Newspapers sell out ... their real estate, that is
Newspaper owners, struggling with plunging demand and advertising spending at a six-decade low, are squeezing money out of the assets they do have with rising value: buildings and land.
A.H. Belo Corp. is trying to sell the main offices of the Providence Journal in Rhode Island and adjacent lots. Gannett Co., owner of USA Today, has put the Iowa building of the Des Moines Register on the market and is evaluating options for its Virginia headquarters, adding to more than 2 million square feet of property divestitures by the company since 2005.
Newspaper properties across the country are attracting developers who are looking to overhaul the assets often located in the heart of downtown areas as real estate values rebound. For publishers, which have slashed jobs, closed bureaus and scaled back coverage as demand for print news falls, selling buildings represents another effort to cut costs and generate returns for investors as their space needs shrink.
"This decline over the last decade has led to major adjustments in the industry," said Mark Perry, an economics and finance professor at the University of Michigan-Flint who tracks newspaper advertising. "If these companies can somehow offset this unprecedented drop in revenue, they will certainly try to do so and selling off some of their real estate makes perfect sense."
Advertising expenditures for print and online media in the U.S. have fallen every quarter since the start of 2007, according to the Newspaper Association of America. Annual advertising revenue was an estimated $19 billion in 2012, the lowest since the group started tracking the information in 1950, when adjusted for inflation, according to data compiled by Perry. Daily circulation volume dropped 12 percent between 2007 and 2011.
Commercial-property values are on the rise, particularly in the urban areas where newspapers tend to be based. U.S. prices climbed 7 percent last year and are, on average, within "a few percentage points" of their 2007 highs, according to a report this week from Green Street Advisors Inc., a Newport Beach, California-based real estate research firm.
A.H. Belo, based in Dallas, estimates the value of its "non-core" real estate at about $72.5 million almost two-thirds of its stock-market value of $113 million. In addition to the Providence Journal site, the publisher is seeking sales of property such as the Press-Enterprise building in Riverside, California, within three years, according to an October presentation posted on the company's website.
The company is looking to take advantage of a real estate recovery as its space requirements decline, Chief Financial Officer Alison Engel said. It considers non-core real estate to be office buildings and parking lots, compared with those used directly in operations, such as printing plants, she said.
"There is a recognition that the business is transforming," she said in an interview. "Now is a good time to pursue opportunities to monetize real estate and redeploy that capital into new revenue initiatives and/or return cash to shareholders."
A.H. Belo, which also publishes the Dallas Morning News, had 1,900 full-time employees at the end of 2011, compared with 3,400 in 2007, according to regulatory filings. Revenue in the third quarter was down 29 percent from the same period four years earlier, though the company reported a $1.5 million profit after losses for three of the previous four years. The stock has fallen more than 60 percent since its spinoff from Belo Corp. in 2008.