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You may flip your wig over this one. In today's (June 7) Union-Tribune is a quarter-page ad for a building at 7701 Herschel in La Jolla. Asking price: $6.5 million. On May 4, the County Assessor's office reported that this building was sold for $4.75 million to 7701 Herschel LLC, which, according to state records, has the same address as Platinum Equity, which has purchased the Union-Tribune. On May 4, the assessor's office recorded sales of several other properties including the Mission Valley U-T headquarters to Platinum entities. The 7701 Herschel building, now vacant, once housed Copley Information Systems. It appears the building has gained significant value in about a month's time.

Comments
19

Don, asking price and sales price are two very different animals.

Let's see if they get any bites at $6.5 Million, and let's see how long it sits on the market.

There is a home currently for sale that belonged to a famous movie star, it is very beautiful, went on the market 18 months ago at $9.2 million, it is still on the market today at $6.2 million with no takers.

A devleoper finished a fabulous 6 acre Malibu estate over a year ago and it was listed for $15 million-not a single offer. Sat on the market over a year until the builder finally pulled it off the market and is now sitting on the property (with carrying costs) hoping* values come back soon (don't hold your breath-could be 3-5 years).

June 7, 2009

BTW-I could not find the ad-can you post a link to it?

June 7, 2009

Run it up the flagpole and see who salutes it.

June 7, 2009

Response to post #1: Oh yes, you always try to get whatever you can. But that's a pretty big -- and fast --markup. Platinum registered the LLC in late March and the sale was recorded for $4.75 million in early May. About a month later the price has climbed a bundle. Maybe Platinum has done something to the building. Don't know. Best, Don Bauder

June 7, 2009

Response to posts #2 and 3: Slattery and Kuzman represented the seller when the building was sold to Platinum for $4.75 million in early May. Best, Don Bauder

June 7, 2009

Response to post #4: There used to be retired generals in top management at Copley. Maybe they can flip a salute. Best, Don Bauder

June 7, 2009

Slattery and Kuzman represented the seller when the building was sold to Platinum for $4.75 million in early May.

I thought this building was part of the overall UT sale, along with the MV HQ's???

Why would they need a broker involved??? Did Grubb/BRE also represent the UT in the MV HQ sale?

I have a feeling they are NOT going to get anything near the price they are asking in La Jolla. Wait and see.

Saw another mega mansion today, will be going to auction starting at $6 mil, 20 acre 13K sq ft in Thosand Oaks. Original asking price= $16 million! Who knows what the place will sell for. The last asking price was $13 mil. The times they are a changing.

We shall see what happens, only the market will determine of they are way over the top on price.

June 7, 2009

Response to post #8: The various real estate deals were done at the same time (early May) but not all the LLCs had the same name. The commercial real estate market is slipping badly. But not this building, apparently -- at least, in the eyes of the seller. Best, Don Bauder

June 7, 2009

The commercial real estate market is slipping badly. But not this building, apparently -- at least, in the eyes of the seller.

The seller must be wearing beer goggles......LOL!

June 7, 2009

Response to post #10: Agreed. This big a leap in this short a time suggests someone has been sipping some giggle juice. Or at least hoping that some buyer has been doing same. Best, Don Bauder

June 8, 2009

The big question is what is the property actually worth? it wasn't sold as a standalone transaction to the highest bidder, so it may have intentionally been low-balled in the first place as part of the larger transaction, so money could be quickly extracted out of it when sold at its legitimate price.

I don't pretend to know why that would be advantageous in this case, but maybe someone else here does. What I do know is that properties are sold below value all the time for a whole host of reasons, some legitimate, some nefarious.

June 8, 2009

Response to post #12: Matt Potter and I worked this story Sunday morning. The first thing that occurred to both of us was that Copley had low-balled the building as part of a discount in selling the company. The Mission Valley building was sold to Platinum for $35.5 million when it had an assessed valuation of $91.3 million. Such discounts will give Platinum a chance to flip the real estate for a fat profit. We don't know that this is the case, of course, but we certainly suspect it. Best, Don Bauder

June 8, 2009

Matt Potter and I worked this story Sunday morning. The first thing that occurred to both of us was that Copley had low-balled the building as part of a discount in selling the company. The Mission Valley building was sold to Platinum for $35.5 million when it had an assessed valuation of $91.3 million. Such discounts will give Platinum a chance to flip the real estate for a fat profit. We don't know that this is the case, of course, but we certainly suspect it. Best, Don Bauder

By dbauder

This is over my head I guess. I just don't get it.

If Copley discounted the properties, then I would think he would get a higher price for the UT. But that did not happen-or did it?

If Copley is going to get the discounted price of the real estate added onto the UT sale then it makes sense, but I don't know if that was the case.

Then there are the tax implications. By taking title to the real estate at a low ball price, just to immediately relist at a much higher price, their taxes increase with the spread between the low ball and market price being subect to capital gain taxes.

It would make MORE sense to over pay for the real etsate (at least on paper) and then sell them at a loss (on paper) for the tax offsets.

Soemone help me out here and let me know the logic behind this.

June 8, 2009

Don,

Do you know what was the full price paid by Platinum? I have been confused by this deal, because it seems like the property acquired by Platinum is worth a lot more than they paid for the whole company, so it didn't make sense to me. I read in one place that the initial offer was only $15 million, and the actual deal was for not a great deal more than that.

I assume the $40 million for the properties was in addition to the $15 million (though I don't understand why they are separate transactions). I am baffled why the paper would sell for such a low price AND the property would be sold for up to $60 million less than the current value. Does that somehow mean Copley had to give Platinum $45 million to take the paper? Does that make any sense?

June 8, 2009

Response to post #14: The big question is whether Copley got anything for the Union-Tribune. We have not seen evidence that the paper itself was sold, although we haven't checked the records recently. The discounts on the real estate may have been a monetary reward for taking the paper off Copley Press's hands. I hasten to add that we don't know this. We only think it is a plausible scenario. If you look at the stock market values of metro daily newspaper chains, you're left with the thought that metro dailies may be worth nothing. Morningstar recently stated that the stock of both McClatchy and Lee Enterprises (which also has a lot of weeklies and smaller papers) may be worth nothing. However, both are heavily leveraged; I think Copley had jettisoned most if not all of its debt. But the former U-T president, when asked if the paper was profitable, joked that it depended on which day one looked. That suggests that the company may have been losing money -- perhaps both on a cash flow and accounting basis. I've suspected that for a long time. Again, I don't know that; the company isn't talking. Best, Don Bauder

June 8, 2009

Response to post #15: We don't know what the paper and its assets sold for -- or whether the paper itself was sold for anything. My best guess is a total of around $50 million. Initial rumors were that the price was $15 million. I didn't want to post that because it sounded so low. But then I realized that an analyst had valued the Boston Globe at $12 million to $20 million. Then I did more research on what metro dailies were going for in the stock market, and that $15 million number didn't look too bad. When I was on vacation, Matt checked the real estate records and found that various properties, including the La Jolla one under discussion, went for a total of a bit over $50 million. And the Mission Valley building went for well under half its assessed valuation. If Copley underpriced the real estate as a lure to get Platinum to buy the paper, then Platinum could be able to flip the buildings for a quick profit, even in this dismal commercial real estate market. That may be what Platinum is attempting with the La Jolla building. Don't be surprised if Platinum has the U-T vacate the Mission Valley building; the U-T would then outsource printing and possibly sell the building to a speculator. It would make more sense, probably, to hold on to it for awhile to see if the market turns. Obviously, Platinum thinks it can restore the U-T to profitability. Possibly it can. Remember, this is speculation. I do not have the inside dope on this deal. Best, Don Bauder

June 8, 2009

Don,

Methinks the Camino de la Reina property lost value because of the newspaper, which has a minimal book value. It'll take big bucks to turn that property into anything but a printing plant.

(Aside from the presses and such, newspapers typically leave behind contaminants such as lead dust, solvents, diesel fuel, et cetera.)

If the Copley were selling because of pending tax bill or other debts, they might have just written the newspaper down to zero and figured it was just a real state transaction. The fact that their consulting partner is Black Publications, another distressed company, indicates that they just want anybody to take the papers to greener pastures.

At least these are my guesses.

June 8, 2009

Response to post #18: Newspapers may leave contaminants behind, but I think that building could be useful after a cleanup. The printing part of it is not a large percentage of the whole. The building could be a tear-down, too. The location is excellent once the commercial real estate market turns around (although that may be a long way off). I continue to suspect (but not know) that the real estate was discounted so that Platinum would take the money-losing paper off Copley's hands. Platinum can make enough flipping the real estate that it can try to break even with the paper and online operation for a couple of years. If it doesn't work out, Platinum can liquidate the U-T. Remember, these are my suppositions and I could be wrong. I do not believe David Copley was selling because of a tax bill. The company sold the Ohio and Illinois papers for almost $380 million, theoretically to satisfy estate taxes from Helen Copley's death. (I still don't know why that tax bill had not been figured to the nickel. Helen died a slow death; there was plenty of time to calculate it.) I also don't think debt was a factor. The company got rid of most of its debt when it sold those Ohio and Illinois papers, I believe. Best, Don Bauder

June 8, 2009

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