The assessed value of the Sun campus is $228.4 million, but tax assessments are typically lower than the market value of the property unless the value of the property dropped significantly since the last assessment. One rumored figure I heard a couple weeks ago for the value of the leaseback was $420 million, although another source claims that number is way too high and even the assessed value is still in question. Translation: negotiations are still in progress. But it is safe to assume the deal will be somewhere in between and could free up hundreds of millions of dollars for Facebook.

The way the leaseback would work is that Facebook would sell the property to a REIT or other institutional investment group like a state pension fund. The investment group would then enter into a longterm lease with Facebook as the tenant of the campus. This arrangement would allow Facebook to move to a bigger headquarters while at the same time extracting a big lump of cash. Of course, it still has to buy the property, but the leaseback would produce more cash than Facebook would have to come up with for a down payment on a more traditional commercial mortgage for the same property. Perhaps the $500 million it just got from Goldman Sachs and DST can help finance the real estate deal.

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Authors: Erick Schonfeld

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