Seritage CEO Benjamin Schall and a shuttered Sears location (Credit: iStock)
As Sears works its way through bankruptcy proceedings, Seritage Growth Properties posted a nearly $26 million net loss in the second quarter, according to its earnings report.
That’s compared to a $10.6 million loss in the second quarter of 2018. For the first half of the year, its net loss totaled $36.8 million.
Seritage’s revenue also continued to fall, down 18 percent to $40.5 million from $49.3 million in the second quarter of 2018.
Seritage, the real estate investment trust formed in 2015 to invest in and revamp Sears-anchored real estate, also reported a nearly $22 million drop in net operating income in the second quarter compared to the same period of the previous year, to $14.6 million, according to its earnings report. For the first half of the year, Seritage generated $38.9 million in net operating income, a 47 percent drop from $73.3 million during the first six months of 2018.
The REIT attributed the drop in NOI to lower rents from its master lease with Sears, which had closed stores and filed for bankruptcy in October.
Since the REIT’s formation, over 26 million square feet of leased space — or more than $110 million of annual base rent — has been taken offline, Seritage said. The firm has since signed new non-Sears leases that total an annual base rent of $154.1 million across 8.9 million square feet of space, but most of these stores have not yet opened. They should begin to pay rent over the next two years, Seritage said.
In the second quarter, new leasing activity totaled 687,000 square feet, with an average rent of about $20 per square foot. Non-Sears tenants make up 90 percent of annual base rent, including signed leases. Overall, 52.4 percent of Seritage’s portfolio is leased, the company said.
In the midst of its bankruptcy proceedings, Sears in April filed a lawsuit against its former CEO, Eddie Lampert. The ailing retailer — which at one point was the largest in the U.S. — claimed Lampert made billions as the company fell into a “death spiral.”