The real in the deal

So why did Platinum Equity spend between 15 and 50 million dollars to buy the San Diego Union-Tribune? Ken Doctor makes a persuasive argument that it was to get at the real estate - the newspaper just happened to come with the building. Which isn't particularly interesting in and of itself, but is interesting if it's emblematic of a larger trend, which Doctor thinks it just might be. He writes:

Hard as it may be to believe, we may have entered a new rocky period for newspaper companies. It would be a period in which the real estate on which they sit determines their market value. Consequently, their real estate value may determine who wants to sell the newspaper property and who wants to buy it -- to get at the real estate.

And we all know just how strong the real estate market is these days.

Essentially, Doctor is saying that the only companies willing to invest in newspapers right now are ones that think they'll be able to turn a profit once the real-estate market rebounds. They aren't putting much stock in the part of the business that involves words and pictures. Doctor continues:

What is certain is that the real estate gambit further accelerates the changing of the daily newspaper industry as we know it. After all, there will be a recovery -- including a relaxing of credit and a re-valuing of commercial real estate. That recovery will come before newspaper companies find a formula that stabilizes them.

In many cities -- of course depending on the location and value of the real estate -- that means newspaper real estate first, news publishing second. It's a world that is out of order, literally, but it's one we're inheriting.

All of which raises some troubling questions for newspaper that have already sold off their real estate holdings. What are they going to use to raise capital when the creditors come to collect?