UPDATE 2-Spear Street to buy BlackBerry's Canadian real estate assets

Mon May 5, 2014 6:08pm EDT

(Adds comments from Spear Street, background, share price move)

By Euan Rocha

TORONTO May 5 (Reuters) - BlackBerry Ltd disclosed on Monday that U.S. real estate investment company Spear Street Capital is buying the majority of the embattled technology firm's Canadian real estate holdings for C$305 million ($278 million).

Waterloo, Ontario-based BlackBerry announced in March it had reached an agreement to sell the vast majority of its real estate holdings, as part of a plan outlined earlier this year to strengthen its balance sheet. At the time, BlackBerry did not name the buyer or disclose the terms of the deal.

Spear Street is a boutique real estate investment firm that began operations in 2001. It often focuses on real estate being used by tech firms and its investments have included corporate campuses, single assets, portfolios, as well as partial and full development projects.

Spear Street President John Grassi said the start-up boom around BlackBerry's hometown of Waterloo was a factor in the investment, but other factors were also at play.

"A lot of larger tech companies are looking for talent, and they're going where the talent is," he said. "Not everyone is going to pick up and move to Silicon Valley because it is tough to do and expensive, so a lot of the larger companies are going to where the talent is and that is engineering and university centers, and Waterloo certainly stacks up well in that regard."

Although BlackBerry has shed more than half its workforce in the last few years, largely in and around Waterloo, the region's fortunes have not faded as it has turned into a start-up hub. It is also home to the University of Waterloo, which runs a highly regarded engineering program.

BlackBerry said on Monday that San Francisco-based Spear Street has waived the due diligence conditions attached to the deal. The parties expect to complete the sale of properties worth roughly 80 percent of the total $278 million deal value later this month, with the sale of the remaining properties being completed during the third calendar quarter of 2014.

Under terms of the deal, BlackBerry will sell more than 3 million square feet of space along with vacant lands. It plans to lease back a portion of the space and Waterloo will remain its global headquarters.

This deal follows and earlier agreement by BlackBerry to sell five buildings, along with some land, to the University of Waterloo for about C$41 million.

The overall price for the real estate assets however, may disappoint some investors. Some analysts had estimated that BlackBerry could bring in as much as $600 million to $700 million from real estate sales.

Shares in BlackBerry closed 2.7 percent lower at $7.93 on Monday on the Nasdaq, after falling as much as 4.2 percent early in the day.

($1 = 1.0967 Canadian Dollars) (Reporting by Euan Rocha; Editing by Paul Simao and Tom Brown)