Tags: McDonalds | REIT | plans | restaurant

McDonald's CEO Says No Plan to Spin Off Properties Into REIT

Tuesday, 10 Nov 2015 04:18 PM

McDonald's Corp. will not spin off its properties into a real estate investment trust (REIT), Chief Executive Steve Easterbrook said at the company's investor meeting on Tuesday.

The company also raised its quarterly dividend to 89 cents per share from 85 cents as part of a broader move to return more cash to its shareholders.

After significant deliberation, the company determined that a REIT was not the best interest of shareholders. The potential upside was not compelling and the risks were too great, Easterbrook said.

Larry Robbins, chief executive officer of Glenview Capital Management which owns shares of the company, had lobbied for the REIT, saying it could unlock more than $20 billion in value.

Real estate historically has been an important part of McDonald's business. The company collects rents from franchisees and those payments have increased 26 percent from 2009 to 2014. Last year, when company sales and profits dropped, rents accounted for more than 22 percent of McDonald's total revenue.

Meanwhile, McDonald's has begun selling properties that are no longer good locations for its restaurants.

Shares of the world's biggest restaurant chain have been trading at record highs since Easterbrook said on Oct. 22 that a rebound in quarterly sales at established restaurants showed his turnaround plan was beginning to take hold.

Investors are also hungry for specific details on the Oct. 6 launch of all-day breakfast in the United States, the company's No. 1 profit market. On Tuesday, Easterbrook said the all-day breakfast was off to an "encouraging" start that was a "little better" than expected.

The move, hailed by so-called "breakfastarians," has irked some restaurant operators. They complained in a survey that all-day breakfast has complicated kitchen operations, slowed service and prompted diners to choose less-expensive breakfast items over higher-priced lunch and dinner options.

Still, the median estimate from 29 U.S. franchisees polled by Nomura analyst Mark Kalinowski predicted that all-day breakfast would boost this quarter's domestic same-restaurant sales by 1.5 percent.

McDonald's executives also announced plans to step up restaurant sales to franchisees, to further cut costs and to take on additional debt to help fund its plan to give more money back to shareholders.

For 2016, they expect overall restaurant sales to increase 3 to 5 percent and operating income growth of 5 to 7 percent, excluding charges.

Shares of the chain, which was among the fast-food companies targeted in a multicity protest for higher wages on Tuesday, were flat at $112.95.

© 2017 Thomson/Reuters. All rights reserved.

 
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McDonald's Corp. will not spin off its properties into a real estate investment trust (REIT), Chief Executive Steve Easterbrook said at the company's investor meeting on Tuesday.
McDonalds, REIT, plans, restaurant
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2015-18-10
Tuesday, 10 Nov 2015 04:18 PM
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