Seritage Growth Properties (SRG +1.58%) was hit hard by the COVID-19 pandemic, as its development plans ground to a halt and many of its tenants were unable to pay rent. However, this redevelopment-focused REIT could still have billions of dollars in value creation potential in the years ahead. In this Fool Live video clip, recorded on Feb. 16, Millionacres real estate analyst Matt Frankel, CFP, and editor Deidre Woollard discuss why Seritage could have an extremely bright future in the post-pandemic world.
Matt Frankel: Seritage owns -- let me just give you a couple of numbers real quick. Seritage owns 183 properties. Most of them it owns by itself, a few of them are joint ventures. Those properties have 28.5 million square feet of space in the buildings. What I think a lot of people and analysts miss when it comes to Seritage, they don't just own the Sears buildings. In many cases, they own a lot of the land around those buildings, too, and that's not just where you live, I'm going to show that in a second. If I can share my screen, bear with me because I am not the most tech-savvy Fool in the world. Let's see. There we go. Can you see that?
Deidre Woollard: Yeah.
Frankel: Perfect. If you see, this is the Landmark Mall right around where Deidre is. This little building right here in the middle is the Sears building. The red outline is the land that Seritage owns around it. That's a lot of land. That's why this is going to be such a high-value project for Seritage. If you see in the corner, the Sears building itself is over 260,000 square feet. It's not a tiny building. But when you consider all these acres and acres of land, and Deidre could tell you better than I can, this is a great location.
Woollard: Yeah, this is right in the heart of everything. This has easy access to a lot of different locations so that's what makes it really intriguing as a development project.
Frankel: They don't just want to develop retail, which is really worth mentioning. They could use this empty parking lot space to put up an apartment building, or a hotel, or something they could build vertically and really add square footage, add value. Because right now, this is just empty land. It's an ugly Sears parking lot sitting there. I'm sure Deidre has driven by it once or twice.
Woollard: I have, and it has a lot of Amazon trucks in the lots. That's the interesting thing, it's all Amazon trucks sitting in there right now.
Frankel: They're at least using it for something. [laughs] But the point is, this is a lot of high potential land, this is acres and acres. When you consider the building is 260,000 square foot building. Look at all that land around it. It's like that in other places. This is really a high-potential mall in Miami. Look at some of these tenants around this property. This is Esplanade at Aventura. This is next to a Tesla, an Equinox, Louis Vuitton, Nordstrom. These are the premier shopping destinations, then you have this ugly Sears building right here, [laughs] and a bunch of land around it that Seritage could do something with it. This is just two of them, I'm not going to go through all 180 properties or whatever. But on Seritage's website, there are a ton of these where there's a big ugly Sears building, and then a giant even bigger ugly parking lot that it owns that it could do something with. Like I said, they're usually in a pretty nice area of town, a high potential area. That one in Miami is right next to some very high-dollar condominiums. It's like a mile from the beach. It's a high-value area, and that's something that they could eventually redevelop. Because when we talk about Simon (SPG +0.80%), a really high-quality mall could be worth $1 billion by itself. Simon has a few billion-dollar malls in its portfolio. Seritage, people are really discounting the potential of that extra space they have to, as they put it, add density to their properties. They already have about 6,000 apartment units planned in its premier properties, that it calls. It's going to be really interesting as this plays out.
