Olive Garden parent, Darden Restaurants, is separating some restaurants into a publicly traded real estate investment trust as part of a plan to pay down $1 billion in debt. Bobbi Rebell reports.
In real estate - and restaurants - it is all about location, location, location. Olive Garden owner, Darden, has lots of them, and is now cashing in. The restaurant chain, which also owns Longhorn Steakhouse and Bahama Breeze, is spinning off 430 of its 1500 restaurant locations into what is called a real estate investment trust, or REIT. It's a fund that houses income-producing real estate. Cushman and Wakefield Vice Chairman Laura Pomerantz: SOUNDBITE: LAURA POMERANTZ, VICE-CHAIRMAN, CUSHMAN AND WAKEFIELD (ENGLISH) SAYING: "I think, it's a creative move, and it's a move in the present economic state that makes sense." The move is part of the changes engineered by activist investor Starboard Value. Darden will transfer the properties to a publicly traded REIT this year, and lease back most of the properties. It will also list 75 properties for individual sale-lease backs, along with its headquarters. The goal - use the proceeds to pay down about a billion dollars in debt. Darden's been struggling with sluggish traffic, though higher prices have helped the bottom line. This kind of move is becoming more popular. Both, Sears and Lord and Taylor parent Hudson Bay, have adopted similar strategies. But there are potential pitfalls. For example, the stores or restaurants have to lease back the real estate assets that they sell, creating a new expense. SOUNDBITE: LAURA POMERANTZ, VICE-CHAIRMAN, CUSHMAN AND WAKEFIELD (ENGLISH) SAYING: "You have a third party landlord, so that is where the risk lies, but the risk is probably minimal now with the interest rates the way they are." Darden's stock hit an all time high on the news. The company also reported better-than-expected results, and issued an optimistic outlook.