Tribune names 'president of real estate,' could sell Times home

The LA Times building from City Hall. LA Observed photo.

Along with splitting off its financially declining newspapers, Tribune Company is looking at how to make more money off its real estate holdings — "including the historic Los Angeles Times headquarters in downtown L.A.," as the Times put it tonight. The company has named a real estate veteran, Murray McQueen, to fill the newly created position of president of real estate. "He will assess whether Tribune is making as much money as it can from its holdings...," the Times story says. "All told, the company owns more than 7 million square feet of real estate, including buildings, printing plants and other facilities. 'Just like the other assets owned by the company, it's important that we think strategically about how best to maximize the value of our real estate for our shareholders,' Peter Liguori, Tribune's chief executive, wrote in a memo to employees." McQueen co-founded Channel West Group, a Los Angeles real estate investment firm, and previously was an executive at Cerberus Capital.

In the plan reported last week to shift Tribune's eight newspapers to a new company, the real estate holdings were kept with the company's TV stations and other more lucrative assets. That could leave the new newspaper company starved of income if newspaper revenues continue to fall. "That's certainly not the intention of the Tribune board or its large investors, to set this up for failure — but it's a risk," said Craig Huber, a media analyst at Huber Research Partners, in the LAT story. "You don't have anything you can fall back on. You can't sell any real estate or Internet properties."

Media analyst Ken Doctor writes at his Newsonomics blog that keeping the real estate separate from the papers that inhabit the buildings is big. It will certainly lower the market values of the Times and the other papers.

I’ve confirmed that Tribune Company intends to hold all the real estate under and around the staffs working from Chicago to Baltimore to Fort Lauderdale to L.A. That includes office buildings and production facilities. The value of newspaper-owned real estate varies widely — location, location, location — but over the last three years of newspaper sales, real estate value has often justified half of overall deal prices.

The hard asset of real estate has been a powerful motivator in deals as diverse as Warren Buffett’s for Media General properties (“The Newsonomics of Near-Term Numerology“) and Halifax Media Group’s for The New York Times Co.’s regional properties. It’s a financeable asset as well. The flipside of no real estate: Buyers will have a new cost to consider, leasing or buying their own space for large workforces and print production.

So Tribune keeps that value in the old company, and would-be newspaper buyers can now lower their appraisals of the papers. That’s one deduction in market value....

Tribune, in its split announcement, took all the reliably profitable parts of the enterprise. It left for the spun-off newspaper company the assets that will lose another five to 10 percent of their print advertising this year, and will likely continue to show overall revenue decline.
We can figure that whatever the papers were collectively worth Tuesday, they’re worth maybe two-thirds of that today.

Doctor goes on to assess three possible strategies at work as Tribune tries to shelter its TV future from its dinosaur newspapers.