US telco AT&T is selling a portfolio of Central Offices in an $850 million sale-leaseback deal involving more than 70 properties across the US.
Central Offices were originally built to house and connect equipment for copper networks. Amid a shift from copper to fiber and wireless, less equipment is needed to manage the network, freeing up space and power for other uses.
AT&T has completed a sale-leaseback of underutilized central office facilities with private real estate development firm Reign Capital.
The deal, which generated more than $850m in upfront cash, totals 74 properties across the US, totaling more than 13 million sq ft (1.2 million sqm).
While it didn’t provide a detailed breakdown of the portfolio, but local reports note the deal includes the Michigan Bell building in downtown Grand Rapids (for $18.8m); 725 13th St. NW in Washington DC (for $112m).
“The uniquely structured deal unlocks value in otherwise stranded commercial real estate space,” said Michael Ford, head of global real estate, 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.”
AT&T plans to retire its copper network by 2029 and is amid a major fiber build-out across the US. The retirement of legacy copper infrastructure leaves AT&T with a large footprint of central offices (also known as telephone exchanges) that will be underutilized.
“By leasing back only space that is needed for the network, AT&T is streamlining its real estate footprint,” the company said. “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 said the agreement includes provisions for financial participation in redevelopment revenues – details of how the sites may be redeveloped weren’t shared.
The telco also noted it retains final redevelopment plan approvals to “ensure network infrastructure and operations remain undisturbed.”
Though it only represents a “small portion” of AT&T’s portfolio of central offices, the telco said the deal structure “serves as a template” for future potential transactions.
AT&T said it completed a similar deal with Reign in 2021, selling 13 properties totaling around 3 million sq ft (278,710 sqm). That deal generated more than $300m in upfront cash, with initial redevelopment revenue generation projected to begin in 2025. The 2021 deal included buildings in Milwaukee, Detroit, and Pittsburgh.
The company is not the only carrier considering what to do with its copper-centric real estate in the wake of the move to fiber. Ziply, spun out of Frontier in 2020, is converting around 200 of its old central offices into colocation data centers off the back of its own fiber network rollout. Frontier, with its own large footprint of COs, also offers colocation services from its legacy sites.
