The Nation's Financial Condition

[cradleandshoot]

I heard a blurb on the radio yesterday. I don't know how accurate it is. The estimate is within 10 years the national debt will jump to 54 trillion dollars. That would cause maintenance on the debt to be the single greatest expenditure in the federal government. Yet some folks will bloviate that it's really no big deal.

[Farfromgeneva]

A topic for Afans heart

https://www.bisnow.com/national/news/re ... dium=email

The Death Knell Is Tolling For Family Sit-Down Restaurants: What's The Future For All Their Empty Husks?
Eighties and nineties nostalgia was dealt a gut punch earlier this month when nearly 100 Red Lobster locations abruptly went dark amid the company’s Chapter 11 bankruptcy filing.

Restaurants that took the U.S. by storm 30 to 40 years ago are beginning to drop like flies after a whirlwind past few years that forced rapid innovation in response to evolving consumer demands. At least 12 of the nation’s biggest casual chains plan to scale back their portfolios this year, and while reasons behind the reductions vary, the potential real estate impacts grow more layered as closures bloom.

The turnover of space is expected to create opportunities in retail markets where rapid population growth has led to historically low levels of vacancy. But in less desirable markets, the empty carcasses of once-beloved chain restaurants will be harder to reckon with.

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Bisnow/created with assistance by DALL-E

“There might be restaurant chains that are willing to come in and maybe take over a lease or a location,” Placer.ai Head Of Analytical Research R.J. Hottovy said. “But it’s also possible, at least in the near term, that there might be a lot of dark restaurants.”

Fans of Cheddar Bay biscuits and endless servings of shrimp are among a growing group of consumers forced to say goodbye to the family sit-down restaurants of yesteryear.

Red Lobster filed for bankruptcy after dwindling traffic led to a $76M loss in revenue last year. The decision to make its limited-time endless shrimp promotion into a permanent menu item was the final nail in the coffin, costing the chain $11M, CEO Paul Kenny said in the Chapter 11 filing. The company did not respond to Bisnow’s request for comment.

Guest visits to Red Lobster have dropped 30% since 2019, per the company’s bankruptcy filing. After a strong start to 2022, year-over-year foot traffic once again declined that spring, remaining in the red until the summer of last year, according to data from Placer.ai. The endless shrimp promotion caused a temporary rebound, but the improvements weren't enough to offset the company’s massive liquidity crisis.

Red Lobster’s financial woes are just a microcosm of what is unfolding at casual sit-down chains nationwide. Labor shortages, pricier ingredients and a decline in foot traffic have caused many to shutter locations and leave dated buildings behind.

Around 300 Applebee’s locations have closed since 2017, with up to 35 more planned for this year, the company’s president said during a fourth-quarter earnings call. TGI Friday’s announced the closure of 36 underperforming restaurants in January, and while rumors of Chilis’ demise have proven untrue, the chain did throw in the towel on 16 struggling branches in 2023.

There are 311 casual restaurant locations on the market nationwide, with Red Lobster leading the way at 75 locations, according to data provided to Bisnow by B+E Net Lease. Seventeen Applebee's locations are up for sale, while 32 Pizza Huts are up for grabs.

“The casual market has slowly tailored back over the last 10 years,” said Jill Battilega Rowe, partner at Venable and an attorney specializing in real estate litigation. “The pandemic expedited everything, but the real estate is still there.”

When a company files for bankruptcy, it is given the freedom to walk away from lease obligations, leaving affected landlords holding the bag, Rowe explained. There are some emerging casual brands that could take over the space, but footprints are often too large and too unique for a simple backfill, she said.

“The landlord is left with a space that is really hard to retenant,” Rowe said. “There is some shifting in the real estate market, and these larger spaces that were built-to-suit for a particular franchise have a particular look that is harder to be flexible with.”

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Today’s prospective tenants are mostly looking for smaller spaces of less than 2.5K SF, according to a nationwide report from JLL. That footprint tends to favor fast-casual concepts, making large-format vacancies difficult to fill. The average Red Lobster in Texas, for example, is 7.4K SF, according to data from Partners Real Estate.

Landlords are also keenly aware of cultural shifts that have unfolded post-pandemic and will be looking to replace dated concepts with brands known to drive traffic, Hottovy said.

Annual visits to fast-casual and fast-food chains have risen for several quarters now, with the latest figures showing an increase of more than 2% in Q1. Meanwhile visits to full-service chains were virtually flat the last two quarters, according to a spring 2024 trend report by Coldwell Banker Commercial.

“We're just not as relevant as we once were,” Cracker Barrel CEO Julie Felss Masino said in an earnings call last week that sent the chain's stock tumbling by 20%. “Some of our recipes and processes haven't evolved in decades.”

Hottovy said the way consumers interact with sit-down dining has changed, and he expects landlords to respond accordingly.

“People aren’t looking for legacy brands. They are looking for smaller, independent, newer concepts to create excitement at their property,” he said.

What the owners of vacant sites choose to do with vacated land will depend on their liquidity position, Rowe said. Most will likely either sell the property or partner with a developer to put in a new concept, whether that be one or more emerging restaurant brands or something mixed-use, Rowe said.

“If you’ve been in the market for 15 or 20 years, you've probably come close to breaking even and maybe made some money,” she said. “If you bought in 2019, you’re having to make some really tough, cut-your-losses decisions.”

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In metros where there is less competition for space, affected landlords should seize the opportunity to capitalize on the media attention around the demise of national chains, said Mike Pittman II, director in Cushman & Wakefield's Houston office.

“For tertiary market deals, it would behoove them to really consider any term sheets in front of them to backfill these locations,” he said. “The bad thing is that they're losing Red Lobster, but the good thing is that this is probably the most press their sites will get over the next 10 or 20 years.”

Renovations may be challenging given the dated architecture of older chains. But some groups could still be willing to attempt an adaptive reuse play, especially in an environment when interest rates aren’t friendly to new construction, MW Law Senior Attorney Shams Merchant said.

Velvet Taco, a Dallas-based brand with a geographic portfolio similar to that of Red Lobster, hopes to grow from 46 locations today to about 200 by 2030, CEO Clay Dover told Nation’s Restaurant News. The company has already had success taking over unlikely locations, including a former sex shop in the Galleria area of Houston.

“Restaurant-retail, like any other retail, is struggling to find space,” Merchant said. “With restaurants going out of business and bankruptcies happening, there is going to be space available for other concepts to make use of.”

The U.S. retail market netted a modest 9.5M SF in deliveries in the first quarter, down about 27% from the same period in 2019, according to JLL. Only 25% of what is in the pipeline is available for lease.

In regions like Dallas-Fort Worth, where the retail market is less than 5% vacant, the demise of family sit-down chains could be a blessing in disguise, said Steve Triolet, senior vice president of research and market forecasting at Partners.

Red Lobster has 13 locations in DFW, per Partners data, two of which closed as part of the bankruptcy filing. But more could be on the horizon as the company evaluates its portfolio.

“The good news from a commercial real estate perspective is there is an acute shortage of second-generation restaurant spaces in the DFW market, and most of their locations will have a number of tenants eager to backfill their spaces,” he said.

Shuttered locations could sit empty longer than usual due to higher interest rates making it more expensive to carry out renovations or demolitions, Rowe said. But if the timing works in the landlord community’s favor, a slew of empty restaurants could hit the market right as rates begin to come down.

“There’s probably going to be a flood of development because there’s all this pent-up desire,” she said. “There’s so many talented people in the developer space watching and waiting and wanting to use their skills, so I think there’s going to be some really fun stuff happening.”

[youthathletics]

A topic for Afans heart

https://www.bisnow.com/national/news/re ... dium=email

I thought I just read or heard somewhere that when RL was acquired by Golden Gate Capital the separated the property from the business. Seems like the PE firm sunk RL wanting only the CRE portion. What say you?

[Farfromgeneva]

A topic for Afans heart

https://www.bisnow.com/national/news/re ... dium=email

I thought I just read or heard somewhere that when RL was acquired by Golden Gate Capital the separated the property from the business. Seems like the PE firm sunk RL wanting only the CRE portion. What say you?

Have to check but I don’t think they owned any of the RE. It was all leased I thought.

But that opco/or opco play is tired and not innovative and hasn’t been since before they tried and failed w Toy R Us.

But I think that was the reorg BK from 2019 and this is most likely a CH 7 liquidation of assets.

Bigger issue is for all the variable cost issues the financialization of all CRE has caused a lot of this. Occupancy costs don’t make sense

[Farfromgeneva]

A topic for Afans heart

https://www.bisnow.com/national/news/re ... dium=email

I thought I just read or heard somewhere that when RL was acquired by Golden Gate Capital the separated the property from the business. Seems like the PE firm sunk RL wanting only the CRE portion. What say you?

Golden gate may be the senior and dip lender here

RED LOBSTER FILES VOLUNTARY CHAPTER 11 PETITIONS TO STRENGTHEN FINANCIAL POSITION AND MAXIMIZE VALUE FOR STAKEHOLDERS
5.19.24
Restructuring to Optimize Real Estate Footprint and Facilitate Going Concern Sale

Orlando, Fla. (May 19, 2024) – Red Lobster Management LLC, along with its direct and indirect operating subsidiaries (“Red Lobster” or “the Company”), owner and operator of the Red Lobster® restaurant chain, today announced that the Company has voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida. The Company intends to use the proceedings to drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern. As part of these filings, Red Lobster has entered into a stalking horse purchase agreement pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders.

Red Lobster’s restaurants will remain open and operating as usual during the Chapter 11 process, continuing to be the world’s largest and most-loved seafood restaurant company. The Company has been working with vendors to ensure that operations are unaffected and has received a $100 million debtor-in-possession (“DIP”) financing commitment from its existing lenders.

Jonathan Tibus, the Company’s CEO, said “This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. The support we’ve received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.”

Court filings and information about the claims process can be found at a separate website maintained by Red Lobster’s claims agent, https://dm.epiq11.com/RedLobster, or by calling Toll Free (U.S.& Canada): (888) 754-0507.

King & Spalding LLP, Berger Singerman LLP and Blake, Cassel & Graydon, LLC are serving as legal advisors. Alvarez & Marsal is serving as financial advisor and providing corporate leadership as Chief Executive and Chief Restructuring Officers. Hilco Corporate Finance is serving as M&A advisor to Red Lobster. Keen-Summit is serving as real estate advisor.

About Red Lobster Seafood Co.

Red Lobster is where the world goes for seafood, now and for generations. With a proud heritage, Red Lobster is focused on serving the highest quality, freshly prepared seafood that is traceable, sustainable, and responsibly sourced. The Company was founded in 1968 and is headquartered in Orlando, FL. To learn more about Red Lobster, including locations and menu options, please visit HTTP://WWW.REDLOBSTER.COM or find us on FACEBOOK, X, INSTAGRAM or TIKTOK.

Media

[email protected]

[youthathletics]

A topic for Afans heart

https://www.bisnow.com/national/news/re ... dium=email

I thought I just read or heard somewhere that when RL was acquired by Golden Gate Capital the separated the property from the business. Seems like the PE firm sunk RL wanting only the CRE portion. What say you?

Golden gate may be the senior and dip lender here

RED LOBSTER FILES VOLUNTARY CHAPTER 11 PETITIONS TO STRENGTHEN FINANCIAL POSITION AND MAXIMIZE VALUE FOR STAKEHOLDERS
5.19.24
Restructuring to Optimize Real Estate Footprint and Facilitate Going Concern Sale

Orlando, Fla. (May 19, 2024) – Red Lobster Management LLC, along with its direct and indirect operating subsidiaries (“Red Lobster” or “the Company”), owner and operator of the Red Lobster® restaurant chain, today announced that the Company has voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida. The Company intends to use the proceedings to drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern. As part of these filings, Red Lobster has entered into a stalking horse purchase agreement pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders.

Red Lobster’s restaurants will remain open and operating as usual during the Chapter 11 process, continuing to be the world’s largest and most-loved seafood restaurant company. The Company has been working with vendors to ensure that operations are unaffected and has received a $100 million debtor-in-possession (“DIP”) financing commitment from its existing lenders.

Jonathan Tibus, the Company’s CEO, said “This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. The support we’ve received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.”

Court filings and information about the claims process can be found at a separate website maintained by Red Lobster’s claims agent, https://dm.epiq11.com/RedLobster, or by calling Toll Free (U.S.& Canada): (888) 754-0507.

King & Spalding LLP, Berger Singerman LLP and Blake, Cassel & Graydon, LLC are serving as legal advisors. Alvarez & Marsal is serving as financial advisor and providing corporate leadership as Chief Executive and Chief Restructuring Officers. Hilco Corporate Finance is serving as M&A advisor to Red Lobster. Keen-Summit is serving as real estate advisor.

About Red Lobster Seafood Co.

Red Lobster is where the world goes for seafood, now and for generations. With a proud heritage, Red Lobster is focused on serving the highest quality, freshly prepared seafood that is traceable, sustainable, and responsibly sourced. The Company was founded in 1968 and is headquartered in Orlando, FL. To learn more about Red Lobster, including locations and menu options, please visit HTTP://WWW.REDLOBSTER.COM or find us on FACEBOOK, X, INSTAGRAM or TIKTOK.

Media

[email protected]

https://www.nbcnews.com/news/amp/rcna153397

[Farfromgeneva]

A topic for Afans heart

https://www.bisnow.com/national/news/re ... dium=email

I thought I just read or heard somewhere that when RL was acquired by Golden Gate Capital the separated the property from the business. Seems like the PE firm sunk RL wanting only the CRE portion. What say you?

Golden gate may be the senior and dip lender here

RED LOBSTER FILES VOLUNTARY CHAPTER 11 PETITIONS TO STRENGTHEN FINANCIAL POSITION AND MAXIMIZE VALUE FOR STAKEHOLDERS
5.19.24
Restructuring to Optimize Real Estate Footprint and Facilitate Going Concern Sale

Orlando, Fla. (May 19, 2024) – Red Lobster Management LLC, along with its direct and indirect operating subsidiaries (“Red Lobster” or “the Company”), owner and operator of the Red Lobster® restaurant chain, today announced that the Company has voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida. The Company intends to use the proceedings to drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern. As part of these filings, Red Lobster has entered into a stalking horse purchase agreement pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders.

Red Lobster’s restaurants will remain open and operating as usual during the Chapter 11 process, continuing to be the world’s largest and most-loved seafood restaurant company. The Company has been working with vendors to ensure that operations are unaffected and has received a $100 million debtor-in-possession (“DIP”) financing commitment from its existing lenders.

Jonathan Tibus, the Company’s CEO, said “This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. The support we’ve received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.”

Court filings and information about the claims process can be found at a separate website maintained by Red Lobster’s claims agent, https://dm.epiq11.com/RedLobster, or by calling Toll Free (U.S.& Canada): (888) 754-0507.

King & Spalding LLP, Berger Singerman LLP and Blake, Cassel & Graydon, LLC are serving as legal advisors. Alvarez & Marsal is serving as financial advisor and providing corporate leadership as Chief Executive and Chief Restructuring Officers. Hilco Corporate Finance is serving as M&A advisor to Red Lobster. Keen-Summit is serving as real estate advisor.

About Red Lobster Seafood Co.

Red Lobster is where the world goes for seafood, now and for generations. With a proud heritage, Red Lobster is focused on serving the highest quality, freshly prepared seafood that is traceable, sustainable, and responsibly sourced. The Company was founded in 1968 and is headquartered in Orlando, FL. To learn more about Red Lobster, including locations and menu options, please visit HTTP://WWW.REDLOBSTER.COM or find us on FACEBOOK, X, INSTAGRAM or TIKTOK.

Media

[email protected]

https://www.nbcnews.com/news/amp/rcna153397

You meant a decade ago. Yes Darden and rl have been passed around or for years like most of the restaurant chain and qsr segment. Sorry I misreads and was thinking you were referencing something much more recently. Don’t recall that transaction I was deep in my depository ibanking stretch, having left the CRE CDO in 2009 and left HY Corp debt investment in 06. (The HY portion was the most wild eye opening of my career including working out assets nationwide in the financial crisis and being a banker to so many poorly run and shouldn’t exist smaller banks)

I’ve been saying for years this asset light subscription junk didn’t make any sense even in a zero rate world because that condition wasn’t forever. Now individuals and businesses own a lot less tangible assets.

High yield has become a cash flow joke. Goodwill on the balance sheets is through the roof (intangible asset that gets written down eventually rather than earned back through profits like 85% of the time)

I thought you meant they were acquired out of bk now by golden gate. One of a plethora of generic Pe shops these days with modelers out of touch with reality whom work to “derisk their equity and get a cheap
Or free option on the upside” usually in the form of multiple debt funded dividend recapitalizations. The worst is in my backyard called Roark Capital.

Only thing that’s odd is involving keen summit who is a re liquidator. Not like great American group or other liquidators (there’s one in Boston I’m spacing on and hilco as well) that sell IP, other equipment etc but KS I know as only RE.

Edit: now That I think of it they do auction off below
Market leases. But where the heck is that today with rates up and leasing rates crashing everywhere around us.

[cradleandshoot]

I will never understand all of the nuts and bolts about how restaurants like RL operate. I do understand that my mom and dad loved RL. They always had a game plan. They were the first ones in the door for lunch at 11 am. By 11:30 am the place was packed pretty much for the rest of the day. I don't know how ownership fouls that up. I do know that RL always did one hell of a business. I find it hard to believe that unlimited shrimp was the cause of their demise. I would have believed that the buying power of RL on a national level would have given them considerable leverage when purchasing shrimp.

[Farfromgeneva]

I will never understand all of the nuts and bolts about how restaurants like RL operate. I do understand that my mom and dad loved RL. They always had a game plan. They were the first ones in the door for lunch at 11 am. By 11:30 am the place was packed pretty much for the rest of the day. I don't know how ownership fouls that up. I do know that RL always did one hell of a business. I find it hard to believe that unlimited shrimp was the cause of their demise. I would have believed that the buying power of RL on a national level would have given them considerable leverage when purchasing shrimp.

My mother was taken to very nice seafood joint in NYC, Boston, DC and Atlanta by yours truly and always walked out “it’s good but it’s not Red Lobster”.

The shrimp special was the nail in the coffin but if you read the longer piece some QSR execs comment they haven’t innovated or bothered to stay relevant as the world changed. And as I continue to hammer because it’s going to change just may take 5-9yrs (took 7-9yrs from the default of the CRE CDO I worked for in NYC to when the final liquidation do the operating reit parent concluded in 2018).

Real estate prices will reset with still massive losses to come )the Wells Fargo economist is out to lunch with his recent note about credit turning positive-CE just out out another $466mm book of NPLs that’s a bunch of dogs and cats mixed with multi, hospitality etc, destiny mall is likely to have a 100% loss on their cmbs debt, 100% and yet lord Abbott has their Aaa bonds marked at 36 meaning for every $10mm of those bonds they own they’ve written down $.64mm but still have to recognize another $3.6mm in losses for their investors.

When real estate does reset at lower values, rental rates will come down. Occupancy cost is [ rent / sales at the store ]. For war I haven’t checked too presently but it’s gone from 5-8% to like 10-17% as if they were selling high margin luxury goods like a Tiffany’s rather than tight margin and highly variable based on food commodity price middle class meals.

[PizzaSnake]

A topic for Afans heart

https://www.bisnow.com/national/news/re ... dium=email

I thought I just read or heard somewhere that when RL was acquired by Golden Gate Capital the separated the property from the business. Seems like the PE firm sunk RL wanting only the CRE portion. What say you?

Golden gate may be the senior and dip lender here

RED LOBSTER FILES VOLUNTARY CHAPTER 11 PETITIONS TO STRENGTHEN FINANCIAL POSITION AND MAXIMIZE VALUE FOR STAKEHOLDERS
5.19.24
Restructuring to Optimize Real Estate Footprint and Facilitate Going Concern Sale

Orlando, Fla. (May 19, 2024) – Red Lobster Management LLC, along with its direct and indirect operating subsidiaries (“Red Lobster” or “the Company”), owner and operator of the Red Lobster® restaurant chain, today announced that the Company has voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida. The Company intends to use the proceedings to drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern. As part of these filings, Red Lobster has entered into a stalking horse purchase agreement pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders.

Red Lobster’s restaurants will remain open and operating as usual during the Chapter 11 process, continuing to be the world’s largest and most-loved seafood restaurant company. The Company has been working with vendors to ensure that operations are unaffected and has received a $100 million debtor-in-possession (“DIP”) financing commitment from its existing lenders.

Jonathan Tibus, the Company’s CEO, said “This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. The support we’ve received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.”

Court filings and information about the claims process can be found at a separate website maintained by Red Lobster’s claims agent, https://dm.epiq11.com/RedLobster, or by calling Toll Free (U.S.& Canada): (888) 754-0507.

King & Spalding LLP, Berger Singerman LLP and Blake, Cassel & Graydon, LLC are serving as legal advisors. Alvarez & Marsal is serving as financial advisor and providing corporate leadership as Chief Executive and Chief Restructuring Officers. Hilco Corporate Finance is serving as M&A advisor to Red Lobster. Keen-Summit is serving as real estate advisor.

About Red Lobster Seafood Co.

Red Lobster is where the world goes for seafood, now and for generations. With a proud heritage, Red Lobster is focused on serving the highest quality, freshly prepared seafood that is traceable, sustainable, and responsibly sourced. The Company was founded in 1968 and is headquartered in Orlando, FL. To learn more about Red Lobster, including locations and menu options, please visit HTTP://WWW.REDLOBSTER.COM or find us on FACEBOOK, X, INSTAGRAM or TIKTOK.

Media

[email protected]

https://www.nbcnews.com/news/amp/rcna153397

You meant a decade ago. Yes Darden and rl have been passed around or for years like most of the restaurant chain and qsr segment. Sorry I misreads and was thinking you were referencing something much more recently. Don’t recall that transaction I was deep in my depository ibanking stretch, having left the CRE CDO in 2009 and left HY Corp debt investment in 06. (The HY portion was the most wild eye opening of my career including working out assets nationwide in the financial crisis and being a banker to so many poorly run and shouldn’t exist smaller banks)

I’ve been saying for years this asset light subscription junk didn’t make any sense even in a zero rate world because that condition wasn’t forever. Now individuals and businesses own a lot less tangible assets.

High yield has become a cash flow joke. Goodwill on the balance sheets is through the roof (intangible asset that gets written down eventually rather than earned back through profits like 85% of the time)

I thought you meant they were acquired out of bk now by golden gate. One of a plethora of generic Pe shops these days with modelers out of touch with reality whom work to “derisk their equity and get a cheap
Or free option on the upside” usually in the form of multiple debt funded dividend recapitalizations. The worst is in my backyard called Roark Capital.

Only thing that’s odd is involving keen summit who is a re liquidator. Not like great American group or other liquidators (there’s one in Boston I’m spacing on and hilco as well) that sell IP, other equipment etc but KS I know as only RE.

Edit: now That I think of it they do auction off below
Market leases. But where the heck is that today with rates up and leasing rates crashing everywhere around us.

Accounting is just basic math with peculiar rules. Hard to take it seriously.

[a fan]

I will never understand all of the nuts and bolts about how restaurants like RL operate. I do understand that my mom and dad loved RL. They always had a game plan. They were the first ones in the door for lunch at 11 am. By 11:30 am the place was packed pretty much for the rest of the day. I don't know how ownership fouls that up. I do know that RL always did one hell of a business. I find it hard to believe that unlimited shrimp was the cause of their demise. I would have believed that the buying power of RL on a national level would have given them considerable leverage when purchasing shrimp.

My mother was taken to very nice seafood joint in NYC, Boston, DC and Atlanta by yours truly and always walked out “it’s good but it’s not Red Lobster”.

The shrimp special was the nail in the coffin but if you read the longer piece some QSR execs comment they haven’t innovated or bothered to stay relevant as the world changed. And as I continue to hammer because it’s going to change just may take 5-9yrs (took 7-9yrs from the default of the CRE CDO I worked for in NYC to when the final liquidation do the operating reit parent concluded in 2018).

Real estate prices will reset with still massive losses to come )the Wells Fargo economist is out to lunch with his recent note about credit turning positive-CE just out out another $466mm book of NPLs that’s a bunch of dogs and cats mixed with multi, hospitality etc, destiny mall is likely to have a 100% loss on their cmbs debt, 100% and yet lord Abbott has their Aaa bonds marked at 36 meaning for every $10mm of those bonds they own they’ve written down $.64mm but still have to recognize another $3.6mm in losses for their investors.

When real estate does reset at lower values, rental rates will come down. Occupancy cost is [ rent / sales at the store ]. For war I haven’t checked too presently but it’s gone from 5-8% to like 10-17% as if they were selling high margin luxury goods like a Tiffany’s rather than tight margin and highly variable based on food commodity price middle class meals.

Once again, I TRULY appreciate your financial posts. Great stuff.

Someone told me that some firm bought Red Lobster, and sold all their real estate and jacked up the rent. Couldn't find good confirmation on that....do you know? TIA

[NattyBohChamps04]

The shrimp special was the nail in the coffin but if you read the longer piece some QSR execs comment they haven’t innovated or bothered to stay relevant as the world changed.

If I run a shrimp special that loses $11M when I have $4.6B in total revenues? Well then I'm absolutely 100% gonna blame it on that. If I'm lucky, the media and Facebook hopefully eats it up hook, line and trawler.

Sad that a lot of these dudes are probably gonna run additional iconic brands into the ground in the coming years like they have for the past 30+. All to squeeze out a few extra bucks.

[cradleandshoot]

The shrimp special was the nail in the coffin but if you read the longer piece some QSR execs comment they haven’t innovated or bothered to stay relevant as the world changed.

If I run a shrimp special that loses $11M when I have $4.6B in total revenues? Well then I'm absolutely 100% gonna blame it on that. If I'm lucky, the media and Facebook hopefully eats it up hook, line and trawler.

Sad that a lot of these dudes are probably gonna run additional iconic brands into the ground in the coming years like they have for the past 30+. All to squeeze out a few extra bucks.

This may not be the same situation but didn't the iconic Friendlys chain suffer a similar fate? If I remember correctly their demise was attributed to the inability to change their traditional menu to the dietary needs of a different generation. I never had a problem with their traditional menu. They whipped up a pretty good cheese burger and I always liked their brownie sundaes. They also had reasonable prices. I use to take my boys there when they were young all of time.

[cradleandshoot]

The shrimp special was the nail in the coffin but if you read the longer piece some QSR execs comment they haven’t innovated or bothered to stay relevant as the world changed.

If I run a shrimp special that loses $11M when I have $4.6B in total revenues? Well then I'm absolutely 100% gonna blame it on that. If I'm lucky, the media and Facebook hopefully eats it up hook, line and trawler.

Sad that a lot of these dudes are probably gonna run additional iconic brands into the ground in the coming years like they have for the past 30+. All to squeeze out a few extra bucks.

I would have believed that a national franchise like RL would have had the buying power to buy as much shrimp as they needed at a below wholesale price. I love shrimp as much as the next person. My preference has always been a shrimp cocktail. I don't know exactly how many unlimited shrimp most people can eat? Now if they ever had an all you can eat fresh shucked raw clams I personally would eat them into oblivion.

[Farfromgeneva]

A topic for Afans heart

https://www.bisnow.com/national/news/re ... dium=email

I thought I just read or heard somewhere that when RL was acquired by Golden Gate Capital the separated the property from the business. Seems like the PE firm sunk RL wanting only the CRE portion. What say you?

Golden gate may be the senior and dip lender here

RED LOBSTER FILES VOLUNTARY CHAPTER 11 PETITIONS TO STRENGTHEN FINANCIAL POSITION AND MAXIMIZE VALUE FOR STAKEHOLDERS
5.19.24
Restructuring to Optimize Real Estate Footprint and Facilitate Going Concern Sale

Orlando, Fla. (May 19, 2024) – Red Lobster Management LLC, along with its direct and indirect operating subsidiaries (“Red Lobster” or “the Company”), owner and operator of the Red Lobster® restaurant chain, today announced that the Company has voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida. The Company intends to use the proceedings to drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern. As part of these filings, Red Lobster has entered into a stalking horse purchase agreement pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders.

Red Lobster’s restaurants will remain open and operating as usual during the Chapter 11 process, continuing to be the world’s largest and most-loved seafood restaurant company. The Company has been working with vendors to ensure that operations are unaffected and has received a $100 million debtor-in-possession (“DIP”) financing commitment from its existing lenders.

Jonathan Tibus, the Company’s CEO, said “This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. The support we’ve received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.”

Court filings and information about the claims process can be found at a separate website maintained by Red Lobster’s claims agent, https://dm.epiq11.com/RedLobster, or by calling Toll Free (U.S.& Canada): (888) 754-0507.

King & Spalding LLP, Berger Singerman LLP and Blake, Cassel & Graydon, LLC are serving as legal advisors. Alvarez & Marsal is serving as financial advisor and providing corporate leadership as Chief Executive and Chief Restructuring Officers. Hilco Corporate Finance is serving as M&A advisor to Red Lobster. Keen-Summit is serving as real estate advisor.

About Red Lobster Seafood Co.

Red Lobster is where the world goes for seafood, now and for generations. With a proud heritage, Red Lobster is focused on serving the highest quality, freshly prepared seafood that is traceable, sustainable, and responsibly sourced. The Company was founded in 1968 and is headquartered in Orlando, FL. To learn more about Red Lobster, including locations and menu options, please visit HTTP://WWW.REDLOBSTER.COM or find us on FACEBOOK, X, INSTAGRAM or TIKTOK.

Media

[email protected]

https://www.nbcnews.com/news/amp/rcna153397

You meant a decade ago. Yes Darden and rl have been passed around or for years like most of the restaurant chain and qsr segment. Sorry I misreads and was thinking you were referencing something much more recently. Don’t recall that transaction I was deep in my depository ibanking stretch, having left the CRE CDO in 2009 and left HY Corp debt investment in 06. (The HY portion was the most wild eye opening of my career including working out assets nationwide in the financial crisis and being a banker to so many poorly run and shouldn’t exist smaller banks)

I’ve been saying for years this asset light subscription junk didn’t make any sense even in a zero rate world because that condition wasn’t forever. Now individuals and businesses own a lot less tangible assets.

High yield has become a cash flow joke. Goodwill on the balance sheets is through the roof (intangible asset that gets written down eventually rather than earned back through profits like 85% of the time)

I thought you meant they were acquired out of bk now by golden gate. One of a plethora of generic Pe shops these days with modelers out of touch with reality whom work to “derisk their equity and get a cheap
Or free option on the upside” usually in the form of multiple debt funded dividend recapitalizations. The worst is in my backyard called Roark Capital.

Only thing that’s odd is involving keen summit who is a re liquidator. Not like great American group or other liquidators (there’s one in Boston I’m spacing on and hilco as well) that sell IP, other equipment etc but KS I know as only RE.

Edit: now That I think of it they do auction off below
Market leases. But where the heck is that today with rates up and leasing rates crashing everywhere around us.

Accounting is just basic math with peculiar rules. Hard to take it seriously.

You know how much time I have to spend explaining to C suite bankers the difference between accounting and finance? I fight accountants who think they’re finance guys all day for clients. They claim to know market spreads and are way off etc. it’s like the lawyers who are supposed to spell out risks and instead want to pretend they are your business advisor when you didn’t ask for that and they’re billing you full freight for that unwanted advice.

Accounting -backwards looking and horribly explicitly rules based unlike Europeans spirit of rules based accounting system though that opens the door to a heavy handed and nasty govt intervention factor in that side of the pond

Finance-forward looking and far more open in terms of rules required to be followed.

Big picture problem with all this goodwill (-air mostly to me) is that I think loss severities will be higher or recovery rates will be far lower than the 60 cent on the dollar on unsecured bond debt and roughly 70 cents on the dollar on secured debt because there’s less tangible assets to liquidate in secondary markets. That’s not insignificant I promise.

[Farfromgeneva]

The shrimp special was the nail in the coffin but if you read the longer piece some QSR execs comment they haven’t innovated or bothered to stay relevant as the world changed.

If I run a shrimp special that loses $11M when I have $4.6B in total revenues? Well then I'm absolutely 100% gonna blame it on that. If I'm lucky, the media and Facebook hopefully eats it up hook, line and trawler.

Sad that a lot of these dudes are probably gonna run additional iconic brands into the ground in the coming years like they have for the past 30+. All to squeeze out a few extra bucks.

I mean I can spend pages explaining it but then even the people here who don’t hate me will start baiting me but it’s true what I’m saying. Revenue means nothing unless your a moron VC at Andreeson Horowitz 5-10yrs ago. (Now something absurd like A16z is their name but they still are not good stewards of capital at all)

Revenues mean nothing. Brands are silly. As they say they haven’t innovated in ages, their own kind. What kind of brand value is there in stale and non innovated in decades retail businesses?

Btw those shrimp I’ve seen too many times. They aren’t reals shrimp they’re the defects form three mile island and surrounding Staten islands shores.

[Farfromgeneva]

I will never understand all of the nuts and bolts about how restaurants like RL operate. I do understand that my mom and dad loved RL. They always had a game plan. They were the first ones in the door for lunch at 11 am. By 11:30 am the place was packed pretty much for the rest of the day. I don't know how ownership fouls that up. I do know that RL always did one hell of a business. I find it hard to believe that unlimited shrimp was the cause of their demise. I would have believed that the buying power of RL on a national level would have given them considerable leverage when purchasing shrimp.

My mother was taken to very nice seafood joint in NYC, Boston, DC and Atlanta by yours truly and always walked out “it’s good but it’s not Red Lobster”.

The shrimp special was the nail in the coffin but if you read the longer piece some QSR execs comment they haven’t innovated or bothered to stay relevant as the world changed. And as I continue to hammer because it’s going to change just may take 5-9yrs (took 7-9yrs from the default of the CRE CDO I worked for in NYC to when the final liquidation do the operating reit parent concluded in 2018).

Real estate prices will reset with still massive losses to come )the Wells Fargo economist is out to lunch with his recent note about credit turning positive-CE just out out another $466mm book of NPLs that’s a bunch of dogs and cats mixed with multi, hospitality etc, destiny mall is likely to have a 100% loss on their cmbs debt, 100% and yet lord Abbott has their Aaa bonds marked at 36 meaning for every $10mm of those bonds they own they’ve written down $.64mm but still have to recognize another $3.6mm in losses for their investors.

When real estate does reset at lower values, rental rates will come down. Occupancy cost is [ rent / sales at the store ]. For war I haven’t checked too presently but it’s gone from 5-8% to like 10-17% as if they were selling high margin luxury goods like a Tiffany’s rather than tight margin and highly variable based on food commodity price middle class meals.

Once again, I TRULY appreciate your financial posts. Great stuff.

Someone told me that some firm bought Red Lobster, and sold all their real estate and jacked up the rent. Couldn't find good confirmation on that....do you know? TIA

Yeah actually golden gate as YA had seen and grew a link up. Did that in 2014. Didn’t recall that transaction but plenty of those “OpCo”/“PropCo” deals came up. Check his link up a few comments. It’s a high level one I can pull something more detailed and in the weeds if you want but that tells the story. As far as jacked rent that may be harder to find though maybe I can find some filings on rent expense or ofc cost per store.

Same trade the Drexel guys pushed in the 80s that everyone pretended was revolutionary when Eddie Lampert did it Kmart. The CRE wasn’t a bad side or invest in we had some mezzanine debt in the toys r us property company at Libor + 350 for 2-3yr term that had lots of money behind it to be lost before we got hit and a short maturity. Wouldn’t have considered in a million years dipping a toe into the operating enterprise debt at any price or tenor beyond what the guy with the vowel at the end of his name a few blocks away would’ve you in time for repayment for a “on the arm” loan.

[Farfromgeneva]

The shrimp special was the nail in the coffin but if you read the longer piece some QSR execs comment they haven’t innovated or bothered to stay relevant as the world changed.

If I run a shrimp special that loses $11M when I have $4.6B in total revenues? Well then I'm absolutely 100% gonna blame it on that. If I'm lucky, the media and Facebook hopefully eats it up hook, line and trawler.

Sad that a lot of these dudes are probably gonna run additional iconic brands into the ground in the coming years like they have for the past 30+. All to squeeze out a few extra bucks.

This may not be the same situation but didn't the iconic Friendlys chain suffer a similar fate? If I remember correctly their demise was attributed to the inability to change their traditional menu to the dietary needs of a different generation. I never had a problem with their traditional menu. They whipped up a pretty good cheese burger and I always liked their brownie sundaes. They also had reasonable prices. I use to take my boys there when they were young all of time.

Loved the kids cone head sundaes so much until I got old enough to order Jim Dandy’s.

But yeah you don’t have to do my work to see this stuff gets tired and stale and mgt sucks in my these places. They also have become the playground for private equity. Cats growing chain gets hot, goes public, growth curve flattens because it’s not unique or value add to society or fast followers come in and flood the market with that type of joint (how many bs high end burger joints have you seen the last 15yrs rise up?). Anyone remember a spot called Cosi? Hot and hades on cnbc in 2006-2007 gonzo ten years later after high flying ipo.

[Farfromgeneva]

Quick search this is far from
Comprehensive but as a idea of things

Here are the major U.S. restaurant chains that have disappeared
Fox TV Stations

A closed sign hangs on the door of a Bennigan's Grill & Tavern restaurant July 29, 2008 in downtown Chicago, Illinois. (Photo by Scott Olson/Getty Images)

Restaurant brands face many challenges, whether it's sales growth or customer retention. But when these eateries struggle to keep up with competitors in their industry, it occasionally results in these brands closing their doors nationwide.

With news that Red Lobster was considering a bankruptcy filing, many diners are wondering if the iconic eatery could be next.

Here are some of the famous American restaurant chains that have closed most, if not all, of their locations through the years.

Steak & Ale

Steak & Ale opened in 1966 and had 280 locations, serving steakhouse fillets at cheap prices but shut down in 2008.

Chi Chi's

Chi Chi's became a go-to restaurant for casual family dining for tacos, burritos, and salsa. The Mexican restaurant had more than 200 locations but filed for bankruptcy in 2003.

ShowBiz Pizza Place


Denver Post columnist Barry Morrison warns that the atmosphere at the new ShowBiz pizza restaurant is quite addictive to youngsters and even their parents, January 31, 1981. (Denver Post via Getty Images)

ShowBiz Pizza was a popular place for pizza and kids' birthday parties in the 1980s. The chain struggled in the early 1990s and slowly merged with its former rival, Chuck E. Cheese.

Planet Hollywood

Planet Hollywood restaurants filed for bankruptcy in 1999 and only has a few restaurant locations in the world as the company converted the brand into a luxury resort chain years later.

ESPN Zone

ESPN Zone featured sports arcade games and food and lots of big-screen TVs. The restaurant only lasted 20 years and by 2010, there were only two remaining locations with the last restaurant in California closing in 2018.

Casa Bonita

Casa Bonita was known for its live shows featuring circus performers. The restaurant chain struggled financially before COVID-19 came along, which closed all locations at the time. The brand was purchased by "South Park" creators, Trey Parker and Matt Stone, and reopened the last Casa Bonita location in Lakewood, Colorado, in 2023.

Kenny Rogers Roasters

Kenny Rogers Roasters was known for wood-fired rotisserie chicken but multiple ownership changes led to the closing of the last U.S. location in 2011. It lives on in ‘Seinfeld’ lore.

All Star Café

All Star Café was a Planet Hollywood-owned restaurant with 10 locations, but the tavern closed its doors at the Walt Disney World location in 2007.

Bennigans

The first Bennigans opened in 1976 but is now down to just 10 locations after a 2008 bankruptcy.

Howard Johnson's restaurants


1940s: Howard Johnson roadside restaurant, Fort Lee, NJ. (Photo by Charles Phelps Cushing/ClassicStock/Getty Images)

Howard Johnson's restaurants had 400 restaurants across the US. By the 1970s, there were more than 1,000 of them, many sporting the chain's iconic orange roof. The final restaurant closed its doors in 2022.

Blimpie Subs & Salads

Blimpie seemed like it was everywhere and it nearly was – the chain closed 1,114 stores.

Country Kitchen

Country Kitchen closed 197 restaurants.

Damon's Grill & Sports Bar

Damon's Grill & Sports Bar, known for ribs, wings, and big-screen TVs, closed 107 restaurants.

Ground Round Grill & Bar

Ground Round Grill & Bar, where you could once dump your peanut shells on the floor, closed 106 restaurants.

TCBY

It may have been "The Country's Best Yogurt," but TCBY closed 405 stores.

Don Pablo's

Tex-Mex restaurant Don Pablo's, once the second largest full-service Mexican restaurant chain within the United States, closed 93 restaurants.

Big Boy

Bob's Big Boy Statue outside of a restaurant in circa 1972. (Photo by Albert Moote/Michael Ochs Archives/Getty Images)

Big Boy closed 265 restaurants.

Ponderosa and Bonanza Steakhouses

Ponderosa/Bonanza, known for steak and buffets, closed 305 restaurants.

This story was reported from Washington, D.C.

[Farfromgeneva]

But fellas a much larger issue in stripping re and operating businesses apart in the story of Medical Properties Trust and Steward healthcare. This impacts all of you so so so much more than some shi**y franchise restaurants. Cerberus has the reit over a barrel with their hospital ownership and it’s a problem for society.

https://www.healthcaredive.com/news/med ... cy/715676/

Steward’s landlord Medical Properties Trust posts $736M loss as hospitals flounder
Susanna Vogel
An illustration of a large dollar coin with medical supplies flying in the foreground is positioned on an analysis tracking chart background.
Illustration: Xavier Lalanne-Tauzia for Industry Dive
Dive Brief:

Hospital landlord Medical Properties Trust posted a $736 million loss for the first quarter Thursday, compared to an income of $33 million in the same period the year prior. The results come days after MPT’s largest tenant, Steward Health Care, filed for Chapter 11 bankruptcy.
MPT’s quarterly performance was dragged by $693 million in impairments related to Steward and an international joint venture formed in 2020 — also tied to Steward through its CEO, Ralph de la Torre.
The company’s earnings were also dinged by lower than expected rent payments from Prospect Medical Holdings. Rosa Hooper, senior vice president of operations at MPT, said on a Thursday earnings call that the for-profit hospital system has not paid rent for April or May.
Dive Insight:

While MPT has a portfolio of 436 properties, analysts were focused on the impact of Steward’s bankruptcy filing on the company.

“When an operator representing ~20% of revenue (4Q23) goes bankrupt, there is not much else worth focusing on,” wrote a Jeffries analyst it in a research note Thursday morning.

MPT holds long-term leases on 36 Steward-operated facilities, according to its earnings filing. Steward fell behind on rent payments last year and filed for bankruptcy Monday, disclosing $9 billion in debt.

MPT is solely backing Steward’s $75 million debtor-in-possession bankruptcy financing, which has raised eyebrows. But MPT CEO Edward Aldag said other lenders considered financing Steward.

“There absolutely were others or other lenders involved [in financing discussions], as you know, but we’re not gonna get into the details of those negotiations at this point,” said Aldag.

The real estate investment trust has already lent Steward hundreds of millions of dollars even as the loans have dragged down MPT’s own revenues. Aldag, for example, attributed much of the company’s quarterly loss to impairments related to MPT’s 2021 loan to Steward for $360 million.

Steward did pay $9 million in rent to MPT this quarter. However, that comes after MPT financed a $60 million bridge loan in January and an additional $75 million asset-backed loan, according to the earnings report.

Aldag declined to comment directly on a variety of Steward matters, ranging from whether some hospitals might close during bankruptcy proceedings, to which specific companies are in talks to take over Steward’s leases.

Hospital sales are a key factor moving forward for Steward. MPT said it might give the hospital operator further funding of up to $225 million if it sells its hospitals this summer — a timeline Steward’s legal counsel called “not feasible” in a bankruptcy hearing this week.

Aldag expressed confidence that the deals could get done, saying some hospital sales have been in the works for five or six months.

“We’re way down the road with many different people,” Aldag said.

Aldag said MPT’s rental agreements were not what landed Steward in bankruptcy proceedings as he struck out against “misinformation” about MPT’s business model.

“Rent is never mentioned by Steward on the list of contributing factors to its financial stress,” Aldag said. “If Steward wasn’t paying rent, they’d be paying interest in principal repayments on some type of financing for the facilities. Because as we all know, buildings are not free.”

Executives also gave updates on other tenants, including Prospect Medical Holdings. MPT disclosed Thursday that Prospect only paid $7 million in rent during the quarter, and that the fair market value of the health system’s assets declined by approximately $60 million.

Prospect has been struggling financially — this time last year, the health system took out a $375 million ABL loan to help with liquidity.

Prospect has also been attempting to sell hospitals to Yale New Haven Health since 2022. However, Yale recently sued to get out of the deal, citing Prospect’s “irresponsible financial practices, severe neglect and general mismanagement” of facilities.