American Realty Capital Properties (ARCP) has agreed a USD1.5 billion sale-leaseback transaction for over 500 Red Lobster restaurant properties.
This transaction is in conjunction with Golden Gate Capital's (GGC) acquisition of Red Lobster from Darden Restaurants.
The transaction's purchase price represents a GAAP cap rate of 9.9 per cent and a cash cap rate of 7.9 per cent. Approximately 93.5 per cent of the USD1.5 billion portfolio's leases will be structured with a 25-year initial term and approximately 6.5 per cent (constituting leasehold assets) will have a weighted average 18.7-year initial term. The portfolio master leases will also include two per cent annual contractual rent escalations, providing built-in income growth.
Through executing this transaction, ARCP will achieve its 2014 USD3.0 billion acquisition target well-ahead of schedule.
Nicholas S Schorsch, chief executive officer and executive chairman of ARCP, says: "This transaction further demonstrates our team's ability to execute on our investment strategy. As corporate America continues to sell its owned real estate, our team has shown its strength in seizing these opportunities, evidenced by this deal, and due largely to our inherent advantage as the largest net lease REIT."
David S Kay, president of ARCP, says: "As we have continued to discuss, our ability to transact large-scale sale-leaseback transactions like the Red Lobster transaction, demonstrates our competitive advantage in the marketplace. With strong financial metrics, built-in two per cent annual rent growth and long-term lease commitments, this acquisition affords shareholders value and supports our future earnings growth. When consummated, the Red Lobster transaction will allow us to achieve the high end of our acquisition guidance which we set at USD3.0 billion for the entire year of 2014. We previously promised acquisitions at cap rates north of eight per cent and have done so this year in small self-originated transactions; now, we have duplicated that effort on a large scale."