Tribune Co., the Baltimore Sun Co.'s parent company, will purchase the city properties where the newspaper is produced, opening the way for possible redevelopment deals for large sites downtown and near the waterfront.
The Chicago media company said yesterday that it exercised an option to purchase The Sun's headquarters complex on North Calvert Street and its printing plant on nearly 60 acres in South Baltimore.
The purchase is part of a $175 million acquisition of eight former Times Mirror properties totaling 3 million square feet. Tribune said it expects to close on the deal in April.
Tribune has been leasing those properties from the Times Mirror Chandler Trusts for use by The Sun and the Los Angeles Times, Newsday and The Hartford Courant since acquiring Times Mirror Co. in 2000.
The Sun's Port Covington printing plant operates in an industrial area off Hanover Street that the city has targeted for mixed-use redevelopment.
A developer and owner of a neighboring shopping center that envisions a $2 billion "Harbor East"-style community on the Middle Branch peninsula hopes to work with Baltimore Sun Co.'s ownership on a cooperative redevelopment plan.
Already, the owner of the Port Covington Shopping Center says, potential tenants and more than a dozen developers are assessing the shopping center site, now home to a Wal-Mart and Sam's Club.
Real estate experts and developers say The Sun's 400,000-square-foot headquarters at 501 N. Calvert St. and office space and a 620-space garage at 601 N. Calvert St., would likely generate strong interest from investors or developers. The properties are in an area surrounded by proposed and existing redevelopment projects.
"There are parties that are quite interested in those properties, without question," said Stephanie Pater, director of real estate for Tribune, who said both buyers and joint-venture partners have approached the company.
"We have not engaged in any meaningful dialogue. We had to have it under our control and spend time educating ourselves."
The company will assess all options, which could include retaining, selling, redeveloping or leasing back properties, she said. "There is nothing that has been taken off the table."
Tribune had been expected to exercise the real estate option yesterday. It secured the option and below-market price in September 2006, when it worked out a deal to disentangle the company from the Chandler Trusts, which had been Tribune's largest shareholders .
Yesterday's move came just over a month after real estate mogul Sam Zell took control of Tribune in an $8.2 billion sale to Zell and an employee stock ownership plan. Zell, now chairman and chief executive, has said Tribune has no plans to sell any of its 23 television stations and the Chicago Tribune and eight other daily newspapers.
He said in a statement yesterday that exercising the option will eliminate rent payments in several key markets.
That will save the company more than $22 million overall, said a Tribune spokesman, who would not break out rents for individual properties.
Zell also has indicated he would take steps to maximize the value of the company's real estate holdings, and is moving quickly to do so, announcing yesterday a sale of Tribune Studios and related real estate in Los Angeles to Hudson Capital LLC for $125 million.
As part of the deal, the company signed a five-year lease that will allow its local TV station, KTLA-TV, to continue operating from the studio through 2012.
Pater, the Tribune real estate official, said other noncore properties likely will be sold in the next month.
Tribune's acquisition of Baltimore Sun Co. real estate came as welcome news to developers hoping to remake Port Covington.
Finmarc Management and Kodiak Properties already have announced that the Sam's Club would relocate to Glen Burnie. They envision redeveloping their own 56-acre retail site and as much as 140 acres if owners of adjoining properties owners sign on.
Finmarc and Kodiak have launched a search for a joint-venture partner or buyer to act as a master developer. About 15 to 20 developers have expressed interest. And several large office tenants have said they might want to anchor the proposed mixed-use community of homes, offices, shops and a hotel.
"We look forward to working with the Baltimore Sun or with Sam Zell or his organization on a redevelopment plan for the entire Port Covington land area," said Marc F. Solomon, a Finmarc principal.
Zell as developer"[Zell's] background is real estate development. He might have the vision that potentially the previous owners did not."
Tribune has been approached regarding the North Calvert Street headquarters as well, Pater said.
If the property is put on the market, one developer said his company would take a look.
"Anything that opens up in our general area, we're going to take a look at," said John Ginnever, executive vice president of RWN Development Group LLC. The Washington company plans a residential and retail high rise in the 300 block of Guilford Avenue, with a tower to follow on Saratoga Street. "I couldn't say what proposed use we'd be looking at."
Pater said she could not say yet whether Tribune would likely keep the Baltimore Sun Co.'s operations in their current spots.
"We need to sit down and assess our business needs and the business opportunities and marry those two things," she said.