Profit taken from fall of papers
Real estate from distressed companies sold
When the downtown building in Tennessee housing the Memphis Commercial Appeal newspaper sold last April, the name of the buyer — Twenty Lake Holdings LLC — seemed of little consequence. The paper would be moving from its longtime home amid declining circulation and a shrinking staff under its owner, Gannett.
The old newsroom was little more than an afterthought.
But Twenty Lake Holdings is not just another commercial real estate investor. It is a subsidiary of Alden Global Capital, the New York City hedge fund that backed the purchase of and dramatic cost-cutting at more than 100 newspapers — causing more than 1,000 lost jobs.
For Alden and its subsidiary, the Gannett empire’s newspapers are clearly an attractive feature. But by purchasing the Memphis building and others like it, Alden has already begun coming for what it may consider a bigger prize, Gannett’s real estate.
The hedge fund’s newspaper business, Digital First Media, is bidding to buy Gannett, operator of the nation’s largest chain of daily newspapers by circulation, including USA Today — as well as its $900 million in remaining property and equipment — for more than $1.3 billion.
The tactics employed by Alden and Digital First Media are well-chronicled: They buy newspapers already in financial distress, including big-city dailies such as the San Jose Mercury News and the Denver Post, reap the cash flow and lay off editors, reporters and photographers to boost profits.
In a 2018 court case, Alden disclosed it has a series of affiliated real estate companies whose business is focused primarily on efficiently buying, selling, leasing and redeveloping newspapers’ offices and printing plants.
Two years after Alden established Digital First, it created Twenty Lake Holdings, which began taking ownership of some of the papers’ facilities, according to public records.
On its website, Twenty Lake Holdings says it “utilizes centralized brokerage, asset management, lease administration, legal, project management and architectural services to efficiently manage, transact, maximize value and minimize expense.” First Media are well-chronicled: They buy newspapers in
It claimed to have acquired more than 180 properties and 2.3 million square feet of real estate in 29 states. A review of property records by The Washington Post found dozens of newspaper buildings Twenty Lake Holdings or Twenty Lake Management had bought or sold.
A Twenty Lake subsidiary, Praxis Commercial, acts as a broker for selling and leasing properties, according to properties it lists online and marketing fliers placed with listing services including CoStar.
After The Washington Post sent inquiries to the company’s executives, the website for Twenty Lake Holdings was replaced with a page saying “Our website is under construction.”
In response to questions sent to Alden and Digital First, also known as MNG Enterprises, spokeswoman
Renee Soto declined to offer any examples of the company investing anew in its media properties.
Soto issued an email statement: “MNG is committed to the newspaper business and a long-term investor in the space. MNG’s focus is on getting publications to a place where they can operate profitably and sustainably and continue to serve their communities.”
A Gannett spokesman also declined to comment for this story.
Other media companies have focused in recent years on selling underused real estate to raise cash.
Gannett has sold more than $150 million worth of properties to help stabilize its finances since 2015, according to commercial real estate data and news reports.
But experts said Alden
has moved more aggressively to make money off its real estate than competing media companies. For Alden, the Commercial Appeal’s building may not have been an afterthought but its main target.
“I think real estate is the first thing they look at,” said Doug Arthur, an analyst at Huber Research who said he met with Alden’s founder, Randall Smith, around 2013 after he said Alden principals expressed an under-the-radar interest in Gannett, in which they proposed spinning off all of the company’s real estate into a separate firm.
Analysts say such a move would have yanked a potential lifeline the company’s media properties could turn to for cash in hard times.
Last week, Gannett’s board voted to reject the offer, questioning Digital First’s ability to finance the deal.
Digital First fired back, nominating six people for Gannett’s board. Gannett said it will consider whether the nominees are “committed to acting in the best interests of all of Gannett’s shareholders, or are beholden” to Digital First.
While Gannett is resistant to Alden’s hostile bid for the company’s newspapers, Gannett has already sold at least six of its buildings — at least five of them within the past year — to Twenty Lake Holdings or an affiliate, according to property records.
In some instances, Twenty Lake has already extracted higher prices for Gannett’s real estate than Gannett did.
In April of last year, Gannett sold Twenty Lake the headquarters of the Asheville Citizen-Times in North Carolina for $3.2 million. In a transaction the county recorded on the same day, Twenty Lake flipped the property to a local developer for $5.3 million.
Alden subsidiaries are now working to help other media companies monetize their real estate, listing their properties for sale or lease, even as journalists at Aldenowned papers decry their management as “insanity,” as the Denver Post editorial board did.
“Alden has been down this road before,” Arthur said. “They are the ultimate cash flow mercenary. They want to find cash flow and bleed it to death.”
Alden and Digital First, which controls 7.5 percent of Gannett’s stock, clearly see it differently.
“We Save Newspapers,” chairman of the Digital First board, R. Joseph Fuchs, declared in a letter to the Gannett board last month, arguing Digital First has run a profitable newspaper business even as Gannett has struggled with shrinking revenue and a declining stock price.