JimmyCsays: At the juncture of journalism and daily life in KC

The McClatchy Co. appears to have a deal to sell The Kansas City Star’s printing plant for about $32 million, about 15 percent of what it cost to construct the plant before it opened in 2006.

In announcing its first-quarter financial results this morning, McClatchy reported this under the heading of “real estate activity”:

“On April 26, 2019, the company completed the sale of a small distribution center in Miami, FL, and expects to complete another sale of real property that will allow it to reduce first lien debt by approximately $32 million by the end of the second quarter of 2019.”

In March, the Kansas City Business Journal reported that the printing plant was for sale for $31 million. As far as I know, McClatchy has no other building worth close to $30 million.

During today’s conference call, Elaine Lintecum, McClatchy CFO and vice president of finance, said she would not reveal any details about the pending deal, including identifying the prospective buyer.

McClatchy has planned for bout two years to sell the building to reduce debt, which now stands at $745 million, and lease it back from the new owner. In addition to printing The Star, the building at 16th and McGee prints several other papers and publications.

Two years ago McClatchy reached an agreement to sell the printing plant for an unspecified price to a nebulous entity called R2 Capital LLC, which may have been out of Chicago. But McClatchy backed out of that deal, with one commercial realtor, Jerry Fogel, speculating McClatchy decided it wasn’t getting an adequate price for the plant.

The decision to build the plant was made by The Star’s previous owner, Knight Ridder, in the early 2000s. At the time, Art Brisbane was publisher of The Star. The plant opened about the time McClatchy closed on the purchase of the Knight Ridder properties in June 2006.

McClatchy sold The Star’s longtime headquarters building at 1729 Grand for $12 million in 2017. The buyers, local developer Vincent Bryant and several partners, are redeveloping the property for a variety of uses, including retail.

When it put both buildings up for sale in 2017, McClatchy was asking for a combined $46 million. It subsequently agreed to sell the two buildings — to different buyers — for $42 million.

With the headquarters building going for $12 million, that meant the price for the printing plant, back then, was about $30 million. If the new, proposed sale of the printing plant should go through at $32 million, it would be only a $1 million increase over the previous agreed-upon price.

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As usual, McClatchy’s quarterly results were more bad than good.

Some of the lowlights…

:: The red ink continues to flow, with McClatchy reporting a net loss of $42 million for the first three months of 2019, or $5.34 per share of stock. In the first quarter of 2018, the company reported a net loss of $38.9 million, of $5.04 per share.

:: For the first time since it embarked on its transition from print to digital, digital-only advertising revenue was down — down by 5.2 percent against the first quarter of 2018. McClatchy CEO Craig Forman attributed the dip to a “softer news cycle” in the first quarter of this year and “a strategic tightening of website paywalls.”

:: Total advertising revenue was $85.2 million, down 14.7% compared to the first quarter of 2018.

Some of the highlights:

:: The number of digital-only subscribers rose nearly 60 percent from the first quarter of 2018. McClatchy now has 179,100 digital-only subscribers…although that is an average of only about 6,175 for each of of the company’s 29 papers. (The Star has about 12,000 digital-only subscribers. People who take the print edition automatically have digital access.)

:: It was the twelfth consecutive quarter of growth in digital only-subscriptions for McClatchy.

:: The company significantly improved its performance in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), which the company called a “key metric.”

In news that could be described as good or bad, depending on one’s perspective, the company expects to save about $12 million this year as a result of its 2018 early-retirement program.

Eleven longtime editorial employees were among Kansas City Star staff members who accepted buyouts. The 11 included political columnist and editorial writer Steve Kraske, Johnson County government and business-development reporter Lynn Horsley and photographers John Sleezer and Keith Myers.

The 11 editorial staff members were all earning significant salaries — probably $80,000 or more each. The Star has been hiring new, younger staff members this year. The new new staff members are being paid significantly less, perhaps as little as $35,000 a year, I understand.

…To work for that kind of salary, you have to really be hungry to break into the newspaper business. But it’s certainly a good thing for all of us news consumers that some people are willing to do it. Getting good, accurate information about our communities, nation and world has never been more important.