Finding a sweet business model in downsizing newspaper real estate

June 10, 2015
Category: Uncategorized

This Jan. 31, 2005, file photo shows the St. Louis Post-Dispatch Building in St. Louis. Lee Enterprises, the parent company of the Post-Dispatch, said Tuesday, May 26, 2015, it is looking for a new home for the newspaper after 56 years in the six-story building. (AP Photo/James A. Finley, File)

This Jan. 31, 2005, file photo shows the St. Louis Post-Dispatch Building in St. Louis. Lee Enterprises, the parent company of the Post-Dispatch, said Tuesday, May 26, 2015, it is looking for a new home for the newspaper after 56 years in the six-story building. (AP Photo/James A. Finley, File)

Newspaper companies have been selling off downtown headquarters buildings and presses for some years now. But the trend has become accelerating and urgent:

— Soon-to-retire Digital First CEO John Paton told me that he found that long-term leases were among the toughest legacy costs to shed. His successor Steve Rossi put 51 Digital First properties on the market last summer.

— Close to home, the headquarters of the Tampa Bay Times (which Poynter owns), Sarasota Herald Tribune and Tampa Tribune are all for sale.

— This truly is the flip side of digital transformation. Companies find themselves with much to do and little access to internal capital to support the multiple product launches needed. Proceeds of a real estate sale can quickly be redeployed to digital expansion.

So I probably shouldn’t have been surprised to learn this spring that a vendor — Hilco Real Estate of suburban Chicago — has discovered a business opportunity in this boomlet.  The company will help dispose of unneeded presses, too.

I spoke to David Kirshenbaum, senior vice president of Hilco, about how the company got into the business, what it offers and the mirror the activity holds to the industry. (He has also written about “optimizing real estate holdings,” for the Inland Press Association’s monthly Inlander).

How did Hilco get with newspapers?

“Our roots are in distressed properties, liquidation and bankruptcies,” (like disposing of many closed retail stores at once) Kirshenbaum said. “But we have grown it to helping companies with too much real estate, too expensive or both.”

Besides sales or lease renegotiations, he said, Hilco may be asked for help with tax appeals or appraisals.

What does the company offer that a local commercial broker does not?

It’s not unusual for the company to work together with local brokers, Kirshenbaum said, but a competitive advantage is a huge data base of potential buyers, many international. “We can find needles in a haystack.” The company also sometimes buys and holds properties for a short time.

How about presses? Is there really a market for them any more?

“Folks are looking for a turnkey solution…and we’re not necessarily buyers. But there is a global market,” he said — especially in Asia. (Presses can be disassembled and sent to a new home by boat). Demand is strong for newer presses, Kirshenbaum added, “but over a certain age, it will be scrapped.”

How is the company paid?

Like a typical brokerage, it looks for a 5 to 6 percent commission on what it sells. It also negotiates appropriate fees for savings achieved by renegotiating leases or tax assessments..

What’s his view of the trajectory of his business and of the industry?

“With 1,400 newspapers, this has been a fairly robust activity. It’s dominated by the big public companies,” he said — like GateHouse/New Media Investment. As the consolidators have been gobbling up titles of late, that’s a plus for Hilco since they will look to right-size office space and press capacity for each acquisition.

Small family-owned papers have been less affected by the digital challenge, Kirshenbaum said, “and some may be in love with their real estate because grandpa bought it.”

Hilco also found as it entered the business that it’s not just about empty space in an oversized newspaper headquarters.

“A lot find themselves with too big a real estate footprint — smaller satellite facilities that may have only three or four people left.”

In better times, many newspapers banked land for future expansion. So those holdings go on the block as well.

Despite presiding over so much downsizing, Kirshenbaum said that he is relatively optimistic about the industry. “The worst of the shakeout is over. The companies remaining are healthier. They made it through the storm.”

When the Ann Arbor News reorganized and stopped daily print publication in 2009, its architecturally distinguished headquarters was sold. The enterprise moved to an office building with a ground floor coffee shop, converted to a venue for chats with readers who dropped in.

I have no idea of an exact count, but the trend spread to hundreds of newspapers over the last six years — with a few spectacular sales like the Miami Herald’s getting $236 million from a Malaysian casino developer for its bay-front campus.

The St. Louis Post-Dispatch put its headquarters on the market just two weeks ago.

You can take the exodus as a marker of newspapers’ diminished fortunes, ending their long run as high-profile players at the center of their communities’ business districts. On balance, though, getting unsentimental about status real estate seems to me a healthy indicator of moving on to the future.