New Redevelopment - Seritage Growth Properties

CORPORATE PROFILE
AUGUST 2016
Forward-Looking Statements
This document contains forward-looking statements, which are based on the current beliefs and expectations of
management and are subject to significant risks, assumptions and uncertainties that may cause our actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed or
implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are
not limited to:
competition in the real estate and retail industries; our substantial dependence on Sears Holdings
Corporation; Sears Holdings Corporation’s termination and other rights under its master lease with us; risks relating to our
recapture and acquisition of properties and redevelopment activities; contingencies to the commencement of rent under
leases; the terms of our indebtedness; restrictions with which we are required to comply in order to maintain REIT status
and other legal requirements to which we are subject; and our lack of operating history. For additional discussion of these
and other applicable risks, assumptions and uncertainties, see the “Risk Factors” and forward-looking statement
disclosure contained in filings with the Securities and Exchange Commission. While we believe that our forecasts and
assumptions are reasonable, we caution that actual results may differ materially.
We intend the forward-looking
statements to speak only as of the time made and do not undertake to update or revise them as more information becomes
available, except as required by law.
2
Company Overview
Seritage Growth Properties (NYSE: SRG) is a fully integrated REIT and
owner of 266 retail properties totaling over 42 million square feet across 49 states
 Focused strategy and platform to create substantial value through re-leasing and redevelopment
•
Convert single-tenant buildings into first class, multi-tenant shopping centers at meaningfully higher rents
•
Maximize value of substantial land holdings through retail and mixed-use densification
•
Leverage joint venture relationships with three leading mall REITs
 Right to recapture at least 50% of space at each property leased to Sears Holdings, totaling over 22 million SF
•
Take back ~$4.00 PSF space and re-lease at significantly higher rents while diversifying tenant base
•
Includes right to recapture164 freestanding and attached auto centers totaling 3.6 million SF
•
Includes right to recapture 100% of space at 21 identified properties totaling 3.9 million SF
Portfolio Rent and Square Footage(1)
Square Footage
Portfolio Rent PSF(1)
Annual Rent
Sears
89%
$22.79
$24.00
$18.00
Sears
71%
$11.98
$12.00
3rd Party
Tenants
11%
(1)
(2)
3rd Party
Tenants
29%
$6.00
$4.30
$0.00
Sears Holdings
3rd Party Tenants
(In Place)
3rd Party Tenants
(SNO Leases) (2)
Based on signed leases as of June 30, 2016. Includes proportional share of joint ventures.
Signed, not yet open tenants.
3
Highly Desirable Real Estate
Largest concentrations of asset value in high growth markets
 Diverse real estate: ~50% attached to regional malls and ~50% freestanding or shopping center properties
 Strong demographics: average population density of 584,650(1) and average household income of $70,290(1)
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Geographic Summary
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% of Annual
Base Rent(2)
California
18.9%
Florida
11.8%
New York
6.1%
Texas
5.9%
Illinois
4.3%
New Jersey
4.2%
Pennsylvania
3.9%
Virginia
3.7%
Michigan
3.1%
Puerto Rico
2.9%
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PR
(1)
(2)
Source: US Census Bureau and SNL Financial.
Based on signed leases as of June 30, 2016. Includes proportional share of joint ventures.
4
Investment Highlights
Unique value creation opportunity through retenanting and redevelopment
Significant Growth
Potential
High Quality
Portfolio
• Multiple strategies to significantly grow income and unlock value
• Opportunity to generate material spread to Sears Holdings master lease rent upon redevelopment
• Superior real estate locations reflect Sears' influence as leading anchor when malls and shopping
centers were initially developed
• Substantial presence in high growth markets such as California, Florida and the Northeast
• Management team with extensive experience with retail real estate and repositioning strategies
Fully Integrated
Organization
Strong Financial
Position
(1)
(2)
• In-house leasing, development and construction teams – completed or initiated 30 redevelopment
projects since Company inception in July 2015
• Conservative leverage: total debt equals less than $30 PSF(1)
• Significant liquidity: $250 million of cash on hand and borrowing capacity(1)(2)
As of June 30, 2016.
Includes cash and cash equivalents, restricted cash and borrowing capacity under future funding facility.
5
Summary of Results
Focused on built-in growth opportunity and driving shareholder returns
Financial Results (three months ended June 30, 2016)
Funds from Operations (“FFO”)
$30.2 million, or $0.54 per diluted share
Company FFO
$32.1 million, or $0.58 per diluted share
$209 million(1)
Annualized Total NOI
99.3%
Percentage leased
Leasing Summary
Square
Feet
Annual
Base Rent
Avg. Base
Rent PSF
Signed from inception through June 30, 2016
788,000
$18.8 million
$23.90 PSF
Sears Holdings master lease, same space basis
707,000
$3.5 million
$4.90 PSF
1,044,000
$23.8 million
$22.79 PSF
Total signed not yet open (“SNO”) leases
Dividends Declared
(1)
Third Quarter 2016
$0.25 per share
Second Quarter 2016
$0.25 per share
First Quarter 2016
$0.25 per share
Includes all signed leases and net of rent attributable to the associated space to be recaptured.
6
Tenant Activity
New third-party tenants expected to provide substantial revenue growth
 SNO leases total over $23.8 million of annual rental income at an average of $22.79 PSF(1)
SNO Lease Summary(1)
(In thousands)
Tenant
Floor & Décor, Orchard Supply Hardware
Long's Drugstore (CVS)
PetSmart
Ross Dress for Less
Nordstrom Rack
Saks Off 5th
Nordstrom Rack, Ulta Beauty
Burlington Stores
Dave & Busters
PetSmart
Williams-Sonoma
Forever 21
Outback Steakhouse
Yard House
Multiple
Orvis
Jared the Galleria of Jewelry
BJ’s Brewhouse
Other
Other
Property
Orlando Fashion Square
Freestanding
Freestanding
Freestanding
The Marketplace at Braintree
The Marketplace at Braintree
Freestanding
Multiple
Multiple
Freestanding
Westfield UTC
Westland Mall
King of Prussia Mall (auto center)
King of Prussia Mall (auto center)
Southbay Pavilion (auto center)
Park North Shopping Center (auto center)
Park North Shopping Center (auto center)
Multiple
Various (wholly owned properties)
Various (JV properties)
Location
Square Feet
Orlando, FL
100,000
Honolulu, HI
24,000
Honolulu, HI
20,000
Honolulu, HI
33,000
Braintree, MA
37,000
Braintree, MA
33,000
Memphis, TN
43,000
4 locations
193,000
3 locations
119,000
Rehoboth, DE
19,000
San Diego, CA
16,000
Hialeah, FL
13,000
King of Prussia, PA
8,000
King of Prussia, PA
12,000
Carson, CA
14,000
San Antonio, TX
5,000
San Antonio, TX
6,000
5 locations
38,000
Multiple
157,000
Multiple
151,000
Total
1,044,000
Annual Base
Rent
Annual Base
Rent PSF
$23,793
$22.79
(1) As of June 30, 2016. Includes proportional share of joint ventures.
Note: rent commencement is subject to specific contingencies, as well as build-out and tenant improvement obligations..
7
Redevelopment Update
Progress to date exemplifies magnitude of opportunity to grow NOI and create value
 Delivered nine of 15 projects that were in various stages
of development when acquired by the Company
 Remaining six projects are under development with $9.6
million remaining to be spent(1)
 Announced 15 new, wholly owned redevelopments,
including Sears and Kmart full-line stores, as well as
Sears Auto Centers
 Expected incremental unlevered returns in excess of 12%
(1)
Recent Openings
Anchorage, AK
San Diego, CA
Thousand Oaks, CA
Clearwater, FL
North Miami, FL
Salem, NH
Tulsa, OK
King of Prussia, PA
Greensboro, SC
Virginia Beach, VA
Nordstrom Rack
Pottery Barn Kids, Williams-Sonoma
DSW, Nordstrom Rack
Nordstrom Rack, Whole Foods
Aldi
Dick’s Sporting Goods
Hobby Lobby
Dick’s Sporting Goods, Primark
Floor & Décor, Gabriel Brothers
Nordstrom Rack, Fresh Market, DSW, REI
Redevelopment Pipeline
King of Prussia, PA (auto center)
Yard House, Outback Steakhouse
Braintree, MA
Nordstrom Rack, Saks Off 5th
Honolulu, HI
CVS, PetSmart, Ross Dress for Less
Memphis, TN
Nordstrom Rack, Ulta Beauty
Wayne, NJ
Dave & Busters
Fairfax, VA
Dave & Busters
Madison, WI
Dave & Busters
West Jordan, UT
Burlington Stores
North Hollywood, CA
Burlington Stores
Orlando, FL
Orchard Supply Hardware, Floor & Décor
Multiple locations (4)
BJ's Brewhouse
As of June 30, 2016.
8
Value Creation Through Redevelopment
New redevelopment projects are representative of opportunity to unlock built-in growth
 Projected incremental income of over $21 million drives potential total value creation of nearly $425 million
across 15 new, wholly-owned redevelopment projects(1)
 Estimated incremental yield on cost of 12-13% assuming total estimated project costs of $172.5 million
Estimated Annual Income for 15 New Redevelopments
Illustrative Value Creation from 15 New Redevelopments
$ millions
$ millions
$30.0
$550.0
$27.0
$500.0
$24.0
$450.0
$400.0
$21.0
Total Value
Creation
$350.0
$18.0
$300.0
$15.0
$250.0
$12.0
$200.0
$9.0
$150.0
$6.0
$100.0
$3.0
$50.0
$0.0
$0.0
In-place Income
Sears Holdings
(1)
(2)
(3)
Projected Income (2)
Third Party
Acquisition Value
Cost Basis
Est. Value at Stabilization
Project Costs (3)
Net Value Creation
Includes redevelopment projects in King of Prussia, PA, Braintree, MA, Honolulu, HI, Memphis, TN, Ft. Wayne, IN, Albany, NY, Bowie, MD, Hagerstown, MD, Wayne, NJ, Fairfax, VA, Madison,
WI, West Jordan, UT, North Hollywood, CA and Orlando, FL.
Projected annual income includes assumptions on stabilized rents to be achieved for space under redevelopment. There can be no assurance that stabilized rent targets will be achieved.
Total estimated project costs include termination fees to recapture 100% of certain properties.
9
Recently Completed
Virginia Beach, VA: four first-to-market retailers at front of regional mall
BEFORE:
MARKET STREET
CENTRAL PARK AVE
VIRGINIA BEACH BOULEVARD`
COLUMBUS STREET
INDEPENDENCE BOULEVARD
Pembroke
Mall
CONSTITUTION DRIVE
AFTER:
10
Recently Completed (cont’d)
Thousand Oaks, CA: prime freestanding location in close proximity to “A” mall
Regional Mall
Thousand Oaks, CA
Clearwater, FL: redevelopment of full-line Sears and auto center for premier retailers
Regional Mall
Clearwater, FL
Auto Center
Clearwater, FL
11
New Redevelopment: Honolulu, HI
100% recapture, create multi-tenant shopping center in freestanding location
Total Project Square Feet
Total Estimated Development Cost(1)
Total Estimated Project Costs(1)
Estimated Construction Start
Estimated Substantial Completion
(1)
79,000
$8.5 million
N Nimitz Hwy
Project Details
$19.7 million
Underway
Q2 2017
Total estimated development costs exclude, and total estimated project costs include, termination fees to recapture 100% of the property.
12
New Redevelopment: King of Prussia, PA
Complete redevelopment of premier mall asset with addition of high volume restaurants
MALL BLVD.
Project Details(1)
Total Project Square Feet
Total Estimated Development Cost(2)
$3.9 million
Total Estimated Project Costs(2)
$3.9 million
Estimated Construction Start
NORTH GULPH ROAD
(1)
(2)
29,100
Estimated Substantial Completion
Underway
Q4 2016
Auto center only
Total estimated development costs exclude, and total estimated project costs include, termination fees to recapture 100% of the property.
13
New Redevelopment: Braintree, MA
100% recapture, create multi-tenant shopping center in freestanding location
Project Details
Total Project Square Feet
90,000
Total Estimated Development Cost(1)
$11.7 million
Total Estimated Project Costs(1)
$12.1 million
PearlPlaza
Estimated Construction Start
Estimated Substantial Completion
(1)
Underway
Q4 2016
Total estimated development costs exclude, and total estimated project costs include, termination fees to recapture 100% of the property.
14
New Redevelopment: San Antonio, TX
Repurpose auto center located on highly visible corner across from regional mall
Project Details(1)
Total Project Square Feet
Total Estimated Development Cost(2)
$3.3 million
Total Estimated Project Costs(2)
$3.3 million
Estimated Construction Start
Estimated Substantial Completion
(1)
(2)
18,900
Underway
Q2 2017
Auto center only
Total estimated development costs exclude, and total estimated project costs include, termination fees to recapture 100% of the property.
15
Larger Scale Development Opportunities
Maximize value of overall site through additional retail and mixed uses
 Fee ownership and control over buildings, parking lots and outparcels enable development initiatives
•
Average site of ~13 acres, over 3,000 acres across wholly owned portfolio, drives property densification potential
•
Right to recapture 100% of 21 properties will facilitate certain larger scale development projects
100% Recapture Properties
Property
Location
Square
Feet
Acres
Property
Location
The Mall at Sears
Anchorage, AK
257,940
26
Oglethorpe Mall
Savannah, GA
Inland Center
San Bernardino, CA 264,682
22
Freestanding
Honolulu, HI
Freestanding
Santa Monica, CA
117,801
3
Braintree Marketplace
Westminster Mall
Westminster, CA
197,904
14
Corbin’s Corner
West Hartford, CT
194,385
Town Center at Boca Raton Boca Raton, FL
Aventura Mall
Square
Feet
Acres
155,684
15
77,452
4
Braintree, MA
113,442
34
Freestanding
St. Clair Shores, MI
122,137
11
13
Freestanding
St. Paul, MN
217,930
17
174,333
19
Freestanding
Middletown, NJ
184,540
23
Miami, FL
173,322
12
Freestanding
Watchung, NJ
262,902
19
Southland Mall
Miami, FL
170,122
15
Freestanding
Hicksville, NY
340,434
30
Freestanding
North Miami, FL
106,305
11
Freestanding
Memphis, TN
196,564
11
Orlando Fashion Square
Orlando, FL
202,000
18
Valley View Center
Valley View, TX
229,227
23
Tyrone Square Mall
St. Petersburg, FL
187,000
14
TOTAL
3,946,106
354
Bold indicates that100% recapture rights have been exercised at this property.
16
Joint Venture Partnerships
50% interests in 31 properties through joint ventures with leading regional mall REITS
 Initial investment of $429 million (50% of total joint venture purchase price)
 Opportunity to leverage joint venture partners’ leasing and redevelopment platforms
•
Joint venture partners focused on driving value at top malls in their portfolios through recapturing and re-leasing space
•
Seritage is 50-50 partner and participates in 50% of all net value created
Regional Mall
Location
Regional Mall
Location
Regional Mall
Location
Alderwood
Lynnwood, WA
Barton Creek Square
Austin, TX
Arrowhead Town Center
Glendale, AZ
Coronado Center
Albuquerque, NM
Brea Mall
Brea, CA
Chandler Fashion Center
Chandler, AZ
Natick Collection
Natick, MA
Briarwood
Ann Arbor, MI
Danbury Fair
Danbury, CT
Oakbrook Center
Oak Brook, IL
Burlington Mall
Burlington, MA
Deptford Mall
Deptford, NJ
Paramus Park
Paramus, NJ
Midland Park Mall
Midland, TX
Freehold Raceway Mall
Freehold, NJ
Pembroke Lakes Mall
Pembroke Pines, FL
Ocean County Mall
Toms River, NJ
Los Cerritos Center
Cerritos, CA
Ridgedale Center
Minnetonka, MN
Ross Park Mall
Pittsburgh, PA
South Plains Mall
Lubbock, TX
Sooner Mall
Norman, OK
Santa Rosa Plaza
Santa Rosa, CA
Vintage Faire Mall
Modesto, CA
Staten Island Mall
Staten Island, NY
The Shops at Nanuet
Nanuet, NY
Washington Square Mall
Portland, OR
Stonebriar Centre
Frisco, TX
Woodland Hills Mall
Tulsa, OK
The Mall at Columbia
Columbia, MD
Valley Plaza Mall
Bakersfield, CA
Bold indicates that a recapture notice has been submitted for a portion of the space at this property.
17
Fully Integrated Real Estate Platform
Expertise unlocking real estate value through redevelopment and retenanting
BENJAMIN SCHALL
BRIAN DICKMAN
President
Chief Executive Officer
Exec. Vice President
Chief Financial Officer
Previously served as Chief
Operating Officer of Rouse
Properties (NYSE: RSE).
Prior to that role, was
Senior Vice President with
Vornado Realty Trust
(NYSE: VNO) leading the
suburban retail shopping
center business.
Previously served as
Chief Financial Officer at
Agree Realty (NYSE:
ADC), a growth-oriented
retail REIT. Prior to that
role, was an investment
banker covering the REIT
industry.
MATTHEW FERNAND
Exec. Vice President
General Counsel
MARY ROTTLER
JAMES BRY
EVP, Leasing and
Operations
EVP, Development and
Construction
Previously served as
partner in Sidley Austin
LLP’s Real Estate Group
focusing on real estate joint
ventures and partnerships
and the financing,
development, acquisition
and disposition of
commercial properties.
Previously served as Vice
President of Real Estate
at Wal-Mart (NYSE:
WMT). Prior to that role,
was Vice President for
Realty Supplier
Management and
Compliance. She joined
Wal-Mart in 2001.
Previously served as
Senior Vice President,
Development at Vornado
Realty Trust (NYSE: VNO)
leading development and
construction for the Retail
Division.
 Management team with extensive public company and retail real estate experience
 Experienced team of over 40 full-time development, construction, leasing, legal, finance and accounting professionals
 Assembled national network of leasing brokers and engaged with leading real estate services firm to provide property
management and certain property accounting functions
18
Current Financial Position
Conservative leverage levels and significant liquidity to support capital needs
Capital Structure Summary(1)
($ in millions)
$4,000
$3,500
Current Liquidity Summary(1)
Total Market Capitalization:
$3.94 billion
($ millions)
Cash & Cash Equivalents
Restricted Cash(3)
Total Debt
$1.16 billion
Future Funding Facility
Total Liquidity
$3,000
$63.7
87.0
100.0
$250.7
$2,500
Estimated Annual Cash from Operations(1)(4)
$2,000
$1,500
Market Value
of Equity(2)
$2.78 billion
($ millions)
Net Operating Income
$1,000
G&A expenses
EBITDA
$500
Interest expense
Cash from Operations
$0
$209.0
(17.0)
$192.0
(60.0)
$132.0
Leverage Ratios(1)
Total debt to total market capitalization:
Total debt PSF:
(1)
(2)
(3)
(4)
29.5%
$29
As of June 30, 2016
Market Value of Equity assumes conversion of Operating Partnership units and is based on share price of $49.84 as of 6/30/16.
Restricted cash includes $39.3mm of capital project reserves, $33.4mm of property carry costs in lender reserves and $14.3 million of prepaid rent.
Represents management estimate of annual operating cash flow based on signed leases as of June 30, 2016 (including signed, not yet open (“SNO”) tenants), current estimate of annual
overhead costs and estimated annual interest expense based on current borrowings and interest rates.
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Seritage Growth Properties
489 Fifth Avenue | New York, NY 10017
212-355-7800 | www.seritage.com