BlackBerry Announces Plans to Divest Canadian Real Estate Holdings

By Adam Zeis on 21 Jan 2014 04:41 pm EST
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BlackBerry has announced today that it will "divest the majority of its commercial real estate portfolio" in a partnership with CBRE Limited. BlackBerry will offer up a total of over 3 million square feet of space through both a sale-leaseback and vacant assets sales. The plan will help BlackBerry by providing additional income and resources to support their current and future operations. No financial details were disclosed however.

Press Release

WATERLOO, ONTARIO--(Marketwired - January 21, 2014) - BlackBerry® Limited (NASDAQ: BBRY)(TSX:BB), a world leader in mobile communications, today announced that it intends to divest the majority of its real estate holdings in Canada.

In partnership with CBRE Limited, BlackBerry intends to strategically divest the majority of its commercial real estate portfolio through a combination of sale-leaseback and vacant asset sales. The properties to be offered for sale comprise over 3 million square feet of space.

"BlackBerry remains committed to being headquartered in Waterloo and having a strong presence in Canada along with other global hubs," said BlackBerry CEO and Executive Chair, John Chen. "This initiative will further enhance BlackBerry's financial flexibility, and will provide additional resources to support our operations as our business continues to evolve."

BlackBerry will not comment on the potential value of a sale and will disclose further information as required in connection with any definitive sale transaction.

Reader comments

BlackBerry Announces Plans to Divest Canadian Real Estate Holdings

105 Comments

You should be worried.

I'm particularly concerned WHY the word "Future" is used, when the past year $2 billion in cash, and up until 15 days ago BlackBerry remained quite liquid!

" The plan will help BlackBerry by providing additional income and resources to support their current and future operations."

Where are they bleeding the cash lately?! There are no words on recent acquisitions, eyeing any potential thereof, nor further R&D aspects or prospects, so I'm only leading to think it's the CEO, and two new hires are going to be paid a LOT more than the recent staff their replacing?!!??

Am I wrong in this line of thinking, Chris U have a thought on this?

Also I'm curious if ANY Of their NOC buildings or server farm is being sold!! Proper wipe should be done along with disconnecting hard lines and IP, router, switching information as well if this is a concern.

Waiting for  BlackBerry Q10  & Full Metal CB10!

The new CEO is paid mostly based on par with the last and has considerable stock interest. So mostly he's there to push the stock and confidence up.

The moves are needed to help lean the company and become more focused. Just because they are moving making room for cash and investments doesn't mean they are struggling on a cash basis. I'd they maintain a $2 billion (assuming they spend $1 billion in a quarter, which is unlikely) they will have $2B to $250Mil ratio. That's still amazing and quite liquid

Posted via CB10

They are becoming more lean, they had too much space for the company they are becoming. They laid off thousands of employees. The space they occupied is no longer needed. Makes sense.

And where will the BlackBerry headquarters be?

Sorry but Canada might not be the best (cheapest) location to run a technology corporation from. I imagine that hardware "assembly" is pretty much done for at this point - if they stay in hardware it will be manufactured completely in China. A move to Silicon Valley might get them better talent, at less cost for their R & D teams. The support departments could go to India. ;)

So many problems with your comment. First BlackBerry has a number of buildings for lease in "rim park" so Crackberry could easily find some office space to lease. Second almost all BlackBerry handsets have been manufactured in Mexico for a number of years now. Chen has gone on to say that they will continue to Design and manufacture their Premium devices here in north America. I won't even comment on moving their CS to India...

Posted via CB10

NtotheK is right from what I have read unless I'm missing something. I don't know why people have to question somebodies ideas.

Keep The Faith  BlackBerry Q10 

Foxconn is not in North America and that is where the new devices are to be made but to move to silicon valley would be a no no as rents there are 10 times more expensive than being in a building they already own. Waterloo is the silicon valley of the north and we like it that way...

Foxconn are not building the premium BlackBerry made devices, they are charged with building the BlackBerry Designed lower cost handsets.

Posted via CB10

I work at a billion dollar company and we have no interest in being a landlord, even to ourselves. We are worldwide, have multiple offices on most continents and we lease every building. It works very well for us!

Posted from my Z10 via CB10

Silicon Valley is way more expensive than Waterloo Ontario! And still being next door to the University of Waterloo gives them immediate access to a global talent pool of software development...

I don't see them moving HQ anywhere anytime soon...

Posted via CB10

I laughed at the "better talent" part too. What a horrible place to be, with all that worthless engineering talent coming out of that second rate university

Posted via CB10

Lol second rate?!

That's why Google Canada did a HUGE hiring blitz specifically targeted to former BlackBerry employees back in November after the 5000 layoff occurred!

Microsoft and IBM Canada also did the same!

Many former BlackBerry employees had transportation and help fining suitable homes in California to Google headquarters. Yeah some pathetic Waterloo talent there hmm.

Waiting for  BlackBerry Q10  & Full Metal CB10!

Yeah. Smart people only go to school in California. I'll gladly pay top dollar to fight over that small talent pool with every other tech company rather than hire out of an untapped pool. Everybody else is dumb.

Gord! How's it going!? :)

After the layoffs they have a lot of buildings that are empty. They built 4 a few years back and are moving all employees there and selling off the ones they aren't using. Simple as that.

As for the NOC and data centers, they will remain where they are for the time being. I know there is a plan to move the DC simply because of size and power limitations, but other than that this is a good move. No point in paying for empty space.

I wouldn't move anything to the state of California if it should be successful. Taxes are worst than Canada.

Posted via CB10

Lmao moving to silicon valley to be cheaper?! Lol.

Both Telus and Rogers have a storage business - hardly even contributes to their quarterly revenue to be highlighted but in the past 8 months BOTH have seen their revenue climb more than 58%!

This is due to new clients trying to save on cooling just for their storage costs (yes cooling is a separate charge, some factor it in the month they costs of server farms/storgae) along with major server security protection against snooping.

I suspect storage is the reason here in this article. Why not goto their two largest partners for a sustained long term storage price that's cheaper to expense than having your own property taxes electrical bills and then paying staff to maintain?!

Bell will NOT be considered since their pushing KNOX by Samsung.

Waiting for  BlackBerry Q10  & Full Metal CB10!

Berry Ripe, not sure of you're from the US, but that's a pretty US-centric comment. There is a ton of talent in Waterloo, Toronto, Ottawa as well as anywhere else they draw from. The criticisms of BlackBerry have nothing to do with their talent.

Posted via CB10

Talent will go to the US.

Bbry needs to build partnerships not hire a bunch of young engineers. And the partnerships they need to build are in the US. Unless of course you want the new team to do what the last team did... make calls to try and get a meeting.

Bbry needs it's team members to start 'running into' other decison-makers makers in the airport, baseball diamond, kids dance class, kids school play etc.... you're deluding yourself if you think otherwise.

Posted via CB10

Ewalker I didn't make the statement about "talent not in waterloo", please go back and re-read what I wrote followed by the comments.

Keep The Faith  BlackBerry Q10 

They have sold their real estate to an investment company and are leasing it back from them. This frees up their capital in real estate and allows the company to use this capital for purposes that will generate a higher return. Long story short turning long term illiquid investments into cash to use for other purposes.

And no announcement of just how much cash, what the cost of releasing the buildings for at what interest rate, means a few people get to wipe their arsed with new $100 polymer vs $10 polymer ;)

Waiting for  BlackBerry Q10  & Full Metal CB10!

You from north Queensland, mate?

Your post sounds like you're straight out of "Tayownsville" or left alone "Caaairns"....

Zzzzwiped from a Zedevice....

Great Great news....Blackberry for 2014 so far is making some big changes and a lot of positives so far.....this year is going to be an interesting year.....few examples

10.2.1 Release....
BBM 2.0 for Android and iOS voice calling and bbm channels...
BES 10 keeps on growing....
Working on a high end keyboard phone....
Stock keeps on growing....

Telling you major things are coming.

I'm not sure I get this. BlackBerry is supposedly flush with cash, but they are selling their property for more cash and then they will...lease the same space from CBRE? I definitely need someone to explain this to me. This sounds like hard assets with a measurable value being traded for liability on the balance sheet. Am I completely off base?

With lease back, you're open to market landlord vultures with increased annual rent. Hopefully the contract has some nice clauses.

Catapulted from my Z10.

Typically you'd do a sale-leaseback when:
- you want to raise cach for some project / pay off debt, hardly the case for BlackBerry I think
- financial/accounting purposes - rent is an expense you deduct against profits which tells me Chen is positive on churning profits! :) (also, don't know the Canadian RE market but if asset values have appreciated so is the tax related to the asset)

Q1o

There is a time limit on the amortization... say 20 years? After that it's value is zero, no more deductions. Thats one reason folks sell off buildings.

Plus you pay tax on when you sell, so to avoid tax you must bold in to it forever, also property tax comes into play. It might be better to write this off so as to offset the 6% being paid to Fairfax on that $1.25 billion

Posted via CB10

They aren't a property management company and they are unlocking the capital invested in real estate that generates little return to use for other purposes.

You basically have it right. They sell for cash and lease back what they need. Very common. Seen this many times with other companies I've covered.

Posted via the Android CrackBerry App!

Actually it is based upon GAAP; default would equal acceleration of remainder. But, it would not show up as long term debt on the financials. (just speaking for how ot works in the States)

Posted via CB10

A lot of corporations do that, nothing unusual. Just like leasing a car, ownership can be a risk, and the tax side of it can be very beneficial.

Zzzzwiped from a Zedevice....

A lot of positives for BlackBerry they seem to be making smarter moves than they did before which was apparent even to a newbie like me

Master Chen wastes no time. He hit the ground running. I have a feeling sayings like "some time soon" are about to disappear from BlackBerry vernacular

Posted via CB10 with "Z" best

I don't fully understand the implications here, but if the real estate is not needed by BlackBerry, then it is a good move. I fully support Crackberry moving in too!

Posted via CB10

I think it's probably not great market timing, but it will free up cash. Chen has showed no interest in selling the Z30 in the US and my guess is he's got a lot of unsold Q10 inventory. He could have BlackBerry profitable again in the next quarter or two, but he seems to have a vision of BlackBerry as much smaller, leaner, and more entrepreneurial. That's a good thing, but it hurts people like me who believed that, with a better retail and direct sales effort and a slightly more distinctive product, BB10 would have hit and BlackBerry would be competing with the big boys, again. Chen just wants to focus on upgrading old enterprise customers and may never want to compete in a larger market, the kind of market BlackBerry really should be competing in. But, he may surprise us...

Anyway, the sale and leaseback will generate cash and, just as importantly, it will allow Chen to lay off the property management and landlord side of the business as BlackBerry will go from owner to tenant. Owning revenue-generating property is good, but it's also a lot of work and it adds risk and management costs. The big boys like Apple, Google, Amazon, Facebook develop and own substantial real estate portfolios, but Chen does not see BlackBerry as ever being one of the big boys again -- his vision looks more like Sybase or some, smaller, significantly profitable enterprise company you've never heard of... those companies rent offices and they don't hold massive real estate portfolios.

Posted via CB10

If BBRY doesn't make it selling devices/enterprise/BBM it won't matter what the real estate they own is worth, it would be sold off in bankrupty court. This is going for broke, raise cash, clean house of bad management, go for the big corporate clients.

The thing is those corp clients will be using BB10 handsets, which IMO is a great selling point. Once you use a Z10, those ifones/doids look terrible.

The main goal is to make a profit, that's the sole goal of any company. Products, services, real estate doesn't matter. The only thing that matters is making money, that's it, nothing else.

There's a book called "The Goal" I encourage anyone reading this post go out and buy it, you won't regret it.

Zed30

It is almost certainly untrue to suggest that he isn't interested in selling the z30 in the US when a more obvious reason should spring instantly to mind, they cannot force the carriers to sell stuff if they don't want to do so.

I don't see this as a great thing to be honest. I can understand the desire to raise cash immediately in order to ride out short to medium term trouble, but this isn't the best scenario. Obviously not paying rent is better than paying rent.

Posted via CB10

They can earn a better rate of return on this capital by investing it in their core business which does not involve property management.

You think CBRE is going to rent them the space for less than the cost of the property taxes? CBRE isn't a charity...

No but CBRE probably took a deal where rents are low now and rise in the future for 5 years. Which is a good deal for CBRE and BBRY. If BBRY makes it back, everyone wins, if not and BBRY goes under, CBRE gets the buildings and whatever cash they get from rent until then.

I'm surprised Crackberry hasn't moved in to the office space.

Have to check the balance sheet for the affordability.

Maybe Mr Chen can sort out a deal for you.

Posted via CB10

They probably have a fair bit of unused space that they are paying to maintain now. They're basically half the size they were three years ago. This raises cash, reduces the maintenance liability and moves teams closer together away from unused space

Mr Chen is taking big decisions. He will definitely revolutionise the way of thinking and doing things at blackberry. The firm needs that the shareholders and the customers. Something new, big decisions. I'm very optimistic regarding the future of BB.

Posted via CB10

:( sad to see my home lose it's greatest part but i know it will need the restructuring.

Posted via CB10 on my blazing fast Z30

Great move! Real estate is not their core business, no reason to keep it in house. Offload it to someone who has expertise in the area and can benefit from synergies. I'm sure they got fair market value for it and now they can reinvest that capital into their core business.

Posted via CB10

Well, if they have downsized the staff by the 1,000's, then I'm sure they don't need all the space they had before.

Posted from my CB10 via the power of "Q"

With all due respect, given how long Chen has been at the company, it's unfair to assume many of these initiatives weren't kicked off under Thorsten

Posted via CB10

This is far from unusual or desperate. My corporation did the same thing with CBRE years ago. The idea is if you invest the cash properly you get a better return on your investment then your lease payments. So Chen is actually doing something smart here. It changes nothing else.

Posted via CB10

Awesome move Mr. Chen. You continue to make all the right decisions. The business world, at least, has taken note. As far as the rest of the populace is concerned, they are more worried about Entertainment Tonight and are clueless. Anecdotally, all you have to look at is U S elections of late.

Posted via CB10

Cash rules everything around me...
C.R.E.A.M. Get the money...
Dolla dolla bills y'all!!!!

(●'‿'●)ノ

Posted while peeking and flowing on my incredible BBQ10! 

Sounds like a good move, I wouldn't mind running a business within a BlackBerry building long as there name stayed on the outside. Years ago I worked for an Insurance company that did the same. No need of holding onto empty space if someone else could use it.

Posted Via CB10 Using my great Z30 Or Z10

So can anyone explain why the last CEO Heins is a board member of the Canadian University just next door?

Posted from a Blackberry Z10 version10.2.1.176 on Verizon 4G network

I've said it time and time again, BBRY will end up in Kanata with QNX headquarters. Closer to the feds, cheaper real estate and QNX is already there.

Posted via CB10

Most of the comments are real funny. I would advise people read the news release before commenting. Nowhere did it say BBRY is selling all its properties. Its selling 3 million square feet of space out of the 4 million it currently has.

This is a strategic move by BlackBerry to sell some of its real estate for $$$$ and lease back some space so it may be written off via taxes. There is no point in BlackBerry paying $millions$ in property taxes for empty buildings, so why not sell them.

Mr. Chen seems to be on track with his strategic restructuring of the entire company. This is not a small bill, this is a massive bill, and he's been on track ever since he was given the BBRY GOLD KEYS.

LONG BBRY...

BlackBerry certainly has a lot of property. :) it's not a bad thing to generate some Quick cash ;)

C0038297E Quote of the Day (BBM Channel)

Good news. This addresses one of the root causes of rim's fall: Labour shortage in Canada, Waterloo area in particular.

Hmmm selling off it's properties and leasing them back is what Nokia did to bolster it's finances before it bit the dust and fell to Microsoft