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Berkshire Stakes Seritage to $2 Billion Loan Ahead of Sears Store Closings

Seritage Gets $600 Million Cash for Redevelopment
August 1, 2018
Seritage is pursuing the redevelopment of former Sears stores, including a mixed-use project in downtown Santa Monica now known as the Mark 302, in which Invesco Real Estate is a 50-percent joint owner.



Seritage Growth Properties has received a $2 billion term loan from Warren Buffett’s Berkshire Hathaway Life Insurance Co. to pay down debt and help redevelop properties, many of which are expected to soon be vacated by Sears Holding Corp.

The loan will provide Seritage, a REIT that owns 249 retail properties across the U.S., with $600 million in cash to "fund its robust development pipeline," according to the company.

Seritage was formed by Sears Holding Corp. CEO Edward Lampert in 2015 to acquire a real estate portfolio from Sears, and Lampert remains the REIT's largest shareholder. Sears announced earlier this year that it would close 78 stores in September.

In its first-quarter 2018 earnings report, Seritage said it had $154.3 million reserved for redevelopment costs and another $135.1 million in unrestricted cash, but said it needed another $900 million to fund projects over the next two years.

Seritage Chief Executive Benjamin Schall said the loan from Berkshire will help the company "accelerate" development across the U.S. The company said in its 2017 annual report that it expects to receive 65 percent of its income from non-Sears tenants by the end of this year, up from 20 percent three years ago.

The company had announced redevelopment projects at 22 of its properties, and said it would continue to fill former Sears stores with new tenants, which pay on average about four times higher rents than Sears did.

Sears originally sold its stores to the REIT as part of a sale-leaseback arrangement, allowing Seritage to assume control of certain properties when desired. The REIT, based in New York, now owns or operates 126 properties without Sears as its primary tenant, according to company documents filed in March. Overall, its properties total more than 39 million square feet of space across 49 states and Puerto Rico.

Buffett, who invested in Seritage three years ago, owns 2 million shares, or 5.7 percent of the company, according to a March 13 SEC filing.

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