Seeking Alpha

BlackBerry sells U.S. HQ

  • BlackBerry (BBRY) has sold its Irving, TX U.S. headquarters to Canadian real estate firm Brookfield Property for an undisclosed sum. The company is leasing back 37% of the campus, which sports six buildings and 460.3K sq. feet of office space spread out over 12.9 acres.
  • BlackBerry, which has carried out huge job cuts, rallied in January after announcing it planned to unload the majority of its Canadian real estate holdings (3M+ sq. feet altogether) via sale-leaseback deals.
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Comments (28)
  • customize
    , contributor
    Comments (128) | Send Message
     
    Namely a good business decision when you are in transition. Nothing wrong with unloading dead weight, less liability and expenses, bigger sales, the more the profits.
    10 Mar 2014, 06:31 PM Reply Like
  • King Rat
    , contributor
    Comments (811) | Send Message
     
    Actually not. An asset you use is not dead weight. You are taking a depreciating asset (tax shield) and replacing it with cash+lease obligations. That is HIGHER cash burn and LOWER profits. The only "gain" is short term 1 time infusion of cash. This is an act of desperation. That is not to say that Apple was desperate in 1998 as well, either, but it is an act of desperation no less.
    10 Mar 2014, 06:59 PM Reply Like
  • King Rat
    , contributor
    Comments (811) | Send Message
     
    On that note, BBRY would have been better off just leasing out the 63% of the Texas property they don't use, unless they REALLY needed that cash short term.
    10 Mar 2014, 07:04 PM Reply Like
  • kmi
    , contributor
    Comments (4216) | Send Message
     
    Sale-leasebacks are bog standard methods for raising capital. Owning your corporate campus is actually wasteful, and indicative of a company with money to burn. Yes, that means a company owning its campus is profitable, but it also means that there's wasteful spending that can be trimmed back.

     

    The point being, its a good strategy when you are looking to boost margins and need some cash to restructure your ops.
    10 Mar 2014, 09:23 PM Reply Like
  • kmi
    , contributor
    Comments (4216) | Send Message
     
    Why would BBRY get into landlording when it isn't their business? That makes no sense. Plus they'd have to put up with vacancy and credit losses on that 63%, reducing the potential return. Far better to let a pro do it with the connections and infrastructure to manage the property and the willingness to take credit risk on tenants.
    10 Mar 2014, 09:25 PM Reply Like
  • King Rat
    , contributor
    Comments (811) | Send Message
     
    So they could sell the other 63% if they don't need it. The point is, from this quarter on out, their bottom line will include cash costs (rent) instead of non-cash loss (depreciation of buildings). Which would you rather have if your company needs cash?
    10 Mar 2014, 11:21 PM Reply Like
  • laugher
    , contributor
    Comments (66) | Send Message
     
    Just trying to learn from all this. Isn't it better for a company to had more liquidity (cash) especially when it needs to use it to restructure and re-position? I mean if you were starting a business from scratch, the first thing you would need is a lot of upfront cash (whether from a loan or otherwise). I would have thought John was looking for money quickly to set the company up in a way where he can very quickly and clearly see where the bottomline is. This also removes any uncertain or doubt about the balance sheet.
    11 Mar 2014, 02:18 AM Reply Like
  • gwynfryn
    , contributor
    Comments (4553) | Send Message
     
    He's hardly starting from scratch, and BBRY is actually shrinking, so what do they need the cash for?
    11 Mar 2014, 01:17 PM Reply Like
  • GRojasHruska
    , contributor
    Comments (98) | Send Message
     
    What is the BlackBerry data center I heard of in Washington or something?
    http://zd.net/1fQOcdF
    10 Mar 2014, 06:33 PM Reply Like
  • jjtom
    , contributor
    Comments (443) | Send Message
     
    Smart move, besides if things go bad in the US as it looks like it will might as well sell everything. The funny thing is BB pays more taxes to The IRA than Apple does, yet they get shafted by US Airforce, DOD etc.
    10 Mar 2014, 07:01 PM Reply Like
  • stevef1086
    , contributor
    Comments (52) | Send Message
     
    "BB pays more taxes to The IRA than Apple does, yet they get shafted by US Airforce, DOD etc."

     

    @ JJtom - do you have a source for this?
    10 Mar 2014, 09:38 PM Reply Like
  • ELLAS
    , contributor
    Comments (2217) | Send Message
     
    Great point.
    This is all part of the BlackBerry restructuring. Slim down as much as possible. There's no point in keeping unused real estate. Then lease back a small portion, something you can use as a tax write off.

     

    Good business plan. This is not a desperation but a good business decision and all part of the restructuring going on. I also believe the Enterprise has gained some healthy traction and continues to gain traction all over the world.
    Even if the next quarterly results are bad, that's to be expected. John Chen has already stated that it will take several quarters to rectify the damage caused to BBRY by previous incompetent management staff.
    14 Mar 2014, 12:09 AM Reply Like
  • jjtom
    , contributor
    Comments (443) | Send Message
     
    King Rat i don't think you really understand what is transpiring there. If the office space is empty, how is it desperation to sell it especially since it seems to be a done deal. ie. as soon as this deal is done the cash is in the bank.
    10 Mar 2014, 07:26 PM Reply Like
  • Zzoot1
    , contributor
    Comments (210) | Send Message
     
    Selling out before bankruptcy is a good move.

     

    Now that cash can be used to pay out hefty bonuses.
    10 Mar 2014, 08:00 PM Reply Like
  • mikebator
    , contributor
    Comments (1593) | Send Message
     
    @ZZ,

     

    Cash for DC location, so a shift in the location of resources closer to their target audience from Texas is solely for golden parachutes? Then why spend on a new state of the art facility next to your customers at the Pentagon?
    10 Mar 2014, 09:00 PM Reply Like
  • kevinconway
    , contributor
    Comments (2401) | Send Message
     
    Great move. Makes a lot of financial sense. and Brookfield, which I have also owned for a long time, bought it. Chen and co are impressing me on almost a daily basis...the speed at which they are moving is amazing.

     

    There are a lot of companies divesting themselves of real estate assets or spinning them off. Once real estate reaches a certain level of value to a company you need to question if you are in the real estate business(?) Do you want to tie up capital in this or do you want to put the money towards the core focus of your business? that is a very easy decision to make.
    10 Mar 2014, 08:46 PM Reply Like
  • farmwersteve
    , contributor
    Comments (333) | Send Message
     
    I think it is great.
    Probably the same reason why bug companies lease (rent) fleets of vehicles, excavation machinery etc. I actually don't know many companies that own that type if equipment, so why own real estate.

     

    Especially, since they probably made a lot of money on the increased value of the property, so dump it and earn some cash and put it to Good use.

     

    Keep it up Chen..
    10 Mar 2014, 10:09 PM Reply Like
  • bbry long
    , contributor
    Comments (2) | Send Message
     
    If you're not in the business of real estate, don't own it. No brainer.
    10 Mar 2014, 10:28 PM Reply Like
  • customize
    , contributor
    Comments (128) | Send Message
     
    Las Colinas in Irving, Texas where Blackberry U S headquarters is very expensive commercial property and Blackberry had hundreds of thousands of square footage that wasn't being utilized, and even an adjacent land property that was unfinished. Commercial property in the area pretty much holds its value whether your company is doing well or not and hardly ever depreciates, if anything it stay the same or appreciates i'm talking about the land and the improvement. The company down sized quite a bit with little or no employees to accommodate the existing space. The Texas economy hasn't been that benevolent as in leasing commercial property here of late. Occupancy rates are high and companies with growing pains aren't leasing luxury space everyday. BlackBerry did very good according to their conditions and or toward the company books.
    10 Mar 2014, 10:51 PM Reply Like
  • Bailout2009
    , contributor
    Comments (235) | Send Message
     
    Everyone stop analyzing this to death. BBRY is a business enterprise company....and they are becoming leaner and meaner. Who cares if they own...lease or whatever with the property. Bottom line....grow revenues and increase margins and let the stock go up.

     

    You are a amateur investor if you care and discuss weather BBRY should lease or buy or own or whatever...who cares!!!

     

    AAPL building a huge campus.....who cares if it is good idea or bad. Bottom line....do the phones sell????
    10 Mar 2014, 11:09 PM Reply Like
  • King Rat
    , contributor
    Comments (811) | Send Message
     
    The actions combined with the timing demonstrate the mentality of management.

     

    The problem with your "leaner and meaner" view is that revenues and margins are falling... The business/government enterprise business may be profitable, but only worth about 1/4 the current market cap. Leaner and meaner should also refer to the value of the stock and treatment of the stock on shareholders.

     

    Apple's campus is a fashion statement as are many Apple products. It is financially unwise, but when the total cost comes to about 1 month of net profit, or 3 weeks of pre-tax profit, "who cares". When these asset sales of Blackberry amount to 6 months of losses, it is a bigger deal.
    10 Mar 2014, 11:29 PM Reply Like
  • el stevadore
    , contributor
    Comments (143) | Send Message
     
    of course they did
    10 Mar 2014, 11:46 PM Reply Like
  • sodapop905
    , contributor
    Comments (3) | Send Message
     
    Blackberry Z10 the best move I made moving away from iPhone 5. No more crashes now I have a phone that works. Thanks blackberry
    11 Mar 2014, 09:28 AM Reply Like
  • JCvS
    , contributor
    Comments (2) | Send Message
     
    Owning real estate takes people and resources to maintain. Getting out of real estate is a prudent move. I recall that all the big Canadian banks sold off all their own real estate back in the late 1990's and early 2000's and reduced the size of their real estate departments. These sell-offs were not the act of desperate companies needing short term cash infusions rather they were prudent decisions to focus resources on their core corporate businesses.
    11 Mar 2014, 09:48 AM Reply Like
  • gwynfryn
    , contributor
    Comments (4553) | Send Message
     
    No doubt they called the price they got "profit" as an excuse to pay more bonuses...
    12 Mar 2014, 09:00 AM Reply Like
  • Dmitry Kovalchuk
    , contributor
    Comments (384) | Send Message
     
    Too bad positive things do not make it to the news here:

     

    Brazilian Bank Itaú Unibanco Upgrades 7000 Devices to BlackBerry 10 & BES 10
    http://bit.ly/1lwFoZI
    11 Mar 2014, 05:20 PM Reply Like
  • gwynfryn
    , contributor
    Comments (4553) | Send Message
     
    BBRY a "World leader"? I had to check the date, and the story is current!
    12 Mar 2014, 09:02 AM Reply Like
  • ELLAS
    , contributor
    Comments (2217) | Send Message
     
    gwynfryn
    """BBRY a "World leader"? I had to check the date, and the story is current!"""

     

    The Smart Phone industry does not revolve around the USA. Yes BBRY is indeed a world leader in Mobile Security & Innovation. BB10 is a testament to that Security & Innovation.
    14 Mar 2014, 05:15 AM Reply Like
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