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UPDATE: IHOP inks sale-leaseback deal for 187 Applebee's units

GLENDALE Calif. IHOP Corp. on Tuesday said it would sell and leaseback the properties of 187 corporate Applebee's Neighborhood Grill & Bar units to garner proceeds of $347 million before taxes. After-tax proceeds are expected to total $294 million, the company said in a filing Wednesday with federal regulators.

The after-tax estimate falls $56 million short of what IHOP in February had estimated the transaction would bring. Chairman and CEO Julia Stewart had cautioned investors in April that the tightened credit market would affect IHOP's ability to complete a sale-leaseback agreement, especially at the price the company had predicted two months earlier.

IHOP said the proceeds from the deal announced Tuesday would be used to pay down debt. The total pre-tax price reflects an average location value of $1.86 million.

The buying group includes Drawbridge Special Opportunities Fund LP and Drawbridge Real Assets Fund LP, which are affiliates of Fortress Investment Group, a New York-based asset manager.

When IHOP acquired Lenexa, Kan.-based Applebee's last year, it said it planned to seek sale-leaseback deals on corporate real estate and to refranchise most of the casual-dining chain's 510 corporate units. IHOP said that the deal announced on Tuesday allows it to transfer the property leases to franchisees after a sale has been completed. So far, only 41 corporate Applebee's locations have been sold in a deal with franchisee Apple American Group. IHOP has said it expects to sell this year a total of 100 locations for between $90 million and $100 million.

The sale-leaseback deal is expected to close June 16. Prior to June 1, the buyer holds the right to adjust the purchase price based on restaurant sales for the trailing 12 months ended April 30, which are not yet finalized, IHOP said. In addition, the buyer can refuse to purchase a maximum of 15 percent of the properties if they are determined to have "material deficiencies."

IHOP, based here, operates or franchises 1,353 namesake family-dining restaurants and 1,986 ApplebeeÕs locations.

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