Wall Street Journal - March 10, 2009
New York Times Co. said it has raised $225 million in a sale-leaseback of most of its share of its 52-story Manhattan headquarters building, gaining much-needed debt relief as it tries to weather the advertising slump imperiling newspaper companies.
The New York Times struck a deal in which it will sell its share of its midtown headquarters, above, and lease it back for up to 15 years.
Under the terms of the transaction, the real-estate investment firm W.P. Carey & Co. LLC will pay the sum for the 21 floors occupied by the Times, which then will lease the space back for up to 15 years, with an option to buy it back in 2019 for $250 million. The company will use the proceeds from the sale-leaseback to retire $250 million in notes due in 2010.
The deal gives the Times the cash infusion it was seeking when it announced its plans for a sale-leaseback in December.
With more than $1 billion in debt maturing in the next couple of years and a gloomy forecast for print advertising revenue, the publisher effectively has been building a bridge to 2011, albeit at a cost. In January, it received a $250 million loan from Mexican billionaire Carlos Slim, and last month the Times Co. board voted to suspend the quarterly dividend.
The loan by Mr. Slim, which came with warrants for a stake in the company, carries a 14% interest rate, and the leaseback agreement calls for the company to pay $24 million in rent in the first year. At about $55 per square foot, including operating costs and taxes, the initial rent is well within the market rate, though rent payments will increase in later years.
Times Co. so far has avoided making another round of job cuts, although some Times staffers say there is mounting fear in the newsroom that cuts may be imminent. A Times Co. spokeswoman declined to comment. Job-cutting has been widespread in the industry. On Monday, McClatchy Co., owner of the Miami Herald, said it would cut 1,600 jobs, or about 15% of its work force, and reduce wages across the company. The debt-burdened company carried out successive rounds of 10% staff cuts last year.
Times Co. owned a 58% stake in the headquarters building, which was completed in 2007. Forest City Ratner, the Times's partner in developing the tower and the owner of the top floors of the building, took out a $640 million mortgage against its portion of the property in 2007.
As falling revenues have coincided with looming debt obligations and tightening credit, some critics say the Renzo Piano-designed building has become a symbol of bad timing for Times Co., which sold its old headquarters building in 2004 for $175 million to Tishman Speyer Properties LP. Tishman Speyer later sold it for three times that amount. Times executives have said they couldn't have foreseen the subsequent explosion of real estate.
Advertising revenue has fallen sharply at the Times, as it has at other newspaper publishers, leading Times Co. to take a number of steps to conserve cash. Besides cutting and later suspending the quarterly dividend, it recently announced it is trying to sell its nearly 18% stake in the company that owns the Boston Red Sox.
Sphere: Related Content