Seritage Growth Properties (SRG)

[Enterprising Investor]

Re-leasing former Sears Holdings locations is the key.

Master Leases with Sears Holdings

• Remaining Exposure: as of September 30, 2018, including the effect of all previously exercised recapture and termination activity, Sears Holdings was a tenant in 82 properties under the Master Lease and 20 properties under the JV Master Leases representing an aggregate of 12.4 million square feet and $61.2 million of annual base rent, or 31.4% of all base rent under signed leases.

• Impact of Re-Leasing Spreads: the 3.5x to 4.5x rental uplift that Company has historically achieved upon re-leasing space formerly occupied by Sears Holdings allows it to recover all the rental income generated from Sears Holdings by re-leasing only 25-35% of the formerly occupied space and deploying the capital required to bring the rental income online.

Uplift based on historic rates would produce additional revenue between $214 and $275 million using $61.2 million of annual base rent.

Needless to say, bankruptcy now provides Sears Holdings with an opportunity to reject leases.