Florida newspapers at core of industry strife

Wake up and good morning. With plenty of implications for Florida, it's one more turn of the wringer this week for a troubled newspaper industry with reports the Tribune Co. is preparing for a possible filing for bankruptcy-court protection. The Tribune Co. owns 23 TV stations (and the Chicago Cubs) and 12 newspapers, including two of the eight largest in the country by circulation: the Los Angeles Times had weekday circulation of 739,000 and the Chicago Tribune had 542,000 as of Sept. 30.

The company also owns the South Florida Sun-Sentinel in Fort Lauderdale and the Orlando Sentinel.

Tribune Co. has been struggling under a $13-billion debt load incurred last December when real estate magnate Sam Zell took the company private in an $8.2-billion leveraged buyout. Today the company faces a deadline on $70-million of unsecured debt taken on by Tribune Co. before the deal.

Chicago-based Tribune has hired investment bank Lazard Ltd. as its financial adviser and law firm Sidley Austin to advise the company on a possible trip through Chapter 11 bankruptcy, say reports in the Wall Street Journal and New York Times.

For Florida newspaper readers, it's only the latest crisis brewing. Another newspaper company also burdened by debt and a steep slide in newspaper advertising, the McClatchy Co., wants to sell the Miami Herald, according to reports. The Herald is one of the largest of McClatchy’s 30 daily papers, with daily circulation of 210,000, and arguably its most prestigious, having won 19 Pulitzer prizes. The newspaper was once the largest in Florida but demographic changes and competition has forced it to shrink. (The St. Petersburg Times -- the newspaper I work for -- is Florida's largest newspaper now, and it, too, faces a challenging business environment. But it is privately owned and does not face the same stock price or debt pressures of many publicly-traded companies.)

Of course, the Miami Herald got a new owner just a few years ago when the once-great-now-defunct Knight-Ridder newspaper chain sold most of its papers to McClatchy for $4.5-billion in 2006.

Here's what all these newspaper companies share. They are publicly traded and investors are pessimistic about the industry's future, depressing company stocks. They have large debt loads -- the Tribune because buyer Zell borrowed heavily to buy the company in the first place, and similarly McClatchy borrowed to buy Knight-Ridder. They also face sharply dropping advertising revenue (most newspapers, public or not, face this same issue) because of the recession and some fundamental shifts in advertising strategies away from the printed page.

What does this all mean for Florida, which has suffered especially because of the sharp decline in housing (and real estate advertising)? Well, the Miami Herald could see a new owner of some kind. It's less clear the Orlando Sentinel or Fort Lauderdale's Sun-Sentinel will be sold but it's a distinct possibility if a Chapter 11 step by their parent company forces the sale of assets to raise money.

The owner of the struggling Tampa Tribune, Media General Inc. in Richmond, Va., saw its stock price close at a startling low $1.57 on Friday after trading above $27 per share in the past year.

The hardest-to-decipher question: Who's in the market for newspapers? With newspaper profits shrinking fast, the economy contracting and credit tight, many newspapers have been on the block for months without selling. Tribune Co. did manage to auction off its Long Island, N.Y., daily Newsday (bought by a cable TV business) to raise cash. But tighter credit markets are pushing sale prices lower.

Consider what's happening in the Denver market. William Dean Singleton, the chief owner of The Denver Post, said told the Denver Business Journal that Cincinnati's E.W. Scripps Co., the owner of the Rocky Mountain News, told his company last month it planned to close the money-losing News "as soon as practical." Singleton told the Journal he doubts a buyer will emerge for the 149-year-old daily, which was put up for sale Thursday.

-- Robert Trigaux, Times Business Columnist

source: tampabay.com

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Fort Lauderdale Blog and Real Estate News
Rory Vanucchi
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http://waterfrontlife.blogspot.com
www.FortLauderdaleLiving.net

Shareholders Ponder North Dakota Law

A new front in the battle over corporate governance is emerging in an unlikely place: North Dakota.

Only two publicly traded companies are incorporated in North Dakota. But last year lawmakers there -- prodded by out-of-state activists including Carl Icahn -- enacted the nation's most shareholder-friendly corporate-governance law.

Associated Press

Carl Icahn

The law prescribes rules that companies incorporating in North Dakota can adopt as a package, including requiring an annual shareholder advisory vote on executive pay and the naming of a chairman who isn't an executive. The rules also provide for the annual election of directors and make it easier for shareholders to nominate their own director candidates.

Now, shareholders at four companies are offering resolutions urging those companies to reincorporate in North Dakota. Experts say the proposals, while unlikely to pass, could lead to pressure for more shareholder-friendly corporate-governance rules in other states.

John Chevedden, a longtime activist investor in California, filed a proposal urging Oshkosh Corp. to move its incorporation to North Dakota from Wisconsin. Mr. Chevedden also helped shareholders at Hain Celestial Group Inc., Whole Foods Market Inc. and PG&E Corp. draft and file similar proposals.

Mr. Chevedden says he picked those companies because of what he considers to be their weak governance and the timing of their annual meetings. "We wanted to get early feedback ... to see what level of support this will generate," he says.

In October, Hain Celestial, a Melville, N.Y., organic-food maker incorporated in Delaware, unsuccessfully petitioned the Securities and Exchange Commission to dismiss the proposal on procedural grounds. A company spokeswoman declined to comment.

Brian Hertzog, a spokesman for California-based and incorporated PG&E, says shareholders are well served by the utility's current corporate-governance rules. "It's unlikely that we would support" the proposal, he says. "We've been a California company now for over 100 years."

Representatives at Oshkosh and Whole Foods declined to comment.

The North Dakota law is part of an effort by shareholder advocates to generate competition among states for company incorporations based on governance rules. More than half of publicly traded companies are incorporated in Delaware, which has long courted such business. Critics say Delaware law favors management over shareholders.

In 2005, a group of activists, including Mr. Icahn, hired William H. Clark Jr. -- a Philadelphia lawyer who has helped write corporate laws in Pennsylvania -- to draft a pro-shareholder governance model. Mr. Chevedden says he isn't affiliated with that group.

"I think it was prescient," says Mr. Icahn. "If you look at the companies on Wall Street and the problems you have there, it's because nobody is accountable."

Mr. Clark first took the legislation to Vermont, home to only five public companies in 2005. But one company objected, and the bill died in committee.

The following year, North Dakota removed a provision from its constitution that had discouraged companies from incorporating there. Mr. Clark then began building support for a revamped corporate-governance bill. He recruited local lawyers, a prominent businessman and the former mayor of Bismarck as backers. The group then hired a well-known Bismarck lobbyist, Joel Gilbertson.

Republican State Rep. Duane DeKrey says he has known Mr. Gilbertson for years and agreed to co-sponsor the bill, although he had no "burning desire one way or another" and didn't expect it to pass.

The Greater North Dakota Chamber of Commerce and Integrity Mutual Funds Inc., the larger of two companies incorporated in the state, opposed the bill. But Integrity dropped its objections after learning it could stick with its traditional rules, Mr. Clark says. Integrity Chief Executive Bradley Wells declined to comment.

Al Jaeger

The group also won the support of longtime Secretary of State Al Jaeger, who thinks the law might attract business to North Dakota. "Our position was ... we will build it," Mr. Jaeger says. "If somebody wants to come and play in our ball field, that's great."

The North Dakota law is unlikely to draw much business to the state soon, experts say. The four reincorporation proposals are nonbinding and unlikely to win approval, says Carol Bowie, director of the Center for Corporate Governance at proxy adviser RiskMetrics Group Inc.Activist investors say the North Dakota law adds fuel to the debate over shareholder rights and oversight, which has intensified during the U.S. financial crisis.

"This is more a wake-up call for Delaware to modernize than any significant attempt to attract business in North Dakota," says Richard Ferlauto, head of corporate governance and pension investment at the American Federation of State, County and Municipal Employees.

Write to Cari Tuna at cari.tuna@wsj.com

source: wsj.com

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Fort Lauderdale Blog and Real Estate News
Rory Vanucchi
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http://waterfrontlife.blogspot.com
www.FortLauderdaleLiving.net

List of potential tenants is tight amid a wave of store closures

The big, yellow “Closing” banner caught Greg Allen’s attention.

“I decided to see if there are any deals,” the Home Depot flooring salesman said. “It is surprising because Sound Advice has been around for a long time.”

Allen was among a steady flow of bargain hunters streaming into the Sound Advice on Federal Highway in Fort Lauderdale on Nov. 17. It had been little more than a week since the beleaguered stereo and electronics retailer announced the closing of 94 stores nationwide, including all in South Florida.

“They say we are in a recession, so I might as well save money as much as I can on something that I need,” said Ariel Umana, a photo specialist at a nearby Walgreens. He was on the hunt for a CD player.

Sound Advice, rocked by competition and declining sales, is hardly the only retailer sinking in these stormy economic seas.

Linens ’n Things, Floral Supply Mart, OfficeMax and The Rag Shop have also closed stores. After two years in business, the Brandon Fine Furniture store in Fort Lauderdale closed. The closures have given rise to a swell of empty big-box spaces in an environment where few are lining up to lease space.

“From this point forward, we are estimating 14,000 retail doors will close,” said Richard L. Kaye, executive VP of the Hilco Organization, an asset disposition, appraisal and acquisition firm. The Northbrook, Ill.-based firm is handling the liquidation of bankrupt Linens ’n Things.

The combined store closings will flood the retail real estate market with about 75 million square feet of vacant space by the middle of next year, Kaye said.

“Frankly, it is going to be a very challenging environment for retail space in general,” he said.

The cracks are already starting to form in South Florida’s once-Teflon retail sector.

Third quarter vacancy rates were at a five-year high, according to Reis research. In response, third quarter rents dipped lower across South Florida.

Many retail real estate experts are bracing for vacancy rates to spike several percentage points by early next year, as sluggish holiday sales are likely to wipe out more retailers.

“I think everyone imagines that January of 2009 will not be a pretty picture,” said Stephen Bittel, chairman of Terranova Corp., which owns and manages 3 million square feet of shopping centers in South Florida. “Christmas was always critical, but this year, Christmas assumes unusual importance.”

Bittel said home goods, apparel, and restaurants are the most vulnerable.

The downturn, however, could create opportunities for some retailers to grab prime spots at discounted rents.

Dollar Tree is looking to open as many as 20 new stores across South Florida, said Bill Rotella, president of Fort Lauderdale-based Rotella Group, which is representing the discounter. The chain’s stores range from 10,000 to 20,000 square feet.

“Landlords are aggressively trying to get their boxes re-tenanted and are being as flexible as they can,” Rotella said. He estimated deals are now being cut for rents that are 20 percent less than a year ago.

According to local brokers, other big-box retailers now looking to move into South Florida are: Indianapolis-based electronics and appliance retailer hhgregg, with 30,000-square-foot store formats; Monrovia, Calif.-based neighborhood grocer Trader Joe’s, whose stores are 12,000 to 15,000 square feet; and Kent, Wash.-based outdoor gear and clothing retailer REI, whose stores average 27,000 square feet.

Bethany Neilson, a spokeswoman for the 105-store REI chain, confirmed that the retailer is looking for locations in Florida, but has yet to sign any leases. Despite the economy, she said, REI is not planning to deviate from its growth rate of six to eight new stores a year.

In addition to new chains, empty big-box spaces could be snapped up by existing market players looking to fill in coverage gaps, said Paco Diaz, senior VP of CB Richard Ellis.

With little new construction in the near future, Diaz said, landlords able to act aggressively to land deals and financially positioned to withstand lean times will come out on top once the market rebounds.

“Come 2011,” Diaz said, “they are going to be in very good condition.”

dlunsford@bizjournals.com (954) 949-7523

source: South Florida Business Journal

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List of potential tenants is tight amid a wave of store closures



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Rory Vanucchi
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http://waterfrontlife.blogspot.com
www.FortLauderdaleLiving.net