Seritage Growth Properties

Previous wording

Prior to the adoption of the Company’s Plan of Sale (defined below), Seritage was principally engaged in the ownership, development, redevelopment, disposition, management and leasing of diversified retail and mixed-use properties throughout the United States. Seritage will continue to actively manage each remaining location until such time as each property is sold. As of September 30, 2024, the Company’s portfolio consisted of interests in 21 properties comprised of approximately 2.7 million square feet of gross leasable area (“GLA”) or build-to-suit leased area, and 342 acres of land. The portfolio consists of approximately 1.5 million square feet of GLA and 208 acres held by 12 consolidated properties (such properties, the “Consolidated Properties”) and 1.2 million square feet of GLA and 134 acres held by nine unconsolidated properties (such properties, the “Unconsolidated Properties”).

Current wording

Prior to our adoption of the Plan of Sale, we were principally engaged in the ownership, development, redevelopment, management, sale and leasing of diversified retail and mixed-use properties throughout the United States. As of March 31, 2025, our portfolio consisted of interests in 16 properties comprised of approximately 1.6 million square feet of gross leasable area (“GLA”) or build-to-suit leased area and 240 acres of land. The portfolio encompasses nine wholly owned properties consisting of approximately 0.8 million square feet of GLA and 132 acres and seven unconsolidated entities consisting of approximately 0.8 million square feet of GLA and 108 acres.

Previous wording

On March 1, 2022, the Company announced that its Board of Trustees commenced a process to review a broad range of strategic alternatives to enhance shareholder value. The Board of Trustees created a special committee of the Board of Trustees (the “Special Committee”) to oversee the process. The Special Committee retained Barclays Capital, Inc. as its financial advisor from March 2022 through August 2023 to assist with the strategic review. The Company sought a shareholder vote to approve a proposed plan of sale of our assets and dissolution (the “Plan of Sale”) that would allow our board to sell all of our assets, distribute the net proceeds to shareholders and dissolve the Company. The Plan of Sale can be suspended by the Board of Trustees.

Current wording

On March 1, 2022, the Company announced that its Board of Trustees has commenced a process to review a broad range of strategic alternatives to enhance shareholder value. The Board of Trustees created a special committee of the Board of Trustees (the “Special Committee”) to oversee the process. The Special Committee retained Barclays as its financial advisor from March 2022 to August 2023 to assist with the strategic review. The Company sought a shareholder vote to approve a proposed plan of sale of our assets and dissolution (the “Plan of Sale”) that would allow our board to sell all of our assets, distribute the net proceeds to shareholders and dissolve the Company.

Previous wording

There were no impairments recorded during the three months ended September 30, 2024. Due to negotiations for rent relief with existing tenants that began during the second quarter of 2024 which triggered the need for an impairment analysis pursuant to ASC 360, Property, Plant and Equipment, and, in certain circumstances excluding Aventura, agreeing to sell below carrying value, we recorded impairment losses of $87.5 million for the nine months ended September 30, 2024 primarily due to changes in discount rates and residual capitalization rates between June 2023 and June 2024. We did not recognize any other-than-temporary impairment losses on our investments in unconsolidated entities during the three and nine months ended September 30, 2024. We continue to evaluate our portfolio, including our development plans, hold periods and, if applicable, offers received, which may result in additional impairments in future periods on our consolidated properties and investments in unconsolidated entities.

Current wording

There were no impairments recorded during the three months ended March 31, 2025. We recognized $8.5 million in other-than-temporary impairment losses on our investments in unconsolidated entities during the three months ended March 31, 2025, which is included in equity in income (loss) of unconsolidated entities within the consolidated statements of operations. We continue to evaluate our portfolio, including our development plans, hold periods and, if applicable, offers received, which may result in additional impairments in future periods on our consolidated properties and investments in unconsolidated entities.

Previous wording

On March 31, 2022, the Company announced that its Board of Trustees, with the recommendation of the Special Committee, approved a plan to terminate the Company's REIT status and become a taxable C Corporation, effective for the year ended December 31, 2022. As a result, the Company is no longer required to operate under REIT rules, including the requirement to distribute at least 90% of REIT taxable income to its stockholders, which provides the Company with greater flexibility to use its free cash flow. Effective January 1, 2022, the Company is subject to federal and state income taxes on its taxable income at applicable tax rates and is no longer entitled to a tax deduction for dividends paid. The Company operated as a REIT since inception and through the 2021 tax year, and existing REIT requirements and limitations, including those established by the Company’s organizational documents, remained in place until December 31, 2021. Refer to Note 7 – Income Taxes of the Notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

On March 31, 2022, the Company announced that its Board of Trustees, with the recommendation of the Special Committee, approved a plan to terminate the Company's REIT status and become a taxable C Corporation effective January 1, 2022. As a result, the Company is no longer required to operate under REIT rules, including the requirement to distribute at least 90% of REIT taxable income to its shareholders, which provides the Company with greater flexibility to use its free cash flow. Effective January 1, 2022, the Company is subject to federal and state income taxes on its taxable income at applicable tax rates and is no longer entitled to a tax deduction for

Previous wording

Our primary cash expenses consist of our property operating expenses, general and administrative expenses, interest expense, and construction and development related costs. Property operating expenses include real estate taxes, repairs and maintenance, management fees, insurance, ground lease costs and utilities; general and administrative expenses include payroll, office expenses, professional fees, and other administrative expenses; and interest expense is on our term loan facility. In addition, we incur substantial non-cash charges for depreciation of our properties and amortization of intangible assets and liabilities.

Current wording

Our primary cash expenses consist of our property operating expenses, general and administrative expenses, interest expense, and construction and development related costs. Property operating expenses include: real estate taxes, repairs and maintenance, management fees, insurance, ground lease costs and utilities; general and administrative expenses include payroll, office expenses, professional fees, and other administrative expenses; and interest expense on our term loan facility. In addition, we incur substantial non-cash charges for depreciation of our properties and amortization of intangible assets and liabilities.

Previous wording

The decrease of $5.9 million in property operating expense for the nine months ended September 30, 2024 was due primarily to asset sales offset by insurance refunds for sold properties that were less than the estimated receivables.

Current wording

The decrease of 0.8 million in property operating expense for the three months ended March 31, 2025 was primarily due to asset sales which was partially offset by an increase of $1.2 million in insurance expense.

Previous wording

General and administrative expenses consist of personnel costs, including amortization of costs associated with share-based compensation awarded in prior years, professional fees, office expenses and overhead expenses.

Current wording

General and administrative expenses consist of personnel costs, including share-based compensation, professional fees, office expenses and overhead expenses.

Previous wording

Gain on Sale of Real Estate, Net

Current wording

Gain on Sale of Real Estate

Previous wording

During the nine months ended September 30, 2024, the Company sold 10 properties for aggregate consideration of $111.7 million and recorded a gain totaling $7.4 million, which is included in gain on sale of real estate, net within the condensed consolidated statements of operations.

Current wording

During the three months ended March 31, 2024, the Company sold five properties for aggregate consideration of $48.8 million and recorded a net gain totaling $1.1 million.

Previous wording

During the nine months ended September 30, 2024, the Company recognized $1.7 million impairment of real estate assets as a result of the Company accepting offers below book value on three properties and an $85.8 million impairment of real estate assets on the Company's development property in Aventura, FL due to negotiations for rent relief with existing tenants that began during the second quarter of 2024 which triggered the need for an impairment analysis pursuant to ASC 360, Property, Plant and Equipment. The Company determined the fair value of this property by applying a discount to projected cash flows over the estimated hold period. During the nine months ended September 30, 2023, the Company recognized $107.0 million of impairment losses as a result of recognizing an impairment on the Company's development property in Aventura, FL, which is included within the condensed consolidated statements of operations.

Current wording

There were no impairments recorded during the three months ended March 31, 2025. During the three months ended March 31, 2024, the Company recognized $1.1 million impairment of real estate assets as a result of the Company accepting offers below book value on two properties.

Previous wording

The decrease of $3.7 million in interest expense for the three months ended September 30, 2024 was driven by partial Term Loan Facility pay downs.

Current wording

The decrease of $1.8 million in interest expense for the three months ended March 31, 2025 was driven by partial Term Loan Facility pay downs during 2024.

Previous wording

-31 - primary source of operating cash flow, did not fully fund obligations incurred during the nine months ended September 30, 2024 and the Company recorded net operating cash outflows of $39.6 million. Additionally, the Company generated investing cash inflows of $71.7 million during the nine months ended September 30, 2024, which were driven by asset sales and partially offset by development expenditures.

Current wording

Our primary uses of cash include the payment of property operating and other expenses, including general and administrative expenses and debt service (collectively, “Obligations”), and certain development expenditures. Property rental income, which is the Company’s primary source of operating cash flow, did not fully fund Obligations incurred during the three months ended March 31, 2025 and the Company recorded net operating cash outflows of $9.2 million. Additionally, the Company generated net investing cash inflows of $19.8 million during the three months ended March 31, 2025, which were driven by asset sales and partially offset by development expenditures.

Previous wording

Obligations are projected to continue to exceed property rental income and we expect to fund such obligations and any development expenditures with cash on hand and a combination of capital sources including, but not limited to, sales of Consolidated Properties, sale of interests in Unconsolidated Properties and alternative financing transactions, subject to any approvals that may be required under the Term Loan Agreement. Below is our sales activity since we began our capital recycling program:

Current wording

Obligations are projected to continue to exceed property rental income and we expect to fund such Obligations and any development expenditures with cash on hand and a combination of capital sources including, but not limited to, sales of Consolidated Properties, sales of interests in Unconsolidated Properties and optional financing transactions, subject to any approvals that may be required under the Term Loan Agreement. Below is our sales activity since we began our capital recycling program:

Previous wording

From the approval of the Plan of Sale on October 24, 2022 through September 30, 2024, we sold 86 Consolidated Properties, and additional outparcels at certain properties, and generated approximately $968.2 million of gross proceeds.

Current wording

From the approval of the Plan of Sale on October 24, 2022 through March 31, 2025, we sold 90 Consolidated Properties, and additional outparcels at certain properties, and generated approximately $1.0 billion of gross proceeds.

Previous wording

From the approval of the Plan of Sale on October 24, 2022 through September 30, 2024, we sold our interests in eight Unconsolidated Properties and generated approximately $140.7 million of gross proceeds.

Current wording

From the approval of the Plan of Sale on October 24, 2022 through March 31, 2025, we sold our interests in 10 Unconsolidated Properties and generated approximately $151.5 million of gross proceeds.

Previous wording

As of November 12, 2024, we had two assets under contract for sale with no due diligence contingencies for total anticipated proceeds of $33.7 million and three assets under contract for sale subject to customary due diligence for total anticipated proceeds of $54.2 million at share. All five assets are subject to closing conditions.

Current wording

As of May 15, 2025, we had one asset owned by our consolidated joint venture under contract for sale subject to customary due diligence for total anticipated proceeds of $14.0 million and is subject to closing conditions.

Previous wording

As previously disclosed, on May 5, 2020, the Operating Partnership and Berkshire Hathaway entered into an amendment (the “Term Loan Amendment”) to the Term Loan Agreement by and among the Operating Partnership and Berkshire Hathaway as initial lender and administrative agent that permits the deferral of payment of interest under the Term Loan Agreement if, as of the first day of each applicable month, (x) the amount of unrestricted and unencumbered (other than liens created under the Term Loan Agreement) cash on hand of the Operating Partnership and its subsidiaries, minus (y) the aggregate amount of anticipated necessary expenditures for such period (such sum, “Available Cash”) is equal to or less than $30.0 million. In such instances, for each interest period, the Operating Partnership is obligated to make payments of interest in an amount equal to the difference between (i) Available Cash and (ii) $20.0 million (provided that such payment shall not exceed the amount of current interest otherwise due under the Term Loan Agreement). Any deferred interest shall accrue interest at 2.0% in excess of the then applicable interest rate and shall be due and payable on July 31, 2023; provided, that the Operating Partnership is required to pay any deferred interest from Available Cash in excess of $30.0 million (unless otherwise agreed to by the administrative agent under the Term Loan Agreement in its sole discretion). In addition, repayment

Current wording

As previously disclosed, on May 5, 2020, the Operating Partnership and Berkshire Hathaway entered into an amendment (the “Term Loan Amendment”) to the Term Loan Agreement by and among the Operating Partnership and Berkshire Hathaway as initial lender and administrative agent that permits the deferral of payment of interest under the Term Loan Agreement if, as of the first day of each applicable month, (x) the amount of unrestricted and unencumbered (other than liens created under the Term Loan Agreement) cash on hand of the Operating Partnership and its subsidiaries, minus (y) the aggregate amount of anticipated necessary expenditures for such period (such sum, “Available Cash”) is equal to or less than $30.0 million. In such instances, for each interest period, the Operating Partnership is obligated to make payments of interest in an amount equal to the difference between (i) Available Cash and (ii) $20.0 million (provided that such payment shall not exceed the amount of current interest otherwise due under the Term Loan Agreement). Any deferred interest shall accrue interest at 2.0% in excess of the then applicable interest rate and shall be due and payable on July 31, 2023; provided, that the Operating Partnership is required to pay any deferred interest from Available Cash in excess of $30.0 million (unless otherwise agreed to by the administrative agent under the Term Loan Agreement in its sole discretion). In addition, repayment of any outstanding deferred interest is a condition to any borrowings under the $400.0 million incremental funding facility under the Term Loan Agreement (the “Incremental Funding Facility”).

Previous wording

During the nine months ended September 30, 2024, we have repaid $80.0 million against the principal of the Term Loan Facility. Our outstanding balance as of September 30, 2024, is $280.0 million. Subsequent to September 30, 2024, the Company made an additional principal payment of $25.0 million, reducing the balance of the Term Loan Facility to $255.0 million as of November 12, 2024.

Current wording

During the three months ended March 31, 2025, we did not make any payments against the principal of the Term Loan Facility. Our outstanding balance as of March 31, 2025, is $240.0 million.

Previous wording

See Note 1 – Organization of the Notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of liquidity and the substantial doubt about the Company's ability to continue as a going concern.

Current wording

See Note 1 – Organization of the Notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of liquidity and going concern.

Previous wording

Cash Flows for the Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Current wording

Cash Flows for the Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Previous wording

The following table summarizes the Company’s cash flow activities for the nine months ended September 30, 2024 and 2023, respectively (in thousands):

Current wording

The following table summarizes the Company’s cash flow activities for the three months ended March 31, 2025 and 2024, respectively (in thousands):

Previous wording

In 2024, a decrease in rental income and a decrease to accounts payable, accrued expenses and other liabilities, partially offset by a decrease to tenant and other receivables and receipt of distributions from an unconsolidated entity.

Current wording

In 2025, a decrease in operating cash, partially offset by an increase to tenant and other receivables and an increase to accounts payable, accrued expenses and other liabilities.

Previous wording

In 2023, $719.1 million of net proceeds from the sale of real estate and interests in unconsolidated entities offset by development of real estate of ($61.6) million and investments in unconsolidated entities of ($11.9) million.

Current wording

In 2025, $28.8 million of net proceeds from the sale of real estate and $4.4 of distributions from unconsolidated entities offset by development of real estate of ($13.3) million; and

Previous wording

In 2024, $106.5 million of net proceeds from the sale of real estate, offset by development of real estate of ($25.4) million and investments in unconsolidated entities of ($9.0) million; and

Current wording

In 2024, $44.3 million of net proceeds from the sale of real estate, offset by development of real estate of ($12.5) million and investments in unconsolidated entities of ($2.9) million.

Previous wording

In 2024, ($80.0) million cash repayment of Term Loan Facility principal and cash payments of preferred dividends, ($3.7) million; and

Current wording

In 2025, cash payments of preferred dividends, ($1.2) million; and

Previous wording

In 2023, ($630.0) million cash repayment of Term Loan Facility principal and cash payments of preferred dividends, ($3.7) million.

Current wording

In 2024, ($30.0) million cash repayment of Term Loan Facility principal and cash payments of preferred dividends, ($1.2) million.

Previous wording

The Company’s Board of Trustees did not declare dividends on the Company’s Class A common shares during the nine months ended September 30, 2024 and 2023, respectively.

Current wording

The Company’s Board of Trustees did not declare dividends on the Company’s Class A common shares during the three months ended March 31, 2025 and 2024, respectively. The last dividend on the Company’s Class A and C common shares that the Board of Trustees declared was on February 25, 2019, which was paid on April 11, 2019 to shareholders of record on March 29, 2019.

Previous wording

The Company’s Board of Trustees declared the following dividends on preferred shares during 2024 and 2023:

Current wording

The Company’s Board of Trustees also declared the following dividends on the Company’s Series A Preferred Shares during 2025 and 2024:

Previous wording

During the three and nine months ended September 30, 2023, the Company invested $11.7 million and $61.6 million, respectively in our consolidated development and operating properties and an additional $0.8 million and $11.9 million, respectively into our unconsolidated joint ventures.

Current wording

During the three months ended March 31, 2024, the Company invested $12.5 million in our consolidated properties and an additional $2.9 million into our unconsolidated joint ventures.

Previous wording

In accordance with accounting standards regarding loss contingencies, we accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued or disclose the fact that such a range of loss cannot be estimated. We do not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. In such cases, we disclose the nature of the contingency, and an estimate of the possible loss, range of loss, or disclose the fact that an estimate cannot be made.

Current wording

In accordance with accounting standards regarding loss contingencies, we accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued or disclose the fact that such a range of loss cannot be estimated. We do not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. In such cases, we disclose the nature of the material contingency, and an estimate of the possible loss, range of loss, or disclose the fact that an estimate cannot be made.

Previous wording

On July 1, 2024, a purported shareholder of the Company filed a class action lawsuit in the U.S. District Court for the Southern District of New York, captioned Zhengxu He, Trustee of the He & Fang 2005 Revocable Living Trust v. Seritage Growth Properties, Case No. 1:24:CV:05007, alleging that the Company, the Company’s Chief Executive Officer, and the Company’s Chief Financial Officer violated the federal securities laws. The complaint seeks to bring a class action on behalf of all persons and entities that purchased or otherwise acquired Company securities between July 7, 2022 and May 10, 2024. The complaint alleges that the defendants violated federal securities laws by issuing false, misleading, and/or omissive disclosures concerning the Company’s alleged lack of effective internal controls regarding the identification and review of impairment indicators for investments in real estate and the Company’s value and projected gross proceeds of certain real estate assets. The complaint seeks compensatory damages in an unspecified amount to be

Current wording

On July 1, 2024, a purported shareholder of the Company filed a class action lawsuit in the U.S. District Court for the Southern District of New York, captioned Zhengxu He, Trustee of the He & Fang 2005 Revocable Living Trust v. Seritage Growth Properties, Case No. 1:24:CV:05007, alleging that the Company, the Company’s Chief Executive Officer, and the Company’s Chief Financial Officer violated the federal securities laws. The complaint seeks to bring a class action on behalf of all persons and entities that purchased or otherwise acquired Company securities between July 7, 2022 and May 10, 2024. The complaint alleges that the defendants violated federal securities laws by issuing false, misleading, and/or omissive disclosures concerning the Company’s alleged lack of effective internal controls regarding the identification and review of impairment indicators for investments in real estate and the Company’s value and projected gross proceeds of certain real estate assets. The complaint seeks compensatory damages in an unspecified amount to be proven at trial, an award of reasonable costs and expenses to the plaintiff and class counsel, and such other and further relief as the court may deem just and proper. On or around January 15, 2025, another purported shareholder of the Company filed a derivative lawsuit in the U.S. District Court for the District of Maryland, captioned Paul Sidhu v. Seritage Growth Properties, Case No. 1:25-cv-00152. On or around January 20, 2025, another purported shareholder of the Company filed a derivative lawsuit in the U.S. District Court for the District of Maryland, captioned James Wallen v. Seritage Growth Properties, Case No. 1:25-cv-00190. On or around May 8, 2025, another purported shareholder of the Company filed a derivative lawsuit in the U.S. District Court for the Southern District of New York, captioned Derrick Cheroti v. Seritage Growth Properties, Case No. 1:25-vc-00152. The Derivative Actions allege the same or similar claimed acts and omissions underlying the Securities Action, assert breach of fiduciary duty and other claims against the Company’s Chief Executive Officer, the Company’s Chief Financial Officer, and current and former members of the Company’s Board of Trustees, and name the Company as a nominal defendant. The complaint in each of the Derivative Actions seeks compensatory damages in an unspecified amount to be proven at trial, an order directing the Company and the individual defendants to reform and improve the Company’s corporate governance and internal procedures, restitution from the individual defendants, an award of costs and expenses to the plaintiff and reasonable attorneys’ and experts’ fees, costs, and expenses, and such other and further relief as the court may deem just and proper. The complaint in the Cheroti Derivative Action also seeks an award of punitive damages, an order directing the individual defendants to account for all damages caused by them and all profits and speci…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We are subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business and due to the current environment. While the resolution of such matters cannot be predicted with certainty, management believes, based on currently available information, the final outcome of such ordinary course legal proceedings and claims will not have a material effect on the condensed consolidated financial position, results of operations or liquidity of the Company.

Current wording

We are subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business and due to the current environment. While the resolution of such matters cannot be predicted with certainty, management believes, based on currently available information, the final outcome of such ordinary course legal proceedings and claims will not have a material effect on the

Previous wording

A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2023 in Management’s Discussion and Analysis of Financial Condition and Results of Operations. For the nine months ended September 30, 2024, there were no material changes to these policies.

Current wording

A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2024 in Management’s Discussion and Analysis of Financial Condition and Results of Operations. For the three months ended March 31, 2025, there were no material changes to these policies.

Previous wording

The following table reconciles NOI-cash basis and NOI-cash basis at share to GAAP net loss for the three and nine months ended September 30, 2024 and 2023 (in thousands):

Current wording

The following table reconciles NOI-cash basis and NOI-cash basis at share to GAAP net loss for the three months ended March 31, 2025 and 2024 (in thousands):