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DRI, Red Lobster and ARCK
#1
DRI announced plans to sell Red Lobster to a private equity firm

http://www.usatoday.com/story/money/busi...n/9164335/

The next bit from a comment on a SA ARCP article

Quote:•In conjunction with the sale of Red Lobster to Golden Gate Capital, American Realty Capital ( ARCP) agrees to about a $1.5B sale-leaseback deal on more than 500 Red Lobster restaurants.

•The purchase price represents a cash cap rate of 7.9%, with the vast majority of the properties on a 25-year initial term. The leases all provide for annualized 2% rent boosts.

•Already ahead of schedule on its plan for $3B in acquisitions this year, this deal for ARCP assures it.
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#2
Hadn't seen this about ARCP. This is good to know.
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#3
Sold DRI in my mother-in-law's portfolio a couple months ago when there still was no logical plan from management. Since her portfolio is income oriented, I couldn't risk the dividend when the last few quarter earnings reports were so disappointing.

Took the proceeds and bought T on a small dip. Increased her earnings stream a bit and I feel much more comfortable.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan


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#4
That makes one Red Lobster branch (plus a few extras, apparently) for each share of ARCP that I own. The 2% escalator and the 8.8% declining comp sales at the restaurant don't really excite me. I'm not going to sell, but I'm going to stop adding, and I'll reinvest my dividends elsewhere.
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#5
I'm not really sure what to make of this one. I don't mind ARCP continuing to grow quickly, but it is hard to imagine that hundreds of Red Lobster locations improves the average quality of their portfolio of properties. I mean, I suppose with the sale Red Lobster might be ripe for a rebranding / turnaround / resurgence and hence might be reliable long-term tenants. But generally I don't think of them as having either strong future business potential OR a vast pile of prime real estate.
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#6
So I said I wouldn't add, but I added 84 shares of ARCP at $11.84 in my Roth IRA because it was just too cheap to pass up. I sympathize with the concerns and criticisms people have with the CEO and recent transactions, but this price is just silly and I see it as a classic fear trade. I'll reduce my position if it hits 15.

The money came from selling part of my SDRL since it ran up a bit.
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#7
(06-13-2014, 07:25 PM)earthtodan Wrote: So I said I wouldn't add, but I added 84 shares of ARCP at $11.84 in my Roth IRA because it was just too cheap to pass up. I sympathize with the concerns and criticisms people have with the CEO and recent transactions, but this price is just silly and I see it as a classic fear trade. I'll reduce my position if it hits 15.

The money came from selling part of my SDRL since it ran up a bit.

I did the same at 11.83. The fear trade is a powerful thing.
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#8
(06-14-2014, 05:29 PM)DRILLINDK Wrote:
(06-13-2014, 07:25 PM)earthtodan Wrote: So I said I wouldn't add, but I added 84 shares of ARCP at $11.84 in my Roth IRA because it was just too cheap to pass up. I sympathize with the concerns and criticisms people have with the CEO and recent transactions, but this price is just silly and I see it as a classic fear trade. I'll reduce my position if it hits 15.

The money came from selling part of my SDRL since it ran up a bit.

I did the same at 11.83. The fear trade is a powerful thing.

I added more recently too (though I didn't catch sub-$12 Dodgy). I also couldn't resist the bargain. I am not quite as confident as you two seem to be, but I sure hope you are right!
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#9
I added a few more at $12.06 to bring my share count up to 600, which nets $50/month tax free to my Roth. Okay, now I'm really not buying any more unless it falls to 11.50 for no apparent reason.

By the way, CEO Nick Schorsch is stepping down, according to this letter to shareholders. Must be why the stock is up today.
https://www.sec.gov/Archives/edgar/data/...ex99-1.htm
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#10
(06-20-2014, 10:46 AM)earthtodan Wrote: By the way, CEO Nick Schorsch is stepping down, according to this letter to shareholders. Must be why the stock is up today.
https://www.sec.gov/Archives/edgar/data/...ex99-1.htm

Hmmmm. Hard to argue with a day like today -- up 3 percent at the moment. Not sure how I'd react to NS leaving, though. A lot of investors were buying his personal magic when they invested in ARCP. Though the Red Lobster deal makes me wonder if it isn't time for less magic (hyper-fast growth) and more simple, transparent, execution.
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