In a move that surprised absolutely no one, The New York Times Monday agreed to a sale-and-lease back of part of its new headquarters building for $225 million, Bloomberg News reported. The move, which involves the sale/leaseback of 21 floors of the 52-story building, will provide The Times with revenue needed to pay-down debt and increase its cash position during a period of declining revenue for print advertisements, Bloomberg News reported.
The deal amounts to a lease payment of $24 million per year, or $32 per square foot, The Times said. The company built the new headquarters building on Eighth Avenue in Midtown Manhattan for more than $600 million.
Shares of The New York Times (NYSE: NYT) were virtually unchanged on the news in mid-day Monday trading, gaining just 7 cents to $4.14.
Internet, recession hit revenue
Like most print, metropolitan daily newspapers, The Times has been hit hard by a one-two macroeconomic punch during the initial decade of globalization: loss of print revenue due to a shift in ads to the internet, and a cyclical decline in ad revenue, generally, due to the U.S. and global recessions.
The Times has also been hurt by the severe slump in the financial services, auto, and retail sectors, which historically have been major, full-page ad buyers.
Earlier, the company borrowed $250 million from telecom billionaire Carlos Slim Helu of Mexico. Helu's loan, plus Monday's sale/leaseback, is expected to help The Times lower the more than $1 billion in debt it said it had at the end of 2008.
Stock Analysis: The Times is making progress reducing its debt, but the question remains: can it cut operating costs fast enough? As noted, the print editions of almost all metro dailies are struggling -- with numerous broadsheets having ceased publication -- but The Times has a bigger hurdle to mount because it has the highest per employee costs in journalism. Its web site is a success, but, at least initially, online revenue will be less than one-tenth what's needed to cover the company's overall costs -- which points to the need to cut expenses much more.
Can The Times successfully cut costs and transition to a 'mostly web' operation? It's possible, but that may require extensive tree surgery: some have talked about The Times eliminating print editions on Monday and Tuesday and/or moving to a subscription-based model for web content -- for example, a charge of $1-3 per month.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Would you pay $1-3 per month to read The New York Times online? Or would you just try to get national and international news from another, free source? Let us know what you think.
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Reader Comments (Page 1 of 1)
3-10-2009 @ 11:36AM
Andrew T said...
I'd pay up to 30 bucks a month to read the times online if they shutter their print editions. It is too important a newspaper to not have in my reading list.