McREIT? McDonald's Considering $40B Real Estate Spinoff

Photo by Bruce Marlin

After a third year of declining sales, McDonald's could unlock $20B of value by placings its $40B real estate holdings in a REIT, analysts say, joining Sears and Macy's on the list of juggernauts to consider a REIT-spin-off. While the company has always stressed the importance of owning its properties, CFO Kevin Ozan recently said it would consider all financial options—including real estate—to boost shareholder value. And while a new "McREIT" could prove profitable, the long-term impact of a spin-off remains in question. McDonald's real estate is a cash cow as is, totaling about $6.1B in rental revenue last year, a 26% jump from the year before. And the dangers of a McDonald’s REIT—namely increased lease costs on 14,350 US restaurantscomplicated leasing agreements and relationships with franchisees—could outweigh any benefits and would contradict CEO Steve Easterbook’s agenda for increased operations. [WSJ]

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