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AT&T's $850M Sale-Leaseback Offers Blueprint for Companies Seeking Liquidity

AT&T’s $850 million plus sale-leaseback deal with Reighn Capital of 13 million square feet across 74 US underutilized central office properties offers some creative real estate approaches other companies might decide to try.

The portfolio represents only a small part of the company’s central office holdings. The deal will not negatively affect service or jobs and noted it is “leasing back space that’s needed for the network,” as the company’s statement said. This will help AT&T cut operating expenses, trim power consumption, and turn away from copper networks — a long-term shift the company has taken to improve margins and exit the legacy networks and line of business by 2029. The deal allows the company to earn money from the properties sold in the future.

There are some strong benefits the company will see. “With refinancing in today’s world, you might not get 100% of the property value,” Jonathan Hipp, principal, U.S. capital markets and head of U.S. net lease group, tells GlobeSt.com. “They wouldn’t be able to finance it altogether.”

And then there is the length of sale-leaseback agreements, which regularly run to 15 or 20 years. Bank financing, if lucky, might extend to ten years, meaning at least an additional refinancing round.

The AT&T deal is unusual and specific. Central offices aren’t offices in the usual sense. They are telecommunications structures that act as connection and switching facilities that route calls and manage communications in a specific geographic area. However, there is broader potential for other industries.

It also is a bit unclear in parts, like how AT&T would participate in future sales. Typically, in sale-leasebacks, the seller doesn’t have an interest in future sales. However, a company that would buy one of the properties would likely be taking over the copper phone service in an area, so equipment would need to be part of a transfer.

“I think the sale-leasebacks work for companies that are not as financially strong and would have a hard time getting a loan today,” Hipp says. “But it can also work for investment-grade companies when the debt markets are in some turmoil and a great majority of the properties are more traditional offices.”

“Everybody thought interest rates would come down and unlock capital,” Hipp adds. “With AT&T doing such a large transaction, it should lead to others thinking that if AT&T does it and they’re a smart multi-billion Fortune 100 company, maybe we should think of it.”

Reprinted with permission from the Tuesday, 28 January 2025 07:15:45 EST online edition of GlobeSt © 2025 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.