Plural Investing's Chris Waller on the entertainment and hospitality turnaround at Seaport $SEG

Episode Summary

Executive Summary: The episode centers on Seaport Entertainment (SEG), a post-spin, cash-burning New York real estate/entertainment platform with misunderstood asset value. Chris Waller argues the market overfocuses on Tin Building losses and underappreciates Pier 17, 250 Water Street, and the Vegas assets. He believes new management can cut costs, increase foot traffic, and unlock substantial upside from today’s ~$20 share price.

Main Topics: What Seaport Entertainment is (Priority: 5/5): SEG was spun out of Howard Hughes in July 2024 as a collection of complicated, loss-making assets in Manhattan’s Seaport district plus some Las Vegas holdings. The discussion frames SEG as an unusual real-estate-and-entertainment turnaround rather than a simple property company. Market mispricing and valuation setup (Priority: 5/5): The speakers argue the market is fixated on limited disclosures and near-term cash burn, while overlooking stabilized or near-stabilized assets that may already cover the current market cap. The setup is described as a spin-off plus rights offering with technical selling pressure. Cash burn and Tin Building turnaround (Priority: 5/5): A major debate is whether SEG can reduce cash burn, especially at the Tin Building. The speakers outline cost cuts, management changes, concept rationalization, and procurement consolidation as levers to move the building toward breakeven. Pier 17 as the growth engine (Priority: 5/5): Pier 17 is presented as the company’s most important asset. The new Meow Wolf lease and the shift from office space to entertainment/hospitality are viewed as transformative because they should drive foot traffic across the Seaport district. 250 Water Street and monetizable land value (Priority: 4/5): 250 Water Street is described as a fully approved, tax-advantaged development parcel that could be sold or JV’d. It may provide a near-term catalyst and potentially be worth a large share of the company’s market cap on its own. Vegas assets and optionality (Priority: 3/5): The Las Vegas ballpark, Aviators-related holdings, and air rights above the Fashion Show Mall are treated as additional upside. The air rights are framed as a long-dated, low-burn call option with uncertain timing but potentially meaningful value.

Key Arguments: SEG is mispriced because investors are anchoring on limited disclosure and Tin Building losses rather than the value of the whole district and the higher-quality assets. The Tin Building is likely fixable to at least breakeven through cost reductions, operator consolidation, concept pruning, and better allocation of space. Pier 17 is the key catalyst because Meow Wolf should attract large visitor traffic and create a flywheel for restaurants, retail, and surrounding assets. 250 Water Street is valuable because it is fully approved, tax-advantaged, and in a prime view corridor; selling or JV’ing it could unlock substantial value quickly. The stock’s rights-offering mechanics created technical selling pressure, so the market may be understating the intrinsic value implied by Pershing Square’s willingness to backstop at $25. Ackman/Pershing Square ownership is not necessarily a discount; it may instead signal conviction and a willingness to support rational capital allocation. The downside case largely depends on continued cash burn and failure of the turnaround initiatives, especially if Meow Wolf or tenant mix improvements disappoint.

Data Points: SEG market capitalization: about $250 million - Discussed as the current market value of the company versus its asset base Net cash: about $50 million - Approximate cash position after netting debt and preferred claims Debt / preferred on two properties: about $115 million of debt plus a little preferred stock - Described as largely non-recourse and tied to specific assets Cash balance: about $160 million - Balance sheet cash mentioned in the asset discussion Howard Hughes investment into pool of properties: about $1.5 billion - Historical capital invested into the Seaport-related asset base Stock price: about $20 per share - Current trading price referenced during the conversation Potential recovery price: about $50 in three years - Chris’s rough upside estimate for the stock Pershing Square ownership at spin: 38% - Ownership stake at the time the company was spun out Pershing Square ownership today: 40% - After backstopping the rights offering and adding through oversubscription Rights offering backstop price: $25 per share - Pershing Square backstopped the financing at this level Possible over-ownership in rights offering: up to 70% - Hypothetical maximum ownership if Pershing had fully backstopped and others didn’t subscribe Q4 operating cash flow: negative $7 million - First post-spin quarter referenced as seasonally weak Q4 equity losses: negative $9 million - Mostly attributed to the Tin Building equity investment Q4 cash burn before capex: about $16 million - Operating cash flow plus equity losses in one quarter Tin Building annual revenue: just over $30 million - Current revenue level for the luxury food hall/market Tin Building annual expenses: about $70 million - Current cost base before restructuring Tin Building landlord rent income: $10 million to $11 million per year - Rent received by SEG as landlord in the building Tin Building comparable revenue per square foot: $600 per square foot - Current Tin Building performance Chelsea Market / Eataly / Flatiron revenue per square foot: $2,000 to $2,400 per square foot - Successful Manhattan food hall comparables Pier 57 revenue per square foot: about $900 per square foot - Comparable West Side water-adjacent concept Employee reduction at Tin Building: about 20% - Cost-cutting already initiated by management Pier 17 office / total space issue: about 215,000 square feet with significant vacancy - Office space inherited from pre-COVID design assumptions Meow Wolf lease size: 75,000 square feet - New anchor tenant for Pier 17 office-to-entertainment conversion Meow Wolf attendance potential: over 1 million visitors per year - Referenced as the concept’s estimated draw in New York and at other locations 250 Water Street developable area: 545,000 square feet - Fully approved mixed-use project, mostly residential 250 Water Street non-recourse mortgage: $60 million - Debt secured against the parcel 250 Water Street estimated sale value: about $160 million - One valuation estimate discussed for a possible sale/JV Fulton Market Building size: 115,000 square feet - Fully leased building in the historic district Fulton Market Building estimated revenue: about $10 million - Derived from estimated $85 per square foot rents Fulton Market Building estimated EBIT: about $6.5 million - Based on assumed margin conversion Fulton Market Building value at 6% cap rate: about $110 million - Implied value estimate from income and cap rate assumptions Vegas ballpark investment: about $150 million - Approximate capital invested in the ballpark Aviators value estimate: about $25 million - Rough estimate assigned to the AAA team / related asset Vegas ballpark + Aviators combined cost basis: about $175 million - Used to frame potential asset value versus market cap

Pivotal Quotes: "What did Caesar say about their Eldorado deal synergies?" — Andrew Walker: Sponsor example showing FinTool’s ability to retrieve specific filing evidence quickly "I think this is going to be the single most important thing that the management does to turn this company around." — Chris Waller: On the Meow Wolf lease and its role in driving traffic to Pier 17 and the Seaport district "I do think that there is a way to get to break even." — Chris Waller: On the Tin Building’s revenue/cost gap and the plausibility of a turnaround

Implications: Listeners should see SEG as a high-upside, event-driven turnaround where asset-level analysis matters more than headline cash burn. Near-term catalysts include cost cuts, Meow Wolf, and a possible 250 Water Street monetization.