New York Times raises another $225M by selling headquarters, giving publisher bigger cushion
NEW YORK (AP) -- The New York Times Co. has sold most of its home office for $225 million, padding the newspaper publisher's financial cushion amid a sharp drop in revenue that has forced management to scrounge for more money.
The deal announced Monday covers 21 of the building's 52 floors. That space, about 750,000 square feet (69,676 sq. meters), became the Times' headquarters when the midtown Manhattan offices opened in 2007.
Under the terms of the sale to investment firm W.P. Carey & Co., the New York Times Co. will rent back the offices at a cost of $24 million this year, with subsequent increases spread through the 15-year lease. The company will have an option to buy back its interest in the space for $250 million in 10 years.
The office sale is the latest financial sacrifice that the Times company has made to ensure it has enough money to repay its debts. It also suspended its shareholder dividend to save about $133 million this year and secured a $250 million infusion from Mexican billionaire Carlos Slim by agreeing to pay an abnormally high interest rate of 14 percent in addition to giving him potentially valuable stock warrants.
Although management got the cash it wanted from the office sale, it probably was a difficult pill to swallow, said bond analyst Mike Simonton of Fitch Ratings.
"Forcing a real estate deal though at this inopportune time demonstrates management's resolve to get its balance sheet in order," Simonton said. "This improves their ability to control their own destiny."
The company will still own seven floors of the Manhattan building. Six of those floors already had been leased to another tenant.
Simonton and Gimme Credit analyst Dave Novosel believe the company should be able to repay about $300 million in debts coming due through 2010. The risk of default would have been much higher if the company hadn't raised more cash. Its total debt stood at $1.1 billion at the end of 2008.
Investors, though, remained skittish as the New York Times Co.'s shares fell 17 cents, or 4.2 percent, to $3.90. The company's stock has plunged by nearly 80 percent since 2007.
W.P. Carey shares rose 86 cents, 4.8 percent, to close at $18.88.
Like all newspaper publishers, the New York Times Co. has been staggered by an accelerating drop in ad revenue that began several years ago as more marketers shifted their spending from the print medium to the Internet, where the costs are lower and the audience is still growing as more readers get their news for free online. The 15-month-old recession has exacerbated the newspaper industry's misery.
The Times company and other publishers have been attracting more online readers as they pour more resources into their Web sites, but they aren't bringing in nearly enough revenue from the Internet to offset the erosion in their print product. Nearly $268 million in advertising revenue evaporated from the Times company last year, a 13 percent drop from 2007.
Still, the Times company remains in better shape than many of its rivals.
Several publishers, most notably Tribune Co., have sought bankruptcy protection in an attempt to restructure their debts. Others, like McClatchy Co., have laid off thousands of employees and slashed the wages of the workers still on the payroll. In the worst scenarios, some publishers are preparing to cease publication, following in the footsteps of the Rocky Mountain News in Denver.
"By raising more money like it has, The New York Times is able to say, `We are not in dire straits at this point,'" Novosel said.
To gain even more wiggle room, the Times company is still hoping to sell its 17.8 percent stake in a partnership that owns the Boston Red Sox. If that effort succeeds, the Times company could pocket another $150 million or so. But both Novosel and Simonton doubt a buyer will emerge soon because the recession is threatening to depress baseball's revenue, too.
If it needs even more cash, the Times company also could try to sell some of its other newspapers, which include The Boston Globe and 16 other daily publications. But newspaper buyers are scarce now.
By Yahoo
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