Patriot Pointe at Orlando, Orlando, FL

Challenge

Since the inception of its flagship restaurant concept Red Lobster in 1968, Darden Restaurants, Inc. has been located in Orlando, Florida. Over the years, its headquarters grew to a sprawling campus of ten-buildings spanning over one mile in Orlando Central Park, a mixed-use business park. This factor led Darden’s Management team to conclude that a lack of a collaborative and unified campus was actively disadvantaging its 1,100 headquarters employees. They felt if this was left unresolved it could significantly affect the company’s national operations and financial bottom-line. While corporate growth was a good problem to have, the prospect of lost opportunity due to real estate inefficiency naturally worried Darden.

The company needed a custom-built campus of several interconnected buildings with a center core dedicated to employee training and development. As a resident of Orlando Central Park since the late 1960s, Darden was sensitive to maintaining its standing as the only Fortune 500 Company headquartered in Orlando. Furthermore, any potential solution needed to accommodate ongoing operations at the current headquarters location during the planning and construction phases of the new facility.

Solution

Patriot agreed to a flexible short-term leaseback that met the sellers’ requirements and allowed Darden to lease 100% of its existing headquarters for three years with additional short-term rental options. By partnering with Patriot for the sale of its entire portfolio as opposed to one-off sales of each of its buildings, Darden immediately generated the cash needed to fund future development plans and its management team saved valuable time and resources. More importantly, the quick timeframe achieved by Patriot allowed Darden to successfully execute on a Reverse 1031 transaction, which saved the company several million dollars of potential tax liability.

Result

The Darden portfolio acquisition exemplifies how the Patriot Operating Platform creates value in sale/leaseback transactions. Darden significantly reduced its transaction costs and quickly mobilized Patriot’s internal resources to close the deal in a short time frame. Since the Darden portfolio was comprised of multistory Class A office, single-story Class B office, and flex space, the task of bringing each of these product types to market separately would have been daunting. By executing a flexible sale/leaseback for multiple properties with Patriot Equities, Darden had to negotiate just one lease, and one transaction with a single focused buyer.

Patriot executed its strategy of value optimization by selling off the properties individually. After Darden phased out of ten of the buildings to backfill into their new build-to-suit, Patriot repositioned the assets for lease and sale to smaller local tenants. Eventually, all the buildings were sold to local users and investors.