Thursday, August 22nd 2013

AMD Announces Proposed Sale and Lease-back of AMD Singapore Facility

AMD (NYSE: AMD) today announced that its Singapore subsidiary, Advanced Micro Devices (Singapore) Pte Ltd. (AMD Singapore), has entered into a conditional put-and-call option agreement to sell and lease-back its Singapore facility located at 508 Chai Chee Lane, Singapore 469032 to HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of Sabana Shari'ah Compliant Industrial Real Estate Investment Trust (Sabana REIT).

The transaction is expected to generate proceeds of approximately 59 million Singapore dollars (USD$46 million), net of all fees, which will be reflected in AMD's third quarter 2013 financial statements when reported on Oct. 17, 2013. AMD expects to record a gain of approximately $16 million in the third quarter of 2013. AMD Singapore will continue its operations in a portion of the Singapore facility and has negotiated a 10-year sub-lease agreement with Sabana REIT with extension options to continue those operations. The sub-lease would be effective upon the close of the sale of the property.

Prior to transaction close, AMD Singapore needs to secure final approval from the JTC Corporation (JTC), the Singapore entity tasked with managing the country's industrial infrastructure. The company anticipates securing all required approvals from the JTC as part of closing the transaction.

The sale of AMD's Singapore facility is in keeping with AMD's strategy to reduce investments and capital in non-core parts of the business, including real estate. AMD launched operations in Singapore in 1984 and remains committed to the site as a vital part of the company's global operations. In 2012, AMD Singapore completed its transformation from a high-volume manufacturing site to an engineering center of excellence and currently employs approximately 500 people.
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10 Comments on AMD Announces Proposed Sale and Lease-back of AMD Singapore Facility

#1
freaksavior
To infinity ... and beyond!
I see them doing this to eventually pull out of that building. Why else would it make sense to sell a building you're already in, then lease it for a specific time frame and then migrate production to another facility
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#2
remixedcat
How is this saving money...?? rent is typically more then mortgage payments and then they add a buncha fees on top of it known of as TICAM to commercial buildings.
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#3
HumanSmoke
by: remixedcat
How is this saving money...??.
Long term? It isn't. AMD aren't likely thinking long term- they're thinking about the short term balance sheet. The next quarter is the self-imposed (and possibly industry/financial based) deadline to achieve break-even status that they announced a year ago:
AMD is also putting in place a business model to break even at an operating income level of $1.3 billion of quarterly revenue. The company is targeting to achieve this by the end of the third quarter of 2013.
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#4
HisDivineOrder
AMD must be insanely low on cash to be doing this so often. This is essentially penny-pinching for them. These are trivial amounts of money and that they're doing it at all suggests their financial straits are not nearly done with.
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#5
Jorge
Actually it has nothing to do with being low on cash. Many big companies with plenty of cash are doing this because it has tax advantages in addition to allowing the cash to be invested where it will generate a nice return. There is no return on capitol investments until you sell them. With the lease buy-back the company ends up with the building back in the end but they have not had to pay real property taxes on the asset for years and they have gotten a good return on the cash they got when they sold it. It's a win-win situation for a large company.
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#6
Thefumigator
by: Jorge
Actually it has nothing to do with being low on cash. Many big companies with plenty of cash are doing this because it has tax advantages in addition to allowing the cash to be invested where it will generate a nice return. There is no return on capitol investments until you sell them. With the lease buy-back the company ends up with the building back in the end but they have not had to pay real property taxes on the asset for years and they have gotten a good return on the cash they got when they sold it. It's a win-win situation for a large company.
Exactly, and every penny you can save counts
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#7
HalfAHertz
They probably made a huge profit. Land prices in Singapore have gone up something like tenfold since 1984.
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#8
remixedcat
if you lease you still pay taxes in the form of TICAM.

don't let that fool you.

Leases are often more per month than mortgages and then they add TICAM on top of that to commercial properties.
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#9
cadaveca
My name is Dave
AMD is running "asset-light" business model, as they have been for years. News like this should come as no surprise as it's how they run their business, so rather than being BAD news, this is actually GOOD NEWS, since they are following their long-term business plan. The whole "ASSET-LIGHT" strategy for business is a well-defined business model.

To put that into perspective, AMD announced moving into "ASSET-LIGHT" in early 2007.

BTW, this is 100% an "ASSET-LIGHT" move, as in, part of the definition of "ASSET-LIGHT".
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#10
HumanSmoke
by: cadaveca
AMD is running "asset-light" business model, as they have been for years. News like this should come as no surprise as it's how they run their business, so rather than being BAD news, this is actually GOOD NEWS, since they are following their long-term business plan. The whole "ASSET-LIGHT" strategy for business is a well-defined business model.
To put that into perspective, AMD announced moving into "ASSET-LIGHT" in early 2007.
BTW, this is 100% an "ASSET-LIGHT" move, as in, part of the definition of "ASSET-LIGHT".
So, if I'm reading it right it's called....."asset-light" ?
:laugh:

Well done Dave. Rory says you can have both halves of the Oreo tonight (new AMD bonus scheme!) since you managed three more "asset-light" 's than even Hector could accomplish in announcing the strategy

/We all proud of you
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