BlackBerry's real estate sale to net CDN$305 million

BlackBerry's real estate sale to net CDN$305 million
By Derek Kessler on 5 May 2014 08:48 am EDT

BlackBerry has been working to sell their real estate holdings in Canada for a few months now, and today they've got a buyer. Today brought the announcement that Spear Street Capital has agreed to purchase BlackBerry's more than 3 million square feet of real estate and vacant lands for CDN$305 million (US$278 million).

Spear Street has waived their due diligence in the process to move things along, and expects that around 80% of the sales will be complete by the end of the month. The remainder might take a bit longer, with those sales not expected to be completed until the third quarter of the year. The sale includes space that BlackBerry currently uses, which they'll continue to occupy and lease from Spear Street.

A few hundred million dollars isn't a bad thing for BlackBerry to have on their books, and it comes at a time when BlackBerry could use every few hundred million dollars that they can get. They might be top tech dog in Canada today, but there's work for BlackBerry to do to continue their path forward. So every few hundred million counts.

Press release:

BlackBerry Announces Update on Sale of Canadian Real Estate Holdings

WATERLOO, ONTARIO--(Marketwired - May 05, 2014) - BlackBerry Limited (NASDAQ: BBRY)(TSX: BB), a world leader in mobile communications, today announced that Spear Street Capital, LLC has waived its due diligence condition pursuant to BlackBerry's previously-announced agreement to sell the majority of BlackBerry's real estate holdings in Canada. Spear Street has agreed to purchase the properties for CDN$305 million, or approximately US$278 million. The parties expect to complete the sale of properties valued at approximately 80% of this total later this month, with the sale of the remaining properties to be completed during the third calendar quarter of 2014, subject to customary closing conditions in each case.

Under the terms of the transaction, BlackBerry will sell more than 3 million square feet of space as well as vacant lands. BlackBerry will lease back a portion of the space as the Company continues to have a strong presence in Canada with Waterloo continuing as the home of its global headquarters.

Derek Kessler Derek Kessler "Managing Editor of Mobile Nations" 89 (articles) 5 (forum posts)

Reader comments

BlackBerry's real estate sale to net CDN$305 million


Yep. Selling to Spear Street and leasing back what they use.

Which, if we're being honest, is never a sign of good health for a company.

I hear you. Well I guess at the end of the day, they gotta whatever it take to make back some money. I know they did the same thing here in Nova Scotia with their building...before letting pretty much all the staff go in December. Apparently there's a few staff still in the building every now and then but for the most part it's empty although a few floors are being taken over by IBM.

Posted via CB10

Hey Derrick selling real estate and leasing back is common have no idea what you're talking about

Why are you commenting on BlackBerry stuff anyway?...everyone knows since Palm went in the toilet you've be come a huge Apple fanboy.

Posted via CB10

No no no...didnt you hear the guy who ran that webOS site is letting us know this is bad news......sorry, but he knows whats up, we should all listen to him....Get your logic, knowledge, and education out of here...Derrick has spoken!

Posted via CB10

Mr Kessler why is selling the real estate not a good sign ?? A real estate lease back is always a good strategy in a good Realty market to sell and is also a good corporate tax strategy going forward. Also interest rates have one way to go is up and can become a Dead Horse that Eats type of assets ...hmmm !! Plus Prem Watsa , Canso Financial and Brookfield Asset Management all owners of the convertible bond seem to know quite a bit about Real Estate strategy !! Nope I am all for a lease back and like the deal .

Its not a good sign because he has no idea what he is talking about (fact)......So you have to wonder why a bias bitter Palm guy is reporting finance/ business news on Crackberry, then trying to manipulate the communities opinion(that it must be bad news) upon the intake of the news in the comments, when he clearly has no background in the matter, and is pretty obvious completely ignorant to it.

Its a head scratcher...

Posted via CB10

Ok I will give him a pass ....but he should stick to tech gadgets ...because financial engineering can get a little to complicated for some !

His comments just make him look completely ignorant. I dont know why he is even spin negative nonsense? embarrassed for the guy lol.

Posted via CB10

Dereks comments are bang on. If you own your house, and need cash so bad you sell it, and rent it back that is bad financial strategy.

Much better to own relestate and keep having the value increase, and if you hold a mortgage the equity as well.

Turning hard assets into cash is not a good financial sign.

It does however mean it has more cash to try to turn company around, given financial situation best to sell it now and use cash, rather than loose the land in bankruptcy.

Posted via CB10

1990 housing real estate mess in Canada and 2008 USA real estate mess , CMHC is a bloated balance sheet hitting $600B primarily was suppose to be used for insuring mortgages is now insuring questionable real estate assets also the Canada Housing Trust a division of CMHC has a bloated balance sheet and interest rates have one direction and that is up !! That's housing real estate 101 going forwarded ! Here we are talking about Commercial Real Estate a whole different financial engineering animal & strategy ! My tenant has been renting from me for 12 years , he gets to write off some of his rent , travels and has a time share and yes makes a good income. Rent or Own another topic for another day visit lots of action there on that topic !!

I think that is ridiculous, why would you rent if you could own? Leasing from a company you just sold to is not even a band aid solution. This smacks of the old guard and not what Chen would do. What gives BlackBerry?

Z10 with OS

Financial Engineering / Tax Strategy / Cash / Real Estate can be a dead horse that eats type of asset / commercial realty financing could hit some head winds .......

I did read the beginning section written by CrackBerry (which didn't mention the land being leased back..btw..hence my question) but not the press release which I do normally because I find the summery that crackberry writes much easier to read. The press releases tend to be a bit wordy at times. So to answer your question..."not fully".

Posted via CB10

Correction: I reread it and I missed the part where they mentioned it. I appreciate the snarky comment know...people don't make mistakes and all *eyeroll*

Posted via CB10

How so? Thus far they haven't really done anything aside from further cut costs and delay products? The Z3 was delayed from it's March/April launch window to May. So they haven't even ended that long standing BlackBerry tradition yet. But Prem Watsa has been invested in and on the board of BlackBerry for years.

Good, now drop 100 mill on actual relevant advertising. Not Alicia Keys and a pointless superbowl add but real commercials with relevant stars

Posted via CB10

As much as I hate them to do it, I think they should get some really popular people that all the teenagers cry over, like one direction bad and such.

I didn't know Canada had any tech dogs. Ati is no longer Canadian, Nortel is gone and Blackberry (formerly RIM) is on life support.

Posted via my Q10

Ya it's sad to see whatever few tech companies Canada produces either get bought up usually by an American company like in the case with Ati now AMD or goes bankrupt.

Nortel filed for bankruptcy no thanks to our government trying to help them to save the intellectual property they owned and were working on.

Hope not but BlackBerry could be another Nortel if they don't get healthy / profitable real soon.

 Posted via CB10 on my  Z30

Good use the money for product placement in "50 Shades of Gray" movie. Ill keep saying this because its an opportunity that would pay off huge! So much exposure and giving BlackBerry a cool factor they have lost.

Posted via CB10

Its a BlackBerry not a cigar. Lol. In all seriousness, the main character uses a BlackBerry and gives one to his girl and tells her to use the "blackberry". It will be interesting to see if its shown in the movie. Just a nice opportunity to use product placement similar to Fed Ex in the movie Cast Away. Audi actually is doing this for "50 Shades of Gray".

Posted via CB10

Speaking of product placement, I saw a weird one in an Armin van Buuren video last night ("This is what it feels like") where, in the video, he has a rivalry with his friend (and vocalist for the song) Trevor Guthrie...they both wind up pulling pranks on each other one of which was Trevor taking Armin's phone and using it to stir his coffee. Just found it to be a little weird that Mr. Van Buuren makes north of 50 million a year but his daily driver looked to be a BlackBerry Pearl! Even if it was just a prop for the video I mean, what, they couldn't go out a buy a Q10 to ruin? :-)

Posted via CB10

The buildings are a depreciation asset, they probably have already written the buildings off entirely depending on how long they have been holding them for, so no more taxable benefit to gain aside from maintenance cost write offs I guess, now they can claim the lease as an expense, in the end it works out better on paper I believe, plus they have more cash in the bank now.

Posted via CB10

This comparison may not be as relevant as I think it is, but they’re selling this real estate at $1/sq ft. I paid $30/sq ft. for my house. Does this seem a bit off to anyone else? Haha

Posted via CB10

Derek is 100% right. One shot revenue booster, and then increasing debt, now must pay rent. The 1.25 billion infusion, now is also debt.

Chen is obviously buying time, this is totally understandable, but after the $$$ is spent, BB will be left with huge monthly payments on the 1.25B loan, and now rent payments.

It's a gamble for the future.....

Capital allocation. Well,...

Do you want money tied up in real estate that might carry a return similar to bank interest rates, or do you want to invest it in your real actual business, where you might have higher margins and get a much better return?

Ok, BBRY is still not profitable.
Let's say they could have a 10 to 20% margin, the money is better spent invested in their main business than running their own real estate shop or being a landlord to themselves.

"No Q10?" -> "Buy from Chen... "

Leave it to Wall street to make a large real estate sale that creates hundreds of millions for the company appear bad.

Posted via CB10

Hmm. Looks like they are trying to get whatever cash they can. Hope it will be spent wisely.

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Remember folks, Apple almost went bankrupt in the 90's...Give Chen a little time...Miracles are not overnight in the tech business

Posted via CB10

Isn't this story old news, other than confirming the specifics and the fact the deal is now firmed up.

Posted via CB10

Real Estate holdings are bought to be used, held until vested and than sold for future benefits at the owners discretion. In this case, it is a sound business move.

Sounds good if they need the cash, hell i would do that too if it was required if I had that much land that wasn't being used. Or better yet, plant trees on it and beautify it, since more trees equals more oxygen.