Benjamin Schall, president and CEO of Seritage Growth Properties (NYSE: SRG), joined REIT.com for a CEO Spotlight video interview at REITWeek 2017: NAREIT’s Investor Forum at the New York Hilton Midtown.
Seritage is the real estate spinoff of Sears Holding Corp. It began trading as a public company in 2015.
Schall noted that two years ago, 80 percent of Seritage’s income came from Sears. Today, that level has fallen to 60 percent. Later this year, it should be below 50 percent, according to Schall.
“We expect 50 percent of income to come from newly developed shopping centers occupied by best-in-class retailers that we believe will continue to resonate with consumers in an omni-channel world,” Schall said.
During the last 18 months, Seritage has leased almost 3 million square feet of space, Schall said. In the process, rent has increased from the Sears level of $4 per foot to $18 per foot, he noted.
“These rental spreads are driving significant net operating income (NOI) growth and allowing us to exponentially diversify away from Sears,” Schall observed.
As for tenants, Seritage is actively working with off-price fashion retailers, full line and specialty grocers, gym operators, home goods retailers, and restaurants and entertainment providers.
“Given the quality of our holdings and our scale, we expect to be a preferred developer with many of these retailers going forward,” Schall said.
According to Schall, Seritage has quickly become one of the most active developers of retail real estate in the country. The company completed or commenced about $525 million of development during the past two years. That number is expected to approach $1 billion by the end of 2017, he said.