AMD Executes Purchase Agreement to Sell and Lease-Back Austin Campus

[btarunr]

AMD (NYSE: AMD) today announced that it has entered into an agreement to sell and lease-back its "Lone Star Campus" located at 7171 Southwest Parkway in Austin, Texas to 7171 Southwest Parkway Holdings, LP, an affiliate entity of real estate investment company Spear Street Capital. Upon closing, net of all fees, the sale is expected to generate approximately $164 million in cash. The proceeds are expected to be reflected in the company's first quarter 2013 financial statements when reported on Apr. 18, 2013. At closing, AMD will enter into a 12-year lease with an extension option to continue its operations on the campus. The transaction is expected to close on or about Mar. 26, 2013.

The sale of AMD's Austin campus is in keeping with the company's strategy to reduce investments and capital in non-core parts of the business, including real estate. In 1998, the company sold and currently leases-back its headquarters in Sunnyvale, Calif. In 2008, it sold and currently leases-back its major site in Markham, Ontario, Canada. Recently, AMD also began marketing the sale of its Building 3 property located at 5900 East Ben White Boulevard in Austin, Texas. Building 3 is a largely unoccupied property whose operations and employees will be consolidated at other AMD sites.

"As we reset and restructure AMD for long-term success, we are taking a number of steps designed to optimize our business and monetize assets," said Devinder Kumar, chief financial officer of AMD. "The sale of our Austin campus will unlock a significant amount of capital, while the multi-year lease back of our Austin campus reconfirms our long-term commitment to the city that so many AMD employees have called home since 1979."

The company expects to record a special charge of approximately $50 million in the first quarter of 2013 primarily related to the difference between the sale proceeds and the carrying value of the property. AMD employs approximately 1,900 people in Austin.

[Drmark]

When I see this a lot of times it means the CEO or owner is buying the property and leasing it back for tax reasons. Then they pass the property on to the kids for obvious reasons.

[tacosRcool]

Well since they are gonna be the sole supplier of console cpus and gpus, hopefully that will put them in the green this and next year

[Jorge]

This is a common Biz practice today to free up cash from fixed assets. It has tax benefits as well as financing benefits. It's a win-win for all involved actually.

[Steven B]

AMD invited me there for AMD Day to do some OC demo, it was a really nice campus. ALmost like a university campus

[human_error]

A lot of businesses do this - even ones with buckets of cash. It allows them to free up capital that was locked in the value of the buildings and invest it in areas that will make a greater return than the extra costs involved with leasing the building back.

[cadaveca]

Originally Posted by human_error

make a greater return than the extra costs involved

Exactly. The owner is responsible for maintenance costs, property tax, and other things that a tenant isn't. Plus, depreciation of the value of the property itself is now no longer an issue.


The only downside is someone else could buy it, and toss you out.

[HumanSmoke]

Originally Posted by cadaveca

The only downside is someone else could buy it, and toss you out.

No problem...there should be a vacant building in Santa Clara once Nvidia move across the street:


I'm hoping for a Crimson Permanent Assurance outcome...

[newtekie1]

Originally Posted by cadaveca

The only downside is someone else could buy it, and toss you out.

Legally, that isn't possible. Any time a commercial building, or even residential building, is sold the new owners must honor the leases currently in place. They can choose not to renew the lease when it comes to an end, but they can't just toss the people out on the street. So AMD would be safe for at least 12 years.

[Super XP]

Originally Posted by tacosRcool

Well since they are gonna be the sole supplier of console cpus and gpus, hopefully that will put them in the green this and next year

AMD scored big on the consoles and many years of R&D and Revenues from them.