11/17/2015 | By Sarah Borchersen-Keto
Benjamin Schall, CEO of Seritage Growth Properties (NYSE: SRG), joined REIT.com for a CEO Spotlight video interview at REITWorld 2015: NAREIT’s Annual Convention for All Things REIT at the Wynn Las Vegas.
Seritage is the real estate spinoff of Sears Holding Corp. It began trading as a public company in July.
Schall explained that Seritage acquired a 40-million-square-foot portfolio from Sears. About half of the portfolio is located in dominant regional malls, while the other half is made up of free-standing sites, he said.
“Demand from retailers has been very strong to date, and continues. What we’re looking to do is tap into that demand in order to unlock the underlying value of our real estate portfolio,” Schall noted.
He also discussed the advantages of the unique lease structure in place with Sears. Seritage has the right to downsize Sears stores by up to 50 percent at each of its 266 sites, Schall said. This allows Seritage to take single-tenant buildings leased by Sears at an average rent of roughly $4 per square foot and convert them into multi-tenant shopping centers at significantly higher rents, he explained.
“It will also allow us to diversify our tenant base as well as grow net operating income (NOI) significantly,” he added.
Looking ahead, Schall pointed out that the company has its core team and platform in place and will now focus on executing projects. When Seritage closed the spin-off transaction in July it had 15 projects totaling about 1.3 million square feet, all in various stages of development and construction. Those are now complete or in the process of being completed over the next three to six months, according to Schall.
Schall said Seritage is particularly excited about the next set of redevelopment projects. Schall pointed out that the company’s average site has 13 acres of land, which provides opportunities to add density over time.