2 Reasons This Retail REIT Is in Big Trouble

Just six months ago, it looked like Seritage Growth Properties' (NYSE: SRG) slow-moving strategy of redeveloping former Sears and Kmart stores for higher-value uses was finally close to paying off. While Sears Holdings' late-2018 bankruptcy was a setback, new tenants opened at a rapid pace within Seritage's portfolio toward the end of 2019. Moreover, the retail REIT appeared poised for another year of strong leasing activity and tenant openings in 2020.

Unfortunately, the COVID-19 pandemic thoroughly disrupted this momentum. The REIT's recent earnings report highlighted why it will be very difficult for Seritage Growth Properties to get back on track.

Seritage Growth Properties' first problem relates to its tenant mix. In recent years, many retail and real estate analysts concluded that while there were too many retail stores in the U.S., some of the excess space could be soaked up by "experiential" tenants ranging from restaurants to gyms to arcades to movie theaters. (The idea was that such experiences can't easily be duplicated online.)

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Source Fool.com