Down to Business: Seritage situation only gets more confusing

This is starting to get confusing.

Seritage Growth Properties, owner of former Sears and Kmart sites nationwide, now says it wants to sell all of those real estate holdings, pay off liabilities and dissolve.

The plans are detailed in a preliminary proxy filed with regulators for an annual shareholders’ meeting at a yet-to-be-determined date.

According to the document, amended last week, pursuing multiple deals with different buyers is preferable to trying to sell the company as a whole, since the “diversified nature of our portfolio” — residential, retail and mixed-use — means there is “low likelihood” of finding one buyer.

So Seritage asks that shareholders give the board of trustees authority to sell off 160 properties one by one or in groups. (A deal to sell the whole company would still be considered.) A two-thirds vote at the annual meeting would be required for approval.

Actual sales then could take 18 to 30 months to complete, according to the document, which pegs the potential total gross sale proceeds at $2.8 billion to $3.5 billion. After liabilities are paid, shareholders could see a return of $18.50 to $29 per share. Shares were trading in the $12.50 range this week.

Seritage, once Sears and Kmart’s landlord, established a committee of independent trustees in January to review “strategic alternatives.”

That followed an earlier reorganization of holdings by end use – multi-tenant retail; premier mixed-use; residential; joint-venture retail – that also designated dozens of “non-core properties” for quick sale to provide working capital for redevelopment of the others.

Eleven non-core sales occurred through June 30, according to Seritage, including a former Sears site at a mall north of Syracuse, in the town of Clay, and a Kmart store in Olean, near the Pennsylvania border. Local media reports put the prices paid at $2.2 million and $3.7 million, respectively.

Seritage owns the former Sears space at Colonie Center, which totals 20 acres, mostly surface parking. Grocer Whole Foods is a tenant, as are a handful of businesses at what was the Sears Auto Center.

The property initially was targeted for quick sale, but was shifted this year to further redevelopment as multi-tenant retail. A schematic shows five or more tenants could occupy remaining space in the former two-story Sears anchor store, which closed five years ago. A new outparcel with drive-thru potential also is shown.

Sparking the Seritage sale and dissolution proposal is a $1.34 billion loan from Berkshire Hathaway that will come due next summer unless it’s paid down to $800 million to trigger a two-year extension.

Quarterly releases from Seritage deem that possible. However, the proxy lists as a risk factor “persistent negative macro-economic headwinds,” including higher interest rates and persistent inflation, which could affect the cost and availability of financing “and therefore the prices that buyers are willing and able to pay for commercial real estate assets.”

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected].

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