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Kraft Foods sells suburban Chicago headquarters, leases it back

The sale-leaseback deal is part of a broad effort by Kraft Foods to return cash to shareholders.

January 21, 2013|By Emily Bryson York
  • A can of of Kraft Easy Cheese.
A can of of Kraft Easy Cheese. (Morry Gash / Associated…)

Kraft Foods Group Inc. has sold its suburban Chicago headquarters as part of a broad-based effort to return cash to shareholders.

The company, which plans to lease back the building for at least 10 years, declined to say how much the buyer — real estate investment trust W.P. Carey Inc. — paid for the 679,000-square-foot property, situated on a 70-acre campus.

Kraft Foods was spun off from Mondelez International in October and is now a $19-billion North American grocery business. Chief Executive Tony Vernon said the company will shift its focus from revenue growth and profit margins to generating cash.

Although sale-leasebacks are a multibillion-dollar industry, Garry Cohen, senior managing director of leaseback capital at Mesirow Financial in Chicago, characterized them an "underutilized tool."

Companies employ sale-leasebacks as a way to "unlock capital they had previously tied up in real estate," he said.

A Kraft Foods spokesman said the move allows the company to reinvest capital from the property without moving from the campus in Northfield, Ill.

In a memo to employees, Vernon said the sale reflects a desire to generate cash — not an interest in leaving the area.

"We're looking at numerous opportunities across our entire organization — from corporate to the functions to the business units — to improve our cash flow," Vernon said.

He added that nothing will change for employees as a result of the sale except the name on the deed. "In other words, it's business as usual," Vernon said.

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