AT&T gets $850 million in cash from property dealAT&T gets $850 million in cash from property deal

As asset monetisation goes, that's not a bad result by anyone's standards.

The US telecoms operator disclosed that earlier this month it completed an arrangement with private real estate development firm Reign Capital that included the transfer of 74 properties across the country, covering over 13 million square feet of space.

Essentially, AT&T no longer needs all of that space. The properties in question are central offices that were originally built to house and connect AT&T's copper network assets, but the shift to fibre significantly reduces the amount of space the operator needs...as well as lowering power and other operating costs.

AT&T plans to exit, in its words, "the large majority" of its copper network operations by the end of 2029 as part of its ongoing drive towards fibre. By that same date it aims to have covered 50 million locations with fibre, it disclosed at the end of last year. As such, there's a lot of spare real estate and that will only increase over the next couple of years.

Under the terms of the deal, AT&T will lease back only the space it needs from Reign Capital. It will maintain exclusive operational control of space required for access to communications infrastructure in each location, it said. It didn't have much to say on the size of those lease payments, but it's safe to assume that they will not make a massive dent in that $850 million upfront sum.

Naturally, AT&T was more keen to talk about the cash and to highlight the potential for "future profit sharing from redevelopment opportunities." It includes provisions for financial participation in redevelopment revenues, which essentially means AT&T can still benefit from property value increases in future.

The telco retains final approval on any redevelopment plans, thereby safeguarding remaining infrastructure and operations.

"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."

It certainly seems like a highly logical deal with the potential to benefit both parties. Indeed, AT&T has done this before and may well do it again in future.

In 2021 it carried out a similar but smaller real estate deal with Reign Capital, selling 13 properties covering 3 million-plus square feet to bring in an upfront cash sum of $300 million. Initial redevelopment revenue generation will begin this year, it said.

This latest deal is clearly bigger, but AT&T emphasised that it still impacts only a small portion of its central offices. And it will not impact on jobs or the services offered to customers, it was careful to add.

However, it will serve as a template for potential future transactions elsewhere in its real estate footprint, it said.

Rolling out fibre is an expensive business. Freeing up cash from the buildings that once housed copper network is clearly a logical way to help with the finances.