Tuesday, December 30, 2008

Setback!... McClatchy grants 6-month extension to buyer in $190 million Miami land deal... buyer had trouble securing financing

In a disappointing development for a company hoping for good news and an infusion of much-needed cash, McClatchy announced Tuesday it has agreed to a 6 month extension of escrow in the $190 million Miami Herald real estate deal.

The McClatchy Company (NYSE: MNI) announced today that it has extended the closing date of its agreement to sell 10 acres of land adjacent to The Miami Herald in order to allow the buyer additional time to arrange financing in this difficult credit environment.

The purchase price remains unchanged at $190 million -- $10 million of which McClatchy has already received in the form of a nonrefundable deposit.

With the acquisition of Knight-Ridder, Inc. in 2006, McClatchy inherited an agreement to sell The Miami Herald's 10-acre parking lot with no expiration date on the deal. The contract had subsequently been amended to require closing by Dec. 31, 2008.

Under the terms of the new amendment, the buyer, Citisquare Group, LLC, has agreed to close the transaction on or before June 30, 2009, and will relinquish its right of first refusal to purchase The Miami Herald's building and underlying land, which was included in the original agreement. Citisquare has the ability to extend the agreement for an additional six months to Dec. 31, 2009, by increasing the termination fee payable to McClatchy should the deal fail to close.

Gary Pruitt, McClatchy's chairman and CEO, said, "We are pleased to reach an accommodation with Citisquare to preserve this valuable transaction. Maefield Development, a Citisquare partner and the developer of this land, has expressed confidence to us that the deal will close."

Not getting the deal done now is bad news. Of course the worst news would be if the deal fell apart. But what will the financial health of the buyer be in 6 months? And I'm betting McClatchy needed the cash from the deal pretty badly, even though they claimed they would use the proceeds to pay down debt.


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Anonymous said...

Commercial property in South Florida is in a crash dive. It could be years before the commercial property sector climbs out of that sinkhole.

By then, the Herald parking lot will be worth as much as the parking lot at 20th and Q streets.

Anonymous said...

Hmmmm seems to be a foreign company. Venezuela? That would explain McClatchy's love for Hugo.

Anonymous said...

Maybe they will make a better real estate company than they do a news organization.

I am guessing that they will make every effort to avoid pissing off half of their potential customers when it comes to selling property, which would be a far superior business model than their current one.

Anonymous said...

Since the property deal is delayed, Plan B to reduce first quarter debt is more layoffs.