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The White Elephant in the Room: Stuck with Shuttered Plants, Papers Battle the Taxman

Magazine article Editor & Publisher

The White Elephant in the Room: Stuck with Shuttered Plants, Papers Battle the Taxman

Article excerpt

U.S. NEWSPAPERS DIDN'T WAIT for the economy to start hollowing out before emptying out their production plants. By the time many readers found their homes were costing more than they were worth, newspapers already were shuttering sites for similar reasons.

As the recession deepened, lending tightened and more plants closed, chances that any would attract another enterprise diminished. Not that newspapers didn't try to sell their white elephants: Despite the collapse, the number of newspaper real estate appraisals actually didn't change much over the past two years, says James Redford, a senior analyst at Fort Worth-based Integra Realty Resources.

Newspaper plants are among the more complicated commercial properties to sell because they are special-use structures that are not easily converted to other industrial purposes.

"The same issues that affect the value of the machinery affect the value of the plant," explains John Woolard, managing partner at the property tax valuation and consulting firm Morrison & Head in Austin, Texas. In the ease of newspapers, mothballed printing presses depress the value of the plants that house them.

Consider the case of the Chicago Sun-Times. In connection with the parent company's bankruptcy, Huron Consulting Group appraised the relatively new plant and presses. On paper, they were worth about $51.3 million. But the consultants concluded that even if there were not a glut of printing equipment on the market, the Sun-Times couldn't sell its presses because they and the building would be damaged in the dismantling process. Huron's bottom line: Plant and presses might fetch $3.2 million in a sale.

Given the high cost of modifying a press foundation and pad, newspapers often argue with tax authorities that their idled plants should be appraised at the lower rates applicable to a warehouse. Woolard is handling the tax appeals of four newspapers, and recently resolved a fifth, successfully arguing that its plant was marketable only as a warehouse.

Some papers managed to stay ahead of commercial real estate's downward curve. The New York Times upgraded its College Point plant before exiting its Edison, N.J., facility. Just beating the bum market, the Los Angeles Times sold its Valley plant in 2006. But as the L.A. Times moved all printing to its modern Olympic plant downtown, a process that was expected to be completed in June, it isn't trying to sell its Orange County plant. "We will mothball the presses" and retain business and editorial offices there, says Communications Vice President Nancy Sullivan. …

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