AT&T Inc. (NYSE: T) announced the completion of its structured sale-leaseback of underutilized central office facilities with Reign Capital, a private real estate development firm.
According to the companies, the transaction includes the asset transfer of 74 properties encompassing over 13 million square feet of space. The properties are central offices originally built to house and connect large, bulky, and energy-intensive equipment for copper networks. But as customers moved from copper to fiber and wireless, a smaller equipment footprint is now needed to manage AT&T’s network, thus freeing up real estate for other uses.
AT&T 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. AT&T added the transaction covers a small portion of its central offices and will not impact customer service or its employees’ job security.
The transaction generates more than $850 million in upfront cash proceeds for AT&T through a deal structure that enables future profit sharing from redevelopment opportunities.
“The uniquely structured deal unlocks value in otherwise stranded commercial real estate space,” said Michael Ford, head of global real estate at AT&T. “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.”
This is the second transaction of its kind between AT&T and Reign Capital – in 2021, a similar deal involving 13 properties covering over 3 million square feet generated more than $300 million in upfront cash for AT&T, with initial redevelopment revenue generation projected to begin in 2025.
