Whether The Providence Journal stays in its 160,000-square-foot Fountain Street headquarters after the building’s sale – the Journal’s parent company, A.H. Belo Corp., formally announced in December that the property was going on the market (READ MORE) – could affect the company’s ability to sell, the eventual selling price and the future of the building.
The key component, according to the company’s broker, CB Richard Ellis-New England’s Providence office President Charles T. Francis, is the question of whether the newspaper will stay in the building after the sale.
“That is undetermined at this time,” Francis said in an interview late last month. “If a developer wants to keep them in, that might be considered. They are also prepared to move because they have downsized their operation substantially.”
The building contains more than twice the area than the roughly 60,000 square feet that the company would need in another building, Francis added.
As complex as the sale of the headquarters is, the newspaper, whose parent company is based in Dallas, has put a total of eight properties on the market.
Five of the properties are being marketed as a package, Francis said. That includes the 75 Fountain St. headquarters, a parking lot at 78 Fountain St., a parking lot at 73 Mathewson St., a parking lot at 1 Eddy St., and the Parkade Garage at 29 Eddy St.
Those downtown properties are assessed at about $33.2 million, but the company has not given a starting price for the sale, Francis said.
“We want to see what developers envision and what kind of value they would affix” to the project, Francis said. “There are so many variables to a transaction like this that you can’t really put a price on it until someone indicates that they really do want it and they have a reuse schedule.”
At MG Commercial, a commercial broker not involved with the sale, Executive Vice President Gerry Surprenant said the Fountain Street headquarters’ value will be affected by several variables, including whether the company decides to do a sale-leaseback, with the newspaper remaining the sole tenant.
“From a buyer’s standpoint, the question is: how long of a lease is the Journal’s parent company going to sign and what is the financial strength of the parent?” Surprenant said.
At the moment parts of the headquarters are underutilized. The easternmost wing is a one-story, 8,901-square-foot garage space that had originally housed newspaper-delivery trucks. That piece of the property is being pitched as a “development opportunity,” Francis said. “And the city has indicated that they’re very flexible reviewing potential reuses for the property.”
In A.H. Belo Corp.’s second-quarter earnings call, Chairman, President and CEO Robert Decherd estimated possible pretax proceeds of about $35 million from the property sale. He said the sale should be completed sometime in 2009, but he acknowledged during the company’s third-quarter earnings call that “anyone who can time real estate transactions is a lot more clever than we are. …” The company did not return a call seeking further comment.
Providence’s commercial real estate market sank during the second half of 2008 and CB Richard Ellis predicts that it is expected to stay down for much of 2009, despite recent outside interest in downtown. Last year, three buildings – the Turk’s Head, Union Trust and 50 Kennedy Plaza buildings – were bought by out-of-state entities for a total of $57 million.
And Francis said that there has been interest in the Journal property, although he declined to comment on potential buyers.
Francis’s firm is also marketing a three-parcel, 3.9-acre package that fronts on both Kinsley and Harris avenues. That Belo property, where Rhode Island Monthly has its office, is priced at $5.9 million, he said.
With Blue Cross & Blue Shield of Rhode Island also moving out of its downtown offices for a new headquarters in Capitol Center, Providence’s commercial vacancy rate could rise in the next year, Surprenant said. And the Journal building, last renovated in 1978, might not be the highest-quality office space, he said.
“You’re going to have a lot more B-quality space on the market then we have now,” Surprenant said. “That sometimes tends to be more difficult to market than the Class A space is to market.”
As of last month, Surprenant’s firm put the Class B vacancy rate in Providence at 15.0 percent, above the 11.0-percent vacancy rate for Class A space. MG’s year-end Rhode Island Market Analysis 2008 put the Class B annual lease rates at between $15 and $21 per square foot.
If the Journal moves out of it current headquarters, it won’t be the first move for the paper. The current headquarters opened in 1934 and is only about one-tenth of a mile from its former headquarters at Westminster and Eddy streets, which the newspaper built in 1906.
When the Fountain Street building was built, it was one of only three capital projects to be completed in Providence during the Great Depression, according to the 1986 Statewide Historical Preservation Report. A neo-Georgian brick building, it was designed by the Detroit architecture firm of Albert Kahn Inc., which also served as principal architect of the U.S. Naval Air Station at Quonset Point, R.I. Historical Preservation & Heritage Commission Executive Director Edward F. Sanderson said.
Sanderson said it’s important to downtown both in style and history.
“Historically, downtown Providence had many of the hallmarks of what you expect of a thriving commercial center of the early 20th century,” he said. “It had a railroad station, government buildings and the federal court, a first-class hotel in the Biltmore. A newspaper was part of what any self-respecting downtown had.”
While the paper had expanded enough to need a 160,000-square-foot headquarters, now its staff is being thinned out, sections are being cut and it’s unclear whether it will move to a new location.
Sanderson said the building would be a good candidate for redevelopment, although the owners did not apply for the R.I. Historic Preservation Investment Tax Credit program before it was halted.
“With the tax credit, it would be more likely – at least when the economy improves a little bit – that somebody would come in, fix the building up and it would still be part of Fountain Street,” he said •
