AT&T secures $850 million in real estate deal

DALLAS - AT&T Inc. (NYSE:T) has completed a significant real estate transaction, transferring 74 of its underutilized properties to Reign Capital, a private development firm. The deal, which closed on January 8, has provided AT&T with more than $850 million in upfront cash. The properties, spanning over 13 million square feet nationwide, were previously used for legacy network equipment.

This structured sale-leaseback arrangement allows AT&T to continue utilizing the necessary space for its network infrastructure while enabling Reign Capital to redevelop and monetize the remaining real estate. Under the terms, AT&T will lease back the space essential for its operations and maintain exclusive control over the areas required for network access.

Michael Ford (NYSE:F), head of global real estate at AT&T, highlighted the deal's creativity, noting that it offers both immediate and future financial benefits through a revenue-sharing model. The agreement aligns with AT&T's strategic goals and capital allocation priorities, particularly as the company transitions away from its legacy copper network operations, with plans to exit the majority by the end of 2029.

The transaction is part of AT&T's broader legacy network transformation, reflecting a shift from copper to more efficient fiber and wireless technologies. This evolution reduces power consumption and operating costs while freeing up valuable property for alternative uses.

AT&T's agreement with Reign Capital also includes financial participation in the redevelopment of the properties, ensuring AT&T benefits from future increases in property value. The company retains approval rights over redevelopment plans to safeguard its network operations.

The deal has no impact on AT&T's workforce or the services offered to customers, as it involves only a small fraction of the company's central office portfolio. The transaction serves as a potential model for future real estate deals within AT&T's footprint and represents an ongoing effort to realize cost savings from its legacy transformation.

Previously, in 2021, AT&T engaged in a smaller transaction with Reign Capital involving 13 properties, generating over $300 million in upfront cash. Revenue from that deal's redevelopment is expected to commence in 2025.

This news is based on a press release statement. InvestingPro subscribers can access additional insights, including 8 more ProTips and detailed financial analysis, to better understand how this strategic move fits into AT&T's broader financial picture. The platform's Fair Value analysis suggests the stock is currently trading slightly above its estimated Fair Value, making it crucial for investors to monitor future developments carefully.

In other recent news, AT&T Inc. has been the subject of multiple analyst upgrades and downgrades. Argus analysts upgraded AT&T shares from Hold to Buy, citing the company's shift towards the integration of wireless and fiber internet services. Similarly, RBC Capital Markets upgraded AT&T from Sector Perform to Outperform, highlighting the company's effective use of fiber investments. On the other hand, Citi analysts maintained a Buy rating on AT&T stock, expressing confidence in the company's potential to meet its 2024 guidance.

In addition to these developments, AT&T has faced significant security challenges. The company experienced a major breach last year, which exposed confidential FBI data. The hackers are believed to have stolen months of agents' call and text logs, potentially compromising criminal investigations and national security.

In terms of financial performance, BofA Securities expects AT&T to deliver solid results in line with its full-year guidance and potentially initiate a share buyback program. The company is expected to stay on course to achieve its leverage target by mid-2025, which could positively influence its earnings per share and free cash flow. These recent developments reflect the ongoing activities and strategies of AT&T.

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