Apollo Group, which owns the for-profit University of Phoenix has apparently entered into a sale-leaseback agreement on its headquarters (right) in order to raise cash.
According to an article by Melissa Korn and A.D. Pruitt in the Wall Street Journal:
Apollo Group Inc. (APOL), the nation’s largest for-profit college by market capitalization, sold its 600,000 square foot headquarters in Phoenix for $170 million to a privately-held real estate company.
According to a securities filing, Apollo agreed to sell its headquarters to a unit of Cole Real Estate Investments, a non-traded real estate investment trust based in Phoenix. Apollo then will lease the properties back at an annual rental rate of $12 million, with 2% increases each subsequent year. Apollo expects $28 million in gains on the sale, to be realized throughout the life of the lease. The lease, with an initial term of 20 years, has four five-year renewal options.
Sale-leaseback agreements are common tactics of financially struggling companies. Two years ago the New York Times Company, for instance, raised $225 million through the sale-leaseback of part of its headquarters. That agreement helped the company to make payments on the roughly $1 billion in debt it held at the time.
“We are taking many steps to optimize the structure of our current real estate portfolio, and we will continue to execute on opportunities to improve our space utilization and market leasing terms,” Apollo spokesman Manny Rivera said. Whatever that means.
Two months ago the company reported that new student enrollment had declined 42 percent. Apollo, like other companies involved in for-profit education, is facing increasing regulation by the federal government.
In 2010 some 88 percent of the University of Phoenix’s revenue came from federal financial aid. [Image via]