I have explained what cap rate the new barimore would want to see on Oct 21. just search for "cap rate" and you will get that post.
reality is if customers keep leaving the store everything would coil down to the real estate value of the store.
some owned locations could be suitable for redevelopment, many are pretty weak in my opinion.
assuming location is good or great and redevelopment is possible this is how u should value the property (the land) if u are developer
lot size x 30% floor to area ration gives u that size of the future retail pad as a foot print.
say current Olive Garden is sitting on 60,000 SF lot.
it gives u future 18,000 SF retail building which will be leased @ $25 - $40/SF AAA lease ideally.
future SGI (and the NOI incase of AAA) is $450K - $720K.
now look at the expense side to buy and build.. if I use construction cost $130/SF the total cost to built is $2.3Mil. If Darden sells the land for $5 Mil the total cost is roughly $7.3 Mil. Why do I use $5 Mil here? Only because barimore said 800+ stores worth $4.4 Bil in his opinion.
$7.3 Mil acquisition plus construction
20% down, 80% converted long term loan in the end : $5.8 Mil at 5% annual = $290K interest payment per year.
Investment upfront $1.9 Mil. will bring ROI at the range $180 - $370K.
CAP rate will be .45 Mil/7.3 Mil to .72Mil / 7.3 Mi or 6% to 10%. This was ideal case, of course, and no one will pay 5.3 Mil for the most of their locations.
My take funds used this barimore to create a new real estate tulip and try to exit after killing few shorts.
This is the worst performing chain in the casual dining sector, period. look at bennigan's like ending