I don’t do a “Media Year in Review,” but if I did, yesterday brought a great new entrant: “Star Tribune denies own story.”
The short version: mid-afternoon Tuesday, the online Strib declared Ryan Cos. secured an option to buy four of the newspaper’s downtown Minneapolis blocks. Within minutes, the story disappeared. Eventually, Finance & Commerce’s Burl Gilyard tweeted, “Star Tribune spokesman Steve Yaeger: Reports that Ryan Cos. has a deal to buy Star Tribune land are NOT accurate.”
It was the Strib’s report!
By bedtime, the Strib’s corrected version appeared: “Ryan Cos. in talks with Star Tribune over land development.” Apparently, the two have decided to talk exclusively. Still interesting, less significant, and the paper issued no correction or mea culpa.
Business editor Todd Stone has promised me a statement; I’ll update this piece when I get it.
[Update: In the original story, reporter Janet Moore did indeed quote Ryan Cos. V.P. Rick Collins — I couldn’t recall if she had — but paraphrased Collins saying Ryan had an option. According to Stone: “We pulled the news item 20 minutes after publication when we discovered that the initial description we were given of the negotiations was imprecise. We continued to engage sources, then posted an updated story later that evening.”]
For his part, Yaeger emphasizes there is no land sale and the discussions are merely over an option to buy. This is even less than the 2007 Vikings deal, where the team backed away from a specific $45 million purchase price.
If nothing else, even the corrected story indicates things are heating up on the stadium doorstep. So if the deal happens, what would it mean for the paper?
What we know for sure: less debt. According to the Strib’s post-bankruptcy financing covenants, any land sale proceeds (minus relocation costs) are obligated to pay down debt. Originally $100 million just three year ago, Strib management has been paying at an accelerated rate, and the debt now stands at “roughly $70 million,” Yaeger says.
Last month, the paper sold a 3.4-acre parcel in downtown’s North Loop to an apartment developer for $1.8 million. That money will help offset the $70 million.
Lower debt means lower interest payments, which can only help a paper that has seen revenues shrink by low single digits. The paper has bragged that in a ravaged print sector, its cash flow is stable; lower debt can only help that.
What we can only guess at: how much the land is worth. That Ryan has secured exclusive negotiating rights likely means they have a client or clients who are really interested in the last four-block contiguous parcel in downtown. If you’re a developer, you want to be able to tell your potential client you won’t get beat out for the property. Ryan now has a good-faith, short-term, but not specifically time-limited ability to say that.
Strib executives have always insisted that the four blocks (west of Park Avenue between South 3rd and 5th streets) are attractive not because of the stadium but because of developable size and proximity to light rail (especially with the Central Corridor route coming online in 2014).
Stadium foes, noting the paper’s full-throated stadium advocacy, will scoff; the eventual deal may settle the debate.
The four-block parcel’s ultimate price could depend on what Ryan wants to build there, but we have a pretty good idea what will be built on the Strib’s fifth stadium-area block: a stadium. Or more precisely, something the new Metropolitan Sports Facilities Authority wants to build, since that block (east of Park and south of 3rd) is within the stadium footprint.
As of right now, the MSFA has $25.8 million in its budget for land acquisition. As of March, the Strib’s block was assessed at $3.3 million. I estimated then that the Strib stood to reap between $4.3 million and $5.6 million, or a 30-75 percent premium over the assessed value.
The four “Ryan blocks” are assessed at “about $18 million,” according to the Strib this morning. Inflate that by 30 to 75 percent and you’re looking at $23 million to $31 million. That would demolish a good chunk of debt.
Again, the Vikings were once about to pay $45 million, so perhaps such a large parcel reaps an additional premium … or as we stagger from the Great Recession, a volume discount.
What we’re pretty sure about: The Strib stays downtown. CEO Mike Klingensmith has said this repeatedly and it hasn’t changed. The Strib would likely lease instead of own.
The folks at the Associated Press have to feel a bit shellshocked, since they just moved into Strib HQ this fall. But both sides would be guilty of malpractice if the lease didn’t recognize the years-old chance that 425 Portland would meet the wrecking ball.
Despite yesterday’s flurry of excitement, Strib officials don’t expect any relocation to happen in the next 12 months, and possibly many months after that, even if a deal somehow gets sealed quickly.