Telecommunications giant AT&T is selling more than 13 million square feet of properties to a New York-based investor in a leaseback deal that puts real estate in play for redevelopment across the country.
Reign Capital paid more than $850 million for 74 of AT&T's so-called central offices that were built to house and connect large, bulky and energy-intensive equipment for outdated copper networks. As technology evolved and AT&T customers moved to fiber and wireless systems that require less space, the company realized it was only using about 35% of the portfolio it sold to Reign Capital.
The deal is designed for AT&T to use less and less of the real estate over time but keep operational control of the space it needs for its communications infrastructure at each location, according to an AT&T spokesperson.
In addition, the agreement includes a provision for AT&T to get revenue from any redevelopment of the properties, helping the Dallas-based telecom company streamline its real estate footprint and monetize its underutilized central office facilities.
The portfolio purchase closed Jan. 8. Terms of the deal were not disclosed. AT&T declined to disclose the properties but said they were located in 23 states. CoStar data shows one of the properties in the deal is located in Washington, D.C., at 725 13th St. NW.
“The uniquely structured deal unlocks value in otherwise stranded commercial real estate space,” AT&T Head of Global Real Estate Michael Ford 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.”
AT&T is planning to exit the large majority of its legacy copper network operations by the end of 2029, officials said in a statement Friday. The company said the sale-leaseback deal with Reign Capital only impacts "a small portion of AT&T's portfolio of central offices," and there's no impact to its workforce or the services it offers customers.
This isn't the first time AT&T has sold some of its U.S. real estate in a sale-leaseback deal or to monetize otherwise aging properties. The company has a track record for parting with its properties in blockbuster deals in recent years. AT&T recently mandated a return to office five days a week but has been cutting back on its physical real estate in a move that Business Insider said had employees jockeying for open desks and parking at some office locations.
Redevelopment play
Reign Capital touts itself as specializing in adaptive reuse and modernizing historical and landmarked buildings. The firm did not immediately respond to an emailed media request from CoStar News regarding its plans.
AT&T and Reign Capital made a similar yet smaller deal in 2021 when the real estate firm acquired 13 properties spanning about 3 million square feet for $300 million.
The telecom giant expects to start receiving revenue from redevelopment of those properties this year, according to the statement.
AT&T, which ranks No. 32 on the Fortune 500's latest list of largest publicly traded U.S. companies by revenue, plans to use this type of deal structure as a template for potential future real estate transactions, the statement said.
The deal is "just one way the company intends to realize cost savings from legacy transformation," AT&T said.