Tellurian Inc. inked a binding commitment letter to divest 800 acres of land owned by Driftwood LNG LLC to Blue Owl Real Estate Capital LLC for $1 billion. The commitment also extends to the leaseback of the acres to Driftwood.

The commitment letter replaced a letter of intent dated April 4, 2023 between Tellurian and Blue Owl, Houston-based Tellurian revealed July 18 in a Securities and Exchange Commission Form 8-K filing.

Tellurian, which is developing the 27.6 million tonnes per annum (mtpa) Driftwood LNG project in Lake Charles, Louisiana, in two phases, has struggled to obtain financing to move forward Phase 1 of the project estimated at around $14 billion. The leaseback deal is seen as part of Tellurian’s actions to get the project over the starting line.

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Per the commitment letter, Blue Owl will form a special purpose entity to acquire the acres pursuant to a purchase and sale agreement. Upon closing of the transaction, a 40-year lease to Driftwood LNG will commence with a capitalization rate of 8.75% and an annual rent escalator of 3%, as well as require Driftwood to post a letter of credit equal to 12 months of rent.

Additionally, the commitment letter requires that joint and several contingent guarantors in the lease hold an investment grade rating of ‘BBB’ or higher or attain an equivalent shadow credit rating, and be otherwise acceptable to the Blue Owl special purpose entity.

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