Four Corners Property Trust, a real estate investment trust engaged in the ownership of high-quality, net-leased restaurant properties, announced the signing of a definitive agreement to acquire up to 48 corporate-operated Chili’s restaurants through a sale-leaseback transaction with certain subsidiaries of Brinker International, Inc. for a purchase price of up to $155.7 million on initial annual cash rent of up to approximately $9.9 million. As of the end of Brinker’s third fiscal quarter on March 28, Brinker owned, operated or franchised 1,686 restaurants under the names Chili’s Grill & Bar (1,634 restaurants) and Maggiano’s Little Italy (52 restaurants).a
The transaction is expected to close on or around August 8, 2018, subject to due diligence and customary closing conditions. The properties are under individual leases with 15 years of initial term, rent increases of 10% every five years during the initial term and a corporate guarantee from Brinker International, Inc. If the Company is successful in closing the transaction and acquires all 48 properties, Brinker would comprise approximately 8% of the Company’s cash rent and the Company’s exposure to Darden would decrease to approximately 79% of the Company’s cash rent. Additionally, closing on all 48 properties would have a positive impact on FCPT’s portfolio weighted average lease term, increasing it from 12.5 to 12.7 years.
The properties are located principally in Florida (14 properties) and Texas (13 properties), but are spread across 15 states and include exposure to western U.S. geography (AZ, CA, CO, FL, GA, LA, MS, NC, NM, NV, OK, SC, TN, TX, VA). The sites are within well-located retail corridors with high traffic and attractive demographics. FCPT believes that rent is well-supported with conservative EBITDAR coverage, averaging 3.9x for the portfolio. FCPT has significant cash on hand ($88 million as of 6/30/2018) and an undrawn corporate revolver ($250 million) to finance this acquisition. FCPT expects to remain below the low end of its stated leverage thresholds pro forma for this transaction.
Bill Lenehan, CEO of FCPT says: “We are excited to partner with Brinker on this important transaction for both of our companies. FCPT focuses on building a high credit quality portfolio with household brand names, and we are excited to bring Chili’s branded real estate into our portfolio in such a meaningful way. In addition to the attractive locations, we are particularly pleased with the property-level rent setting and strong coverage in this portfolio.”
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