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GLENDALE, CA-Six months after completing its $2-billion acquisition of Applebee’s International Inc., IHOP Corp. has signed an agreement to sell and lease back 187 company-owned Applebee’s locations. The buyer is a trio of Drawbridge funds, which have been formed by New York City-based Fortress Investment Group.

The deal is expected to generate gross proceeds of about $347 million before taxes, according to a press release from locally based IHOP. An SEC filing by the company states that assuming the sale price of $347 million, “the net after-tax cash proceeds would be approximately $294 million.” It plans to use all after-tax proceeds to pay down debt.

The deal is expected to close no later than June 16. The gross price is subject to adjustment based on restaurant sales for the 12-month trailing period ended this April 30. Those results are not yet available, but the final price is to be set no later than June 1.

Under the agreement, the buyer has a limited right to not buy up to 15% of the total number of restaurants in the deal if the properties have material defects related to their condition and such factors as access, zoning and title. Should the total fall below 187 units, the overall purchase price would be adjusted downward.

Collectively, the properties enter into a master land and building lease and, according to the SEC filing, can be operated as an Applebee’s or IHOP branded restaurant. The master lease is for an initial term of 20 years with four five-year extension options.

Sales figures for the 12 months ended this April 30 will determine the monthly base rent. Based on the current, yet still-incomplete sales data for the properties’ sales performance, IHOP estimates the aggregate initial monthly base rent will be approximately $2.7 million. As the tenant, IHOP is responsible for additional rent covering taxes, expenses, fees and other charges connected with the properties.

Furthermore, under certain unspecified conditions, the Applebee’s entities that enter into the master lease agreement may sublease some or all of the properties without the owner’s consent, providing the sublessors enter into a direct lease agreement. This structure, according to the IHOP statement, paves the way for transferring leases to franchisees.

IHOP has previously announced plans to franchise a majority of Applebee’s company-owned restaurants. This March it announced an agreement to sell 41 such units in Southern California and Nevada to Apple American Group, its largest franchisee.

For the quarter ended March 30, same store sales for IHOP units were up 3.7% compared with the same quarter a year ago. By comparison, same store sales for Applebee’s units rose just 0.5%. As of this March, there were 1,353 IHOP restaurants and 1,986 Applebee’s units.

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