BTShine Posted November 1, 2018 Share Posted November 1, 2018 Earnings are out. Good progress on the plans for redevelopment and SNO leasing. But, their actual non-sears in place leases have been slow to gain traction. Only $5 m (annualized) in tenants took space this quarter. Their SNO numbers and stated plans imply they will see this number go to $25m a quarter, but that hasn't actualized. Link to comment Share on other sites More sharing options...
koshigoe Posted November 3, 2018 Share Posted November 3, 2018 Earnings are out. Good progress on the plans for redevelopment and SNO leasing. But, their actual non-sears in place leases have been slow to gain traction. Only $5 m (annualized) in tenants took space this quarter. Their SNO numbers and stated plans imply they will see this number go to $25m a quarter, but that hasn't actualized. "During the three months ended September 30, 2018, the Company <b>sold five of the terminated properties for $15.2 million and recorded a gain of $6.5 million</b> which is included in gain on sale of real estate within the condensed consolidated statements of operations. During the nine months ended September 30, 2018, the Company <b>sold ten of the terminated properties for a total of $42.3 million and recorded a gain of $11.4 million</b> which is included in gain on sale of real estate within the condensed consolidated statements of operations." ...and this is their worst stuff in secondary markets? Seems they are having no trouble pruning portfolio and selling assets in a weak environment. Link to comment Share on other sites More sharing options...
undervalued Posted November 6, 2018 Share Posted November 6, 2018 https://www.usatoday.com/story/money/2018/11/06/sears-bankruptcy-eddie-lampert/1903950002/ The Seritage deal was particularly suspicious, the unsecured creditors group alleged. The committee said its examination of the deal shows it "appears to be at discounted prices" and that subsequent leaseback deals to Sears carried "unfavorable and burdensome terms" for the struggling retailer. Sears was paying Seritage $90.8 million in annual rent for 151 leases, amounting to $4.73 per square foot, according to a Seritage public filing. Link to comment Share on other sites More sharing options...
SlowAppreciation Posted November 6, 2018 Share Posted November 6, 2018 https://www.usatoday.com/story/money/2018/11/06/sears-bankruptcy-eddie-lampert/1903950002/ The Seritage deal was particularly suspicious, the unsecured creditors group alleged. The committee said its examination of the deal shows it "appears to be at discounted prices" and that subsequent leaseback deals to Sears carried "unfavorable and burdensome terms" for the struggling retailer. Sears was paying Seritage $90.8 million in annual rent for 151 leases, amounting to $4.73 per square foot, according to a Seritage public filing. How can it be both "too low" and "unfavorable and burdensome"? Link to comment Share on other sites More sharing options...
cmlber Posted November 7, 2018 Share Posted November 7, 2018 https://www.usatoday.com/story/money/2018/11/06/sears-bankruptcy-eddie-lampert/1903950002/ The Seritage deal was particularly suspicious, the unsecured creditors group alleged. The committee said its examination of the deal shows it "appears to be at discounted prices" and that subsequent leaseback deals to Sears carried "unfavorable and burdensome terms" for the struggling retailer. Sears was paying Seritage $90.8 million in annual rent for 151 leases, amounting to $4.73 per square foot, according to a Seritage public filing. How can it be both "too low" and "unfavorable and burdensome"? "Too low" in that Sears was paid below market for the leases signed and "unfavorable and burdensome" in that the lease basically says Sears has absolutely zero flexibility to use the leased space for any use other than a Sears department store, virtually ensuring that they would have to pay to give back the space when Sears died off one store at a time. Link to comment Share on other sites More sharing options...
Candyman1 Posted November 7, 2018 Share Posted November 7, 2018 Docket 484. file:///C:/Users/Stefaan/Downloads/M126119354327-rep-0611010819.pdf ESL isn't cooperating with the UCC. Also, it seems hard to see that the SRG dividend will not be cancelled shortly when SHLD files for Chapter 7. So in first day filings, according to SHLD, it is losing $125 million on an operating basis per month and it has 687 stores. But somehow there are 400 profitable stores and thus the other 287 stores are losing more than $125 million a month in aggregate? After all ... aren't those 400 stores profitable? I am having a hard time seeing how these "400" stores are profitable. Also, I am curious to see what happens to the 145 stores for which SHLD was going to file with the court on November 1 and didn't. It looks like SRG is about to get a bunch more stores thrown back into its lap. Link to comment Share on other sites More sharing options...
Candyman1 Posted November 7, 2018 Share Posted November 7, 2018 Earnings are out. Good progress on the plans for redevelopment and SNO leasing. But, their actual non-sears in place leases have been slow to gain traction. Only $5 m (annualized) in tenants took space this quarter. Their SNO numbers and stated plans imply they will see this number go to $25m a quarter, but that hasn't actualized. Yeah, I have done some construction in my life ... all takes longer than one thinks. SRG is about to lose about $39.2 million (out of total revenues of $56.5 million) a quarter using Q3, with SHLD likely going Chapter 7. SRG better speed things up. At least they increased rental income by $1.25 million a quarter. =) Link to comment Share on other sites More sharing options...
peridotcapital Posted November 7, 2018 Share Posted November 7, 2018 Docket 484. file:///C:/Users/Stefaan/Downloads/M126119354327-rep-0611010819.pdf ESL isn't cooperating with the UCC. Also, it seems hard to see that the SRG dividend will not be cancelled shortly when SHLD files for Chapter 7. So in first day filings, according to SHLD, it is losing $125 million on an operating basis per month and it has 687 stores. But somehow there are 400 profitable stores and thus the other 287 stores are losing more than $125 million a month in aggregate? After all ... aren't those 400 stores profitable? I am having a hard time seeing how these "400" stores are profitable. Also, I am curious to see what happens to the 145 stores for which SHLD was going to file with the court on November 1 and didn't. It looks like SRG is about to get a bunch more stores thrown back into its lap. Saying the 400 stores are profitable is misleading, as it is referring to four-wall EBITDA margins. No G&A, no interest expense, no marketing, etc. It should be pretty obvious to anyone that if you are closing your worst stores and yet for years you cash burn stays at over $1 billion annually, there is nothing actually profitable inside the store base. Link to comment Share on other sites More sharing options...
BTShine Posted November 7, 2018 Share Posted November 7, 2018 There is an updated presentation on their website, which includes the new financials. There is a better breakdown of information in this presentation vs. their prior releases. http://ir.seritage.com/Cache/1500114818.PDF?O=PDF&T=&Y=&D=&FID=1500114818&iid=4584761 Link to comment Share on other sites More sharing options...
SlowAppreciation Posted December 16, 2018 Share Posted December 16, 2018 https://valueinvestorsclub.com/idea/SERITAGE_GROWTH_PROPERTIES/8318662187 Link to comment Share on other sites More sharing options...
CorpRaider Posted December 17, 2018 Share Posted December 17, 2018 Thanks for sharing. I don't think I follow all of the arguments and quotes to support a conclusion that Fairholme made prior inconsistent statements. Seems like that is one of the reasons to form the committee to pursue the litigation (and otherwise advocate as a group). Also, at this point the egg/mistake is already all over his face. The time to worry about optics has looooooong passed. I suppose the fact that they were in the SRG + SHLD equity after the spin and any purchases of debt after that time were maybe a tacit/market-based endorsement of the arrangement/terms of the transfers. But it seems like there are other creditors to whom that argument wouldn't apply. Link to comment Share on other sites More sharing options...
SlowAppreciation Posted December 17, 2018 Share Posted December 17, 2018 Haha and there's another one.... I think that's 8 different SRG writeups on VIC: https://valueinvestorsclub.com/idea/SERITAGE_GROWTH_PROPERTIES/5144211202 Link to comment Share on other sites More sharing options...
ander Posted December 20, 2018 Share Posted December 20, 2018 Seritage Preferreds hitting new lows. Warrant a revisit or is the equity a better risk / reward? Link to comment Share on other sites More sharing options...
BTShine Posted December 20, 2018 Share Posted December 20, 2018 Seritage Preferreds hitting new lows. Warrant a revisit or is the equity a better risk / reward? Great question. What do you see as the mid-range expectations for equity returns in SRG? Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted December 20, 2018 Share Posted December 20, 2018 A few thoughts: - My read is that the market is growing increasingly concerned about fraudulent conveyance issues. Read between the lines of WSJ's recent "Sears Pushes for More Offers as ESL Bid Takes Heat" - It's also looking more likely that all (or nearly all) $SHLDQ stores liquidate in the relatively near future. Maybe by YE 2019? - I think the next ~1 year is going to be tough for $SRG, as lost revenue from $SHLDQ will continue to outpace revenue growth from new development. The higher interest expenses they are now incurring are an additional cash drain. Link to comment Share on other sites More sharing options...
ander Posted December 21, 2018 Share Posted December 21, 2018 My question would be if the fraudulent conveyance issues have merit, then would the preferred's still have value. Maybe the equity gets impaired but the preferred's are still fully covered? Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted December 21, 2018 Share Posted December 21, 2018 A few thoughts: - My read is that the market is growing increasingly concerned about fraudulent conveyance issues. Read between the lines of WSJ's recent "Sears Pushes for More Offers as ESL Bid Takes Heat" - It's also looking more likely that all (or nearly all) $SHLDQ stores liquidate in the relatively near future. Maybe by YE 2019? - I think the next ~1 year is going to be tough for $SRG, as lost revenue from $SHLDQ will continue to outpace revenue growth from new development. The higher interest expenses they are now incurring are an additional cash drain. They're going to have a hard time with the fraudulent conveyance argument. It's not as if it was spun-off to shareholders with Sears receiving nothing. It was a public market IPO where Sears received the fair market value in cash for the properties - and there's obviously no argument to stand on that Sears had the resources to redevelop the properties itself... Link to comment Share on other sites More sharing options...
HalfMeasure Posted December 21, 2018 Share Posted December 21, 2018 A few thoughts: - My read is that the market is growing increasingly concerned about fraudulent conveyance issues. Read between the lines of WSJ's recent "Sears Pushes for More Offers as ESL Bid Takes Heat" - It's also looking more likely that all (or nearly all) $SHLDQ stores liquidate in the relatively near future. Maybe by YE 2019? - I think the next ~1 year is going to be tough for $SRG, as lost revenue from $SHLDQ will continue to outpace revenue growth from new development. The higher interest expenses they are now incurring are an additional cash drain. They're going to have a hard time with the fraudulent conveyance argument. It's not as if it was spun-off to shareholders with Sears receiving nothing. It was a public market IPO where Sears received the fair market value in cash for the properties - and there's obviously no argument to stand on that Sears had the resources to redevelop the properties itself... Wasn't it a rights offering to Sears shareholders? That structure protects from Sears equityholders claiming fraudulent conveyance, but the door may still be open for bondholders. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted December 21, 2018 Share Posted December 21, 2018 A few thoughts: - My read is that the market is growing increasingly concerned about fraudulent conveyance issues. Read between the lines of WSJ's recent "Sears Pushes for More Offers as ESL Bid Takes Heat" - It's also looking more likely that all (or nearly all) $SHLDQ stores liquidate in the relatively near future. Maybe by YE 2019? - I think the next ~1 year is going to be tough for $SRG, as lost revenue from $SHLDQ will continue to outpace revenue growth from new development. The higher interest expenses they are now incurring are an additional cash drain. They're going to have a hard time with the fraudulent conveyance argument. It's not as if it was spun-off to shareholders with Sears receiving nothing. It was a public market IPO where Sears received the fair market value in cash for the properties - and there's obviously no argument to stand on that Sears had the resources to redevelop the properties itself... Wasn't it a rights offering to Sears shareholders? That structure protects from Sears equityholders claiming fraudulent conveyance, but the door may still be open for bondholders. Yes, I guess IPO wasn't the appropriate term. A rights offerings where Sears received $1.6B from the sale of the real estate. Link to comment Share on other sites More sharing options...
CorpRaider Posted December 21, 2018 Share Posted December 21, 2018 Yeah, the VIC write-ups I've read are like 90+% about the fraudulent conveyance issues. I think reorg report or whatever its called also had an analysis. You guys must have me on ignore, but the post above was responding to the VIC write-up argument about the impact of the fact that creditors, including Fairholme, have already raised the issue/asked for formation of a committee to pursue the interests of certain creditors in this regard. Also creditors aren't just bondholders, of course, don't forget about PBGC and trade creditors. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted December 28, 2018 Share Posted December 28, 2018 80 more SHLDQ stores closing. Someone correct me if I'm wrong, but I don't think any of these properties are owned by SRG. This makes me suspect that there will be a separate store closing announcement for SRG-owned properties soon. https://www.cnbc.com/2018/12/28/sears-closing-80-more-stores-in-march-faces-possible-liquidation.html?__source=sharebar|twitter&par=sharebar Today is the deadline for bids for the company. Insofar as I know, no one (not even ESL) has made an official bid yet. https://www.foxbusiness.com/retail/sears-faces-critical-deadline-will-it-survive Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted December 28, 2018 Share Posted December 28, 2018 80 more SHLDQ stores closing. Someone correct me if I'm wrong, but I don't think any of these properties are owned by SRG. This makes me suspect that there will be a separate store closing announcement for SRG-owned properties soon. https://www.cnbc.com/2018/12/28/sears-closing-80-more-stores-in-march-faces-possible-liquidation.html?__source=sharebar|twitter&par=sharebar Today is the deadline for bids for the company. Insofar as I know, no one (not even ESL) has made an official bid yet. https://www.foxbusiness.com/retail/sears-faces-critical-deadline-will-it-survive "Big Ed"/ESL submitted a last second bid. The saga continues. https://www.cnbc.com/2018/12/28/sears-chairman-eddie-lampert-submits-bit-for-company.html Link to comment Share on other sites More sharing options...
Deepdive Posted December 30, 2018 Share Posted December 30, 2018 I don't understand Eddie Link to comment Share on other sites More sharing options...
Shane Posted December 30, 2018 Share Posted December 30, 2018 I don't understand Eddie Welcome to the club Link to comment Share on other sites More sharing options...
saltybit Posted January 7, 2019 Share Posted January 7, 2019 https://www.bloomberg.com/news/articles/2019-01-06/sears-said-to-prepare-for-possible-liquidation-as-esl-bid-fails Link to comment Share on other sites More sharing options...
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