is not 55mm. 

its lower and in fact much closer to the guy I was hating in for using the wrong share count. 
 

this is why you should not snarking tell people to correct the share count and reduce their price target by $20.

it is puzzling to me that it took this long for this to come out. took me like months of SRG hating and diligence to get the right share count. 

 

I think you are mistaken. From the 10-K:

Common Shares and Operating Partnership Units

On March 3, 2021, the reported closing sale price per share of our Class A common stock on the NYSE was $20.99.

As of March 3, 2021, there were 38,903,146 Class A common shares issued and outstanding which were held by approximately 138 shareholders of record.  The number of shareholders of record does not reflect persons or entities that held their shares in nominee or “street” name.

In addition, as of March 3, 2021, there were no Class B non-economic common shares issued and outstanding and 17,002,906 outstanding Operating Partnership units (“OP Units”) held by limited partners other than the Company.  

[thepupil]

Haha so wait the original interpretation of 55mm is correct?

Ego restored?!?!? 

[peridotcapital]

2 minutes ago, thepupil said:

Haha so wait the original interpretation of 55mm is correct?

Ego restored?!?!? 

I believe any shares/units owned by SRG or its controlled entities would not show up in the fully diluted share count on the income statement. Not sure where people are miscalculating... perhaps they don't realize that Eddie owns shares/units personally, and ESL owns others indirectly on behalf of his LPs...

[thepupil]

Thanks, for a second there I felt like an idiot!

[peridotcapital]

12 hours ago, thepupil said:

Thanks, for a second there I felt like an idiot!

Haha... Twitter strikes again. Just focus on the Form 4s that Eddie files. They clearly showed he owned 17M OP units at the beginning of the year. That figure is down to ~13.2M after some exchanges and LP distributions from his fund in 2021.

[Pistachio_Lawyer]

Seritage trading volume is up 10 day average by 16.5%. New guru or institutional investor joining the party?

[thepupil]

AMC and GME were up 35% and 5% today.

SRG tends to trade in sentiment with those because it is also heavily shorted (all three about 20% short interest) 

[Pistachio_Lawyer]

3 hours ago, thepupil said:

AMC and GME were up 35% and 5% today.

SRG tends to trade in sentiment with those because it is also heavily shorted (all three about 20% short interest) 

That figure is outdated. Unless I am reading the wrong chart, SRG short float has decreased by ~5% since January: https://www.marketbeat.com/stocks/NYSE/SRG/short-interest/

[thepupil]

~6mm / ~43mm shares, ~14% of shares outstanding. bloomberg only considers about 2/3 of the shares as float (appears to be counting mohnish/dalal/eddie/tisch as non-float) and gets to about 20%. 

I think exact figures don't matter too much in this respect. It's accurate to say that SRG has high correlation with the "high short interest " factor and may cause it to spike on days where $AMC and the like are dancing. 

I think this adds non-fundamental risk to a prospective short position and punchiness on the long side (and potentially vice versa in a different environment). anyone considering going short should be aware of this (proably matters less for a long term oriented shareholder). 

Edited May 28, 2021 by thepupil

[RetroRanger]

 

https://www.fool.com/investing/2021/05/27/3-stocks-that-could-have-10x-potential/

Anand Chokkavelu: Let's get on to "most likely to 10x," if any.

Matt Frankel: Seritage (NYSE:SRG) is the cheating answer just because it's so small. Market cap well under $1 billion. With 26 million square feet of space, not including their land, it wouldn't be inconceivable for them to build that into a $7 billion business if things go well, the big if at this point. Excluding Seritage, I'd say my No. 1 to 10x is Pinterest (NYSE:PINS). I think it can easily 10x its monetization from here.

Jason Hall: Seritage, I think is maybe the most binary. The other factor of it to be a 10x investment is eventually getting dividends. It gets the scale, it manages to get through this period of business-building without having to sell off its best assets and ruin the returns. This could be an incredible over the next 10 years. It could turn into a huge income growth stock, too, when you start thinking about total returns. I think I would agree with Seritage.

 

[Gregmal]

41 minutes ago, thepupil said:

~6mm / ~43mm shares, ~14% of shares outstanding. bloomberg only considers about 2/3 of the shares as float (appears to be counting mohnish/dalal/eddie/tisch as non-float) and gets to about 20%. 

I think exact figures don't matter too much in this respect. It's accurate to say that SRG has high correlation with the "high short interest " factor and may cause it to spike on days where $AMC and the like are dancing. 

I think this adds non-fundamental risk to a prospective short position and punchiness on the long side (and potentially vice versa in a different environment). anyone considering going short should be aware of this (proably matters less for a long term oriented shareholder). 

Thats probably a decent setup to short some puts then. Real estate rarely blows up overnight, but just gradually erodes over time as far as public entities are concerned. If there's high short interest there's always juice on the puts. I dont know if I'd want to go long this, as I still feel like its a terrible risk/reward and one of those things(like PTON) that even if it works out, it was dumb and if you do it enough will get your head handed to you, but cleaning up on OTM put sales might be attractive. 

[BG2008]

58 minutes ago, Gregmal said:

Thats probably a decent setup to short some puts then. Real estate rarely blows up overnight, but just gradually erodes over time as far as public entities are concerned. If there's high short interest there's always juice on the puts. I dont know if I'd want to go long this, as I still feel like its a terrible risk/reward and one of those things(like PTON) that even if it works out, it was dumb and if you do it enough will get your head handed to you, but cleaning up on OTM put sales might be attractive. 

Gregmal always has some of the best looks on various situations. 

[Pistachio_Lawyer]

3 hours ago, Gregmal said:

Thats probably a decent setup to short some puts then. Real estate rarely blows up overnight, but just gradually erodes over time as far as public entities are concerned. If there's high short interest there's always juice on the puts. I dont know if I'd want to go long this, as I still feel like its a terrible risk/reward and one of those things(like PTON) that even if it works out, it was dumb and if you do it enough will get your head handed to you, but cleaning up on OTM put sales might be attractive. 

True. You can also try Phil's Town's version of bull put spreads and get into Seritage at more competitive prices. Short length puts may be profitable here, but longer positions can be risky as the stock price has doubled in the past year. I understand for value investors, underlying price is irrelevant, but as an options trader, if you're betting puts on stocks you stumble upon in a value discussion forum, you're looking for trouble xD

[Gregmal]

4 hours ago, Pistachio_Lawyer said:

True. You can also try Phil's Town's version of bull put spreads and get into Seritage at more competitive prices. Short length puts may be profitable here, but longer positions can be risky as the stock price has doubled in the past year. I understand for value investors, underlying price is irrelevant, but as an options trader, if you're betting puts on stocks you stumble upon in a value discussion forum, you're looking for trouble xD

I dont think its advisable to short puts on a long duration basis. The crux is to pinch off some of the obscene IV which if done correctly can generate ridiculous annualized returns. I generally dont look to go more than at most 3 months out. But typically you're looking for weekly or monthly in terms of duration. You just want to play the volatility, not hang around for the investment to work or not work. Best example was shorting the GME Apr $20 puts when the stock was at $350 in late January/February. Stock collapsed to like $50 in a few weeks and puts went from being worth $5+ to less than $1.50. It is once in a 5 year stretch or so type of situation where you can get that type of juice, but its quite common to get enough to make the trade worthwhile on many of the high short interest names. I used to do it all the time with stuff like DDS, RICK, FIZZ. I have no positions in SRG and no intention to initiate one so I am not recommending anything, but if you look even at the June 18 $15 puts you can effectively create a 1% monthly yield and you're only getting put the stock if it falls 10%+ in a couple weeks. Stock goes down, you keep rolling down. With share price decline IV should spike, giving you more premium. If I was an SRG enthusiast I would be all over a strategy like this. 

[indirect]

Gregmal, problem with that approach, not much liquidity in the options. 

[Pistachio_Lawyer]

Here is a recent video by Pabrai talking about Seritage (at the one hour mark if I am not mistaken) and other matters such as refraining from confusing low-risk high-uncertainty situations with high-risk low-uncertainty scenarios.

The Kolkata Value Hunters Club; Q&A with Mohnish Pabrai - YouTube

Edited June 1, 2021 by Pistachio_Lawyer