Seattle Times selling lots to Vulcan for $31 million

The Seattle Times Co. struck a deal to sell about half its land in Seattle's South Lake Union area -- nearly six acres around its main headquarters -- for $31 million to Paul Allen's real estate investment company.

The pending sale, announced yesterday, will boost the Microsoft Corp. co-founder's holdings in the Seattle neighborhood to 58 acres, solidifying his position as the biggest property owner in the South Lake Union area.

Proceeds from the sale will help the newspaper avoid further cutbacks in its operations for the time being, Times Publisher Frank Blethen said.

"We were to the point where we were going to have to make some deep cuts in staffing and content," Blethen told the Seattle Post-Intelligencer in an interview yesterday.

The Seattle Times Co. said the proceeds also will help it defend the newspaper against the "aggressive actions" of the Hearst Corp., the P-I's owner. The companies are embroiled in a dispute over their joint operating agreement, or JOA.

Allen's company, Vulcan, has been assembling land in the South Lake Union area for several years, planning to redevelop much of it with a mix of biotechnology, residential, retail, office and other types of buildings.

Vulcan ultimately intends to redevelop the land to be acquired from The Times Co., but it has "no immediate plans" to do so, Vulcan spokesman Michael Nank said.

The price for the land amounts to about $120 per square foot, around the middle of the range of prices Vulcan has paid for land in the neighborhood, according to data collected by real estate company Cushman & Wakefield of Washington. The deal is expected to be completed around June 25, The Seattle Times Co. said.

Much of the land is currently used for surface parking, largely by Times employees, and Vulcan is expected to keep it as parking for at least one or two years, until it's developed, The Times Co. said.

Blethen described the decision to sell the land as a difficult one for himself and other members of his family, who own a controlling interest in The Seattle Times Co.

But he said the alternative to selling the land or making further cuts in the paper's operations would have been to "throw the towel in and give Hearst their victory, and sell out to them."

The Times Co. reiterated in a news release announcing the land deal that it believes Hearst is trying to force the Blethen family to sell the paper. Under a separate agreement between the two newspaper owners, Hearst would be first in line to buy The Times if it's put up for sale.

Hearst issued its own statement yesterday disputing The Times' statement and citing internal documents that Hearst says show that the Blethen family "has had the elimination of the P-I as a top priority since 1985" -- something the Blethens dispute.

Hearst also sought to show that The Times isn't in such dire financial straits, citing The Times newspaper's $70 million in cash flow from operations from 2000 to 2002.

The Hearst statement noted that The Seattle Times Co. receives 50 percent more of the JOA revenue than Hearst does.

Under the JOA formula, The Times gets 60 percent of the money left over once the combined business expenses of the papers -- not including the costs of running either newsroom -- are subtracted from their combined revenue. Hearst gets the remaining 40 percent.

Under the JOA, the Times handles advertising, circulation, production and distribution of both newsapers. The newsroom operations remain separate.

Either paper can seek to end the agreement if its annual share isn't enough to cover its news and editorial expenses for three straight years. The Times last year declared such losses and moved to end the JOA. Hearst filed suit to block the move -- citing, among other things, the fact that the losses in two years were caused by a strike.

The companies are currently awaiting a decision from the state Supreme Court on Hearst's request to hear its appeal of a lower court ruling.

The Times Co. has said it would be willing to renegotiate the terms of the JOA to keep it intact. Hearst says the P-I wouldn't survive outside the JOA. Blethen yesterday called Hearst's statement about The Times' share of the JOA revenues "a pretty sophomoric comment."

Blethen declined to say whether executives from Hearst and The Times Co. have recently held negotiations.

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