When Sam Zell led an $8.2 billion buyout of the Tribune Company we knew the real estate mogul would make some big changes.
He's done layoffs, slashed news pages and upped advertising. Now he's using his real estate expertise and turning to some less obvious ways to raise money- by almost literally dismantling the company, and I'm not talking about his sale of Newsday, the New York daily.
Zell, now the company's chief executive, is looking into selling the company's high valued real estate, including Chicago's landmark Tribune Tower and the Times Mirror Square complex in downtown LA. He used softer terms when explaining his plan to employees, saying he wants to "maximize value" of the company's "underutilized" real estate.
Is selling these iconic buildings worth it? Perhaps-- their prime location and spacious square footage could bring hundreds of millions of dollars-- at least $150 million for the Tribune tower and $235 million for the LA Times complex, according to real estate experts. But that's far too simple for savvy Zell. Tribune has a much more sophisticated plan than an outright sale. Tribune said it wants to maintain a stake in the building and be able to stay in them for at least five years. Tribune could sell the buildings on the condition of a low-cost lease for the next five years. Or it could ship the journalists to lower rent buildings and lease out the landmark buildings.
Zell has been on a bit of a selling spree-- it's auctioning off the Cubs, which are expected to bring in up to $1 billion, last month it agreed to sell Newsday for $650 million, and now this. All in, this year Zell should be able to eliminate about a billion dollars in debt. This has been a top priority of Zell's since taking the company private in December when the debt load was $13 billion.
I've been blogging about the travails of the newspaper industry, yesterday writing about an Orange County paper outsourcing to India. Well, if Zell is really determined to cut costs, I wonder where he'll go next.
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