By: Jim Rosenberg
U.S. newspapers didn’t wait for the economy to start hollowing out before emptying out their production plants. By the time many readers found their homes were costing more than they were worth, newspapers already were shuttering sites for similar reasons.
As the recession deepened, lending tightened and more plants closed, chances that any would attract another enterprise diminished. Not that newspapers didn’t try to sell their white elephants: Despite the collapse, the number of newspaper real estate appraisals actually didn’t change much over the past two years, says James Redford, a senior analyst at Fort Worth-based Integra Realty Resources.
Newspaper plants are among the more complicated commercial properties to sell because they are special-use structures that are not easily converted to other industrial purposes. “The same issues that affect the value of the machinery affect the value of the plant,” explains John Woolard, managing partner at the property tax valuation and consulting firm Morrison & Head in Austin, Texas. In the case of newspapers, mothballed printing presses depress the value of the plants that house them.
Consider the case of the Chicago Sun-Times. In connection with the parent company’s bankruptcy, Huron Consulting Group appraised the relatively new plant and presses. On paper, they were worth about $51.3 million. But the consultants concluded that even if there were not a glut of printing equipment on the market, the Sun-Times couldn’t sell its presses because they and the building would be damaged in the dismantling process. Huron’s bottom line: Plant and presses might fetch $3.2 million in a sale.
Given the high cost of modifying a press foundation and pad, newspapers often argue with tax authorities that their idled plants should be appraised at the lower rates applicable to a warehouse. Woolard is handling the tax appeals of four newspapers, and recently resolved a fifth, successfully arguing that its plant was marketable only as a warehouse.
Some papers managed to stay ahead of commercial real estate’s downward curve. The New York Times upgraded its College Point plant before exiting its Edison, N.J., facility. Just beating the bum market, the Los Angeles Times sold its Valley plant in 2006. But as the L.A. Times moved all printing to its modern Olympic plant downtown, a process that was expected to be completed in June, it isn’t trying to sell its Orange County plant. “We will mothball the presses” and retain business and editorial offices there, says Communications Vice President Nancy Sullivan.
A few other papers managed to sell off facilities even as the economic slump deepened. In early 2008, the Denver Newspaper Agency sold the 320,000-square-foot Denver Post plant near the I-25/I-70 interchange. DNA wanted $20 million for it, and it ultimately sold for $17.1 — as a warehouse. At that same time, The Washington Post announced it was selling its College Park, Md. plant. The deal took nearly two years to close. The state of Maryland bought the 300,000-square-foot structure on 18.5 acres near the University of Maryland, for $12 million — well less than half its assessed value of $28 million.
Another property problem for most newspapers is that suddenly unnecessary pressrooms are part of the headquarters. Last year, The Palm Beach Post outsourced all printing to the competing South Florida Sun-Sentinel’s Deerfield Beach plant. The Post is removing equipment from its plant, which is connected to its offices by an elevated walkway.
Arguing that a warehouse is “probably the only alternative use” for the decommissioned plant, “we’ve contested their [tax] assessment for the last two years,” says John Woolard of the property tax valuation consultancy.
The Atlanta Journal-Constitution solved its similar problem by moving production and packaging — which occupied roughly two-thirds of its downtown property — to its Gwinnett plant in late 2008, and then relocating the last of its offices to a northern suburb in April.
The old nine-story office building and production plant — in a prime location near the Georgia Dome, and the CNN and Convention Centers — will be offered for sale, says Senior Director of Production Richard Hawes. The most likely scenario, he says: “The buildings will be torn down to make room for something else.” And with the glutted used-equipment market, there’s no hurry to cart away the old iron. Only four Schur palletizers may have value at the Gwinnett plant, Hawes says.
The latest production facility wearing a for-sale sign is The Dallas Morning News’ South Plant, which is barely three years old. Owner A.H. Belo values the 50 acres and 134,000-square-foot facility at $5.26 million. Because it’s a packaging rather than printing plant, “it lends itself much more easily for alternative use,” says Woolard. And with South Plant’s location in a tax-advantaged development zone near two interstate highways, the Morning News might be a rare newspaper these days able to slap an “under contract” sticker over the for-sale sign.