Darden Restaurants, Inc., on Monday named real estate veteran Bill Lenehan as the first CEO of the casual dining operator’s new real estate investment trust (REIT), Four Corners Property Trust, Inc.
Lenehan is also a member of the Darden board of directors, having been elected back in October along with 11 other board members as part of activist investor Starboard Value’s successful proxy contest against the Orlando-based company.
“The board and I have been incredibly impressed with Bill’s leadership, knowledge and skill related to the Four Corners transaction,” Darden CEO Gene Lee said in a statement. “We have also been impressed with his vision and capability, which gives us confidence he will be able to lead and transform Four Corners into a leading growth company.”
In June, Darden announced plans to create a separate company to manage much of its real estate. The company is transferring 424 of its properties to that company, Four Corners, which will lease 418 of the properties back to Darden. It will then spin the company off to shareholders as a separate company. That separation will take place Jan. 1.
Lenehan will resign from the Darden board once the separation takes place, the company said. He will report to Lee until then.
According to a recent U.S. Securities and Exchange Commission (SEC) filing, Four Corners is expected to add other, non-restaurant properties through acquisitions to diversify its asset base — rather than simply rely on properties from Darden, a single company.
The REIT strategy was a stated goal of Starboard Value’s during last year’s proxy fight, and Lenehan was expected to play a big role in the real estate spinoff given his background.
Lenehan has spent two years as a special advisor to the board of directors at Evoq Properties Inc., which was one of the largest property owners in downtown Los Angeles. He also spent time as interim CEO of what is now known as Granite REIT, an owner of industrial and manufacturing real estate. He spent 10 years as investment professional in the real estate group at Farallon Capital Management.
He also serves on the board of directors at Gramercy Capital Corporation, a publicly traded REIT.
Darden said it hopes that by spinning off much of its real estate into a REIT like Four Corners, it will be able to concentrate more on running restaurants. The trust will also build value for existing shareholders, because it will pay out most of its cash in the form of dividends, and the stock typically trades at a higher value on Wall Street. By spinning the real estate off into a separate company, Darden saves taxes on the deal.
Four Corners will pay Darden for the properties, and Darden expects to use the funds to pay off about $1 billion in debt, according to the SEC filing.
The properties span across 44 states and will be in five of the company’s brands, 300 of which will be Olive Garden and 104 LongHorn Steakhouse. The company didn’t include properties with existing ground or building leases, or which were below a certain earnings level and couldn’t individually support rent payments. It also didn’t spin off locations that could benefit from relocating or were relatively new restaurants, according to the SEC filing.
All told, 424 properties will be transferred to Four Corners. In addition, Four Corners will operate six LongHorn Steakhouse restaurants in the San Antonio market — as a franchisee.