Tellurian, Blue Owl move forward with $1 billion land sale and leaseback deal

US LNG firm Tellurian, the developer of the Driftwood LNG export project, said it had entered into a binding commitment letter with a fund of Blue Owl Real Estate Capital regarding the sale and leaseback of Driftwood land.

Tellurian announced in April it entered into a binding letter of intent worth $1 billion with an unidentified New York-based institutional investor regarding the sale and leaseback of about 800 acres of land owned and/or leased by its unit Driftwood LNG.

This land will be used for the proposed Driftwood LNG terminal in Lake Charles, Louisiana.

Tellurian said in filling with the US SEC that this commitment letter effectively replaced the previously announced letter of intent between the company and the investor.

Subject to signing the purchase deal and closing of the transaction, a special purpose entity to be formed by Blue Owl will buy Driftwood LNG’s interests in the property for $1 billion, and lease the property for 40 years to Driftwood LNG.

Moreover, Tellurian said that terms of the master lease will include, among others, a capitalization rate of 8.75 percent, annual rent escalators of 3 percent, a requirement that Driftwood LNG posts a letter of credit equal to 12 months of rent, etc.

Securing equity and debt commitments

Pursuant to the commitment letter, the period in which Blue Owl may be obligated to consummate the transaction will start on July 18, 2023, and terminate upon the earliest to occur of January 14, 2024, Tellurian said.

Also, the closing of the transaction will occur “upon the satisfaction of the closing conditions in the purchase agreement, including the company or its affiliates securing equity and debt commitments in a sufficient amount with respect to the development of the Driftwood project on terms satisfactory to the purchaser,” Tellurian said.

Tellurian is expecting the development costs for the first phase of its Driftwood LNG export plant in Louisiana to reach $14.5 billion.

Under the first phase, Tellurian aims to build two LNG plants near Lake Charles with an export capacity of up to 11 mtpa.

The US LNG firm issued a limited notice to proceed to compatriot engineering and construction giant Bechtel in March last year.

Tellurian’s shareholders recently also approved doubling the number of its common shares, as the US LNG firm continues to work on financing the first phase of its Driftwood LNG export plant and signing deals with equity partners.

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