CORPORATE PROFILE MARCH 2016

Transcription

1 CORPORATE PROFILE MARCH 2016

2 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

3 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) Portfolio Rent PSF (1) Sears 91% Square Footage Sears 76% Annual Rent $24.00 $18.00 $12.00 $11.78 $ rd Party Tenants 9% 3rd Party Tenants 24% $6.00 $0.00 $4.30 Sears Holdings 3rd Party Tenants (In Place) 3rd Party Tenants (SNO Leases) (2) (1) Based on signed leases as of December 31, Includes proportional share of joint ventures. (2) Signed, not yet open tenants. 3

4 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 582,892 (1) and average household income of $75,538 (1) AK HI PR Geographic Summary % of Annual Base Rent (2) California 19.7% Florida 11.4% New York 6.2% Texas 6.1% Illinois 4.5% Pennsylvania 4.1% New Jersey 3.5% Michigan 3.2% Virginia 3.2% Puerto Rico 3.1% (1) Source: Scan/US,Inc. 10-mile radius; excludes Puerto Rico. (2) Based on signed leases as of December 31, Includes proportional share of joint ventures. 4

5 Investment Highlights Unique value creation opportunity through retenanting and redevelopment Significant Growth Potential Multiple strategies to significantly grow income and unlock value Opportunity to generate material spread to Sears Holdings master lease rent upon redevelopment High Quality Portfolio 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 Fully Integrated Organization Management team with extensive experience with retail real estate and repositioning strategies In-house leasing, development and construction teams recently completed seven projects; executing on eight in-process and five newly announced projects Strong Financial Position Conservative leverage: total debt equals less than $30 PSF (1) Significant liquidity: $250 million of cash on hand and borrowing capacity (1)(2) (1) As of December 31, (2) Includes cash and cash equivalents, restricted cash and borrowing capacity under future funding facility. 5

6 Summary of Results Focused on built-in growth opportunity and driving shareholder returns Financial Results (three months ended December 31, 2015) Funds from Operations ( FFO ) $31.3 million or $0.56 per diluted share Normalized FFO $32.9 million or $0.59 per diluted share Annualized Total NOI $199 million (1) Total occupancy 99.4% Operational Highlights Square Feet Avg. Base Rent New leases signed through December 31, ,000 $30.03 PSF New leases signed through March 1, 2016 (2) 370,000 $31.50 PSF Avg. base rent paid by Sears Holdings, same space basis (2) $6.15 PSF Period from July 7, 2015 to December 31, 2015 First Quarter 2016 Dividends Declared $0.50 per share $0.25 per share (1) Includes all signed leases and net of rent attributable to the associated space to be recaptured. (2) Refers to 370,000 square feet of space signed from inception through March 1,

7 Redevelopment Update Progress to date exemplifies magnitude of opportunity to grow NOI and create value Delivered seven of 15 projects that were in various stages of development when acquired by the Company Remaining eight projects are under development with $21.7 million remaining to be spent (1) Recent Openings Thousand Oaks, CA Anchorage, AK Clearwater, FL North Miami, FL Salem, NH King of Prussia, PA DSW, Nordstrom Rack Nordstrom Rack Nordstrom Rack, Whole Foods Aldi Dick s Sporting Goods Dick s Sporting Goods, Primark Announced five new, wholly owned projects, including three 100% recaptures of Sears full-line stores and two auto centers Expected incremental unlevered returns in excess of 12% (1) As of December 31, (2) Recapture notice submitted subsequent to December 31, Braintree, MA Honolulu, HI Memphis, TN King of Prussia, PA (auto center) San Antonio, TX (2) (auto center) Redevelopment Pipeline Nordstrom Rack, Saks Off 5 th Longs Drugs (CVS), PetSmart Ross Dress for Less Nordstrom Rack Yard House Outback Steakhouse Orvis Jared s Jeweler 7

8 Tenant Activity New third-party tenants expected to provide substantial revenue growth SNO leases total over $12.9 million of annual rental income at an average of $20.73 PSF (1) Additional $4.9 million of annual rental income related to recent store openings (1) (In thousands) SNO Lease Summary (1) Tenant Property Location Square Feet Nordstrom Rack Pembroke Mall Virginia Beach, VA 33,400 The Fresh Market Pembroke Mall Virginia Beach, VA 25,800 DSW Pembroke Mall Virginia Beach, VA 17,400 REI Pembroke Mall Virginia Beach, VA 27,300 Outback King of Prussia Mall (auto center) King of Prussia, PA 8,000 Yard House King of Prussia Mall (auto center) King of Prussia, PA 12,300 Nordstrom Rack The Marketplace at Braintree Braintree, MA 36,500 Nordstrom Rack Freestanding Memphis, TN 33,200 Orvis (auto center) San Antonio, TX 5,000 PetSmart Freestanding Honolulu, HI 19,600 Long's Drugstore (CVS) Freestanding Honolulu, HI 23,800 Williams-Sonoma Westfield UTC San Diego, CA 16,300 Hobby Lobby Woodland Village Shopping Center Tulsa, OK 84,200 Forever 21 Westland Mall Hialeah, FL 13,000 Multiple Southbay Pavilion (auto center) Carson, CA 14,000 Other Various (wholly owned properties) Various 102,000 Other Various (JV properties) (3) Various 153,900 Annual Base Rent Annual Base Rent PSF Total 623,800 $12,936 $20.73 (1) As of December 31, Includes proportional share of joint ventures. Note: rent commencement is subject to specific contingencies, as well as build-out and tenant improvement obligations.. 8

9 Recently Completed 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 9

10 COLUMB US STREET VIRGINIA BEACH BOULEVARD Under Construction: Virginia Beach, VA Pembroke Mall Four first-to-market retailers at front of regional mall BEFORE: INDEPENDENCE BOULEVARD MARKET STREET CENTRAL PARK AVENUE Pembro ke Mall CONSTITUTION DRIVE RENDERING OF NEW PROJECT: 10

11 Under Construction: Carson, CA Southbay Pavilion Repurpose of auto center located on highly trafficked corridor BEFORE: LEAPWOOD AVE. Southbay Pavilion RENDERING OF NEW PROJECT: 11

12 N Nimitz Hwy New Redevelopment: Honolulu, HI 100% recapture, create multi-tenant shopping center in freestanding location Project Details Total Project Square Feet 79,000 Total Estimated Development Cost (1) Total Estimated Project Costs (1) $8.5 million $19.7 million Estimated Construction Start Q Estimated Substantial Completion Q (1) Total estimated development costs exclude, and total estimated project costs include, termination fee to recapture 100% of the property. 12

13 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 29,100 Total Estimated Development Cost (2) Total Estimated Project Costs (2) $3.9 million $3.9 million NORTH GULPH ROAD Estimated Construction Start Q Estimated Substantial Completion Q (1) Auto center only (2) Total estimated development costs exclude, and total estimated project costs include, termination fees to recapture 100% of the property. 13

14 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) Total Estimated Project Costs (1) $11.7 million $12.1 million Pearl Plaza Estimated Construction Start Q Estimated Substantial Completion Q (1) Total estimated development costs exclude, and total estimated project costs include, termination fee to recapture 100% of the property. 14

15 Value Creation Through Redevelopment New redevelopment projects are representative of opportunity to unlock built-in growth Projected incremental rent of nearly $8.0 million drives potential total value creation of over $135 million across five new, wholly-owned redevelopment projects (1) Estimated incremental yield on cost of 12-13% assuming total estimated project costs of $64.2 million Estimated Annual Base Rent for 5 New Redevelopments $12.0 Illustrative Value Creation from 5 New Redevelopments $200.0 $9.0 $150.0 $6.0 $100.0 Total Value Creation $3.0 $50.0 $0.0 In-place Rent Projected Rent (2) $0.0 Acquisition Value Est. Value at Stabilization Sears Holdings 3rd Party Cost Basis Project Costs (3) Net Value Creation (1) Includes redevelopment projects in Braintree, MA, Honolulu, HI, Memphis, TN, King of Prussia, PA and San Antonio, TX. (2) Projected annual base rent includes assumptions on stabilized rents to be achieved for space under redevelopment. There can be no assurance that stabilized rent targets will be achieved. (3) Total estimated project costs include termination fees to recapture 100% of the property. 15

16 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 The Mall at Sears Anchorage, AK 257, Inland Center San Bernardino, CA 264, Freestanding Santa Monica, CA 117,801 3 Westminster Mall Westminster, CA 197, Corbin s Corner West Hartford, CT 194, Town Center at Boca Raton Boca Raton, FL 174, Aventura Mall Miami, FL 173, Southland Mall Miami, FL 170, Freestanding North Miami, FL 106, Orlando Fashion Square Orlando, FL 202, Tyrone Square Mall St. Petersburg, FL 187, Property Location Square Feet Acres Oglethorpe Mall Savannah, GA 155, Freestanding (1) Honolulu, HI 77,452 4 Braintree Marketplace (1) Braintree, MA 113, Freestanding St. Clair Shores, MI 122, Freestanding St. Paul, MN 217, Freestanding Middletown, NJ 184, Freestanding Watchung, NJ 262, Freestanding Hicksville, NY 340, Freestanding (1) Memphis, TN 196, Valley View Center Valley View, TX 229, TOTAL 3,946, (1) 100% recapture rights have been exercised at this property. 16

17 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 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 (1) 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 (1) 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 (1) 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 (1) Bakersfield, CA (1) A recapture notice has been submitted for a portion of the space at this property. 17

18 Fully Integrated Real Estate Platform Expertise unlocking real estate value through redevelopment and retenanting BENJAMIN SCHALL President Chief Executive Officer BRIAN DICKMAN Exec. Vice President Chief Financial Officer MATTHEW FERNAND Exec. Vice President General Counsel MARY ROTTLER EVP, Leasing and Operations JAMES BRY EVP, Development and Construction 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. 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 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 30 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

19 Current Financial Position Conservative leverage levels and significant liquidity to support capital needs Capital Structure Summary (1) Current Liquidity Summary (1) ($ in millions) $3,500 $3,000 $2,500 Total Market Capitalization: $3.40 billion Total Debt $1.16 billion ($ millions) Cash & Cash Equivalents $62.9 Restricted Cash (3) 92.5 Future Funding Facility Total Liquidity $255.4 $2,000 $1,500 $1,000 $500 $0 Market Value of Equity (2) $2.24 billion Leverage Ratios (1) Total debt to total market capitalization: 34.1% Total debt PSF: $29 Estimated Annual Cash from Operations (1)(4) ($ millions) Net Operating Income $199.0 G&A expenses (15.0) EBITDA $184.0 Interest expense (58.0) Cash from Operations $126.0 (1) As of December 31, 2015 (2) Market Value of Equity assumes conversion of Operating Partnership units and is based on share price of $40.22 as of 12/31/15. (3) Restricted cash includes $28.7mm of capital project reserves, $22.6mm of deferred/environmental maintenance reserves and $41.2mm of property carry costs in lender reserves. (4) Represents management estimate of annual operating cash flow based on signed leases as of December 31, 2015 (including signed, not yet open ( SNO ) tenants), current estimates of annual overhead costs and estimated annual interest expense based on current borrowings and interest rates. 19

20 Seritage Growth Properties 489 Fifth Avenue New York, NY