Darden's Dividend Recipe Looks Delicious - my dish olive garden darden restaurants

In early 2014, two aggressive hedge funds
Starboard Value Capital and Barrington Capital)
Restaurant on Twitter (DRI)
The management team broke the golden goose Olive Garden by spinning
Convert the shares held into real estate investment trusts.
At the time, Darton had 2,138 stores in the United States and Canada, and activists wanted to release value in the restaurant group that began to lose its luster.
The ugly duckling of the Darton Empire is the Red Lobster-The struggling seafood chain has faster sales and customer churn than any other brand in Darton, including the Bahamas breeze, season 52, Eddie V and the house in the yard.
Red Lobster is the oldest brand in the Darton collection, and its founder, Bill Darton, was founded in 1968 and renamed his first restaurant, green frog ".
Red Lobster has been an impressive business for years and profits have been re-invested in a variety of restaurant concepts.
Due to the growth of assets and profitability, the market provides Darton with a variety of ways to invest in real estate.
It is not uncommon for a new listed company to create the joy of future growth and push stock valuations to an astonishing multiple.
For example, shake the chamber (SHAK)and Fitbit (FIT)
Based on future growth, both companies are taking advantage of the storm, and at some point, the two companies will trade as expected by normalization.
This is the development of a listed company and the development of the Darton company we are seeing now.
Like most mature brands, Darton is not a shake-and-shake cabin, with less robust growth engines and more worrying management risks.
Last year, the Denton board took some bold steps to reduce the risk in the restaurant portfolio by selling its "ugly duckling" Red Lobster.
Golden Gate Capital bought the seafood chain for $2.
1 billion real estate capital properties in the United States (ARCP)
The most profitable (500 stores)
$1 real estate price.
6 billion after-sales/leaseback transaction.
It is not clear how much of Golden Gate's equity in the Red Lobster deal, but like most private equity deals, Golden Gate has little "skin" in the game ".
The board of directors of radical investors Starboard Value and Darden also believe that management changes need to be made, so former CEO Clarence Otis was named by Gene Lee (
He used to be chief operating officer).
With new leaders and seemingly more profitable businesses (
Red Lobster less)
Denton is now seeking to unleash the great value of its real estate empire (
About 1,500 stores).
As mentioned earlier, Darden is now a mature company, so it cannot drive the diversity of the company based on the expected growth.
However, it can monetize its own entities through the tax efficiency mechanism, which can also be used as a depreciation shield.
Why not sell the property to REIT?
To a large extent, Darton's property is made up of very low-cost old locations.
Therefore, if the company sells its real estate, it will be hit by a huge tax bill.
Of course, Denton can redistribute profits by using the 1031 foreign exchange structure, but Denton has no reason to change the real estate it owns to non-core assets.
By splitting real estate into REIT, Denton can monetize its legacy real estate portfolio with tax-free tools (
Instead of privatizing the company).
Essentially, Darton proposed to take advantage of 54-
REIT law a year ago allowed new companies to take back their property.
It is considering moving about 430 restaurants, mainly olive garden shops, to the new REIT, Dutton said.
In addition, the company is also marketing 75 other properties.
For the new "Darden REIT "(
New name is not recommended)
The company will-
Triple Net REIT peers similar to real estate income (O)
Or National Retail Properties (NNN).
Darton says it will sell some new properties (
High Foundation)
For REITs or private buyers-because there are fewer tax issues-most of Darden (430)
The new REIT will owe the property.
It would be interesting to see how the market reacted to "Darden REIT.
The transaction price of most peers is around 16 X, from the funds of the operation (P/FFO);
They are more diverse, however, with the largest tenants accounting for about 5% of total revenue. ARCP (
Reference above)
About 12% contact with Red Lobster and new CEO Glenn J.
Rufrano may peel off some stores to reduce the attention of the seafood chain.
Darden is the level of investment when assets are sold and/or rotated
Entering the REIT structure, the company may reduce its debt and provide further strength to the overall balance sheet.
Unlike Sears, Denton is an out-of-date brand of real estate, with huge profits.
Proposed rotationoff of Sears-
Own real estate (
Become a REIT called Seritage)
This seems to be the last effort to stop creditors.
Although the Sears balance sheet may look better (
After REIT rotates)
As the struggling retailer is forced to pay rent and squeeze profits further, the profit and loss statement looks worse.
Darton is more capable of using the REIT structure to generate strong profits.
Bob Evans Farm earlier this month (BOBE)
Indicates that REIT conversion is being considered, spin-
Off, or sales/rent-back between 30% and 60% sites.
Asset management (
Activists too)
He has been pressing Bob Evans to open the real estate piggy bank by selling about 560 restaurants.
As you will find in many successful public places
Listed companies in real estate (i. e.
Cheese Cake Factory, Danny, etc. . . )
Real estate is not an important asset and by changing its capital structure to become REIT, Darton should be able to generate a delicious dividend in the coming years.
As Stifel's stock analyst Simon Yarmak said, REIT tools are becoming more and more popular, "after the announcement of the strategy of Darton and Bob Evans, we can see more real estate transactions coming into the market.
Industry experts estimate that the size of the property owned by the company is about $2 trillion, which is a huge potential opportunity ".
For more information about my long-lasting income portfolio, click here.
Brad Thomas, editor of Forbes real estate investment, writes for Forbes.
Looking for Alpha.
He is also a frequent visitor to Fox Business, and he is writing a book about the secrets behind legendary billionaire Donald Trump.
The author owns shares in O.