AT&T Signs $850M, 13 MSF Sale-Leaseback With Reign Capital
AT&T and Reign Capital have nailed down an $850 million structured sale-leaseback transaction covering 74 AT&T central office facilities totaling 13 million square feet across the U.S.
Even as it frees up hundreds of millions in immediate cash, the deal provides AT&T with the ability to safeguard critical network infrastructure in the currently underused facilities—and the ability to share in future profits from redevelopment of the properties.
The underutilization of these properties, which span 23 states, arises from the evolution of telecom technologies. These central offices were originally designed for legacy copper networks, which have increasingly moved to more compact fiber and wireless technologies, saving energy and also freeing up space for other uses.
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AT&T will retain and leaseback only as much space in these facilities as it currently needs for its network, maintaining exclusive operational control of those spaces and also retaining the right to approve any redevelopment plans. The company intends to exit the large majority of its legacy copper network operations by the end of 2029.
AT&T emphasized that this deal affects just a small portion of its portfolio of central offices and will affect neither jobs nor customers.
In 2021, the firm executed a smaller but similar transaction with Reign Capital, involving 13 properties totaling more than 3 million square feet and generating more than $300 million in upfront cash.
AT&T spokesperson Jeff Kobs told Commercial Property Executive that details on the specific locations are not being disclosed at this time.
He continued, “As far as redevelopment space, it comes down to a location-by-location basis. The properties in this transaction have on average under 35 percent utilization today. This deal is designed for utilization to decrease over time based on our operational needs at each location. At lease end, AT&T will retain a portion of space needed for ongoing network operations. This includes maintaining exclusive operational control in perpetuity for that space.”
Kobs added briefly that the onus will be on Reign Capital to decide how best to redevelop the spaces that are available and propose those opportunities to AT&T. Reign Capital did not reply to CPE’s request for comments.
Distinctive, but repeatable
Scott Merkle is a managing partner with SLB Capital Advisors, New York, which specializes in sale-leasebacks. He shared with CPE some observations about the AT&T/Reign transaction.
Merkle started by noting that while most sale-leasebacks have “a plain vanilla structure” under which the acquirer obtains ownership of real property in return for a steady income stream from the selling business, this one is different.
“AT&T’s deal features a sweetener where they received not only $850 million at closing, but structured an ability to participate in any property repositioning driven by the acquirer, Reign Capital.”
He also added that telecom companies have thousands of old central office locations and that while AT&T is selling 74 properties totaling more than 13 million square feet, they represent “only a small portion of its central office property portfolio.”
Similarly, although $850 million is significant in terms of CRE redevelopment, it’s a drop in the bucket for AT&T, which has more than $300 billion of enterprise value.
Finally, Merkle zeroed in on a comment in the AT&T announcement, that this deal structure “serves as a template for potential future transactions for some locations in AT&T’s footprint.…” He therefore would not be surprised to see more deals like this from AT&T down the road as it continues to transition away from copper network technology.
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