This is a very interesting quote:
we are engaged in conversations with both our current and potential future lenders as to how to best capitalize our portfolio going forward.”
For those who do not know, Warren Buffett owns 1mm shares personally and Berkshire is a lender to SRG. This gives us a plethora of options to speculate about regarding what those discussions may be about but I won’t go into that because it is normally a simple guessing game. If we get anything concrete to go on I will, of course, start down that path but as of now, speculation is all I have.
Things are getting better at SRG (slowly) and I really do like the fact they are expanding to multi-family housing as there is a real shortage of housing in the US currently. Like HHC, they will have zero issues selling/renting the units and creating more NOI from managing those assets. It is a smart move to counter the uncertainty in retail out there now and also bakes a shopping base into those retail centers. Statistics have proven proximity is the #1 predictor of where people shop, building 400+ housing units within your retail center means those people will regularly frequent your offerings.
Still holding…..
The Release:
]]>Seritage Growth Properties Reports Third Quarter 2021 Operating Results
New York – November 2, 2021– Seritage Growth Properties (NYSE: SRG) (the “Company”), a national owner and developer of 170 retail, residential and mixed-use properties today reported financial and operating results for the three and nine months ended September 30, 2021.
“In the third quarter of 2021, we continued the repositioning of our portfolio into three main business lines: residential developments, both in conjunction with best-in-class partners or led by our in-house team; premier mixed-use assets, including large-scale master planned projects; and multi-tenant retail destinations such as grocery-anchored shopping centers and NNN outparcels,” said Andrea Olshan, Chief Executive Officer and President. “We are particularly excited about our residential opportunities, where we have accelerated the development of roughly 420 acres across 30 sites utilizing our integrated platform. Our team is hard at work advancing our site diligence and rigorously pursuing all necessary entitlements. This in house effort is dual tracked with our residential joint venture developments, and we are excited to be opening the first of these projects in the fourth quarter of this year.”
“As we focus on executing our development and leasing plans, we will continue to evaluate all facets of our company to ensure Seritage is optimally positioned to drive maximum value creation for our shareholders,” Ms. Olshan continued. “As part of this evaluation process, we are engaged in conversations with both our current and potential future lenders as to how to best capitalize our portfolio going forward.”
Financial Highlights:
During the third quarter, the Company reported:
Net loss attributable to common shareholders of ($21.8) million, or ($0.50) per share
Total Net Operating Income (“Total NOI”) of $8.1 million
Funds from Operations (“FFO”) of ($27.7) million, or ($0.49) per share
As of September 30, 2021, the Company had cash on hand of $160.5 million, including $7.2 million of restricted cashFor the nine months ended September 30, 2021:
Net loss attributable to common shareholders of ($104.8) million, or ($2.50) per share
Total NOI of $25.1 million
FFO of ($80.4) million, or ($1.44) per shareBusiness Highlights
Generated $76.8 million of gross proceeds through disposition activity during the three months ended September 30, 2021 for total gross proceeds of $201.0 million year to date. The Company has additional asset sales under contract for anticipated gross proceeds of $224.4 million, subject to buyer diligence and closing conditions;
Closed on joint venture partnerships for the residential redevelopment of two properties located in West Covina, Calif. and Riverside, Calif. The Company contributed only the portion of the site slated for residential, or 66% of the acreage, to the joint venture at a value of $15.9 million (in aggregate), representing $21,300 per unit, and retained an 80% interest in each entity;
Signed four leases covering 101 thousand square feet in the third quarter at an average projected annual rent of $13.86 PSF; and,
Subsequent to quarter end, the Company signed new leases totaling 49 thousand square feet at a base rent of $18.42 PSF (47 thousand square feet at $17.57 at share). Additionally, the Company generated a leasing pipeline of over 350 thousand square feet (approximately 300 thousand square feet at share), of which approximately 120 thousand square feet are office tenants (approximately 60 thousand square feet at share), with the remainder primarily big box value retailers and other national tenants.
Financial Summary
The table below provides a summary of the Company’s financial results for the three months ended September 30, 2021:
(in thousands except per share amounts) Three Months Ended September 30, 2021 June 30, 2021 September 30, 2020 Net loss attributable to Seritage
common shareholders$ (21,759 ) $ (74,065 ) $ (51,278 ) Net loss per diluted share attributable to Seritage
common shareholders(0.50 ) (1.73 ) (1.33 ) Total NOI 8,075 7,553 5,979 FFO (27,696 ) (33,911 ) (19,898 ) FFO per diluted share (0.49 ) (0.61 ) (0.36 ) Company FFO (24,909 ) (29,305 ) (25,093 ) Company FFO per diluted share (0.44 ) (0.52 ) (0.45 )
For the quarter ended September 30, 2021:
Net loss attributable to common shareholders for the third quarter of 2021 includes net gains of $22.8 million, or $0.41 per share, as compared to a net loss of $(14.7) million, or ($0.26) per share, in the third quarter of 2020.
Total NOI for the third quarter of 2021 reflects the impact of property sales and the termination of the remaining Sears leases in the first quarter.
Total NOI is comprised of:
(in thousands) Three Months Ended Consolidated Properties September 30, 2021 Multi-tenant retail $ 11,395 Premier (458 ) Residential (3,099 ) Sell (974 ) Sold 492 Total 7,356 Unconsolidated Properties Residential 50 Premier 132 Other joint ventures 537 Total 719 Total NOI $ 8,075
Company FFO for the third quarter of 2021 includes net $2.9 million, or $0.05 per share, of charges for severance and restructuring costs.
The Company collected 97% of its billed rent and other recoverable expenses for the third quarter and deferred an additional 1%. The reduction in collections from the first quarter is due to a fitness tenant at one location.
As of September 30, 2021, the Company had cash on hand of $160.5 million, including $7.2 million of restricted cash. The Company expects to use these sources of liquidity, together with a combination of future sales and/or potential debt and capital markets transactions, to fund its operations and select development activity. The availability of funding from sales of assets, partnerships and credit or capital markets transactions is subject to various conditions, including the consent of the Company’s lender under its $1.6 billion term loan facility (the “Term Loan Facility”), and there can be no assurance that such transactions will be consummated.
Dispositions
During the three months ended September 30, 2021, the Company sold five properties, generating $76.8 million of gross proceeds. Of the third quarter transactions:
$5.1 million of gross proceeds were from vacant assets sold at $22.87 PSF. The sale of these assets eliminates $0.5 million of carrying costs.
$71.7 million of gross proceeds were from stabilized asset sales at a 5.6% blended in-place capitalization rate.
As of November 2, 2021, the Company had assets under contract for sale representing anticipated gross proceeds of $224.4 million, subject to buyer diligence and closing conditions. The Company intends to realize cumulative gross proceeds of more than $350.0 million in 2021 through its ongoing capital recycling program. Since Seritage began its capital recycling program in July 2017, the Company has raised approximately $1.3 billion of gross cash proceeds from the sale of wholly-owned properties or joint venture interests in 110 properties, plus outparcels at various properties.
Development Activity
During the nine months ended September 30, 2021, the Company invested $77.6 million in its consolidated development and operating properties and an additional $31.7 million into its unconsolidated entities, including $32.6 million and $10.4 million, respectively during the three months ended September 30, 2021.
Multi-Tenant Retail: During the nine months ended September 30, 2021, the Company invested $32.1 million in its multi-tenant retail properties. The last two multi-tenant retail development projects at Roseville, Calif. and Ft. Wayne, Ind. are slated for their grand openings in the fourth quarter of 2021 and third quarter of 2022, respectively, and the remaining capital expenditures in the multi-tenant retail portfolio are primarily comprised of tenant improvements. During the third quarter, the Company opened stores representing 115 thousand square feet and $1.9 million of annual base rent. In total, for the first nine months of 2021, the Company opened stores representing 347 thousand square feet and $5.5 million of annual base rent.
Premier Mixed-Use: During the third quarter of 2021, the Company completed the first phase of its infrastructure work at its Park Heritage project in Dallas, Texas, and expects to complete the second and final phase by the second quarter of 2022. This project is entitled for residential, office and retail, and the Company is in active negotiations with various tenants. During the nine months ended September 30, 2021, the Company invested $33.0 million in its premier mixed-use projects and contributed $3.2 million to its premier mixed-used projects held in unconsolidated entities.
Subsequent to quarter end, the Company announced that the first tenant in its inaugural premier redevelopment opened at The Collection at UTC in San Diego, Calif. The Company continues to believe it is on track to open its project in Aventura, Fla., (Miami MSA), in the fourth quarter of 2022.
Residential: During the third quarter of 2021, the Company closed on legacy joint venture partnerships for the residential redevelopment of two properties located in West Covina, Calif. and Riverside, Calif. The Company contributed only the residential portion of these projects, or 66% of the acreage, to the joint venture at a value of $15.9 million (in aggregate), representing $21,300 per unit, and retained an 80% interest in each entity. The Company expects to open its first residential joint venture project in the fourth quarter of 2021. During the nine months ended September 30, 2021, the Company invested $1.2 million in its consolidated residential properties and an additional $12.3 million into its residential unconsolidated joint ventures.
Leasing Results
The table below provides a summary of all signed leases as of September 30, 2021, including unconsolidated entities at the Company’s proportional share:
(in thousands except number of leases and per square foot metrics)
Number of Leased % of Total Annual Base % of Tenant Leases GLA Leased GLA Rent (“ABR”) Total ABR ABR PSF In-place diversified leases 255 5,673 82.2 % $ 92,105 76.4 % $ 16.24 SNO diversified leases (1) 71 1,226 17.8 % 28,527 23.6 % 23.27 Total diversified leases 326 6,899 100.0 % $ 120,632 100.0 % $ 17.49
(1)
SNO = signed not yet opened leases.
Multi-tenant Retail: The Company has 3.5 million leased square feet and 560 thousand square feet signed but not opened. With occupancy at 82%, the Company has 897 thousand square feet available for lease. During the three months ended September 30, 2021, the Company signed new leases at its retail properties totaling 96 thousand square feet at an average base rent of $13.11 PSF.
Additionally, the Company generated a leasing pipeline of over 200 thousand square feet comprised of big box value retailers and other national tenants.
Premier Mixed-Use: The Company has three premier mixed-use projects in the active leasing stage. In addition, for the office components of its mixed-use projects, the Company plans to sign leases prior to construction. As of September 30, 2021, the Company has 59 thousand leased square feet (47 thousand at share), 166 thousand square feet signed but not opened (157 thousand at share), and 389 thousand square feet available for lease (246 thousand at share). Additionally, the Company generated a leasing pipeline of approximately 150 thousand square feet (73 thousand at share).
The table below provides a reconciliation of SNO leases from June 30, 2021 to September 30, 2021, including unconsolidated entities at the Company’s proportional share:
(in thousands except number of leases and per square foot metrics)
(in thousands except number of leases and PSF data) Number of Annual SNO Leases GLA ABR Rent PSF As of June 30, 2021 83 1,349 $ 32,339 $ 23.97 Opened (14 ) (208 ) (3,793 ) 18.26 Sold / Contributed to JVs / terminated (2 ) (50 ) (1,025 ) 20.50 Signed (1) 4 135 1,006 7.44 As of September 30, 2021 71 1,226 $ 28,527 $ 23.27
(1)
One signed lease is at a property the Company expects to sell.
During the three months ended September 30, 2021, the majority of the $1.0 million of SNO leases that were sold, contributed to unconsolidated entities or terminated were comprised of leases opportunistically terminated, or expected to be terminated, at the Company’s option to either mitigate tenant exposure risk or retain the space to execute on what we believe is a more accretive plan.
Dividends
On July 27, 2021, the Company’s Board of Trustees declared a preferred stock dividend of $0.4375 per each Series A Preferred Share. The preferred dividend was paid on October 15, 2021 to holders of record on September 30, 2021.
On October 26, 2021, the Company’s Board of Trustees declared a preferred stock dividend of $0.4375 per each Series A Preferred Share. The preferred dividend will be payable on January 14, 2022 to holders of record on December 31, 2021.
The Company’s Board of Trustees does not expect to declare dividends on its common shares in 2021 unless required to do so to maintain REIT status.
Supplemental Report
A Supplemental Report will be available in the Investors section of the Company’s website, www.seritage.com.
COVID-19 Pandemic
The Coronavirus (“COVID-19”) pandemic has caused and continues to cause significant impacts on the real estate industry in the United States, including the Company’s properties.
As a result of the development, fluidity and uncertainty surrounding this situation, the Company expects that these conditions may change, potentially significantly, in future periods and results for the three and nine months ended September 30, 2021 may not be indicative of the impact of the COVID-19 pandemic on the Company’s business for future periods. As such, the Company cannot reasonably estimate the impact of COVID-19 on its financial condition, results of operations or cash flows over the foreseeable future.
Buffett added another ~14MM shares of BAC in the last week.
On a recent podcast I was asked about BAC and at the time said its current valuation was compelling and I still liked their long-term prospects so was not inclined to sell.
Seems Warren agrees?
The selloff in BAC is overblown vs its long term prospects. Buffett stepping in a materially increasing his ownership ought to be evidence enough of that. Q2 earnings took a hit (as expected) but were not nearly as bad as many thought they would be.
Now, as I’ve said, I am very concerned about Q3 and 4 this year. However, BAC and big banks, in general, are in a much different spot than they were in 2008-09. I think if we go into a recession, of course, bank stocks will get hit a bit (although I’m not sure how much more than they already have been) but I think the big banks pick up significant market share from smaller banks. So, in this scenario coming out of any recession, they’ll do so in a much stronger position. Add to that the backing of Buffett if the shit really hits the fan and I’m perfectly happy sitting in this for many years to come.
- Warren Buffett scooped up 34M shares of Bank of America (NYSE:BAC) over the last few days – at an average price of about $24 – taking his stake in the banking giant to over 11% (from about 7.4%).
- Buffett made the move with BAC shares down nearly 32% since the beginning of the year. The stock is up 1.6% premarket on the news.
“Davidson” submits:
]]>The Federal Register(FR) data is released annually mid-year for the prior year. This is one of the least noticed data releases yet remains the most important market and inflation indicator yet to be recognized. There is a significant portion of investors who seek earliest access to data in order to trade ahead of the consensus. It is a focus which leads to active trading via computer driven algorithms as ever more detailed and timely data comes into view. Data of this type of called “High Frequency”. The most frequent data are price trends which can emerge and disappear within days which is responsible for huge market swings as Hedge Funds jump from position to position. Data which is updated with ‘low frequency’ is ignored as not tradable. This leaves the FR data ignored when in fact it provides the most important of future economic signals leaving every other data series as secondary indicators.
The FR reflects a summary of the Federal regulatory burden on society. Mostly regulation has added costs of compliance to society and for this reason a higher page count in the annual FR has considerable correlation with inflation and business fundamentals which market psychology translates to equity and fixed income market performances. The relationship is higher regulatory burden results in higher inflation, weaker business performance, higher unemployment and weaker equity markets. With weaker equity markets, there is an domino impact to pension plan performance adding additional burdens to business. The FR is imperfect as a guide as regulations to reduce regulatory activity also add to the annual page count. Interpretation of the FR requires taking into account the policy stance of the current administration towards regulatory policy.
https://regulatorystudies.columbian.gwu.edu/reg-stats
“The number of pages in the Federal Register—the daily journal of the federal government in which all newly proposed rules are published along with final rules, executive orders, and other agency notices—provides a sense of the flow of new or changed regulations issued during a given period. These regulations might increase or decrease regulatory burdens, making this an imperfect—but frequently cited—measure of regulatory burden.”
The current administration has clearly been reducing society’s regulatory burden. Current statements indicate a continuation of these actions. The last time the US saw this level of deregulation was during President Reagan time in office. The ‘miracle economy’ still leaves many economists in awe having little comprehension why it occurred. Bringing hindsight to bare in comparison with recent economic responses to the policies of the current administration has allowed important but previously hidden relationships to emerge. The first time this occurred under Pres. Reagan, it seemed a fluke. The second time, as is currently in process, shows this was no fluke at all and leads to reinterpretation of previously held assumptions regarding inflation, money supply, employment, productivity and etc.
The short and simple interpretation is that less regulation is correlated with less inflation, higher pace of economic activity, higher employment and productivity. This has already proved the case since 2017. Reduction in regulation has a long term impact, perhaps lasting10rys or longer, till another regulatory burden is imposed. Money supply growth or too much hiring as causes of inflation are debunked as being important sources of inflation. Oil pricing is a response to inflation, not a cause of inflation. While poorly managed directed-government spending is inflationary, this source is not as important as regulatory over-burden. Low unemployment only occurs when economic demand is productive for hiring. There is no record of business hiring to make themselves less productive. In other words, higher unemployment correlates to higher inflation as businesses seek to lower costs.
The US entered the COVID-19 with the best context of economic conditions and level of activity in more than 50yrs mostly due to Domestic regulation reductions, initiatives to lower global tariffs and lower domestic taxation. US debt delinquencies were trending towards 17yr lows even in the face of several bouts of stronger US$ which clearly hurt industrial and farming exports. The periods of strong US$ are the result of global capital seeking better capital returns than elsewhere. Each instance of stronger US$ was met with economic activity taking a period to adjust before resuming its upward trajectory.
The short term evidence today suggests a rapid recovery from the COVID-19 shutdown period. Railcar traffic has returned to ~98% pre-COVID-19 levels in the latest report. Railcar traffic is Warren Buffett’s favorite indicator.
Warren Buffett was right: Trains are awesome at telling you what’s going on in the economy
https://www.businessinsider.com/warren-buffetts-railcar-desert-island-indicator-is-accurate-2015-6
While most are looking at the weekly high frequency tea leaves to parse economic trends, the annual FR data is forecasting a vibrant economic future. Strong economic activity and rapid recovery from events like the unexpected COVID-19 is occurring primarily because lower regulatory burden makes it easier for society to adjust and regain its traction. Should additional deregulation occur, we can expect additional positive economic responses as long as net deregulation results in positives for society as a whole. FR data is the most important big picture indicator for future economic activity in my opinion and its forecast is quite positive.
Rates remain historically low with the 10yr Treasury at 0.07% while equity returns are many fold higher. Even companies with long records of paying dividends with dividends above 2% today represent more than 20 fold better long term returns relative to 10yr Treas. Buy equities!
Remember when the shorts were telling us that Berkshire was going to foreclose on their loan to SRG and take control? Not gonna happen…
Additionally, we reached an agreement with Berkshire Hathaway to modify our Term Loan Facility, providing us with the flexibility to defer interest expense under certain circumstances.”
It isn’t going to happen unless things get significantly worse for SRG. With the economy reopening, that is unlikely. I bought more of this when it was in the $6’s and still think there is plenty of upside to shares. Q2 results for most companies are going to be dreadful but what will matter is what has happened from mid-May on as that is when most states are opening back up.
I still think demand is repressed and not destroyed and people will clamor for normal things once forced lockdowns are lifted.
The Release:
]]>Seritage Growth Properties Reports First Quarter 2020 Operating Results
– Provides business update regarding impact of COVID-19 pandemic –
New York, NY – May 7, 2020 – Seritage Growth Properties (NYSE: SRG) (the “Company”), a national owner of 208 retail and mixed-use properties totaling approximately 32.8 million square feet of gross leasable area (“GLA”), today reported financial and operating results for the quarter ended March 31, 2020.
Summary Financial Results
For the quarter ended March 31, 2020:
• Net loss attributable to common shareholders of $21.9 million, or $0.59 per share
• Total Net Operating Income (“Total NOI”) of $15.8 million
• Funds from Operations (“FFO”) of ($17.6) million, or ($0.31) per share
• Company FFO of ($18.4) million, or ($0.33) per share COVID-19 Pandemic and Business Update
In response to the anticipated impact of the COVID-19 pandemic on its business and the communities in which it operates, the Company has taken a number of measures to reduce operating expenses while preserving the value of its assets and its platform:
• Adapted operations to protect employees and their families, including by implementing a work from home policy;
• Communicated consistently with tenants, including to provide assistance in identifying local, state and federal resources that may be available to support their businesses and employees;
• Made over 180 properties available to governmental and community organizations for relief efforts at no cost;
• Implemented plans to reduce operating expenses at the property and corporate level, each by approximately 20-25%; and
• Put substantially all construction projects on hold at the end of March, limiting capital expenditures until the Company can better assess the duration and extent of the disruption to the economy and its business. Subsequent to the quarter ended March 31, 2020, the Company:
• Amended its Term Loan Facility to provide increased flexibility with respect to the deferral of interest expense, under specified circumstances, until the Term Loan Facility matures in July 2023. As part of the amendment, the lender also reaffirmed its continued support for asset dispositions, subject to the lender’s right to approve individual transactions;
• Collected April rental income representing 47% of contractual amounts, including 54% from tenants other than Transform Holdco LLC (“Sears” or “Holdco”);
• Sold one asset for gross proceeds of $10.0 million, bringing total gross sales proceeds for the year to $70.4 million; and
• Entered into contracts to sell assets for anticipated gross proceeds of $78.2 million; as of May 6, 2020, the Company had asset sales under contract for anticipated gross proceeds of $135.1 million, subject to buyer diligence and closing conditions. “While we began 2020 focused on the continued execution of our redevelopment program, the COVID-19 pandemic has had a meaningful near-term impact on our business and that of our tenants. Our first priority is always the health and safety of our team, our communities and our partners, and we moved quickly to implement changes at both the corporate and property level,” said Benjamin Schall, President and Chief Executive Officer. “We took a number of immediate steps to reduce operating expenses to partially offset expected reductions in rental income, and also placed substantially all of our construction projects on hold for a period of time.
Additionally, we reached an agreement with Berkshire Hathaway to modify our Term Loan Facility, providing us with the flexibility to defer interest expense under certain circumstances.”
Mr. Schall continued, “The foundation of our platform is to convert well-located former retail real estate into a broad set of new uses in enhanced physical environments. While recognizing the temporary and potentially permanent changes from the COVID-19 pandemic, we believe our portfolio, which consists of over 30 million square feet of existing buildings and 2,500 acres of land, is a unique and valuable asset, with a multitude of possibilities for end use. The breadth of our property holdings should allow us to select the best go-forward opportunities for redevelopment and engage with potential buyers for a variety of other assets as we continue our strategy to realize value and generate additional liquidity through asset monetization. As we look ahead, our team, track record, relationships with tenants and partnerships with mixed-use developers and capital providers position us to be a leader in the transformation of real estate that will be necessary as part of the larger economic recovery in our communities.”
Operating Results
During the quarter ended March 31, 2020, the Company signed new leases totaling 203,000 square feet (124,000 square feet at share) at an average base rent of $20.63 PSF ($21.97 PSF at share). On a same-space basis, new rents averaged 3.6x prior rents for space formerly occupied by Sears or Kmart, increasing to $22.01 PSF for new tenants compared to $6.06 PSF paid by Sears or Kmart across 122,000 square feet.
Below is a summary of the Company’s leasing activity, including its proportional share of unconsolidated joint ventures, for the quarter ended March 31, 2020 and since the Company’s inception in July 2015:
(in thousands, except PSF amounts) Since Q1 2020 Inception Leases 12 414 Square feet 124,000 10,551,000 Annual base rent ($000s) $ 2,735 $ 182,502 Annual base rent PSF (1) $ 21.97 $ 18.34 Re-leasing multiple (1)(2) 3.6 x 4.0 x
(1) Excludes certain self storage, medical office, auto-related and ground leases.
(2) Excludes densification square footage (e.g. new outparcel developments) and backfill of vacant space not previously occupied by Sears or Kmart.
The table below provides a summary of all the Company’s signed leases as of March 31, 2020, including unconsolidated joint ventures presented at the Company’s proportional share:
(in thousands except number of leases and PSF data) Number of Leased % of Total Annual Base % of Tenant Leases GLA Leased GLA Rent (“ABR”) Total ABR ABR PSF In-place diversified leases 281 6,864 53.3 % $ 97,972 51.7 % $ 14.27 SNO diversified leases (1) 173 3,917 30.4 % 80,786 42.6 % 20.62 Total diversified leases 454 10,781 83.8 % $ 178,758 94.3 % $ 16.58 Sears or Kmart (2) 19 2,091 16.2 % 10,807 5.7 % 5.17 Total 473 12,872 100.0 % $ 189,565 100.0 % $ 14.73
(1) SNO = signed but not yet opened leases.
(2) Includes 17 properties subject to a master lease (the “Holdco Master Lease”) between the Company and affiliates of Holdco, an affiliate of ESL Investments, Inc., and two leases between the Company’s unconsolidated joint ventures and Holdco. Development
The Company put substantially all of its construction projects on hold at the end of March and reduced capital expenditures to a select handful of projects. The Company deemed this action prudent in light of the COVID-19 pandemic, the resulting economic uncertainty and the direct impacts on its business, including reductions in rental income and the potential effects on future asset sales, which have been a meaningful source of capital for the Company’s development program.
These decisions were also influenced by tenant and construction uncertainty, including tenants’ ability to construct and open new stores and the feasibility of sustaining labor levels with safe working conditions and sourcing supplies, as well as restrictions at the state and local levels, including restrictions on construction and difficulties obtaining inspections and permits.
As of March 31, 2020, the Company had originated 91 retail redevelopment projects since the Company’s inception. Excluding six projects that have been sold, these projects represented an estimated total investment of $1.6-1.7 billion ($1.4-1.5 billion at share), of which an estimated $570-650 million ($520-600 million at share) remained to be spent under the original development plans. Additionally, the Company had recently announced its first three multifamily projects, each of which represented the first phase of larger, mixed-use developments and were expected to have an aggregate incremental cost of $325-350 million for the initial phases.
In this interim period, the Company is working with tenants to preserve signed leases and modify schedules for the projected completion of work and opening of the projects. Once the Company can better assess economic conditions, including the tenant environment and state of the transaction markets, it expects to focus its capital on projects with nearer-term rent commencements and superior value creation prospects, and with tenants and uses that the Company believes can thrive in a post-COVID environment.
Transactions
During the quarter ended March 31, 2020, the Company completed the sale of four properties totaling 475,000 square feet and generated gross proceeds of $60.4 million.
Approximately $56.9 million of the Company’s asset sales were income-producing assets sold at a blended cap rate of 5.5%. The remaining $3.5 million represented a smaller market asset sold at approximately $40 PSF.
Subsequent to March 31, 2020, the Company sold one asset for $10.0 million and entered into contracts to sell six additional assets. As of May 6, 2020, the Company had assets under contract for sale representing anticipated gross proceeds of $135.1 million, subject to buyer diligence and closing conditions.
Since it began its capital recycling program in July 2017, the Company has raised over $770 million from the sale or joint venture of interests in 70 properties, plus outparcels at several properties, and reinvested the majority of the proceeds into its redevelopment pipeline.
Balance Sheet and Liquidity
As of March 31, 2020, the Company had cash on hand of $96.7 million and, as of May 6, 2020, the Company had closed one asset sale in Q2 2020 for $10.0 million and had additional asset sales under contract for anticipated gross proceeds of $135.1 million. The Company expects to use these sources of liquidity, together with a combination of future sales of wholly-owned assets and joint venture interests and/or potential credit and capital markets transactions to fund its operations and, on a limited basis given the current environment, select development activity.
The availability of funding from sales of assets and credit or capital markets transactions is subject to various conditions, including the consent of the Company’s lender under its $2.0 billion term loan facility (the “Term Loan Facility”), and there can be no assurance that such transactions will be consummated.
On May 5, 2020, the Company and Berkshire Hathaway, the administrative agent and the lender under the Term Loan Facility, entered into an amendment (the “Amendment”) to the agreement governing the Term Loan Facility that permits the deferral of interest payments based on the amount of Available Cash (as defined in the Amendment) for each period. If Available Cash is less than or equal to $30 million in a period, the Company shall pay current interest to the extent such Available Cash exceeds $20 million (provided any such interest payment will not exceed the amount otherwise due under the Term Loan Facility). Any deferred interest payments will accrue interest at 2.0% in excess of the then applicable interest rate and shall be due and payable when the Term Loan Facility matures on July 31, 2023; provided that the Company is required to pay any deferred interest from Available Cash in excess of $30 million (unless otherwise agreed to by the administrative agent under the Term Loan Facility in its sole discretion), and the repayment of any outstanding deferred interest will be a condition to any borrowings under the $400 million Incremental Funding Facility described below. Additionally, the Amendment provides that the administrative agent and the lenders express their continued support for asset dispositions, subject to the Administrative Agent’s right to approve the terms of individual transactions due to the occurrence of a Financial Metric Trigger Event, as such term is defined under the Term Loan Facility.
Our Term Loan Facility includes a $400 million Incremental Funding Facility, access to which is subject to rental income from non-Sears Holdings tenants of at least $200 million, on an annualized basis and after giving effect to SNO leases expected to commence rent payment within 12 months, which we have not yet achieved. The timing of our ability to access the Incremental Funding Facility, if at all, will be adversely impacted by the COVID-19 pandemic.
Very good results for BAC today on the back of the news Buffett wants to be able to exceed 10% ownership:
(Reuters) – Warren Buffett’s Berkshire Hathaway Inc is seeking permission from the Federal Reserve to boost its stake in Bank of America Corp above the 10% level, according to an application document provided by the Fed on Tuesday.
Bloomberg first reported the application on Tuesday. Shares of BofA gained 3% after the report came out, dipping slightly to close at 2.02%.
Berkshire, which has a 9.96% stake in BofA, filed an application with the Fed this month, assuring the regulator that it will passively invest in the bank and will not try to force a change in strategy or corporate structure.
A quick look at the results:
- Q3 Non-GAAP EPS of $0.75 beats by $0.07;
- GAAP EPS of $0.56 beats by $0.05.
- Revenue of $22.8B (+0.4% Y/Y) beats by $70M.
Q3 2019 Bank of America Financial Results Press Release by Todd Sullivan on Scribd
Below is the earnings presentation. there is not a single slide here that is concerning in any way. Not one. Every division is growing and loan loses are falling as well as the necessary reserves for them. For those worried about housing, even their exposure there has fallen. It’s no wonder Warren wants to buy more.
The Presentation Materials by Todd Sullivan on Scribd
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1- Warren Buffett’s Berkshire Hathaway discloses it holds 950M Bank of America shares, about a 10.4% stake, in an SEC filing. Bloomberg reports that’s ~53.8M more BAC shares than Berkshire reports holding as of March 31, 2019.
2- Williams says it has placed into service the Norphlet deepwater gas gathering pipeline system, extending the reach of its pipeline network by connecting the existing Transco offshore pipeline lateral to the Jurassic play developed by Shell and Cnooc in the eastern Gulf of Mexico.
3- More than a dozen public pension funds are investing in marijuana through a California real estate investment trust (REIT), a sign that institutional investors wielding billions of dollars in state funds are comfortable pumping money into the cannabis industry.
4- Pipeline, terminal shortages will continue to hamper Permian growth. Houston Chronicle. Growth in the booming Permian Basin has slowed this year and that trend will continue because of ongoing pipeline and export terminal shortages for the next year or so. Although there’s a race to build both thousands of miles of pipelines from West Texas to the Gulf Coast and massive new export terminals both on and offshore, the temporary shortages will lead to greater stops and starts and more pollution, said Eugene Kim, research director at Wood Mackenzie. A lack of natural gas pipelines, in particular, is slowing oil production growth as well because they all come out of the ground together and need to be monetized.
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