Zell to entertain offers for Tribune Tower, L.A. Times building

Sam Zell, the real estate mogul who runs the Tribune Company, put out this stunner this morning: he's willing entertain offers for the company's prize real estate holdings, which include the Tribune Tower in Chicago and the Times Mirror Square complex here in Los Angeles (pictured), which many know as the Los Angeles Times building.

Here's how Thomas Mulligan is covering the story for the L.A. Times: "Tribune Co. is putting two of its most historic properties -- the L.A. Times building and Tribune Tower in Chicago -- on the block."

This from an e-mail Sam sent to me personally, as well as every other Tribune employee: "...  we are in the process of asking a number of real estate firms to give us their best thinking on how we can generate more value from Tribune Tower in Chicago, and the Times Mirror Square complex in Los Angeles."

More: "We’ll be considering numerous options to maximize the value of these properties.  While a near-term transaction is possible, we’ll be focusing on opportunities that allow for some level of ongoing occupancy in both buildings for the mid-term (defined as five years), for farther out (15 years), and beyond.

"Most importantly, we are not rushing this process, and I can assure you we will not accept anything but full market value for these assets.  As we made clear on our first quarter earnings call, Tribune has sufficient liquidity to satisfy our principal amortization requirements through 2008, due to the proceeds we will realize from the Newsday transaction, and from our plans to create an asset-backed commercial paper program.

"Our request for proposals, which is being issued today, is likely to generate media attention and debate about what we should or should not do with the properties.  Both Tribune Tower and Times Mirror Square are iconic structures, deeply intertwined with the history of this company.  But, they are also both under-utilized, and as employee-owners, it’s in our best interests to maximize the value of all our assets."

Your thoughts? Comment? E-mail story tips to peter.viles@latimes.com.
Photo: Los Angeles Times

Comments

[Milla]

wow. what are YOUR thoughts about this, Pete?

[TakeFive]

At least they won't be shipping it to India:

OC Register to outsource some editing to India
SANTA ANA, Calif.

An Indian company will take over copy editing duties for some stories published in The Orange County Register and will handle page layout for a community newspaper at the company that owns the Pulitzer Prize-winning daily, the newspaper confirmed Tuesday.

http://www.businessweek.com/ap/financialnews/
D91GQIK80.htm

[Vic Arpeggio]

Sam Zell is to newspapers what prostate cancer is to old men.

[William E. Jones]

I say, tear down that ugly old LA Times building - it's so yesterday - and replace it with an ugly new building filled with condos. Move the LA Times staff out to Palmdale, or better yet have everyone work from home so there is no need for an "LA Times" building. Think of all the money to be saved!

Outsource printing of the newspaper to a new state-of-the-art printing plant in Tijuana and ad sales to a call center in India.

This running a newspaper is sure fun!

[Cal]

Sam Zell knows RE, he knows commercial prices will be coming down and is willing to sell now and buy back when prices are lower.

[nirad]

As someone who lives in the area, i wouldn't mind seeing the LA Times' sea of parking developed into something more pedestrian-friendly. Though I certainly hope the newspaper isn't moved out of downtown.

[Chuck]

I wonder how long it will take Zell to destroy the papers? Much like Tisch did for CBS.

[Wayne Coyne Flip]

Does this mean Zell wants all the employees to telecommute? Or did Lee Abrams just discover that reporters actually go to an office every day (at least the ones not in Iraq).

[ed]

I knew Zell was in this for the real estate, and not aspiring to become another Hearst. Now he's putting his cards on the table. The only thing that surprises me is that he isn't including the Baltimore Sun's prime downtown property in what looks to me like a firesale. As for the employees of the newspapers, you could always move them into rented space, farm out editing functions to India, contract out the printing operations to local private concerns, and turn delivery over to private operators. This would dramatically pare costs and make newspapers competitive with the Internet in these cost-savings days.

[Angeleno]

Zell's dismantling and elimination of the Times...one piece at a time.

[Alex]

I'd like to see something like the Newseum in Washington DC go where the Times building is. A modern, open, glass building that is home to a variety of print media companies, while also hosting a museum/tourist attraction that focuses primarily on the history of LA through the perspective of the LA Times and other media outlets.

[brian foster]

Absolutely brilliant move by the master of American real estate. Sam Zell makes Donald Trump look like a rank amateur. Reporters don't need to go to offices in these days of laptop computers and wireless connections and Ed points out the other savings to come by farming out printing and delivery operations. Editing and layout could easily be done in India. The only thing newspapering needs in the 21st Century is content providers and people to take phone calls from clients wishing to advertise. It also looks to me as if Zell has structured his real estate deals to be tax free, which must drive Trump and Tisch and the others up a wall of jealousy. Absolutely brilliant move.

[chase]

Couple the real estate play with the addition of adult entertainment ads and I think Zell is making progress!

[Uncle Billy Does Sale-Leasebacks]

Knee-Jerk Thought: Rip off the bandaid. Go completely web-based. Everyone can work from home and stay connected with web-cams.

ABCP: doesn't this mean that one or more business units will be isolated from the others? Doesn't this mean someone will need to *buy* the abcp? Who is doing this lately, especially from companies whose receivables are dropping? Abu Dhabi?

TakeFive: That's a joke, right? No, seriously.

Times Buildings: How many of them are there? I found 5. Are there other tenants besides L.A. Times?

243,749 sq. ft.
234,509 sq. ft.
253,565 sq. ft.
56,111 sq. ft.
142,235 sq. ft.

[anonymous]

I run one of the companies that supplies new subscriptions to the Times and when going to the downtown LA office, there is a ton of things that I see as outdated for todays age. There are many cuts that can be made in personnel and office space. The printing facilities and distribution facilities are much needed, but not EVERY single employee needs there own desk/office. We shall see where Mr. Zell takes us.........

[Laker]

Zell is RE investor/speculator.
He has a lot more money than me, so i trust he knows better than me. If he is looking to sell now, he knows prices are coming down big time. He knows he can get more dollars today than he will get tomorrow, next week, next year, or in the next 10 years...
Zell is the knife thrower or if you wish anti-knife catcher.

Take it back to our LA housing, for average seller, yes, you could sell your house at early 2007 for $1,000,000, but today you can only get $700,000. You better put it on the market and reduce asking price until you sell. If you wait, you will eventually get $400,000 for it as this is the fundamental value of it.
(Much better to have one bird at hand than 3 on the tree)

[I live in LA, too]

As a former newspaper reporter who now has to edit written reports from India, this is not good. Not good at all. I do hope Zell doesn't copy the Register. Now, for all the evil Rupert Murdoch has done, at least he is investing in the WSJ, rather than selling it to the highest bidder.

[Rob]

A) I want to punch this guy in the throat.

B) Who the f' is going to buy a building with the words "THE TIMES" carved into it on two sides in 20 foot high letters?

C)...and isn't it some sort of historic/protected structure that some new occupant couldn't alter or tear down?

D) Seriously, I wanna punch him in the throat.

[Benny]

Sam Zell is obviously eating it on the Tribune deal and this is his only way out. Sale with leaseback is a classic way to bring in cash on assets with dwindling value.

[Alice Arani Cablayan]

It is unfortunate to see the symbol for a great newspaper such as the Los Angeles Times go up for sale.

Perhaps the pain of this potential sale can be redeemed if the building could be purchased and used for a school or part of a university specializing in Journalism, media or the arts.

[Alice Arani Cablayan]

It is unfortunate to see a symbol of this great newspaper go up for sale. The legacy of the Chandler family is also embodied in this building.

Perhaps the pain of this sale can be redeemed if the building can be purchased for a school or become part of a university specializing in journalism, media or the arts.

[Cisco]

If he wants the full value for the LA Times property - why not just sell the paper and it's holdings back to one of the many "LA" billionaires that initially bid for the paper in the first place?

The Chandlers may be one of the most prominent LA families to exist, but selling the times to the Tribune in first place was a bonehead move of epic proportions.

I used to love the LA Times, but since the Tribune assumed ownership, they've bought in one baby bonehead after baby bonehead to run the paper - and through their poor management and star-struckness (ie, the current honcho) the LA Times has fallen from one of the most prestigious papers in the country (How many newspapers would assault someone to have one of their reporters featured repeatedly on "Meet The Press"?) to an "also-ran." It's sad and more reason why its ownership needs to return to an Angeleno.

[CD]

I love that building with the LA TIMES carved on it.
It was truly downtown, it felt great. Now of course the commercial real estate is going to hell as well, so he is in a hurry to unload..... Those guys destroy everything.....Well, maybe you get to work at home with the kids, save on gas.

[Tim]

If I set aside the harm that Zell ownership has done to Los Angeles and the Times, I still can't understand why retaining control is in his best interests. He couldn't have amassed the fortune he holds today if he weren't a shrewd, realistic business person, and a shrewd, realistic business person should see that he has few options for success now. His journalism staff despises him, and the community is learning to. In other businesses -- yes, obviously, he has acumen, but he's not meant for the newspaper world.

[Karl in Burbank]

The LA Times should operate out of a strip mall in Pacoima.

[Jacinto]

Memo to LA Times editorial staff:

Population of LA city (estim 2005): 3.8 million.

Population of LA county not part of LA city: 6.1 million.

This may be the moment for the Times to accept the fact that most people in the circulation area don’t care much about who owns historic buildings in LA city, nor what the LA mayor thinks, nor where LA Times headquarters may move to, nor…you get the picture.

LA Times should move to East LA, which is unincorporated county. It will still be close to the action but maybe it will learn how to be less city-centric. Same is true for local broadcast media. The Golden Gate Theater building is available, and proudly historic.

[eileen]

Poor Otis is probably spinning in his grave.

[Dixon Gayer]

Some 70 years ago (or thereabouts) when I taught high school journalism classes, we didn't have fancy computers. so we typed out stories using a special carbon paper that you smoothed down over a gelatinous bed that you could use to transfer the image onto a piece of paper and print maybe 20 copies—absolutely free. Sam Zell might look into that as a real price-buster.

We "published" our texts and reading materials on our dining room or kitchen tables—no offices or other fancy digs. Think of the savings, Sam!

The newsboy who delivered the paper worked for pocket change. Big whoop. You're onto something, Sam.

Keep plugging Sam, you can bring LA to it's knees. You're the man!!

[Valley Observer]

Peter, how many people work in the building? Are the large machines in there? How many of those people would be expected to be still there in let's say two years? (I'm wondering whether a strip mall would be large enough.)

[RG]

Let me understand the negative Zell sentiment here.....Sam Zell buys control of Tribune and the underlying assets, newspapers, some real estate, etc. And people have issues with him deciding to sell something he owns?

Regarding the Times, is Zell destroying the paper or is he just one of many owners who are struggling with the simple fact that newspapers, in their current form, are a business model that no longer works?

[Ragnar]

This thread is a nice diversion from the usual array of comments (median home prices are down, rent vs. buy, Countrywide sux, etc.) and is generating some of the more interesting posts that I have read on the blog over the past year+. It is a welcome addition to the LA Times Real Estate Blog.

There are a lot of factors built into the request for proposal. Sure, declining real estate prices are probably a large part of it, but I'm all for better utilization of prime downtown office space as a LA continues to grow and evolve. This whole process can be very forward-thinking and refreshing for the city.

[TrojanDLA]

I would LOVE to develop that Times building into a 3 star (out of 5) condo complex for middle management families looking for "affordable" housing without the commute. The large size ample parking, and proximity to metro rail suddenly makes this very viable on a per unit basis. Throw in day care facilities and a gym and I'm sure it would be a bigger hit than that behemoth "Grand Project" that starts at $3 million per unit.

This would be a GREAT study in urban "green" conversion with rooftop gardens and solar panel walls.

The truth is that it would not be a great commercial property, but the perfect residential space for the right developer.

[the problemwithcaring]

One of my earliest memories of being a Los Angeleno is coming back into town from vacation and seeing that LA Times sign on the budiling off 10 freeway...

Ahhh, to grow old in Los Angeles...not for the faint of heart.

[HulaGirl]

Journalism: A Full Circle Jerk

I once had a job editing medical and pharmaceutical papers for Indian doctors practicing medicine in the US.

Guess who edits them now?

I wanna be outsourced so I can get a sub prime loan, and buy a sub prime house in a sub prime part of L.A.

[Housing Bull Chorus]

ZELL!

What are you thinking?

Selling that Fantabulous building when you could convert it into 500sf lofts that are worth $1000psf?

It's simple. Empty useless space + granite countertops + stainless steel appliances = M-O-N-E-Y

And that $1000 psf...that's just now.

Don't sell them yet.

You need to wait a couple years and you'll easily get $2000 psf!

Trust me! People will be lined up around the block in order to buy lottery tickets for the mere chance to be rewarded with the opportunity to buy a Sam Zell (tm) condo!

Just make sure that after you have completed the conversions you absolutely, under no circumstances, rent them out during the obligatory "2 year hold and profit period".

If you do...you'll never get that "renter" smell out of them.

[Jeff S]

Hey I'm from NYC and grew up seeing the Pan Am building all the time. They sold the building and leased the little space they needed before finally going belly up (30 years ahead of the rest of the airline industry).

Anyway, I doubt very many people remember or care about the huge PAN AM on that building that was "historic", "iconic", "carved into the side of the building" as some of you describe.

Today it is the MET Life building and when they sell it, again it just won't matter. It's a building. End of story

[Nathan]

Bemused Chortle of the Day goes to Alex (June 25) who expresses that the Times Building should be torn down...oh, and put a museum in the new structure focusing on the history of LA (through the Times lens, etc).

Uh, so, um, what? Myopic Philistine I may be, but if any building needs to be protected and landmarked, it's the Times Bldng, Kaufmann's expression of interbellum Los Angeles (have you been inside its sublime lobby?!) which I might add would make a swell museum focusing on the history of LA (through the Times lens, etc). Besides, has anyone out there SEEN the buildings built in or around downtown in the last five years? Ok then. Probably not a good idea to tear something down, is it?

And Zell is selling this as a tear-down--as if he bought some 3000sf 1970s 4-unit in a slide area--he was counting on the carving on the side as his main excuse to tear it down. "But I CAN'T convert it! The carving has giant gorgeous restored NEON in it! I've already hired the wrecking balls! I'm a VICTIM!"