Darden to Spin Off Some Real Estate Assets

Darden Restaurants Inc. said Tuesday it plans to separate some of its real-estate assets, spinning off some restaurants into a publicly traded real-estate investment trust and making other sale-leaseback deals.

The company, which owns Olive Garden and LongHorn Steakhouse, will transfer about 430 of its owned-restaurant properties to the REIT, with almost of all REIT's initial assets being leased back to Darden.

The company's board reached this decision after an extensive evaluation of its real-estate assets.

Darden said late last year that it had hired bankers from J.P. Morgan Chase & Co. and Moelis & Co. to explore options for its real estate portfolio, which includes some 1,200 restaurants, such as Olive Garden and Capital Grille.

Rising real-estate values have driven more retail companies to consider splitting off their real-estate assets to generate cash.

In recent months, Hudson's Bay Co., the Canadian parent company of Saks Fifth Avenue and Lord & Taylor department stores, announced a $1.7 billion joint venture with U.S. mall operator Simon Property Group Inc. involving 42 department stores. And Sears Holdings Corp. said it would split off as many as 300 of its best locations into a separate company by June to raise money.

Activist investors, meanwhile, have pushed for real-estate split-offs at a half-dozen other companies, including fast-food chain McDonald's Corp., department store Dillard's Inc. and casino operator MGM Resorts International.

The trend is being driven in part by the record-high valuations for real-estate assets, along with low interest rates and favorable tax treatment. Since they were established as a corporate structure in the 1960s, REITs have been able to pay little or no tax on their earnings as long as they distribute the bulk of their profits to investors through dividends.

Write to Neil Haggerty at [e-mail]

Access Investor Kit for Darden Restaurants, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US2371941053

Access Investor Kit for JPMorgan Chase & Co.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US46625H1005

Access Investor Kit for Sears Holdings Corp.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US8123501061

Access Investor Kit for Simon Property Group, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US8288061091

Subscribe to WSJ: http://online.wsj.com?mod=djnwires