what you can learn from OLIVE GARDEN’S property strategy

| June 24, 2015 | More

The parent company of Olive Garden is getting creative with real estate and hoping to pay off some serious debt in the process. Darden Restaurants, which owns Olive Garden and Longhorn Steakhouse, reported this week that it will transfer more than 400 of its restaurants into a real estate investment trust (REIT) and then lease them back from the REIT. The move will help the company pay off a $1-billion debt.

“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. He added that the plan would “create a more optimized capital structure and long-term shareholder value.” The REIT is expected to eventually acquire other properties and “grow in its own right,” Lee added[1]. Sears announced similar plans this past April, to investor approval, and Darden’s shares rose five percent in value in after-hours trading in the wake of the announcement.

Darden is not just putting its properties to work in real estate; The company is also considering selling its headquarters in Orlando, Florida. The company would then lease the building itself back from the new owner. Hopefully, the new strategy will help counterbalance issues that the company is having in the wake of a coup by activist investor Starboard Value, Darden’s largest shareholder, last year. Same-store sales rose in the fourth quarter of 2014 thanks in part to higher prices[2].

Are you optimizing your real estate assets to get the most bang for your ownership buck? What are you changing to make your investing business better?

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[1] http://www.forbes.com/sites/laurengensler/2015/06/23/darden-restaurants-reit/

[2] http://www.cnbc.com/id/102777735

About the Author (Author Profile)

Carole Ellis is editor in chief of the Bryan Ellis Investing Letter. Under Carole’s leadership, the Bryan Ellis Investing Letter has grown to over 700,000 subscribers, making it one of the largest real estate newsletters in the world. Each day, Carole directly impacts the daily thinking and conversations of real estate investors worldwide by providing thought-provoking analysis and commentary on news topics relevant to serious real estate investors.

Carole has a strong background in research and in the management of respected publications. She holds a degree in English Literature from the University of Georgia, and has substantial research experience in plant biology. She is the former editor of and writer for the University of Georgia’s Research Magazine. She’s also the author of hundreds of articles and multiple books and home study courses published under the names of her clients, many of whom are well known, highly respected real estate entrepreneurs as well.

Carole makes her home in Kennesaw, Georgia with her husband Bryan and 4 children.

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Category: Real Estate