North Bay Business Journal

Thursday, June 24, 2010, 10:36 am

REIT acquires Napa Valley wine assets from Diageo in $269 million sale-leaseback


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    20-year deal involves two Napa wineries, 2,000 acres of vines

    Realty Income Corp.NAPA VALLEY — Escondido-based real estate investment trust Realty Income Corp. (NYSE: O) today announced a $269 million sale-leaseback deal with London-based drinks conglomerate Diageo for Sterling Vineyards in Calistoga, Beaulieu Vineyards in Rutherford and 2,000 acres of winegrape vines in Napa Valley.

    The deal involves the sale of 400,000 square feet of production, retail and hospitality facilities connected to the two wineries as well as the vineyards to Realty Income in exchange for a 20-year, triple-net lease.

    Diageo will retain ownership and marketing of the brands and management of the properties.

    Diageo today said it expects the deal, set to be mostly done by the end of June, to boost cash flow by $200 million and improve return on invested capital in its Napa-based fine wine–oriented Diageo Chateau & Estates division.

    However, proceeds from the sale are offset by restructuring costs within the company, according to the Diageo.

    Diageo will become Realty Income’s second-largest tenant, accounting for 5.7 percent of revenue, or $327.6 million.

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