SRG

Seritage Growth Properties: Q1 2026 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2026. Seritage Growth Properties (SRG) is a taxable C Corporation executing a shareholder-approved "Plan of Sale" to liquidate its real estate portfolio. As of the reporting date, the portfolio consists of 10 properties (5 consolidated, 5 unconsolidated) totaling approximately 0.8 million square feet of gross leasable area and 154 acres of land. The Company is classified as a non-accelerated filer and a smaller reporting company.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased by approximately 55% year-over-year, driven primarily by a $2.5 million drop in rental income due to property sales.
• Impairment Charges: The Company recorded a $15.2 million impairment loss on real estate assets in Q1 2026 due to market offers below carrying value. No such impairment was recorded in Q1 2025. Additionally, a $5.2 million other-than-temporary impairment was recorded on investments in unconsolidated entities.
• Expense Reduction: General and administrative expenses decreased by $10.4 million, largely due to a $9.8 million reduction in personnel costs, including $6.5 million in severance expenses.
• Debt Reduction: The Term Loan Facility principal balance was reduced to $50.0 million as of March 31, 2026, down from $800.0 million in the prior year, following significant paydowns.
• Gain on Sale: Unlike Q1 2025, which included a $6.9 million gain on the sale of real estate, there were no property sales recorded in Q1 2026.

Outlook, Risks, and Management Commentary

• Going Concern Warning: Management has concluded that substantial doubt exists regarding the Company's ability to continue as a going concern. The Term Loan Facility matures on July 31, 2026, and existing cash on hand is insufficient to fund obligations without further asset sales or financing.
• Liquidity Strategy: The Company expects to fund obligations through cash on hand, sales of consolidated and unconsolidated properties, and potential financing. A consolidated property was sold for $11.0 million in gross proceeds subsequent to the quarter-end.
• Strategic Review: The Plan of Sale remains ongoing. The Company is open to value-maximizing alternatives, including a potential sale of the Company, though no assurance of a transaction is provided.
• Internal Controls: The Company disclosed material weaknesses in internal controls over financial reporting related to general ledger review precision and segregation of duties. These remain unremediated as of March 31, 2026.
• Legal Proceedings: The Company is defending against a class action lawsuit alleging securities law violations regarding impairment disclosures and multiple derivative lawsuits alleging breach of fiduciary duty. These actions have been stayed pending the resolution of motions to dismiss in the primary securities action.

Investor Verification Checklist

• Debt Maturity: Verify the status of the $50 million Term Loan Facility maturing July 31, 2026, and the Company's ability to refinance or repay it.
• Asset Sales Pipeline: Confirm the status of the "Plan of Sale" and any pending contracts for the remaining 10 properties to assess liquidity runway.
• Impairment Methodology: Review the specific market offers and valuation assumptions used to justify the $15.2 million impairment charge.
• Internal Control Remediation: Monitor progress on remediation plans for the disclosed material weaknesses in financial reporting controls.
• Legal Exposure: Track the outcome of the pending securities class action and derivative lawsuits, which could result in unspecified damages.