Friday, August 22, 2014

Phoenix Red Lobster Locations Change Hands in $1.5b Sale-Leaseback

By: Paul Dionne | Vizzda

Pursuant to the $2.1b sale of its Red Lobster business unit to San Francisco-based private equity firm, Golden Gate Capital (GGC)—which closed in January of this year—Darden Restaurants, Inc. has completed the sale of four Phoenix-area Red Lobster locations for a combined $14,812,514 or $434.51 per combined square foot. In conjunction with the business unit sale, GGC executed a $1.5b sale-leaseback with American Realty Capital Partners (ARCP) for roughly 500 of the 700 restaurants it acquired in the purchase of Red Lobster.

According to a press release issued by ARCP, the sale-leaseback of approximately 500 Red Lobster locations was completed at a 7.9% cash cap rate or a 9.9% cap rate under generally accepted accounting principles. The portfolio has a weighted average lease term of roughly 25 years and 2% annual compounded rent escalations. While Golden Gate’s acquisition of Red Lobster included the assumption of between $500m and $600m in existing obligations, the sale of these four locations was on a cash only basis.

The four locations are all shadow-anchored by regional malls and are located on major arterial intersections in Peoria, Phoenix and Mesa, where two of the locations are situated. Characteristics of the four locations are described in the table below:

Shadow Anchor
Lease Notes
7921 W Bell Road
North Valley Power Center
Retained by Golden Gate Capital*
6149 E Southern Avenue
Superstition Springs Center
25 year firm term and four 5-year options to extend
1403 S Alma School Road
Fiesta Mall
25 year firm term and four 5-year options to extend
2810 N 75th Avenue
Desert Sky Mall
25 year firm term and four 5-year options to extend

Because the Peoria location conveyed from Darden to a different, GGC-affiliated special purpose entity than the other three properties and because there was no new lease agreement memorialized at the time of sale, it is assumed that that location was retained by GGC.

To Contact the Author:

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