NASHVILLE Tenn. Sagittarius Brands Inc. has completed the sale of 15 Del Taco restaurant properties for $24 million in a sale-leaseback deal with Innovative Property Partners LLC. The proceeds were earmarked to reduce corporate debt, Sagittarius Brands said Tuesday.
The sites are located in Arizona, California and Nevada and have been leased back to Sagittarius Brands’ Del Taco Corp., the Lake Forest, Calif.-based operator or franchisor of the 500-unit-plus quick-service chain. Sagittarius also owns the Captain D’s quick-service seafood brand.
“This sale-leaseback transaction provided us with three significant benefits,” Sagittarius Brands chief financial officer Mike Payne told Nation’s Restaurant News. “We achieved maximum value for our properties while maintaining profitability at the restaurant level, the proceeds were used to reduce debt, and the transaction improved our [bank] covenant leverage ratios.”
Earlier this year Sagittarius refinanced its existing debt ahead of possible lending covenant violations. According to an August Standard & Poor’s Rating Services report, the company agreed to such concessions as higher interest rates, spending caps and asset sales to improve the company’s liquidity.
Numerous restaurant companies have been forced to renegotiate terms with lenders as sales slow and costs rise, leaving less cash to support debt or other growth initiatives. Late last week Ruth’s Hospitality Group Inc., the brand parent to Ruth’s Chris Steakhouse and other high-end brands, also closed on a sale-leaseback deal to help pay down corporate debt.
The buyer of the Del Taco properties, Innovative Property Partners, is a group of investors based in Orange County, Calif. The buyer’s real estate brokerage firm, Faris Lee Investments, used its financing arm, Faris Lee Capital, to coordinate and place the financing, the companies said.