McDonald’s won’t pursue REIT; boosts number of restaurants it plans to refranchise

Real estate historically has been an important part of McDonald’s business.

At its investor meeting on Tuesday, McDonald’s CEO Steve Easterbrook confirmed the company will not be pursuing a real estate investment trust (REIT) after months of evaluating such a transaction. “The potential upside isn’t compelling, and the future value at risk too great”. Many investors and analysts have, in the past, urged the company to place its US properties in a publicly traded real-estate investment trust, which would have provided considerable tax advantages and offset declining sales and profits that McDonald’s, until recently, has been reeling under. Robbins did not immediately return a request for comment. “That said, never say never!” said Kalinowski, who expects the chain to raise its quarterly dividend to 89 cents per share from 85 cents. Shares in the chain, whose NY City investor meeting was targeted by workers protesting for higher wages, were roughly flat at $113.14 in morning trading. The company collects rents from franchisees and those payments increased 26 per cent from 2009 to 2014.

Standard & Poor’s downgraded its credit rating on McDonald’s by one notch late Tuesday, to “BBB+”, saying the company’s credit metrics are “measurably worse”.

Another move is that McDonald’s now plans to have even more franchises than planned. The Oak Brook, Illinois-based company said this puts it in position to meet its new longer-term goal to be 95 per cent franchised. The company is increasing its cash return to shareholders target to about $30 billion for the three years ending 2016, a $10 billion increase over its previous target. It’s financing the effort by borrowing money. Glenview Capital Management LLC, for instance, has said the move could generate at least $20 billion for McDonald’s shareholders.

McDonald’s shares have been trading at record highs since Easterbrook said on October 22 that a rebound in quarterly sales at established restaurants showed his turnaround plan was beginning to take hold. That new target will be almost double the $16.4 billion returned to shareholders for the three years ended in 2013.

Easterbrook also mentioned plans to grow its store count internationally and improve McDonald’s level of efficiency and customer service. McDonald’s United States of America president Mike Andres said during the presentation that the company outperformed quick-service burger restaurants during a week in September for the first time in 71 weeks. The company has moved to a more core focus on its food, and it has expanded its breakfast hours all day, so you can that Egg McMuffin any time now.