The loud gulp you heard today was the McClatchy Co. swallowing another big egg representing millions of dollars of continuing losses going back to its ill-fated purchase of Knight Ridder in 2006.
Last week, on the basis of McClatchy’s conference call regarding its first quarter financial results, I said it appeared the company was close to selling the Kansas City Star printing plant, McClatchy’s last big real estate plum.
This afternoon, The Star posted a five-paragraph story saying the printing plant was being sold to a “hospitality” company for $30.1 million — about 15 percent of what it cost to build the plant ($200 million) in the mid-2000s. The Star will lease the building back for 15 years with annual, initial payments of $2.8 million.
The “good news” here is that the $30 million will reduce McClatchy’s debt to about $715 million.
In one of the worst newspaper deals ever, McClatchy paid $4.5 billion for Knight Ridder in 2006 and also assumed $2 billion in debt.
Pushed to sell by a major, disgruntled stockholder, Knight Ridder fell into a fantastic deal, while McClatchy bought at the worst possible time — when the newspaper industry was starting to fall off an enormous cliff.
In a quote that should live in infamy, then-McClatchy chairman and CEO Gary Pruitt, said, “Opportunities like this come perhaps once in a company’s lifetime…”
Six years later, Pruitt was gone, and McClatchy has been buffeted by big losses and unrealized dreams of a successful print-to-digital transformation. Last year, McClatchy had a net loss of nearly $80 million. For the first quarter of this year, it posted a loss of $42 million.
No wonder, then, that The Star reported the printing-plant sale as almost an afterthought. Better not to call any more attention to this horror show than is absolutely necessary.
…This is the second time in two years The Star reached a deal to sell the printing plant. It backed out of the first deal.
This time, as then, the deal is hazy. Back in 2017, The Star said it was selling to an entity out of Chicago called R2 Capital LLC. In its report on the deal, The Star said nothing about R2’s background or even where it was from.
Today’s report was similarly spare, saying: “The agreement transfers ownership of the building to Ambassador Hospitality, LLC for a price of $30.1 million. The sale closed Wednesday.”
When you Google Ambassador Hospitality, the first listing is to Ambassador Hotel Collection, and there is nothing close to Ambassador Hospitality thereafter. Kansas City has an Ambassador Hotel that is part of the “Collection,” but I wouldn’t think that’s the company that bought the printing plant…Why would a hotel group be buying a printing plant? Menus, maybe?
The mission of The Star and McClatchy is to dig deep and tell readers what’s going on in their communities. The Star, then, should tell its readers more about Ambassador Hospitality — what it is, where it is, what it owns — so people know what’s going on with one of Kansas City’s most prominent and attractive downtown buildings. (P.S. See my Ambassador comment, which I posted a few hours after publishing this piece.)
Once again, The Star has disappointed when it comes to covering itself. But is it any wonder? This is a media company in steep decline — owned by an umbrella company in steeper decline.
The leading McClatchy executives — CEO Pat Talamantes, CFO Elaine Lintecum and VP of Operations Mark Zieman — must think they’re smart, playing some cat-and-mouse game, holding back information.
But I think within a year or two some bigger cat is going to devour the mouse. Yes, Talamantes, Lintecum and Zieman will probably float away on big, golden parachutes. But maybe we’ll be able to finally put this mess of a company in our rear view mirror.
JimmyCsays: At the juncture of journalism and daily life in KC 
Emily Pulitzer must be one of the smartest people I’ve ever met. She and other family members sold the St. Louis Post Dispatch at its peak value around 2005. Lee just sold off the building.
The parallels between the sales of Pulitzer and Knight Ridder are remarkable in some ways. They both sold about the same time, and the buyers bit off more than they could chew.
The difference is, it seems to me, that Lee Enterprises, of the Quad Cities, is better run (Mary Junck has persevered as CEO throughout), plus it has Berkshire Hathaway (Buffett) money behind it. Last year, BH hired Lee to manage BH’s newspaper and digital operations in 30 markets, including Buffalo and Omaha.
Junck was quoted as saying: “Berkshire Hathaway has been a significant investor across our capital structures for years, most recently in the $94 million refinancing of our Pulitzer notes, which we redeemed in 2015, two years ahead of schedule. Our relationship has been positive for both and has become a foundation for us to come together in this agreement.”
At the same time, Buffett has changed his tune about newspapers, from the time many years ago when he began investing in them. In a recent with Yahoo Finance, he said most newspapers are “toast.”
He said the Wall Street Journal, Washington Post and New York Times would survive.
I check in on the Post daily. Tony Messinger is informative (just awarded a Pulitzer.)The editorial page let’s me know about Missouri politics. Mark Schlinkmann is new on the transportation beat, pretty vanilla. Most of the rest I get from the NYT or the LA Times. Similar experience with the Star. Not interested in car crashes and shootings in KC but interested in Jackson County politics. I still have an interest in a farm and a lot of family.
I cannot believe Mark Schlinkmann, who used to work for The Kansas City Times before going to the P-D, is still working. The guy must be 70 years old. He’s a complete newspaper nerd; he would pay the editors to let him write…Did I say I can’t believe he’s still working? As you were…Of course he is.
Well, now…
I just got some interesting information from a former newspaper man who has left the business and lives in Chicago. He did a search and found that Ambassador Hospitality is connected with Mark One Electric, a longtime Kansas City company headed by Rosana Privitera Biondo. Biondo is the registered agent for Ambassador, which was incorporated in December 2000.
Even more interesting is the fact that when the sub-contracts were being awarded on the printing plant, Mark One was at first passed over for the $5 million electrical component in favor of another company. I got a call from Joe Privitera, Rosana’s brother and a Mark One vice president, asking me if there was anything I could do to help. I told him to call Art Brisbane, then publisher, and plead his case. Either he or his sister — but I believe it was he — called and convinced Art to give Mark One the electrical sub-contract…The next time I saw Rosana, she grabbed my hand in both of hers and held it for more than a minute, thanking me profusely.
Even more interesting…Brisbane’s house and Joe Privitera’s house backed up to each other (Brisbane lived in the 5400 block of Central and Privitera lived in the 5400 block of Wornall), and Privitera had pissed Brisbane off by building a swimming pool in his backyard without consulting Brisbane. Despite the tiff, Brisbane gave Privitera the electrical contract — which I considered magnanimous.
…In sum, it appears the Priviteras have bought the building they helped construct.
This is a brilliant deal for a hotel chain. They pay 30 mil, financing most of it, The Star leases it back for 2.8 mil a year for 15 years, generating $42 mil. At the end of the lease, they bulldoze that dinosaur and throw up a luxury hotel across the street from the Sprint Center on the lot The Star paid them $12 mil to buy (assuming The Star doesn’t default.)