(Carl Cronan is editor of Real Estate Florida.)
HEATHROW, FL-Locally based Ruth's Hospitality Group Inc. has completed the sale-leaseback of five Ruth's Chris Steak House locations across the country to Sovereign Investment Co. of Princeton, NJ. The aggregate purchase price was $17.6 million, which Ruth's put toward reducing outstanding debt on a revolving credit line.
Concurrent with the sale, Ruth's Hospitality signed lease agreements with Sovereign for initial terms between 12 and 20 years, along with two five-year options. Two of the properties are in Palm Beach and Sarasota, while the other three are in Metairie, LA, Columbus, OH and Palm Desert, CA.
"One of our primary corporate objectives at this time is to maximize free cash flow and pay down debt so that we can ensure maximum operating flexibility, as well as remove any risk related to our debt covenant compliance," says Bob Vincent, executive vice president and chief financial officer of Ruth's Hospitality. He added in a news release that the sale-leaseback transaction was an effective way for the company to reduce its leverage.
Nicole Miller Regan, who covers Ruth's Hospitality for Piper Jaffray Cos., says the sale-leaseback represents a strong vote of confidence for Ruth's Hospitality because of its ability to repay debt. Vincent said the company has implemented several cost-cutting initiatives after posting a 49% drop in second-quarter earnings, despite double-digit revenue growth.
Ruth's Hospitality has 144 company and franchise-owned locations worldwide with brands such as Ruth's Chris, Mitchell's Fish Market, Mitchell's Steakhouse and Cameron's Steakhouse. The original chain was established in New Orleans in 1965 and moved its headquarters to Heathrow, in suburban Orlando, three years ago.
Sovereign is a large private equity investor providing sale-leaseback capital to owners, operators and developers of single-tenant, net-leased real estate. It claims more than $825 million worth of investments over the last four years.
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