Digital First Media holds the reins at the Orange County Register, but the 14.3 acres surrounding the daily newspaper’s operations at 625 N. Grand Ave. in Santa Ana went to developer Mike Harrah for $34 million.
“We’re not in the business of owning real estate,” said Ron Hasse, publisher and president of Digital First’s Southern California News Group, which now includes the Register and the Press-Enterprise in Riverside—recently acquired out of bankruptcy—and nine other dailies spread over the region.
“Most businesses … just look for the smartest and most efficient way of doing business and oftentimes that’s leasing” space, Hasse said. “And so that’s what we’ll be doing as we move forward.”
Harrah is a longtime presence in Santa Ana, where he has been a prime factor in the redevelopment of the city’s downtown. He joined with the management of the Register’s former parent—Freedom Communications Inc.—in a failed effort to buy the operation.
“[Harrah] was a competitive bidder with the local offer, and I think once the bid was finalized and Digital First Media selected as the winner of the bid, Mike began opening discussions with us,” Hasse said.
Harrah already owned the five-story Register, which he got from Freedom for about $27 million as the company hit a cash crunch in 2014.
The 173,000-square-foot property—which is separate from the adjacent land and printing plant—came with a lease-back that Digital First has renegotiated to run through the end of this year.
“[It] gives us an opportunity to exit the building sooner [than the prior deal] if we want to and find a new location in Orange County for the Orange County Register,” Hasse said. “When we do relocate, we’ll move all non-production positions into a new office environment. The production facility is under a longer lease and will still continue to run out of the Santa Ana office.”
Digital First, which paid $49.8 million for Freedom’s assets in a bankruptcy auction held last month, got two printing plants in Santa Ana and Anaheim, and another in Riverside that sits on a 6-acre site and is used by the Press-Enterprise. It partnered during the closing of the sale with New York-based commercial real estate asset management firm Twenty Lake Holdings, which bought the Riverside real estate and is leasing it back to Digital First.
Operating as a tenant rather than a real estate owner will enable the 11-newspaper Southern California News Group to meet its objective to “make the Riverside and Orange County publications sustainably profitable,” according to Hasse.
Plans call for more than picking up benefits of scale, with new additions to the Register’s digital presence in the offing.
“We’re the largest news gathering operation in the four counties of L.A., San Bernardino, Orange and Riverside, and so we have a different voice, we have a more powerful presence and we believe that we’re going to get some revenue upside because of that,” Hasse said. “There’s not been a lot of digital revenue investment in the former Freedom properties. That’s something that we do very well at Digital First Media and we’re going to be able to provide that level of sophistication to the new properties to drive revenues there.”
Digital First, for example, owns Ad Taxi, an in-house digital advertising agency.
“It allows us to expand outside of our owned and operated inventory,” Hasse said. “A lot of organizations have their websites and their other forms of media, and they put advertisements on that for the readers who come in to read their content. With the advanced digital strategies of Ad Taxi, it allows us to be an agency and to sell to any particular advertiser, with digital reach far outside our operated property, and gives the advertiser greater benefit and much greater return on their investment.”
Digital First has been “profitable since our existence,” Hasse said, adding that the private company, owned by New York-based hedge fund Alden Global Capital LLC, does not reveal its financials.
“We put great emphasis on creating new advertising strategies to continue to try to find ways to fund our newsgathering operations,” he said. “We think we have an amazing audience of readers that our advertisers have great interest in. But really our focus is to drive new digital revenue as the future of our advertising department.”
Hasse also said he is looking to reduce the group’s non-payroll expenses via “vendor negotiations” and “improvements in our printing capacity.” Digital First had contracted Freedom to print several of its publications for a number of years before last month’s acquisition—an area of potential savings.
“We’re a much larger organization, we have scale that we can use to leverage better deals that independent publications like the Press-Enterprise couldn’t, and frankly there are a lot of contractual agreements that we’ve inherited and we think we can improve upon.”
The Register reported a $1.9 million loss on $10.3 million in revenue in February. The Press-Enterprise posted $3.3 million in revenue and $272,000 in income during the same period.
Digital First sought some operational efficiencies as soon as it took over the Register and Press-Enterprise. It laid off Freedom’s senior management team, including some 70 staffers from the marketing, sales and circulation departments. Managing Editor Donna Wares is the highest-ranking supervisor in the Register newsroom, while Michael Coronado retains the title of editor at the Press-Enterprise.
Southern California News Group Executive Editor Frank Pine is in charge of the Orange County Register in Santa Ana and the Press-Enterprise in Riverside, along with the other nine dailies. Tom Kelly has been named the group’s senior vice president of advertising and chief revenue officer, while Dan Scofield is chief financial officer and chief operations officer.
Hasse is continuing his role as a nomad. He took a rental in Orange last month and is keeping his home in the Porter Ranch area of the San Fernando Valley of Los Angeles.
“We don’t have an organizational structure where we get to sit in one building in downtown Los Angeles and run all of Southern California,” he said. “We have 11 different properties, and what I do is move myself around to them frequently. I’ll spend more time in Orange County and Riverside County here in the near future. But my objective is to be a presence in each of the communities we serve. So I’ll have a place in Orange County, I’ll have a place in Los Angeles County, and who knows, I might have a place somewhere else, too.”
