Note 1 – Organization

Seritage Growth Properties (“Seritage”) (NYSE: SRG), was formed as a Maryland real estate investment trust on June 3, 2015, operated as a fully integrated, self-administered and self-managed real estate investment trust (“REIT”) as defined under Section 856(c) of the Internal Revenue Code (the “Code”) from formation through December 31, 2021. On March 31, 2022, Seritage revoked its REIT election and became a taxable C Corporation effective January 1, 2022. Seritage’s assets are held by and its operations are primarily conducted, directly or indirectly, through Seritage Growth Properties, L.P., a Delaware limited partnership (the “Operating Partnership”). Under the partnership agreement of the Operating Partnership, Seritage, as the sole general partner, has exclusive responsibility and discretion in the management and control of the Operating Partnership. Unless otherwise expressly stated or the context otherwise requires, the “Company” and “Seritage” refer to Seritage, the Operating Partnership and its owned and controlled subsidiaries.

Prior to the adoption of the Company’s Plan of Sale (defined below), Seritage was principally engaged in the ownership, development, redevelopment, management, sale and leasing of diversified retail and mixed-use properties throughout the United States. As of June 30, 2026, the Company’s portfolio consisted of interests in nine properties comprised of approximately 0.8 million square feet of gross leasable area (“GLA”) or build-to-suit leased area and 139 acres of land. The portfolio encompasses four consolidated properties consisting of approximately 0.3 million square feet of GLA and 56 acres (such properties, the “Consolidated Properties”) and five unconsolidated entities consisting of approximately 0.5 million square feet of GLA and 83 acres (such properties, the “Unconsolidated Properties”).

The Company commenced operations on July 7, 2015 following a rights offering to the shareholders of Sears Holdings Corporation (“Sears Holdings” or “Sears”) to purchase common shares of Seritage in order to fund, in part, the $2.7 billion acquisition of certain of Sears Holdings’ owned properties and its 50% interests in three joint ventures which were simultaneously leased back to Sears Holdings under a master lease agreement (the “Original Master Lease” and the “Original JV Master Leases,” respectively).

On March 1, 2022, the Company announced that its Board of Trustees had commenced a process to review a broad range of strategic alternatives. The Board of Trustees created a Special Committee (the “Special Committee”) of the Company’s Board of Trustees to oversee the process. The Special Committee retained Barclays Capital, Inc. (“Barclays”) as its financial advisor. The agreement with Barclays expired in August 2023. The Company’s strategic review process remains ongoing as the Company executes sales pursuant to the Plan of Sale, and the Company remains open minded to pursuing value maximizing alternatives, including a potential sale of the Company. There can be no assurance that the review process will result in any transaction or that the Company will be successful in fully executing the Plan of Sale. The Board of Trustees is currently overseeing the Plan of Sale.

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 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 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.

As a result of the Company’s change in corporate structure to a taxable C Corporation effective January 1, 2022, the Company incurred a one-time, non-cash deferred tax benefit of approximately $161.3 million during the quarter ended March 31, 2022. The Company also recorded a full valuation allowance against the deferred tax asset pursuant to ASC 740, Income Taxes, as discussed in more detail below.

The Company sought a shareholder vote to approve a proposed plan of sale of the Company’s assets and dissolution (the “Plan of Sale”) that would allow the Board of Trustees to sell all of the Company’s assets, distribute the net proceeds to shareholders and dissolve the Company. The Plan of Sale is expected to increase the universe of potential buyers by allowing Seritage and potential buyers to enter into and complete value maximizing transactions without subjecting any such transaction to the delay and conditionality associated with having to seek and obtain shareholder approval. On July 6, 2022, Edward Lampert, the Company’s former Chairman, entered into a Voting and Support Agreement under which he exchanged his equity interest in the Operating Partnership for Class A common shares and agreed to vote his shares in favor of the Plan of Sale. As of June 30, 2026, Mr. Lampert owns approximately 23.8% of the Company’s outstanding Class A common shares, and Seritage, including its consolidated subsidiaries, is the sole owner of all outstanding Operating Partnership interests.

The affirmative vote of at least two-thirds of all outstanding common shares of the Company was required to approve the Plan of Sale. The 2022 Annual Meeting of Shareholders occurred on October 24, 2022, following the Company's filing of a final proxy statement with the SEC on September 14, 2022. During the meeting, the Plan of Sale was approved by the shareholders. The strategic review process remains ongoing as the Company executes the Plan of Sale, and the Company remains open minded to pursuing value maximizing alternatives, including a potential sale of the Company. There can be no assurance that the review process will result in any transaction or that the Company will be successful in fully executing on the Plan of Sale. See “Item 1A. Risk Factors — Risks Related to Our Business and Operations — There can be no assurance that we will be able to complete any transaction or any strategic change on terms satisfactory to the Board of Trustees.” included in our Annual Report on Form 10-K, (the “Annual Report”) for the year ended December 31, 2025.

Liquidity

The Company’s 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 during the six months ended June 30, 2026, and the Company recorded net operating cash outflows of $7.3 million. Additionally, the Company generated net investing cash inflows of $12.0 million during the six months ended June 30, 2026, which were driven by distributions from unconsolidated entities and real estate sales and partially offset by development expenditures and investments in unconsolidated entities.

Obligations are projected to continue to exceed property rental income and the Company expects to fund such costs with a combination of capital sources including, but not limited to, cash on hand, sales of Consolidated Properties and sales of Unconsolidated Properties. During the six months ended June 30, 2026, the Company sold one Consolidated Property for gross proceeds of $11.0 million and received a distribution from an unconsolidated joint venture of $5.7 million due to the sale of a portion of an Unconsolidated Property. The Company did not make any paydowns on the Term Loan Facility during the six months ended June 30, 2026, however it paid off the Term Loan Facility subsequent to period end and entered into a new revolving loan facility as described further below and in Note 6, Debt.

Going Concern

In accordance with ASC 205-40, Presentation of Financial Statements - Going Concern, for each annual and interim reporting period, management evaluates whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. As part of this evaluation, the Company takes into consideration all Obligations and certain development expenditures due within the subsequent 12 months, as well as cash on hand and expected cash receipts, plus drawdowns from our new revolving loan facility as described below.

In the prior period ended March 31, 2026, and the year ended December 31, 2025, the Company concluded that management’s plans did not alleviate substantial doubt about its ability to continue as a going concern because anticipated proceeds from asset sales and cash on hand were insufficient to meet its obligations, including the Term Loan Facility that was scheduled to mature on July 31, 2026.

Subsequent to June 30, 2026, the Company sold one Consolidated Property for gross proceeds of $3.0 million and received a distribution from an unconsolidated joint venture of $8.9 million due to the sale of a portion of an Unconsolidated Property. Additionally, on July 24, 2026, the Company entered into (i) a Loan and Security Agreement (the “Real Estate Loan”) providing for a $15.0 million term loan and (ii) a Business Loan Agreement (the “Revolver”), as amended by an omnibus agreement, providing for a $25.0 million revolving loan. At closing of the Revolver, the Company drew $15.0 million, and has $10.0 million available and unfunded. The Company used the proceeds from the closing of the Real Estate Loan and the initial draw under the Revolver, together with cash on hand, to fully repay the $50.0 million outstanding balance on the existing term loan facility that was scheduled to mature on July 31, 2026. The Real Estate Loan is collateralized by the Company’s interest in three Consolidated Properties and bears interest at an annual rate of one-month SOFR plus 2.75% which interest rate shall be reduced to one-month SOFR plus 2.25% if the outstanding balance is reduced to $10.0 million or less. The Revolver is collateralized by $25.0 million of cash held in a restricted account with the lender. Drawn amounts under the Revolver bear interest at an annual rate equal to a spread of 2.0% above the money market rate on the cash collateral which is currently 3.5% for 12 months from closing and thereafter resets annually. Both the Real Estate Loan and the Revolver mature on July 24, 2028 and have a one-year extension option, subject to the adherence of certain conditions defined in the Real Estate Loan and Revolver.

The Company does not currently have any assets under contract with closings that are deemed probable within the 12 month period. As the outstanding balance of the new term loan facility and the revolving loan facility is not due within the one year after the date that the financial statements are issued, they are not factored into the Company’s analysis as current obligations.

Management estimates existing cash on hand, the ability to draw on the remaining unfunded Revolver, and expected rental income would allow the Company to fund its Obligations and certain development expenditures. As a result, the Company has concluded that management’s plans alleviate substantial doubt about the Company’s ability to continue as a going concern as of June 30, 2026.