AT&T sold another building and then signed a long-term lease with the new owner. How does selling a building and then continuing to lease the space works financially? It's a short-term gain but long term it makes little sense. Most businesses buy the properties they are leasing after a while to save costs, not the other way around.
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Cash flow
Tax avoidance
Reduced need for the floor space
Headcount reduction/avoidance: facilities org, property & leasing management
You kind of helped my point actually. My point was that the benefits of depreciation run out over time, Thus the benefits of owning runout over time
I'm just stating facts. If that helps you then great.
As far as the benefits of ownership running out over time, obviously you can't depreciate something below 0. But there are other ongoing ownership benefits like: deducting property tax, deferral of capital gains tax on the eventual sale, and so on.
Renting is the same deal except you insert a middleman. Instead of you claiming a depreciation allowance, the middleman does that instead. Instead of you mortgaging the property, the middleman gets a mortgage. And so on. If it's not obvious, the middleman is the landlord.
At end of the day the landlord needs to turn a profit. Who pays that? Well, the tenant.
AT&T's plan is to sell off employees to other businesses. Those businesses want the employees, skillset, and book of business. They do not want old buildings in slum neighborhoods and decaying buildings in old suburbs. It's much easier to sell off business units and their employees if the real estate sale is separate, so this is a good move for the company.
It can be a smart business move. It brings in money and can saves some money, when you lease the lease becomes a recurring business expense. The need for management and building maintenance staff and other costs go away. Many companies are getting out of the real estate business and have been. Hilton is a good example.
This is another indication of cash flow problems. The leaders don't care about next year as they don't know if they will be around next year.
This also happens before a company reorganizes/is bought out/files for bankruptcy. Stankey and his execs need to pad their wallets before leaving.
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"Did you know? As soon as you sell an asset, you have to pay back all those depreciations. The accountants call this "recapture"."
You kind of helped my point actually. My point was that the benefits of depreciation run out over time, Thus the benefits of owning runout over time. Yes you have to pay capital gains when the building sells including "recapture", but you still get a cash infusion and gain the future benefits of writing off rent expenses.
Real estate is long term investment strategy, Stankey only cares about short term cash. Oh yea, market rate rent will drive up cost, but he wants liquid cash more than anything. He would put up his own mother as a non-strategic assert for cash.
A growing company would use the funds to invest in the business for expansion. Stankey is using the money to pay off the accumulated debt, dividends, executive pay, and stock buy back. None of these will grow the company, this is nothing but a loser mindset. Yep, AT&T is t best in class of losers, led by Stankey and his cronies.
Stankey needs money NOW to finance his next wet dream. It's like getting an auto title loan to buy a gold grill for your teeth.
You don't have recapture for lease payments.
Recapture applies to depreciation i.e. when owning the asset. Obviously you are not leasing if you own the asset.
I'm surprised with that T doesn't rent out space in some of the more larger central offices. Most of them have whole floors with nothing on them.
Also, there other T depts. that could use these without renting or owning excess buildings.
Look at that ! The stock just went up!
Short term savings to look good in accomplishments, By the time the lease ends its somebody else's problem. Makes you look good to your boss and maybe you'll get a raise out of it.
They have been selling off buildings for years. Not a new trick.
He's not wrong about depreciation vs. Rent. You don't have recapture for lease payments.
I'm surprised Stankey hasn't directed an employee to check all the sofas, couches and chairs on S Akard for change everyday. Any way to raise cash!
I think this shows the level of desperation for cash at T. Is this the begining of the end for AT&T? How did the BOD ever let this disaster happen? Shame on all of them for essentially trashing T, a once iconic company.
The depreciation write off on owning buildings runs out over time, but the expense of renting is a write off that never goes away
Did you know? As soon as you sell an asset, you have to pay back all those depreciations. The accountants call this "recapture".
Where is your degree in accountancy from?
This is an example of extreme financial shortsightedness. There is a cash infusion initially, but in the long run lease payments will cost the company far more money.
An intelligent rational management team would realize this. Unfortunately, AT&T is run by id--ts.
Put all buildings on S Akard up for sale. Just rent needed space. Let everyone telecommute.
If you knew the truth the management team at AT&T ...... doesn't even understand how the phone works .
This is is just another symptom of the MBA's like Ratty mismanaging T into oblivion. They find it a cost savings to sell an asset at a low price, and take an initial rental. Then the leaser raises the rent really high, and the S T U P I D mismanagement complains the rent is high and has to move company operations or just shut them down. Remember, all this extra cash goes to paying down the $100B debt Ratty and Stinky got us into - and they skim a taste off the top for themselves for being such great mismanagers.
This is exactly what happened when T sold off cell towers some years ago. Now the cell tower leases are so high, T is scrambling to move to cheaper towers to avoid the high lease rates.
T is run by I D I O T S.
I say the CEO was leaning back in his chair with his eyes closed and in an act of desperation.......... decided to sell the building to raise cash .
it is harvard new world order economics that infiltrated our government, tax code, and corporate world. you will own nothing and be happy.
Leases show as an expense on taxes so it is a write off. The depreciation write off on owning buildings runs out over time, but the expense of renting is a write off that never goes away. Plus no more costs for maintenance of the building and no maintenance employees.
Leases show as an expense on taxes so it is a write off. The depreciation write off on owning buildings runs out over time, but the expense of renting is a write off that never goes away. Plus no more costs for maintenance of the building and no maintenance employees.
Leases show as an expense on taxes so it is a write off. The depreciation write off on owning buildings runs out over time, but the expense of renting is a write off that never goes away. Plus no more costs for maintenance of the building and no maintenance employees.
They ink short term contracts. They anticipate exiting this building after laying off the employees within. Believe me, they will save money using this sell to rent process.