Miami Land Sale Delayed by Six More Months
Miami land sale deal between McClatchy (MNI – the seller) and Citisquare Group (the buyer) was extended for the second time after the latter failed to exercise its option to buy the 10 acres of land adjacent to the Miami Herald.
The deal was supposed to be completed on Tuesday, June 30, 2009. The date of closing the deal is now extended to December 31, 2009. Citisquare Group is required to increase the termination fee payable to McClatchy due to the extension of the agreement.
Earlier, on December 30, 2008, McClatchy announced the extension of the closing date of the agreement (previously December 31, 2008) to sell the 10 acres in order to gain some time to arrange financing in this troubled credit environment, as falling real estate prices and frozen credit markets are making the conclusion of commercial real estate deals extremely difficult. The transaction was expected to close on or before June 30, 2009.
The purchase price remains at $190 million, of which $10 million has already been received by McClatchy in the form of a nonrefundable deposit. When McClatchy, the publisher of Miami Herald newspaper, acquired the Knight Ridder newspaper in 2006, it inherited an agreement to sell the Miami Herald’s 10-acre parking lot.The deal had no expiration date.
McClatchy’s publishing segment competes with The New York Times Company (NYT), The Washington Post Co (WPO), Gannett Co (GCI) and Journal Communications (JRN). The newspaper industry is in the midst of a secular and cyclical slowdown in print advertising, as more and more readers are migrating to the Internet.
McClatchy is building its Internet operations, cutting costs, reducing its debt burden and has recently suspended its dividend. However, postponement of $190 million land sale erodes visibility to any relief. We maintain our Sell recommendation on the stock with a six-month target price of $0.50.
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