BlackBerry stock jumps 9% on news it's selling real estate

Smartphone maker BlackBerry is unlikely to shift its headquarters from Waterloo, Ont., despite a move to sell off the majority of its Canadian commercial real estate holdings, says one analyst.

Moving BlackBerry out of Waterloo 'not possible,' says analyst

Karl Innanen, the Managing Director of Collier's International in Waterloo, says it's an open secret in commercial real estate that types of property that BlackBerry has listed for sale are 'hard to come by these days.' (Canadian Press)

BlackBerry shares jumped nine per cent on Wednesday to close at $11.86, a day after the Waterloo, Ont., smartphone company said it would sell most of its Canadian real estate holdings.

The move was interpreted by investors as a positive development, with cash raised from its considerable assets available to finance the company's turnaround under the leadership of new CEO John Chen.

The stock hit a low of $6.04 in late November, but has been rising ever since and is up 54 per cent since the beginning of the year.

BlackBerry is unlikely to shift its headquarters from Waterloo, despite a move to sell off the majority of its Canadian commercial real estate holdings, said one analyst.

"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.

"So it would be a bad move from an operating expense perspective," he said in a interview with Craig Norris on The Morning Edition Wednesday.

BlackBerry announced Tuesday it was putting over three million square feet of commercial real estate up for sale, with just over 78 per cent of that located in Waterloo Region. Included are holdings at the Northfield Campus and University Campus in Waterloo, Cambridge Campus, Mississauga Airport Corporate Centre Campus and Ottawa campus.

The smartphone maker plans to use a combination of vacant sales and sale-leaseback arrangements in divesting the properties.

It's a move that, according to Misek, is meant to instill confidence in the company. 

"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," he said.

"I think raising cash is absolutely the right decision."

However, it's not quite clear how much money BlackBerry expects to raise, and the company itself did not comment on the potential value of the sales.

That's also keeping analysts guessing . 

CBRE Ltd., the commercial real estate firm hired by BlackBerry to conduct the sale, has plenty of data on U.S. cities and square footage rates, which makes it easier to calculate the effect on the bottom line, he said.

"The problem is, is that in the U.S. when they look at those real estate assets, and they look that they're in Waterloo there's no real [comparison] to Waterloo in the United States that's easily accessible. And by that I mean a comparable city to try and value square footage," said Misek.

That doesn't rule out an expansion in the U.S., however.

"It is very likely, though, [Chen] does open an innovation centre in Silicon Valley and that he makes sure he's tapped into that network that he's able to see what is going on in the market," said Misek.

"When he was announced as CEO, what we went back to, is we looked at transcripts and press clippings and analyst reports of his tenure at Sybase and some interesting things came to light. And that is that he has a playbook, and boy he's following it almost to a T and he really does have a plan. It's remarkable that he has a plan in the situation he's inherited but he does."