NEW YORK CITY—In one of the largest sale-leaseback deals in recent memory, American Realty Capital Properties Inc. said Friday morning it has agreed to buy more than 500 Red Lobster restaurants for $1.5 billion. The deal was announced in conjunction with Golden Gate Capital’s $2.1-billion acquisition of the nationwide seafood chain from Darden Restaurants, also announced Friday morning.
The deal, which is subject to the completion of Golden Gate’s purchase of the chain, comes in at a 9.9% GAAP cap rate. “When consummated, the Red Lobster transaction will allow us to achieve the high end of our acquisition guidance which we set at $3.0 billion for the entire year of 2014,” says ARCP president David S. Kay. “We previously promised acquisitions at cap rates north of 8% and have done so this year in small self-originated transactions; now, we have duplicated that effort on a large scale.”
Approximately 93.5% of the portfolio’s leases will be structured with a 25-year initial term and approximately 6.5%, constituting leasehold assets, will have a weighted average 18.7-year initial term. The portfolio master leases will also include 2% annual contractual rent escalations.
Separately, Darden said Friday that the sale to Golden Gate was “the culmination of a robust process to maximize the value potential of a sale or spin-off of Red Lobster and its real estate assets.” The purchase price is about 9x Red Lobster’s EBITDA.