The Orlando-based restaurant firm Darden Restaurants Inc. announced it will separate and create a real estate investment trust (REIT), where around 430 restaurant properties of more than 1,500 they own will be transferred, along with all their assets, and leased.
“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 in a press release. “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.”
The press release said the REIT will allow for rent coverage ratios, fixed rent escalations and multiple renewal options at Darden’s discretion. It will also allow for the expansion by acquiring other company real estate assets. Darden also plans to continue to pursue several sale-leaseback transactions.
All of this is in an attempt to pay down its debt over time — $1 billion to be exact.
JP Morgan and Moelis & Co. are serving as financial advisors to the Darden REIT separation. Darden expects to complete the REIT transaction by the end of the 2015 calendar, making it effective Jan. 1, 2016.
For the full press release, click here.