Darden Restaurants said its board approved a strategic real estate plan to pursue a separation of a portion of the company's real estate assets.
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Under the plan being pursued, Darden will transfer approximately 430 of its owned restaurant properties to the REIT, with substantially all of the REIT's initial assets being leased back to Darden.
The leases are expected to have attractive rent coverage ratios, fixed rent escalations and multiple renewal options at Darden's discretion. The potential REIT would be well positioned to expand through real estate acquisitions of other businesses.
In addition, the company has been marketing selected properties for individual sale leasebacks. To date, the company has listed 75 properties, and more than 30 of these properties have been sold or are under contract.
The company expects an average cash capitalization rate of approximately 5.5% for all 75 properties, and expects to close most of these transactions by the end of August.
In addition, the company is seeking to sell and lease back its Orlando Restaurant Support Center property and buildings under a long-term contract with multiple renewal options at the company's discretion.
After receiving proceeds from the completion of the strategic real estate plan, the company expects to retire approximately $1 billion of its debt over time and maintain its investment grade credit profile.
Darden Restaurants reported financial results for the fourth quarter and fiscal year ended May 31, 2015. Q4 total sales from continuing operations increased 13.8% to $1.88 billion. Adjusted earnings per diluted share increased 100% to $1.08.
On a GAAP basis, earnings per diluted share from continuing operations increased 156% to $0.92. Excluding the 53rd week, sales increased 6.3% and adjusted earnings per diluted share increased approximately 87%. Same-restaurant sales increased 3.8% for the quarter.
Fiscal year 2015 total sales from continuing operations increased 7.6% to $6.76 billion. Adjusted earnings per diluted share increased 54% to $2.63.
On a GAAP basis, earnings per diluted share from continuing operations increased 9% to $1.51. Excluding the 53rd week, sales increased 5.6% and adjusted earnings per diluted share increased 50%. Same-restaurant sales for the year increased 2.4%
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