Seattle Times publisher Frank Blethen says in a memo explaining why the paper is selling two real estate blocks: “We learned from the financial collapse that sitting on extremely valuable property does not help meet short-term financial obligations, as the ability to sell the property on short notice or at full market value is nil.” The rest of his memo:
TO: All Employees
FROM: Frank Blethen
DATE: February 21, 2012
SUBJECT: Possible Sale of Seattle Times South lake Union Real Estate
Later this week, The Times will be testing the marketplace for a possible sale of one or both of our remaining South Lake Union real estate blocks.
While we would prefer to hold these assets for the long-term, we’re contemplating this action for two reasons:
To determine if we want to take advantage of the unique South Lake Union real estate market – a marketplace in high demand, and one of the few places in the country that the limited remaining real estate has rebounded in value equal to, or exceeding, the November 2008 financial system collapse.
We are also weighing the merits of converting these valuable land assets into a more liquid form, given our experience with the lack of liquidity as the Great Recession took hold.
We learned from the financial collapse that sitting on extremely valuable property does not help meet short-term financial obligations, as the ability to sell the property on short notice or at full market value is nil.
Going into the Great Recession, The Times had one significant liability – our onerous bank debt. Thanks to each of you, our senior management team, and the Blethen family’s willingness to sell the Troy block and the 1000 Denny building, we paid off most of this debt and refinanced a small portion of it on much more favorable terms.
One consideration in our exploration of a sale is the status of our pension plans. Unfortunately, the 2008 financial collapse turned our fully and well-funded pension plans into significant unfunded liabilities overnight. This is not unique to The Times and is negatively affecting almost every defined pension plan in the country in both the private and the public sectors. The annual payments we must make on these liabilities are a challenging drag on the company’s financials.
The external economy is an uncertainty to which we must manage. If it gets steadily better and interest rates begin to rise in 2014, as suggested by the Federal Reserve, our pension liabilities should decrease. On the other hand, if there is a double-dip recession or another economic shock, these liabilities will get worse, and having liquidity to help us through another crisis will be very important. Fortunately, our business model is solid and has a bright future as we continue to nurture its transformation through this decade.
The marketing of these two properties will undoubtedly be in the news. We want you to have some background and not be surprised by any coverage you see. You can rest assured, whether we hold on to both pieces of property, sell one or sell both, it will be a strategic decision that maximizes our ability to navigate the uncertain and unchartered economic environment of the next few years and move into a bright future.
We have a great group of skilled and dedicated employees, and the journalism/public-service we are doing today is as good as we have done in our 115-year history. This is especially important since the public’s need for our independent journalism is greater than ever.
If you have any questions or comments please feel free to email me directly or route them through your department head.