The Sears Bankruptcy Headwind Is Fading for Seritage Growth Properties

Four years ago, Sears Holdings spun off Seritage Growth Properties (NYSE: SRG) through a rights offering, selling more than 250 real estate properties to the newly formed REIT. In the following years, Sears closed stores at a rapid pace, causing Seritage's adjusted funds from operations (FFO) to decline consistently.

The iconic retailer finally filed for bankruptcy protection last fall. While controlling shareholder Eddie Lampert kept the company from going out of business entirely, the bankruptcy led to another wave of store closures -- and some rent reductions, too. As a result, Seritage's adjusted FFO collapsed, forcing the REIT to suspend its dividend earlier this year to conserve cash.

FFO trends are finally stabilizing. And with lots of big redevelopment projects slated for completion over the next few quarters, Seritage should benefit from strong FFO growth beginning in early 2020.

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