With the planned spinoff of its newspaper unit underway, Tribune Co. is turning its attention to its real estate.
The media company announced Tuesday the hiring of real estate veteran Murray McQueen to fill the newly created position of president of real estate. He will assess whether Tribune is making as much money as it can from its holdings, including the historic Los Angeles Times headquarters in downtown L.A.
All told, the company owns more than 7 million square feet of real estate, including buildings, printing plants and other facilities.
“Just like the other assets owned by the company, it’s important that we think strategically about how best to maximize the value of our real estate for our shareholders,” Peter Liguori, Tribune’s chief executive, wrote in a memo to employees.
Tribune said last week that it would cleave off its newspaper unit into a separate company consisting of The Times, the Chicago Tribune and its six other daily papers. All other assets — including real estate and ownership stakes in several valuable Internet companies — would remain part of Tribune Co.
Without those assets, the new publishing unit would have less of a financial cushion. The newspapers’ ad revenue has slid sharply, leaving them little room to maneuver if the economy sours.
“That’s certainly not the intention of the Tribune board or its large investors, to set this up for failure — but it’s a risk,” said Craig Huber, a media analyst at Huber Research Partners. “You don’t have anything you can fall back on. You can’t sell any real estate or Internet properties.”
In the first quarter, Tribune’s newspaper ad revenue sagged 9% after sliding 14.5% the previous two years. All the papers remain profitable, partly because of deep layoffs and cost cuts.
By one estimate, real estate has constituted about half of the value of all newspaper companies sold in the last three years. And property remains a crucial insurance policy for hard-hit newspapers.
Tribune has considered selling its landmark Los Angeles headquarters several times over the years. But deals could not be struck, partly because of unfavorable market conditions, a less-than-prime location and the challenge of reconfiguring the building for other uses.
The Washington Post has considered selling its signature building to raise cash to carry it through the industry’s current travails. The New York Times raised $225 million in 2009 by selling its newly constructed headquarters and renting back space from the investment firm that bought it. The paper has an option to buy back the building after 10 years.
Tribune has yet to release crucial details about the proposed spinoff, including the share of debt that the publishing unit would inherit from the parent company and how much capital it would be given to sustain itself.
News Corp., which completed the split of its entertainment and publishing holdings last month, earmarked $2.6 billion in cash and no debt to its newspaper unit.
One analyst said Tribune’s stand-alone newspaper unit would be able to weather tough times even without its real estate assets. Cost cutting and new revenue sources such as online subscriptions have helped offset print advertising declines, said Matt Kaplan, an analyst at Imperial Capital in Los Angeles.
“Yes, [ad revenue] is declining, but they’ve been able to rationalize expenses at the same time,” Kaplan said.
McQueen, the new Tribune real estate chief, co-founded Channel West Group, a Los Angeles real estate investment firm, in 2011. Previously he was an executive at private equity firm Cerberus Capital.