Seritage Growth Properties (SRG)·Q2 2025 Earnings Summary

Executive Summary

• Seritage extended its Berkshire Hathaway term loan maturity by one year to July 31, 2026 after paying a 2% ($4.0M) extension fee and an additional $4.0M incremental facility fee—materially reducing near‑term refinancing risk while it executes the Plan of Sale .
• Q2 2025 revenue was $4.65M and diluted EPS was ($0.53); EPS worsened QoQ from ($0.42) largely due to an $18.0M impairment in Q2, but improved significantly YoY versus Q2 2024 EPS of ($1.82) that included $86.4M of impairments .
• Asset monetization advanced: $23.0M gross proceeds from one premier property and $8.1M from an unconsolidated interest; three assets under contract total $109.8M and five assets in PSA negotiations total ~$226.4M ($181.2M at share) as of Aug 14, 2025—expanding the sales pipeline versus Q1 .
• Net Operating Income (NOI) – cash basis at share was $2.58M, essentially flat QoQ ($2.59M), despite portfolio shrinkage, while the June 11 $40M voluntary prepayment reduced annual term‑loan interest by ~$2.8M (cumulative reductions ~$99.4M since Dec 2021) .
• Litigation remains an overhang with a securities class action and multiple derivative suits alleging internal control and valuation issues; management intends to vigorously defend these matters .

What Went Well and What Went Wrong

• What Went Well

  • Term loan extension to July 31, 2026 improves liquidity runway as the company pursues orderly asset sales to maximize value. “We exercised our option and extended the maturity date of our Term Loan Facility…” — Adam Metz, CEO & President .
  • Monetization momentum: Q2 closed $31.1M of proceeds and a robust pipeline ($109.8M under contract; ~$226.4M in negotiations) supports debt paydown and future distributions .
  • Interest expense trajectory improving: $40M prepayment in June cuts annual term‑loan interest by ~$2.8M; cumulative repayments since Dec 2021 have reduced annual interest by ~$99.4M .

• What Went Wrong

  • Q2 impairment charge of $18.0M pressured earnings (EPS ($0.53) vs ($0.42) in Q1); while smaller than Q2 2024 ($86.4M), impairments remain a recurring headwind tied to market pricing and portfolio rationalization .
  • Cash on hand stepped down to $80.1M at 6/30 (from $107.1M at 3/31), and to $65.1M by 8/13, reflecting fees tied to the loan extension and ongoing uses of cash during the sale process .
  • Legal overhang persists (securities class action plus derivative actions) alleging internal control and asset valuation issues; potential distraction and incremental costs until resolved .

Financial Results

• Explanation: QoQ EPS deterioration was primarily driven by the $18.0M impairment in Q2; underlying NOI – cash basis at share was stable (~$2.6M) despite continued asset sales .
• Interest expense improved YoY and sequentially, aided by cumulative term‑loan paydowns and the June prepayment .

Segment/Portfolio and Leasing KPIs

Balance Sheet & Liquidity

Asset Sales and Pipeline

KPIs presented by the company include non‑GAAP measures (NOI – cash basis and NOI – cash basis at share); see reconciliation and definitions in the press releases/8‑K .

Guidance Changes

Note: Company does not provide traditional revenue/EPS guidance; disclosures focus on the Plan of Sale, asset pipeline, liquidity and capital structure .

Earnings Call Themes & Trends

(No Q2 2025 earnings call transcript available in the document catalog; themes reflect company press releases.)

Management Commentary

• “We exercised our option and extended the maturity date of our Term Loan Facility… We will continue to pursue our Plan of Sale with the objective of repaying our remaining debt and ultimately making distributions to our shareholders.” — Adam Metz, CEO & President (Q2 press release) .
• “The Company's strategy following the completion of a smooth CEO transition remains the same. We will continue to pursue our Plan of Sale with the priority of repaying our remaining debt from the sale of assets.” — Adam Metz, Interim CEO & President (Q1 press release) .
• “We have made strides to ready more assets for sale… anticipate that a majority of our assets… will be in the market in 2025.” — Andrea L. Olshan, CEO & President (Q4/FY release) .

Q&A Highlights

• No Q2 2025 earnings call transcript was available; therefore, there were no published Q&A clarifications this quarter in the document catalog [List: 0 transcripts found for period] [functions.ListDocuments].

Estimates Context

• S&P Global consensus: We found no published EPS or revenue consensus for SRG for Q2 2025; coverage appears limited given the Plan of Sale and portfolio monetization focus. As a result, there are no beat/miss determinations versus consensus this quarter. Values retrieved from S&P Global.*

Key Takeaways for Investors

• The one‑year extension of the Berkshire term loan to July 31, 2026 and the $40M voluntary prepayment materially de‑risk near‑term refinancing and incrementally reduce interest expense, supporting orderly sales rather than forced transactions .
• Sales execution is accelerating: under‑contract and in‑negotiation deal volume expanded sharply vs Q1, providing line‑of‑sight to further debt reduction and eventual shareholder distributions as the Plan of Sale advances .
• Earnings volatility remains likely given continuing impairments tied to asset‑level valuations; Q2’s $18.0M impairment drove the QoQ EPS step‑down despite stable NOI – cash basis at share .
• Liquidity is sufficient for near‑term needs, but cash balances declined with extension fees and operations; proceeds timing and market conditions (rates/financing) remain key swing factors for distributions .
• Leasing trends at key premier assets (e.g., Aventura) continue to grind higher, supporting value in marketed properties and potentially underpinning sale pricing where stabilized cash flows matter .
• Legal matters (securities class action and derivative suits) remain an overhang; while non‑fundamental to asset value in the long run, they can influence sentiment and costs until resolved .
• Monitoring items for the next quarter: conversion of PSAs to closed sales, incremental debt paydown, any additional impairments, ABR/occupancy progression at premier assets, and updates on litigation and distributions .

Notes and non‑GAAP disclosure:

• NOI – cash basis and NOI – cash basis at share are non‑GAAP metrics; see company definitions and reconciliations in the Q2 and Q1 materials .
• Litigation and market updates are summarized from company filings; the company cautions that challenging market conditions and financing availability may affect sale proceeds and distribution timing .

References:

• Q2 2025 8‑K and Exhibit 99.1 press release (Aug 14, 2025): results, liquidity, sales pipeline, term loan extension, non‑GAAP reconciliations .
• Q1 2025 press release and 8‑K (May 15, 2025): prior‑quarter results and pipeline .
• Q4/FY 2024 press release (Mar 31, 2025): context and trends .
• June 11, 2025 press release: $40M prepayment and interest savings .
• Litigation context (company disclosures and external law firm notice) .

*Values retrieved from S&P Global.