American Realty agrees to $1.5 billion sale-leaseback deal in Darden's sale of Red Lobster business

By Lisa Kerner

Charlotte, N.C., May 16 - American Realty Capital Properties, Inc. entered into a $1.5 billion sale-leaseback transaction for more than 500 Red Lobster restaurant properties. The transaction is in conjunction with Golden Gate Capital's $2.1 billion acquisition of Red Lobster from Darden Restaurants, Inc. on Friday.

The transaction's purchase price represents a GAAP cap rate of 9.9% and a cash cap rate of 7.9%, a company news release said.

According to American Realty, about 93.5% of the $1.5 billion portfolio's leases will be structured with a 25-year initial term. Roughly 6.5% of the leases, constituting leasehold assets, will have a weighted average 18.7-year initial term.

With this latest transaction, American Realty said it will achieve its 2014 $3 billion acquisition target well-ahead of schedule.

"With strong financial metrics, built-in 2% annual rent growth and long-term lease commitments, this acquisition affords shareholders value and supports our future earnings growth," said American Realty president David S. Kay.

Darden, an Orlando, Fla.-based casual dining operator, will use $1 billion of the $1.6 billion of net cash proceeds from the sale of the Red Lobster business to retire debt, according to a company news release. Remaining proceeds will be used for a new share repurchase program of up to $700 million in fiscal 2015.

American Realty is a self-managed New York-based company focused on acquiring and owning single-tenant freestanding commercial properties subject to net leases with high credit quality tenants.

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