Darden Restaurants DRI +1.89% will spin off a bunch of its real estate into a real estate investment trust as part of plans to pay off $1 billion in debt, the restaurant chain said on Tuesday.
The owner of Olive Garden and Longhorn Steakhouse plans to transfer some 430 of its restaurants to the REIT, most of which will then be leased back.
Shares rose 5% in pre-market trading.
The company has also listed 75 properties for individual sale leasebacks and said more than 30 of these properties have been sold or are under contract. Darden owns and operates more than 1,500 restaurants.
The Orlando-based company, which expects to have carried out its real estate plan by the end of the year, will use the proceeds to pay down approximately $1 billion of its debt and keep hold of its investment grade credit profile.
“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 in a statement, noting that the plan is expected to create a more optimized capital structure and long-term shareholder value.
The new publicly-traded REIT will also be looking to acquire other properties and “grow in its own right,” said Lee.
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