Santa Ana developer Mike Harrah is closing in on a deal to buy the headquarters of the Orange County Register, according to sources.
The largest commercial property owner in downtown Santa Ana has made an offer believed to be worth $27 million to buy the paper’s headquarters at 625 N. Grand Ave., multiple sources familiar with the deal have told the Business Journal.
Recent court filings say an all-cash, $27 million deal has been reached with an unnamed buyer.
The deal would include the five-story office that holds the Register’s 173,000-square-foot headquarters, along with three smaller nearby properties, for a total of about 4 acres.
The purported price would work out to about $150 per square foot for the entire property, which is just off the Santa Ana (I-5) Freeway near the Costa Mesa (55) Freeway.
A time frame for the deal hasn’t been disclosed, and sources familiar with it said there are some potential stumbling blocks on the sale.
Several sources also said there’s been at least one other serious bidder—also a local real estate investor. It’s believed the competing bid was in the $24 million range, well below the offer by Harrah, who declined comment.
Freedom Communications Inc., the owners of the Register, put the office building on the market late last year.
The company has said in marketing documents that it could vacate all or part of the office following a sale, depending on the buyer’s wishes.
Harrah’s potential purchase would appear to suggest a lease-back by the newspaper of at least part of the property is likely in the event the sale goes through.
Big Mike’s Back?
It would be the largest acquisition reported in years for Harrah, who came to Santa Ana’s real estate market about 20 years ago. His Caribou Industries has since bought and renovated more than 4 million square feet spread over about 80 buildings near the civic center and downtown.
His work helped spur a revival that’s attracted art galleries, shops and restaurants to the downtown district. Last month, Mayor Miguel Pulido and the city council presented Harrah with an inaugural Santa Ana Outstanding Citizen and Pioneer Award.
He is still working to kick off construction of his One Broadway Plaza office tower in downtown.
The 37-story project, in the works for nearly a decade, would be Orange County’s tallest building. Harrah has said construction could begin this year on the more than 500,000-square-foot project, for which an anchor tenant hasn’t been announced.
Raising Cash
A sale would provide a much-needed source of cash to Freedom Communications, which was acquired in 2012 by Chief Executive Aaron Kushner’s 2100 Trust LLC.
The company’s new ownership has since been looking to lighten its debt while embarking on an ambitious growth plan across several Southern California media markets.
Expansion
Freedom has added several publications to the Register, among them the Press-Enterprise in Riverside County, which it acquired last year for $27.2 million, and the recently launched Los Angeles Register.
The expansion hasn’t offset a rugged stretch at the Register, which has been shedding jobs in the past few months through buyouts and layoffs. Freedom also reduced the frequency of some of its other newspapers, including the Long Beach Register, which it launched about a year ago.
Kushner, who is also publisher of the Register, told employees in a memo late last year that real estate divestitures were part of the company’s plan to improve its bottom line by paying down the pension obligations that came with the newspaper’s acquisition. It’s believed the pension expenses accounted for well more than half the deal’s estimated value of close to $200 million when 2100 Trust acquired Freedom.
“We have already made excellent progress in both reducing our debt and significantly increasing the funding levels of our pension plan,” the memo said. “Exiting the real estate business to focus on the newspaper business will continue that progress.”
Freedom has also sought to sell the bulk of the excess land it owns around its approximately 15-acre headquarters.
William Lyon Homes
Newport Beach-based homebuilder William Lyon Homes entered into an agreement with Freedom this year to buy the excess land. Real estate sources pegged that deal’s value at nearly $40 million in May. The purchase and sales agreement for it runs through the end of 2015.
The status of the sale is unknown, and sources have said William Lyon Homes might no longer be interested in proceeding. Entitlement challenges have been cited as potential issues that could scuttle the deal.
Court filings related to a lawsuit two former Register executives brought against Kushner and Freedom suggest a bulk of the money raised from a sale of the paper’s headquarters is already spoken for.
Freedom and its entities owe about $24.7 million in senior loans, and the former executives are owed $4 million in severance payments under terms of a recent judgment in their favor, according to court documents.
