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SRG

Seritage Growth Properties NYSE:SRG Stock Report

Last Price

US$9.02

Market Cap

US$505.4m

7D

-1.6%

1Y

-42.0%

Updated

30 Sep, 2022

Data

Company Financials
SRG fundamental analysis
Snowflake Score
Valuation1/6
Future Growth0/6
Past Performance0/6
Financial Health3/6
Dividends0/6

SRG Stock Overview

Seritage Growth Properties is a publicly-traded, self-administered and self-managed REIT with 166 wholly-owned properties and 29 unconsolidated properties totaling approximately 30.4 million square feet of space across 44 states and Puerto Rico.

Seritage Growth Properties Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Seritage Growth Properties
Historical stock prices
Current Share PriceUS$9.02
52 Week HighUS$17.12
52 Week LowUS$4.90
Beta2.79
1 Month Change-28.07%
3 Month Change67.04%
1 Year Change-41.96%
3 Year Change-78.52%
5 Year Change-80.35%
Change since IPO-75.69%

Recent News & Updates

Sep 22

Seritage: Bears Beat Back Bold Bulls

Summary Seritage has a liquidation plan. The $100 million debt paydown was nice to see but there is a tall mountain to climb. Dropping fair value of properties by 20-25% versus earlier estimates gets us to today's stock price. Do you feel lucky in a recession? Discretion is the better part of valor. That definitely rings true in a bear market. When we last covered Seritage Growth Properties (SRG) we were enamored by the prospects for the preferred shares (SRG.PA). We liked the valuation overall for that level of equity, but we did not think the common shares warranted a long position. Specifically we said, While we rate the common shares as neutral, we are ready to put a buy on the preferred shares and would not mind venturing into some option plays to capture the upside. We might have even gone with an outright purchase of the common shares if we thought the macro climate was more benign. But at present we still think the risks for SPX 3,200 are up and center, and we approach all long side ideas defensively. Source: Berkshire Is Not Taking A Haircut Here As SRG announced its plan for selling its remaining assets, the market celebrated. Initially the common shares tore far higher than SRG.PA but then the common fell back as the broader market selloff took hold. Fascinatingly, both are now up about 50% since the article date. We look at what's going on and give you our take. Progress To Date Seritage sold 13 properties during the second quarter of 2022 and generated over $160 million in proceeds. It has also sold a similar amount of properties in Q3-2022 with about $100 million in net proceeds that have been directly applied against the term loan. All of that sounds excellent and it is going a long way to ensure the survival of the company. On the other hand there is some heavy skepticism based on where the stock is trading relative to the price suggested. After all, if SRG expects $18.50-$29.00 as the final value, there is a lot of upside in even the lower end of that spectrum. Changes Since The Announcement Date The plan was announced on July 8. Since then, the markets have moved a bit lower with the Vanguard Real Estate ETF (VNQ) down just 6%. But other market conditions have deteriorated far worse. For example, the one-year Treasury rate which gives a glance at future rate hikes as well a possible terminal Fed Funds rate, has moved from 2.8% to over 4%. Y-Charts The Federal Reserve's first future rate cut, which was projected to be in February 2023 at the time of writing the last article, has moved to September 2023 after the latest Fed meeting. Growth projections have markedly deteriorated as the Atlanta Federal Reserve's Q3 numbers have dropped from over 2.5% GDP growth to about 0.5%. This level of marked deterioration has coincided with negatives in the capital markets as well. A few deals have been pulled in recent months and the sharp rise in interest rates has put a lot of firms on the defensive. Will they bid just as liberally on properties as they would three months back? A lot of these properties are slated for apartment developments or mixed use (residential plus retail). With multifamily units under construction surging to new highs, one can wonder what kind of asset sales will be achieved in the next 12 months under extremely tight financial conditions. Daily Shot-Twitter How To Play It SRG had about $1.4 billion in net liabilities (total liabilities less cash) and an equity market capitalization of close to $500 million. At the $18.50 to $29.00 price band, its enterprise value would be in the $2.5-$3.0 billion range. It is not hard to envision a 20% hair cut to property prices during the steepest percentage rise in interest rates we have ever seen. True Insights-Twitter SRG is of course not selling single family homes, but the concept is identical in that you will see prospective buyers throw some number similar to this in their calculations of what they can pay. If you accept that we can get a 20% hair cut vs July estimates, if a modest recession materializes, your enterprise value drops in the range of $2.0 to $2.4 billion. At the low end this is very close to current enterprise value and share price. Y-charts Your $18-$29 range becomes more like $10-$18. Hence we would not play any direct long positions here on the common shares. The risk is just too great, especially after a 50% run-up. The other issue is simply a delay in getting to the same point. SRG did pay down $100 million on its debt, but even if we adjust Q2-2022 numbers (10-Q) for the lower interest expense, the cash burn remains incredibly high. We have highlighted below the numbers that go into the baseline cash burn before capex from the income statement and that works to about $80 million a year. SRG 10-Q That would move to $73 million annually after the debt paydown. Capex was another $68 million in first half of the year. SRG 10-Q That combined burn rate of over $200 million is incredibly high (40% of common equity market capitalization) and should make bulls cautious.

Shareholder Returns

SRGUS Real EstateUS Market
7D-1.6%-0.9%-2.5%
1Y-42.0%-47.1%-23.2%

Return vs Industry: SRG exceeded the US Real Estate industry which returned -47.1% over the past year.

Return vs Market: SRG underperformed the US Market which returned -21.5% over the past year.

Price Volatility

Is SRG's price volatile compared to industry and market?
SRG volatility
SRG Average Weekly Movement24.4%
Real Estate Industry Average Movement7.5%
Market Average Movement6.9%
10% most volatile stocks in US Market15.6%
10% least volatile stocks in US Market2.8%

Stable Share Price: SRG is more volatile than 90% of US stocks over the past 3 months, typically moving +/- 24% a week.

Volatility Over Time: SRG's weekly volatility has increased from 14% to 24% over the past year.

About the Company

FoundedEmployeesCEOWebsite
201540Andrea Olshanhttps://www.seritage.com

Seritage Growth Properties is a publicly-traded, self-administered and self-managed REIT with 166 wholly-owned properties and 29 unconsolidated properties totaling approximately 30.4 million square feet of space across 44 states and Puerto Rico. The Company was formed to unlock the underlying real estate value of a high-quality retail portfolio it acquired from Sears Holdings in July 2015. The Company’s mission is to create and own revitalized shopping, dining, entertainment and mixed-use destinations that provide enriched experiences for consumers and local communities, and create long-term value for our shareholders.

Seritage Growth Properties Fundamentals Summary

How do Seritage Growth Properties's earnings and revenue compare to its market cap?
SRG fundamental statistics
Market CapUS$505.41m
Earnings (TTM)-US$115.45m
Revenue (TTM)US$108.70m

4.6x

P/S Ratio

-4.4x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
SRG income statement (TTM)
RevenueUS$108.70m
Cost of RevenueUS$75.53m
Gross ProfitUS$33.18m
Other ExpensesUS$148.63m
Earnings-US$115.45m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-2.06
Gross Margin30.52%
Net Profit Margin-106.20%
Debt/Equity Ratio226.9%

How did SRG perform over the long term?

See historical performance and comparison