Wednesday, October 22, 2008

Pruitt on McClatchy's Miami land sale -- "no guarantee the deal will close"

In McClatchy's 3rd quarter earnings call, Alexia Quadrani from J.P. Morgan asked about the progress of McClatchy's Miami land sale. In his answer, CEO Gary Pruitt hinted at the possiblity the deal may not close:
We’re selling 10 acres of land, a parking lot adjacent to The Miami Herald building for a price of $190 million. We have a good dialogue with the sellers and we’re hopeful that that deal closes. It’s a real estate contract which means we can’t guarantee that that deal will close. We’re hopeful that it will and 100% of the proceeds, which after tax would be about $115 million, will be used to pay down debt.
"We can’t guarantee that that deal will close"? I believe this transaction has been in the works for about a year. (It was mentioned in the 3rd quarter conference call a year ago.) You'd expect Pruitt's answer to be along the lines of, "We have a closing date next month" or some other concrete statement. Since Miami real estate values have dropped, is it possible the buyer is trying to gain more concessions from McClatchy? Is the buyer having trouble financing the deal? Is the buyer trying to back out?

UPDATE 10:20: I just reviewed the earnings call from 4th quarter 2007. Speaking of the Miami deal, Pruitt sounded much more confident early in 2008:
We also expect to complete the sale of land in Miami this year [2008], with after-tax proceeds of approximately $115 million.

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