Dallas-based telecom giant AT&T said it has secured $850 million from its sale-leaseback of 74 underused central office facilities to Oklahoma City-based Reign Capital.
“The uniquely structured deal unlocks value in otherwise stranded commercial real estate space,” Michael Ford, head of global real estate at AT&T, said in a statement. “It’s a creative solution providing both upfront and long-term value through a revenue sharing model that fits with our broader company and transformation initiatives.”
The offices house AT&T’s legacy copper networks and are located across the country. AT&T said the transaction monetizes properties with development potential, reduces operating expenses, and provides revenue sharing.
AT&T said the deal’s structure preserves the infrastructure requirements necessary to keep the network running smoothly, plus participation in future revenue generated from redevelopment.
Background and details on the deal
The transaction, which closed on Jan. 8, encompasses more than 13 million square feet of space.
Central offices originally were built to house and connect large, bulky, and energy-intensive equipment for outdated copper networks, AT&T said. It said that as customers move from copper to fiber and wireless, a smaller, more efficient equipment footprint is managing the network.
It said that technology evolution not only reduces power consumption, benefitting the environment, but also lowers operating costs and frees up valuable real estate for other uses.
AT&T said the approach not only monetizes real estate assets as the company plans to exit the large majority of its legacy copper network operations by end of year 2029, but it also aligns with AT&T’s strategic capital allocation priorities.
By leasing back only space that is needed for the network, AT&T said it is streamlining its real estate footprint.
AT&T said it will make lease payments to Reign Capital for the duration of the lease term and maintain exclusive operational control of space required for access to communications infrastructure in each location.
The company said the transaction impacts only a small portion of its portfolio of central offices and has no impact on jobs or changes in the services it offers customers.
AT&T said it retains final redevelopment plan approvals to ensure network infrastructure and operations remain undisturbed.
The deal’s structure also serves as a template for potential future transactions for some locations in AT&T’s footprint and is just one way the company said it intends to realize cost savings from legacy transformation.
In 2021, for example, AT&T successfully executed a similar but smaller real estate transaction with Reign Capital, involving 13 properties covering more than 3 million square feet. The company said that deal generated more than $300 million in upfront cash with initial redevelopment revenue generation projected to begin in 2025.
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