Darden Restaurants Inc. said Tuesday it plans to separate some
of its real-estate assets, spinning off some restaurants into a
publicly traded real-estate investment trust and making other
sale-leaseback deals.
The company, which owns Olive Garden and LongHorn Steakhouse,
will transfer about 430 of its owned-restaurant properties to the
REIT, with almost of all REIT's initial assets being leased back to
Darden.
The company's board reached this decision after an extensive
evaluation of its real-estate assets.
Darden said late last year that it had hired bankers from J.P.
Morgan Chase & Co. and Moelis & Co. to explore options for
its real estate portfolio, which includes some 1,200 restaurants,
such as Olive Garden and Capital Grille.
Rising real-estate values have driven more retail companies to
consider splitting off their real-estate assets to generate
cash.
In recent months, Hudson's Bay Co., the Canadian parent company
of Saks Fifth Avenue and Lord & Taylor department stores,
announced a $1.7 billion joint venture with U.S. mall operator
Simon Property Group Inc. involving 42 department stores. And Sears
Holdings Corp. said it would split off as many as 300 of its best
locations into a separate company by June to raise money.
Activist investors, meanwhile, have pushed for real-estate
split-offs at a half-dozen other companies, including fast-food
chain McDonald's Corp., department store Dillard's Inc. and casino
operator MGM Resorts International.
The trend is being driven in part by the record-high valuations
for real-estate assets, along with low interest rates and favorable
tax treatment. Since they were established as a corporate structure
in the 1960s, REITs have been able to pay little or no tax on their
earnings as long as they distribute the bulk of their profits to
investors through dividends.
Write to Neil Haggerty at neil.haggerty@wsj.com
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