Following the announcement that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is looking to sell 15 office buildings in the Waterloo Region on Tuesday, the stock received a huge lift in yesterday’s trading. BlackBerry shares jumped nine percent on Wednesday to close at $11.86. The stock hit a low of $6.04 in late November, but has been rising ever since and is up 54 percent since the beginning of the year.
This is not to say that the company is looking to leave the Waterloo region, just that they find nearly 2 million square feet of commercial real estate to be more than they require at present.
Q2 Letter: Baupost won big in Q2 with PG&E, eBay, Liberty Global
Seth Klarman's Baupost recorded "strong" gains for the second quarter, although precise numbers were not included in the July 23 letter to investors, which was reviewed by ValueWalk. Klarman said that during the first quarter, they were "substantial purchasers of securities," while during the second, they were "significant net sellers" due to the strong rally. Read More
Where are they going?
“It would not be possible for John [Chen] to move the entire company out of Waterloo, based on our work. To replicate the type of talent that he has at his disposal in Waterloo, would at least triple his cost base, potentially more, for the same level of engineering quality,” said Peter Misek, the managing director of technology research at investment firm Jefferies.
“John and the team really have decided to get fortress-level cash balances on their balance sheets, and they want to instill confidence in the employees, suppliers, partners and most important customers, both current and potential, that they’re going to be around,” Misek continued.
All together, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is looking to shed 3 million square feet with 2 million of it expected to sell quickly in the Waterloo region.
“There’s absolutely an appetite for it,” Karl Innanen, the Managing Director of Collier’s International in Waterloo told The Morning Edition host Craig Norris Thursday, adding there’s an open secret about commercial real estate in Canada.
“Something that a lot of people don’t know is commercial real estate, especially good quality investment real estate, is hard to come by these days,” he said.
Who will buy BlackBerry?
“We had buyers up from the States, there are buyers in from overseas, there are local buyers and large Canadian pension funds and real estate investment trusts that would absolutely like parts of this portfolio.”
It’s believed that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) will have three potential customers taking notice now that it has made its announcement. Whether or not BlackBerry intends on leasing back any of these properties will determine who will look to buy.
“So if BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) leases back buildings, then pure investors would buy them,” said Innanen. “By pure investors, I mean people who just want cash flow, so pension funds, insurance companies, real estate investment trusts.”
“If the buildings are vacant, then [it’s] users. Other companies that need space would use them,” he continued, adding that the third type of buyer would be what he called ‘a hybrid.’ “Somebody that would buy a vacant building and possibly change it and fix it up and try to attract tenants to the building,” he finished.
Despite the sale of nearly all its properties in Canada, it’s expected that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) will simply consolidate in north-end Waterloo where it has its RIM Park campus.
When asked how much BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) could make off the sale, Innanen offered a cagey estimate.
“We don’t know how much will be occupied by BlackBerry and how much will be vacant,” he said. “But when we just look at ballpark numbers, we’re talking about something in the neighborhood of $300 million to $350 million.”
Those numbers are based on a recent purchase of 300,000 square feet that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) sold recently to the University of Waterloo.
“That’s about $136 a square foot, so when we extrapolate that into the other buildings that’s where we come up with the $300 million,” he said.
“It is the going rate. It’s absolutely not a fire sale and they’re doing it in a very controlled way.”