ORLANDO, FL - Darden Resturaunts has announced that it will set aside a significant part of its real estate to create a separate, real estate-only business. The new real estate investment trust, or REIT, will be independent and publicly traded.
Darden, which owns restaurants such as Olive Garden and LongHorn Steakhouse, has said it will spin off about 430 of its more than 1,500 restaurants into the REIT. Most of the restaurants will be leased back to Darden, the company expects, and will be completed by the end of the year. The new deal is expected to give the company the opportunity to acquire more real estate, Darden revealed in a statement.
"This strategic real estate plan is the result of a comprehensive review of alternatives to best take advantage of our real estate portfolio," said CEO Gene Lee. "While a significant amount of work remains in order to proceed with the REIT Transaction, we believe this plan will result in a more optimized capital structure and will create long-term shareholder value. We appreciate the valuation differential between restaurant and real estate companies and are excited to create a new company, which we believe will unlock current value while growing through acquisitions of other properties.”
Darden has also listed about 75 properties for individual sale leasebacks. Proceeds from the real estate sales are expected to let Darden retire nearly $1 billion in debt.
“We anticipate a net book gain of approximately $50 million on the total 75 properties, with a $65 million gain being recognized over the next 15 years, and a loss of approximately $50 million that we recorded in the fourth quarter of fiscal 2015,” Lee added.
This announcement comes on the heels of the announcement of Darden's fourth-quarter earnings.
Highlights from Darden’s Q4 financial report include:
- Earnings of $105.3 million, or 82 cents a share
- Adjusted earnings per share were $1.08
- Sales jumped 13.8% to $1.88 billion
- Positive same-store sales jumps at all of the company's brands
- Olive Garden, Darden's largest chain, same-store sales increased 3.4%
As of 11:25 AM Pacific Time, Darden’s stock was up 1.86 to 71.35, a 2.86% increase.
Stay tuned as AndNowUKnow continues to update you on the new restructured companies.
