Apollo Group Enters Sale-Leaseback For Phoenix Headquarters

Apollo Group Inc. (APOL) has entered a sale-leaseback agreement for its Phoenix headquarters, as it continues to seek cost savings amid declining student enrollment and regulatory changes.

According to a securities filing, the for-profit college operator agreed to sell 600,000 square feet of office space to a unit of Cole Real Estate Investments for $170 million. Apollo then will lease the properties back at an annual rate of $12 million, with 2% increases each subsequent year. The lease life is 20 years.

Apollo expects $28 million in gains on the sale, to be realized throughout the life of the lease.

"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," spokesman Manny Rivera said in an emailed statement.

A representative from Cole wasn't immediately available for comment.

Apollo, whose schools include University of Phoenix, has been trying to cut costs as its student body shrinks and marketing expenses increase. The company tightened its admissions standards after it and peers were criticized for lax practices and poor student-loan repayment rates. Apollo also is facing higher advertising costs and more competition in attracting high-quality students who stand a chance of completing the programs. In January, Apollo reported fiscal first-quarter new-student enrollment tumbled by 42.4%, with overall enrollment off 3.8% to 438,100.

Apollo reports fiscal second quarter results on Tuesday.

-By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com

Apollo Education Group, Inc. (NASDAQ:APOL)
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