SHLDQ - Sears Holdings Corp

[txlaw]

http://www.seritage.com/

SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

 

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 

In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

 

Thanks for posting about this.  I wonder if they are starting to get ready to spin this thing off?

[muscleman]

I've created a screenshot of the assets & liabilities broken out by parent, guarantor & non-guarantor subsidiaries. 

 

(1) Take a look at the receivables & the payables. 

(2) Take a look at the equity value of the non-guarantor subsidiaries.

(3) Figure out the "real" equity value of the non-guarantor subsidiaries -- do they really need such high receivables?

 

Next, take a look at the statement of cash flows

 

(4) Figure out how much the non-guarantor subsidiary is earning

(5) Figure out (3) / (4) for an ROE number

 

The biggest issue with Sears has always been the "when" and not the "what."

 

(Edited to put the screenshots in as attachments.)

 

I have been studying these balance sheets for the past few days. Can we say that any liabilities listed in the guarantor sub's balance sheet will have no recourse to the parent holding corp? I found that in the previous 10-Ks for 2007 and 2008, they stated that Sears Canada and OSH's debt are not recourse to SHLD, so when they are spun off, they take away their own debt. I am wondering if that is the same here for the pension liabilities and account payable?

 

I tried to call SHLD's IR and I got transferred to a voice mail that never replied to me. I will try again later and post whatever answer I got from them here, if no one here already knows. :)

[ERICOPOLY]

http://www.seritage.com/

SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

 

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 

In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

 

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

[txlaw]

http://www.seritage.com/

SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

 

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 

In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

 

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

 

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

[Guest hellsten]

Marc Andreeson on Sears:

 

http://qz.com/36619/andreessen-on-eddie-lampert-sears-play-so-the-real-estates-actually-not-valuable/

 

Andreesen invested in a niche retailer that has ~$500 million in revenue and a market value of around $1 billion (~2 P/S).

Zulily into one of the fastest-growing startups in the Seattle region, with monthly revenue now on a pace equivalent to nearly $500 million in annual sales.

http://www.xconomy.com/seattle/2012/11/15/zulily-adds-85-million-led-by-andreessen-horowitz/

 

The process is a perfect example of the type of software-focused “e-commerce 2.0 category killers” that he sees now cropping up, such as  Seattle’s Zulily, a mom’s and kids retail deals site, of which Andreessen’s venture capital firm is an investor. “I think they’re just going to roll through the retail landscape and take out a lot of the retail chains in that kind of market. We love that stuff.”

http://qz.com/36619/andreessen-on-eddie-lampert-sears-play-so-the-real-estates-actually-not-valuable/

 

Andreesen doesn't like SHLD which has a P/S ratio of 0.15.

 

Andreesen definitely likes pump and dump scams. Hell, the scams have a name: “Andreessen Horowitz Effect.”:

Why all the fear and loathing? The primary complaint about Andreessen Horowitz is that they are price insensitive when they decide to invest in a startup. “They are overpaying for deals,” says one VC, “forcing the Greylocks of the world to overpay as well.” In other words, it can drive up valuations even in the deals it doesn’t win. Another VC calls this proclivity to push up prices the “Andreessen Horowitz Effect.”

http://techonomy.com/2012/08/the-andreessen-horowitz-effect/

 

His recent history of deals speaks for itself:

Groupon, IPO, 2011

Instagram, Acquired, 2012

Skype, Acquired, 2010

Zynga, IPO, 2011

http://en.wikipedia.org/wiki/Andreessen_Horowitz

 

I wouldn't trust anyone who helped sell Facebook, Groupon, Zynga, Skype, and Instagram to the public and greater fools. I guess the Autonomy deal is the epitomy of the "Andreessen Horowitz Effect".

 

Andreesen should be improving the world like Elon Musk, instead of selling crap to the greater fools. What an asshole.

[ERICOPOLY]

Andreesen should be improving the world like Elon Musk, instead of selling crap to the greater fools. What an asshole.

 

Andreesen:

 

1) gets started building first web browser: NCSA Mosaic.  It's a free web browser.

2) Founded Netscape which builds it's market share by giving away the browser for free

2)  Cries foul when Microsoft builds a web browser and gives it away for free to build share.

 

What an asshole indeed!

[ERICOPOLY]

http://www.seritage.com/

SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

 

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 

In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

 

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

 

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

 

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.

[merkhet]

ericopoly, I'm curious as to your rationale for buying more. I don't see a clear catalyst for this investment such as with BAC or MBIA...

[ERICOPOLY]

ericopoly, I'm curious as to your rationale for buying more. I don't see a clear catalyst for this investment such as with BAC or MBIA...

 

I think the stock went to $60 recently based on perception that Eddie would make an announcement regarding redevelopment of the properties, then I think that money disappeared rapidly when Eddie made no such comment.  I think the stock dropped more because of his giving no information, rather than dropping for telling us something we already all know (that the retailing sucks).

 

This Seritage Realty Trust website make me feel like the wait won't go on much longer.  But I'm not thinking I terms of weeks, but rather over the next year.

 

[Guest valueInv]

Andreesen should be improving the world like Elon Musk, instead of selling crap to the greater fools. What an asshole.

 

Andreesen:

 

1) gets started building first web browser: NCSA Mosaic.  It's a free web browser.

2) Founded Netscape which builds it's market share by giving away the browser for free

2)  Cries foul when Microsoft builds a web browser and gives it away for free to build share.

 

What an asshole indeed!

 

IIRC, it was Microsoft who made IE free first to gain marketshare. Netscape was then forced to give it away in response.

[AchilliesValue]

http://www.seritage.com/

SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

 

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 

In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

 

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

 

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

 

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.

 

18 million sq ft seems relatively small when they have ~250 million (slightly less given recent sales and spins). I know a lot of the thesis is that 80% of the value is in 20% of the real estate but still seems small

[ERICOPOLY]

http://www.seritage.com/

SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

 

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 

In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

 

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

 

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

 

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.

 

18 million sq ft seems relatively small when they have ~250 million (slightly less given recent sales and spins). I know a lot of the thesis is that 80% of the value is in 20% of the real estate but still seems small

 

10 million is 7.2% of 250 million, or 36% of the valuable 20% (assuming they are focusing on developing the valuable real estate).

 

So if redevelopment is extracting value, then they are extracting 28.8% of the total value (36% of 80%).

 

I'm not sure how accurate it is to assume 80% of the value is in 20% of the properties.  But perhaps there is also wide variation of value within that 20% bracket.  Like maybe 50% of the value is in 7.2% of the properties (perhaps they are developing the top third most valuable properties of those 20%).

 

[AchilliesValue]

http://www.seritage.com/

SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

 

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 

In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

 

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

 

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

 

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.

 

18 million sq ft seems relatively small when they have ~250 million (slightly less given recent sales and spins). I know a lot of the thesis is that 80% of the value is in 20% of the real estate but still seems small

 

10 million is 7.2% of 250 million, or 36% of the valuable 20% (assuming they are focusing on developing the valuable real estate).

 

So if redevelopment is extracting value, then they are extracting 28.8% of the total value (36% of 80%).

 

I'm not sure how accurate it is to assume 80% of the value is in 20% of the properties.  But perhaps there is also wide variation of value within that 20% bracket.  Like maybe 50% of the value is in 7.2% of the properties (perhaps they are developing the top third most valuable properties of those 20%).

 

Yeah I think most that look at the Sears thesis agree that the intrinsic value is substantially higher than the current enterprise value but unless you actually go do the legwork and appraise the property yourself it will be hard to understand how much of a margin of safety you have as they begin to monetize the assets. Are they selling the best properties or the worst? I don't know which makes things difficult.

[luck]

eric and others, wondering if you guys see this as a 4X or greater?  haven't seen anything recently quantifying the upside.  to take on the risk, it seems like this would have to be a multi-bagger. 

 

that said, intriguing developments with seritage, data centers, towers, guarantor/non-guarantor, baker street reporting 80% of their port in shld calls (perhaps not true reflection of actual port given cash, shorts, etc ). 

 

 

[plato1976]

According to my estimation, in a slightly optimistic case, the real estate plus brands is worth 5x the current market cap

 

 

eric and others, wondering if you guys see this as a 4X or greater?  haven't seen anything recently quantifying the upside.  to take on the risk, it seems like this would have to be a multi-bagger. 

 

that said, intriguing developments with seritage, data centers, towers, guarantor/non-guarantor, baker street reporting 80% of their port in shld calls (perhaps not true reflection of actual port given cash, shorts, etc ).

[no_free_lunch]

According to my estimation, in a slightly optimistic case, the real estate plus brands is worth 5x the current market cap

 

Care to give a rough breakdown of that valuation?  I am having a really hard time justifying the bruce berkowitz RE valuations (not that I am in any way an expert) and would just like to know what you put as real estate vs brands. 

[ERICOPOLY]

eric and others, wondering if you guys see this as a 4X or greater?

 

On what timeframe?  I can make 4x just letting the cash compound in my bank savings account.

[luck]

true! :)  maybe 4X or greater in 6 years or less? 

 

perhaps a better question is: what sort of annualized return are you looking for from the investment?  not sure if folks are looking at this as a shorter term trade or a longer term investment.

[BargainValueHunter]

http://www.chicagorealestatedaily.com/article/20130425/CRED03/130429852/sears-to-unload-eight-more-stores-here

 

The decision to hire an outside firm surprised some local brokers, considering that Sears established an in-house division called SHC Realty more than a year ago to oversee its divestiture campaign. More recently, the company formed a new unit called Seritage Realty Trust LLC to augment SHC's work.

 

In a statement, Sears said only that it had hired David Lukes to head Seritage and “lead the company's efforts to further develop and create long-term value in certain real estate assets.”

 

http://jobs.jobs/hoffman-estates-il/marketing-specialist-graphic-design-greenwich-ct/36310748/job/

 

Effectively market a diverse collection of redevelopment properties while also growing the SERITAGE brand name and reputation through direct marketing as well as regional trade show support.

[BargainValueHunter]

http://www.datacenterknowledge.com/archives/2013/05/23/ubiquity/

 

Ubiquity will be able to leverage real estate at both closed stores and some that are still operating, depending on the opportunity. The first step has been to evaluate the portfolio and identify properties that could work as data centers. Chicago engineering firm ESD has been conducting a “data center fitness test” on promising properties to size up their power, fiber and risk profiles. Ubiquity is also working with Newmark Grubb Knight Frank to market the portfolio to the brokerage community.

 

The first Ubiquity project will be a Sears store on the south side of Chicago, nestled alongside the Chicago Skyway. The 127,000 square foot store is closing at the end of June, and will be retrofitted as a multi-tenant data center. Farney says he already has a commitment for the first tenant at the site on East 79th Street, which has 5 megawatts of existing power capacity and the potential to expand.

 

“It’s a building that’s lit very well, from both a fiber and power perspective,” said Farney. “It’s going to be great data center building.”

 

Farney acknowledges that many of Sears’ mall-based retail locations aren’t viable for data center usage. “I don’t think the industry is yet ready for a mall-based data center,” he said. “That may take some time. The stand-alone location is optimal.”

 

Ubiquity has those stand-alone facilities, along with distribution centers and some parcels of vacant land. ”There are closed Kmarts that are stand-alone, 200,000 square-foot properties with good fiber and power and 10 acres of parking,” said Farney. “These are owned assets.”

[Myth465]

The thesis is starting to get some legs, if only they could move a bit faster, as well as explain the long term plan.

[maxprogram]

Personal anecdote:

 

I am involved in a real estate firm that owns the property a large Kmart is on. It is a very good location right next to a major freeway and large residential area. The property is on a long-term lease with probably 10 years to go, but is renewed every 5 years (next renewal is a year away). They are paying an extremely cheap rate and it would continue to be cheap even after the renewal (due to a very advantageous lease agreement). This is why the run-down Kmart has been able to operate for so many years without going out of business. The RE firm has considered buying them out in the past to get out of the lease.

 

In the last month the firm received notice from Sears Holdings that they wanted out of the lease agreement immediately, no questions asked, no buyout. They are likely going to force them to stay for the next year so they can prep for new tenants. This tells me the location must be bleeding cash, or else they would have tried to sublease or get out any other way.

 

So take this anecdote FWIW, I think it could be viewed negatively or positively depending on your position.

[ERICOPOLY]

Personal anecdote:

 

I am involved in a real estate firm that owns the property a large Kmart is on. It is a very good location right next to a major freeway and large residential area. The property is on a long-term lease with probably 10 years to go, but is renewed every 5 years (next renewal is a year away). They are paying an extremely cheap rate and it would continue to be cheap even after the renewal (due to a very advantageous lease agreement). This is why the run-down Kmart has been able to operate for so many years without going out of business. The RE firm has considered buying them out in the past to get out of the lease.

 

In the last month the firm received notice from Sears Holdings that they wanted out of the lease agreement immediately, no questions asked, no buyout. They are likely going to force them to stay for the next year so they can prep for new tenants. This tells me the location must be bleeding cash, or else they would have tried to sublease or get out any other way.

 

So take this anecdote FWIW, I think it could be viewed negatively or positively depending on your position.

 

So a given % of the square footage is getting triaged out of the leased portfolio.  I'm glad there isn't a plan to bring in an Apple executive to turn KMart into a Walmart killer. 

[Parsad]

Personal anecdote:

 

I am involved in a real estate firm that owns the property a large Kmart is on. It is a very good location right next to a major freeway and large residential area. The property is on a long-term lease with probably 10 years to go, but is renewed every 5 years (next renewal is a year away). They are paying an extremely cheap rate and it would continue to be cheap even after the renewal (due to a very advantageous lease agreement). This is why the run-down Kmart has been able to operate for so many years without going out of business. The RE firm has considered buying them out in the past to get out of the lease.

 

In the last month the firm received notice from Sears Holdings that they wanted out of the lease agreement immediately, no questions asked, no buyout. They are likely going to force them to stay for the next year so they can prep for new tenants. This tells me the location must be bleeding cash, or else they would have tried to sublease or get out any other way.

 

So take this anecdote FWIW, I think it could be viewed negatively or positively depending on your position.

 

So a given % of the square footage is getting triaged out of the leased portfolio.  I'm glad there isn't a plan to bring in an Apple executive to turn KMart into a Walmart killer.

 

LOL!  They've done enough of that shit...time to just use some common sense and monetize some of the assets.  Cheers!

[Matson125]

Some more detail on the Sears Canada development proposal

 

http://www.theglobeandmail.com/report-on-business/sears-joins-retails-real-estate-push/article12325885/

 

Sears owns roughly $900-million of real estate, according to a past estimate by retail analyst Keith Howlett at Desjardins Securities. It includes more than 10 owned stores, a number of distribution centres and joint mall holdings. But the retailer hasn’t disclosed all its property holdings in public filings, including the one at Burnaby, he said.