Q3 2025 Seaport Entertainment Group Inc Earnings Call

Speaker #1: If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #1: I would now like to turn the conference over to your host, Jason Wilk, Senior Vice President of Finance. Thank you. You may begin.

Speaker #2: Thank you, Operator, and good morning, everyone. With me today is our President and Chief Executive Officer, Matt Partridge, and our Interim Chief Financial Officer, Lena Elliott.

Speaker #2: Before we begin, I'd like to remind everyone that many of our comments today are considered forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we undertake no duty to update these statements.

Speaker #2: Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's Form 10-K, Form 10-Q, and other SEC filings.

Speaker #2: You can find our SEC reports, earnings release, and quarterly supplemental information on our website, at seaportentertainment.com. With that, I will now turn the call over to Matt.

Speaker #3: everyone. First, I'd like to begin by thanking our team, Board of Directors, shareholders, and partners for their support through the company's recent leadership transition.

Speaker #3: I also want to thank Anton for his contributions during the initial phase of the company's development. I'm honored to be given the opportunity to step into the CEO role, and I'm excited about what the future holds for our company.

Speaker #3: I'm also thrilled for Lena and the opportunity she has in front of her with her new role. Lena and I have worked together closely since the beginning of Seaport Entertainment Group, including on SEG's separation from Howard Hughes and in developing the company's accounting and financial infrastructure.

Speaker #3: She has done an exceptional job stepping into the interim CFO role over the past few months, and I expect that to continue as we finalize the 2026 budgets and work our way into the new year.

Speaker #3: As we move forward, it's important that we continue to refine the company's focus and priorities as we seek to stabilize and then optimize our operating models.

Speaker #3: This includes continuous reassessment of our existing businesses and organizational structure to ensure we're working towards improved efficiency and ultimately positive operating income. We also want to prioritize financial discipline and thoughtful capital deployment.

Speaker #3: With our existing cash on the balance sheet and expected additional cash from the sale of 250 Water Street, we plan to allocate capital in a way that positions the company to deliver long-term value.

Speaker #3: This strategy will include further reinvestment into our existing assets to fill vacancies, improve space utilization, and drive customer visitation and engagement. Beyond our existing portfolio, we plan to be opportunistic as we look for opportunities to create long-term value and grow that leverage is our existing partnerships and real estate-driven hospitality and entertainment platforms.

Speaker #3: With respect to our current portfolio, let's start with New York. I want to address the recent questions about New York City tourism and real estate trends and their broader impacts on our business.

Speaker #3: The New York City market continues to present a mixed picture. On the tourism front, international visitation remains below pre-pandemic levels, currently at about 90% of 2019 volume, and will likely remain soft in the near term.

Speaker #3: This is impacting higher spending patterns typically associated with international guests. That said, domestic travel remains resilient, and total New York City visitation is projected to reach almost 65 million visitors in 2025, surpassing 2024 levels and approaching pre-pandemic visitation levels.

Speaker #3: Meanwhile, the Manhattan office market has shown strength. It is one of the few major US cities to exceed pre-COVID office leasing activity, driven by increasing return-to-office momentum, particularly within the financial services, technology, and media industries.

Speaker #3: While office leasing in Lower Manhattan hasn't rebounded at the same levels as Midtown, Midtown South, and some of the higher-end corridors, Lower Manhattan office leasing will benefit from taking supply out of the submarket through office-to-residential conversions.

Speaker #3: An estimated 10,000 new residential units have recently come to market or are expected to come to market over the next few years. Which will further enhance the area's vibrancy and residential density.

Speaker #3: Since 2010, lower Manhattan has seen its population grow by nearly 29%, which is the fastest growing district in all of Manhattan and the second fastest growing district in all of New York City behind Brooklyn's CD2, which includes downtown Brooklyn, Dumbo, Brooklyn Heights, and other submarkets that are right across the East River with easy access to the Seaport via the subway, ferry, and Brooklyn Bridge transportation networks.

Speaker #3: As part of Lower Manhattan's growth, two of the most proximate submarkets to the Seaport, the Financial District and the Seaport neighborhood itself, experienced residential population growth of 45% and 34%, respectively.

Speaker #3: Well above New York City's 7.7% growth rate over the same timeframe. Furthermore, the under-18 population in lower Manhattan grew more than 60%, the fastest in all of New York City, and five high residents between the ages of 20 and 34 years old have increased by 12.5%.

Speaker #3: A 60% higher growth rate than Manhattan's 20 to 34-year-old population growth rate. As a result of the office leasing strength and other submarkets, moderating supply from these conversions, and a continued shift to becoming more of a younger residential neighborhood, incremental demand for commercial space in Lower Manhattan should grow faster than most, if not all, submarkets in New York City. This should ultimately help push rents higher over the long term for all commercial uses.

Speaker #3: In the near term, our opportunity lies in our ability to curate and deliver compelling, high-quality experiences within the Seaport, experiences that drive visitation, time spent in neighborhood, and customer spending, regardless of broader market cycles or submarket dynamics.

Speaker #3: Sticking with New York, I’d like to provide a quick update on the sale of 250 Water Street. In August, we announced that we entered into an agreement to sell the 250 Water Street development project for $150.5 million to Tavros, an experienced and active mixed-use New York City-based developer.

Speaker #3: In September, Tavros exercised its first extension option, and more recently, they exercised their second and final extension option. As a result, the outside closing date for the sale is now December 15th, the deposit has increased to $7.5 million, and the sale price has increased to $152 million.

Speaker #3: Once completed, we estimate the sale will positively improve historical cash burn by more than $7 million as a result of eliminating interest expense through the repayment of the associated land loan and other related carrying costs, such as taxes, insurance, and site maintenance expenses.

Speaker #3: We remain confident in Tavros' ability to execute on the project and continue to believe this will be a terrific addition to lower Manhattan and the Seaport neighborhood.

Speaker #3: Hospitality operations during the third quarter and year-to-date have seen top-line demand level off in certain legacy venues, while newer concepts such as DuTono, which opened in May, and Long Club, which is in its second full year of operation, have both continued to outperform on a relative basis due to strong social and corporate demand.

Speaker #3: During the quarter, same-store Seaport food and beverage revenues were up 8%, while overall hospitality revenues increased 3% year over year, both of which are also sequential improvements from the first and second quarters.

Speaker #3: We expect a moderation in food and beverage revenue growth during the fourth quarter as we prioritize flow-through and profitability potentially at the expense of revenue growth.

As mentioned previously and highlighted in our press release last week, we were pleased to announce flanker kitchen, and sports bar and hidden boots allude to concepts from Carver Road hospitality.

These events among others hosted at the seaport. This year have further validated our conviction and our ability to deliver Marquee events that drive substantial, visitation to the neighborhood and position us as a premier destination for cultural experiences in New York City.

Third winning flanker brand currently includes locations in Salt Lake City, Glendale in Las Vegas, and we're excited to welcome their east coast flagship location to the Seaport. These concepts will occupy over 14000 square feet at Pier 17.

Like your kitchen, and sports bar will offer an elevated cocktail focused sports and dining experience.

With hidden boots saloon, offering live music and country style atmosphere, both with private event spaces.

This new venue introduces fresh differentiated concepts that will be a complement to the recently opened dining and nightlife venues as well as to our existing restaurant portfolio in the neighborhood or Seaport neighborhood merchandising plan, which also includes MEO Wolf and the aforementioned ditto in long club should appeal to the more social and sometimes younger.

A graphic that is becoming increasingly prevalent in lower Manhattan overall.

Overall with more than 110000 square feet of space leased or programmed over the past 12 months our plan for the seaport should build momentum in the coming years as our concepts further support lower Manhattan's increasing residential density and evolving population.

Finally, I want to congratulate the Las Vegas aviators on a historic season as specific closely champions.

Celebrating the franchise's first P C L title since 1988.

Well, we didn't take home the championship title the team narrowly lost the AAA National Championship game by way of walk off home run in the bottom of the ninth inning, we're extremely proud of their achievements.

Our team in Las Vegas is now in the midst of transforming the Las Vegas ballpark two enchant winter.

The winter Wonderland activation complete with ice rink and other first of activities, which opens later this month and runs through the holiday season.

This year, we made the decision to bring the operations in house, which required upfront investment and startup costs, but we believe it will prove to be a worthwhile endeavor as it should strengthen guest engagement introduced new audiences to the venue and allow us to cross market to a broader customer base, we anticipate more than 175000 guests will visit the season driving revenue to the.

Ballpark during baseball is off season.

With that I want to again, thank the entire <unk> C. G team for their extraordinary effort to date as we continue to drive improvement quarter to quarter, and so appreciative of their commitment and enthusiasm that I know will deliver further progress over the coming months as we get into 2026, I'll now turn it over to Leah.

Thanks, Matt and good morning, everyone before I get into the company's third quarter financial performance I'd like to remind everyone of some changes made at the start of the year, including renaming our sponsorship events and entertainment segment to entertainment.

In conjunction with this change, we reallocated sponsorship and events revenues and expenses to their respective segments that most appropriately are a source of sponsorship or event.

These changes are reflected in both the current and prior year periods presented in our consolidated and combined statements of operations.

Beginning in 2025 and in conjunction with internalizing, our food and beverage operations, we consolidated the tin building into our hospitality segment in prior years. The Tin building was accounted for as an unconsolidated joint venture and our share of net losses reflected in the equity and earnings or losses from unconsolidated ventures line.

Our consolidated and combined statements of operations.

And in effort to provide more comparable information well refer to the 2024 operating results on a pro forma basis.

Selecting the inclusion of the tin building as a consolidated entity during the prior year period, when providing year over year comparisons on this call.

In the third quarter total consolidated revenues were 45.1, million% to 1% year over year increase when compared to pro forma Q3 2024.

Holiday you did revenues exclude the financial results of our unconsolidated ventures, such as the one club and our investment in John George restaurants.

Since they are reflected in the equity and earnings or losses from unconsolidated ventures line on our consolidated and combined statements of operations.

In our hospitality segment hospitality revenues declined 4% compared to pro forma year over year in the third quarter.

Matt noted earlier the decline in hospitality revenue, mainly reflects lower revenues at the tin building and softness among certain legacy standalone restaurants.

Including results of our unconsolidated venture Lawn club total hospitality revenues increased 5% year over year, while same store hospitality revenue rose 11%.

These gains were driven by the continued success of the Golan club the strong launch of Daytona and the benefit of our venues received from hosting events on the fourth of July.

Hospitality segment, adjusted EBITDA, including earnings from unconsolidated ventures declined by $2 9 million year over year as a result of reflecting a favorable one time benefit from reimbursements received in the third quarter of 2024 and related to prior period operating expenses.

Excluding this one time item the hospitality segment adjusted EBITDA improved by 40% year over year supported by the growth of Milan club improvements from Daytona event, driven restaurant buyouts during Macy's fourth of July celebration, and overall lower operating expenses achieved through cost cutting measures.

Moving to the entertainment segment revenues declined 5% year over year, primarily due to hosting seven fewer concerts at there is top at pier 17 compared to prior year.

As we noted on the last call. The show Count was favorable in the second quarter compared to prior year unfavorable to the third quarter, reflecting a timing shift in shadows, rather than a change in demand.

Partially offsetting the lower number of concerts was revenue from the Macy's fourth of July broadcast as well as the Las Vegas aviators postseason run which included three additional playoff games, resulting in the Pacific Coast League Championship game appearance all held at our Las Vegas ballpark.

Entertainment segment, adjusted EBITDA decreased 51% year over year in the third quarter, primarily reflecting decreases resulting from the reduced concert count variances in allocations of overhead compared to prior year, along with increased sponsorship fulfillment costs, which mainly occurred during peak concert season.

Within the landlord segment rental revenue drove most of the consolidated revenue increase in the third quarter rising 56% year over year on a pro forma basis.

We benefited from approximately $1 million in termination related income in the quarter associated with Nike and ESPN, both tenants appear 17 rent.

Rental revenue growth also included private event activity, most notably Nike is the one global finals event, which took place on the rooftop at Pier 17.

Looking ahead, we will no longer receive or recognize any rental revenue from ESPN, while continuing to recognize nike's termination intense through 2026 and into the first quarter of 2027. In addition, Nike will continue with its ongoing monthly rent payments under the lease agreement.

Landlord segment, adjusted EBITDA decreased 45% year over year in the third quarter, primarily due to one time noncash charges totaling around $6 million.

Which include a $4 million loss recorded at $2 50 water Street in conjunction with classifying the property as held for sale and a $2 million write off related to capital spend on the rooftop of infrastructure.

Excluding these nonrecurring items landlord segment, adjusted EBITDA improved 76% year over year, reflecting both the revenue gains discussed earlier and lower operating expenses compared to the prior year period.

Overall total segment adjusted EBITDA for the company in the third quarter of 2025, which reflects the financial performance of each of our segments before the effects of G&A interest income and expense and depreciation and amortization and includes the results of unconsolidated ventures declined by $7 million compared to Q3.

<unk> 24 on a pro forma basis.

When you exclude the impact of the nonrecurring items discussed earlier from both periods, notably the 250 water Street loss on held for sale classification, the rooftop winter structure write off and the favorable hospitality operating expense reimbursement recognized in the prior year.

<unk> segment, adjusted EBITDA improved by 76% or over $4 million year over year.

General and administrative expenses during the quarter were $18 million, resulting in a quarterly year over year reduction of 10%.

Well prior year G&A continues to be impacted by our predecessors cost structure in the quarter, we recognized approximately $11 million in accruals related to the leadership transition.

Excluding this one time accrual our corporate cost structure continues to reflect sequential improvement as we work towards a sustainable operating model.

Interest expense decreased by $3 million compared to Q3 of 'twenty 'twenty four as a result of a $1 million decrease in interest expense related to $2 50 water Street, when compared to 2024 because of the loan pay down that occurred around the time of our separation from Howard Hughes.

And approximately $800000 decrease in interest expense related to the capitalization of interest on the 250 water Street loan and $1 million of offsetting interest income earned on invested cash deposits.

During the quarter, we suspended capitalization of interest for 250 water Street midway through the period as it was classified as held for sale, which resulted in higher interest expense compared to the second quarter.

When compared to pro forma Q3, 2024 results equity and earnings or losses from unconsolidated ventures improved 180% year over year, mainly driven by continued growth at Alon club, which in its second year of operations continues to meet our strong demand for private events.

Third quarter net loss attributable to common stockholders was $33 2 million, representing a year over year decline of around 700000, or 2% with a net loss attributable to common stockholders per share of $2.61 and improvement of $3 28 per share or <unk> 56 per cent compared to the.

Third quarter of 2024.

The non-GAAP adjusted net loss attributable to common stockholders for the third quarter was $7 2 million, representing an improvement of around $18 million or 71% versus the comparable period in 2024.

Q3, 2025, non-GAAP adjusted net loss attributable to common stockholders per share was <unk> 57 cents.

An improvement of $3 97 per share or 87% compared to the third quarter of 2024.

Capital expenditures in Q3, 2025 totaled $4 8 million.

Excluding capitalized costs associated with the $2 50 water Street development. The majority of the capital expenditures were related to the rooftop winter structure, completing the river DUC build out and landlord work and maintenance capital for our existing operations.

Long term debt outstanding as of September 30th remained at 101.4 million unchanged from year end 2024, except for regular way amortization of the Las Vegas ballpark line.

Net debt to gross assets at quarter end was negative 2%.

Our negative net debt position continues to reflect the strength of our balance sheet and cash restricted cash and cash equivalents balances, which totaled 117 million as of September 30th.

Before we open it up for questions I wanted to take a moment to thank Matt for his leadership and guidance and our time working together, but especially over the past few weeks during this transition.

I'd also like to thank the entire S. C. G team our partners and our board of directors for their continued support and collaboration.

I'm excited about the opportunities ahead as we move into planning for 2026, and I look forward to building on the progress we've made as a team with that well now open the line for questions.

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Our first question comes from the line of Matthew <unk> with Jones trading. Please proceed with your question.

Hey, guys. Good morning, Thanks for taking the question and congrats on the continued improvement.

As we look to profitability. What do you think are the biggest levers that you guys can pull to drive that path forward.

Hey, Matt good to hear from you. Its a good question and obviously, it's a pertinent one because we have made a lot of progress, but most of the leasing that we've done if not all of the leasing that we've done other than chateaux hasn't rent commence or started operating sorry. Thank you.

Getting some of these tenants open and operating and paying rent continuing the momentum on the leasing front to fill up the remaining vacancy which if we include the Nike space that will get back in 2027, and it's about 100000 square feet left a programmer lease and then I think focusing on the operational model and the G&A that to try to create some efficiencies with.

What we've what we've already done but there's more room to go is really going to be the path to get us to to breakeven and then profitability.

Got it that's helpful. And then following up on the leasing could you talk a little bit about the demand that you guys are experiencing down there and I guess the mix of tenants that are looking at your perspective spaces.

Yeah I think.

Demand has been really strong there's plenty of articles out there speaking to demand specifically for restaurants space over the last few months in New York City.

We've obviously had a lot of a lot of success with food and beverage operators and getting them in the space, whether that's <unk> and our flanker or Cork or well. It's so I think the food and beverage has been strong we're now starting to focus a little bit more on the more traditional retail tenants.

Well filling out some of our legacy F&B spaces. So we're not short on demand we're more focused on finding the right partners the right experiences and the right tenants.

For the diverse community and customer base that we're trying to serve.

Got it and then is there anything that we should expect kind of timing wise are you guys wanting to kind of get all of these guys in and opened up prior to me I'll walk So say maybe middle of second half of next year, we should look for velocity to really pick up.

Yeah, I think the velocity is definitely going to be in the back half of the year I think Cork will probably get opened before the midpoint willetts will be around the fourth of July timeframe, hopefully and then and flanker and some of the other stuff. We're working on will hopefully be on the back end of our 2026, and then depending on who.

We fill the other vacancies with why there'd be a late 'twenty six or call. It first half of 2027. So the goal is to get everybody open and operating.

Before me I'll Wolf, but obviously it will depend on how things get phased in here from a leasing standpoint.

Got it and then last one for me how do you guys position yourself to continue bringing the special events, such as Macys wine and food Festival.

And then could you also talk about just the importance of these events really bring in helping drive exposure and awareness to the district.

Yeah on the latter point I'm, you know I'm relatively new to New York I've been here about two years now and a lot of the conversations I have with people who live in New York say, Oh, I went to the seaport pre COVID-19 or I haven't been there in a handful of years and so I think these events help pull people down who maybe otherwise.

Didn't have the seaport top of mind.

So it's a great marketing opportunity for us and for the community and for the neighborhood and then I think more broadly positioning the seaport as a cultural and experiential destination just more broadly for New York I think is an important part of pulling people down here and ultimately, making all the concepts in and partners that were bring.

<unk> successful so it's as much about foot traffic and time in destination as it is anything else and I think these events definitely help with that in terms of how to keep building on that momentum. Obviously the team has done a great job of pulling a number of events down here. This year and we're hoping to bring all of those events back and more next year.

Some of that will be through programming and the rooftop some of that will be doing special events out on the pier and the cobblestone. So it's a it's an array of different opportunities that we have in front of us and we just have to keep working and keep networking.

And creating the partnerships that bring these things down here over a multiyear period.

That's great I appreciate the comments as always thank you guys.

Thanks, Matt.

Thank you as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad.

Our next question comes from the line of Ross Haberman with Aro H investments. Please proceed with your question.

Good morning, Thanks, again for having the call.

Could you talk to US specifically, you talked a little bit and your Q about restructuring with Sean George.

Do you think you'll hit a breakeven.

In fact cash wise in 'twenty six let me start off with that.

Morning, Ross when you say hit a breakeven in 'twenty six are you talking about specifically in the hospitality segment or <unk> or something something else, Sean George the Tin building, that's what I'm.

Oh for the Tin building.

Yeah, No I'm not.

I'm not in a position today to give forward guidance on what the Tin building will do in 'twenty six where we've spent a lot of time on it and as we mentioned in the prepared remarks, it's a it's a big focus for us and we plan to be able to outline that plan on the next earnings call. So I'd say give us a couple of months to finalize the budget process and we'll make sure to.

To appropriately lay out our plans for that building.

Call It early March.

With the restructuring let me ask with restructuring are basically are you cutting cost there or.

Sharing was sorry, the restructuring was really to bring the employee base in house. It was it was previously third party managed by John George So that's what the restructuring allowed us to do and by bringing it in house, we were able to restructure those agreements. So we have license agreements now instead of management agreements and so we were able to reduce.

Some of the management fees that we're paying for that external management.

It's a new concept or adjusted concept part of the thinking.

I think everything's on the table now, we're obviously working very closely with our counterparts at Sean George It's a great relationship for US. It's one that we obviously value quite a bit, especially with her or 25% ownership in their in their broader organization. So we're we're working hand in hand with them to try to figure out the best path forward and like I said.

I think we'll have a pretty well laid out plan by March on the next earnings call.

Yeah.

You talked about 100000 square feet of space to rent.

How is that coming and I don't know do you think youll be able to make a dent of half of that in 'twenty six or whats your thought and.

In terms of the people you're currently negotiating or speaking with now do you have a couple of larger prospects that could use I don't know half from more that within 26.

So the biggest chunk of that 100000 is the Nike space, we won't get that back until 2027, but obviously, we're not wait to try to work through that.

A lot of the remaining space is is small shop space. So we should be able to drive higher rents on those spaces. Just just given the size and the US are we are working on a whole host of different opportunities some of which I'm sure we'll get over the finish line on some of which maybe not maybe you won't make it there.

But you know I'm I'm pretty excited about some of the stuff we have in the queue that we haven't been able to talk about yet that hopefully we'll get over the finish line before the end of the year and we can we can have some more announcements.

And just one final question, if I may we expected capital expenditures for the fourth quarter.

So for the fourth quarter, it'll it'll probably be somewhat light.

We're deep into the MEO Wolf landlord work right now and we're doing some work on well it's in Cork.

Yeah, it'll probably ramp up in the first half of 'twenty 'twenty six.

We've got about $15 million or so committed between all the projects that we've announced are I think the majority of that's going to go out sort of in the mid to back half of 2026.

Okay. Thanks, again for having the call I appreciate it.

Of course, thanks Ross.

Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. Partridge for any final comments.

I appreciate it operator, and thank you everybody for joining US today, we'll look forward to sharing more progress on the fourth quarter and year end conference call are in the early part of the new year.

Have a great holiday. Thank you.

Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.