Investors Want McDonald’s To Spin $20 Billion In Property Off Into Real Estate Investment Trust

(yarnzombie)

While McDonald’s doesn’t own the majority of its restaurants, it does own tens of billions of dollars’ worth of the real estate where those restaurants operate, leasing them to franchisees. That’s a valuable asset, and the company is facing pressure from some investors to spin off its land and buildings into a separate, publicly traded McDonaldland. I mean, real estate investment trust. Which they should name McDonaldland.

Investors in other companies are keen on the REIT idea, too. Darden plans to transfer a number of its own restaurants to an REIT, and investors want Macy’s to do the same. Selling property to a trust is the only reason why Sears posted a profit during the most recent quarter.

The Wall Street Journal points out that REITs have benefits for investors, since their tax structure is different from a regular business. Almost half of McDonald’s value is in its worldwide real estate, which would leave the remaining company to be valued based on its earnings from franchise fees.

This trust would own only McDonald’s property in the United States, and that’s a substantial amount of real estate. Experts don’t even know exactly how much there is, but they know that there’s between $20 billion and $35 billion that the company could raise, which they could go on to use to buy shares of the company back, pay debt, or invest in more pantry spices.

The higher-ups at McDonald’s haven’t ruled out the idea, but they also haven’t confirmed that they’re going for it. The company’s chief financial officer will update shareholders in November.

McDonald’s Lands in a Real-Estate Dilemma [Wall Street Journal]