The Basch Report: New Media created to control bankrupt GateHouse
You likely never heard of New Media Investment Group Inc. before it announced its $120 million agreement last week to buy The Florida Times-Union and other newspapers owned by Morris Publishing Group.
That’s because New Media was created just four years ago to take control of the newspapers owned by GateHouse Media Inc. in a prepackaged Chapter 11 bankruptcy restructuring.
Newcastle controlled 52 percent of GateHouse’s debt and reached agreement in 2013 with GateHouse and its other creditors on the restructuring plan. Creditors were given the option of cash payments or shares in New Media.
Newcastle ended up with 86 percent of the shares of New Media when GateHouse emerged from bankruptcy in November 2013.
In addition to the GateHouse newspapers, Newcastle in September 2013 acquired the Dow Jones Local Media Group from News Corp., which had 33 publications. Those publications were combined with the GateHouse properties under New Media.
Three months after the restructuring was completed, Newcastle spun off New Media as a separate public company by distributing its New Media shares to Newcastle stockholders.
Newcastle was operated under a management services agreement with Fortress Investment Group, and after the spinoff, Fortress continued to be the manager of New Media.
However, Fortress only controls about 4 percent of New Media’s stock, according to its most recent proxy statement.
New Media, which owned 125 daily newspapers and several hundred other publications as of June 25, reported revenue of $630.4 million and a net loss of $25.4 million in the first half of this year.
The company agreed to buy the newspaper assets of Augusta, Ga.-based Morris, which includes the Times-Union, the St. Augustine Record and nine other daily newspapers.
Regency: Amazon reinforces strategy
It seems like every day, we see a story about Amazon.com’s phenomenal growth and how it will be the death of traditional retail stores and shopping centers.
However, Hap Stein, CEO of Jacksonville-based shopping center developer Regency Centers Corp., doesn’t see it that way.
“Amazon’s announced purchase of Whole Foods reinforces our conviction that a well-located bricks-and-mortar presence that is convenient to the customer is a critical component to the success of any omni-channel platform,” Stein told analysts during Regency’s quarterly conference call.
“The best grocers, which anchor the vast majority of our centers, are more focused than ever on advancing their own technology, pricing and shopping experiences to service their customers and grow revenues and profits,” he said.
Regency owns all or part of 428 retail properties across the country, mainly shopping centers anchored by grocery stores.
Whole Foods is the fifth-largest tenant of Regency’s portfolio in terms of space, with 26 stores accounting for 2.1 percent of its total leasable space.
In a research note after Regency’s earnings report, SunTrust Robinson Humphrey analyst Ki Bin Kim said the list of Regency’s top 25 tenants is “impressive,” with stores that are expected to remain stable.
“It appears so much stronger vs. the REIT peer set; no Barnes and Noble, no office supply stores, Jo-Ann Fabrics, Ascena, Mattress Firms, and etc.,” Kim said.
“Now, we’re sure Regency has some of these retailers below the ‘Top 25,’ but the concentration is much lower, hence the risk is lower, in our view,” he said.
Regency reported core funds from operations of 93 cents a share in the second quarter, up from 82 cents the previous year.
Funds from operations are basically earnings excluding noncash charges such as depreciation and amortization expense, and are a key indicator of a real estate investment trust’s performance.
Regency’s shopping center portfolio was 95 percent leased as of June 30.
FNFV merging 99 into J. Alexander’s
In the constant wheeling and dealing world of Fidelity National Financial Inc., investments have a way of coming full circle.
In the latest twist, the company’s Fidelity National Financial Ventures unit (FNFV) is selling its interest in 99 Restaurant & Pub to J. Alexander’s Holdings Inc.
If you recall, J. Alexander’s was once owned by Fidelity, but it was spun off as a separate public company in 2015. The company owns J. Alexander’s and three other restaurant chains.
The 99 Restaurant chain is part of a company called American Blue Ribbon Holdings, which is 55 percent owned by FNFV. In addition to 99, it owns the O’Charley’s, Village Inn and Bakers Square chains.
To complete the circle, FNFV will end up acquiring shares of J. Alexander’s in the complex transaction, although it is not clear how big its ownership stake will be. Also, Fidelity Chairman Bill Foley will join J. Alexander’s board of directors.
“We are excited to be involved with J. Alexander’s again and look forward to great success with the combination of these two great concepts,” Foley said in a news release.
FNFV will not be owned by Fidelity for much longer. The Jacksonville-based title insurance company is working to spin off FNFV as a separate public company in a deal that is expected to be completed by the end of the summer.
Dick’s Wings owner increases earnings
ARC Group Inc., operator of the Dick’s Wings & Grill restaurant chain, reported a big increase in first-quarter earnings after taking ownership of two restaurants in the chain.
The Jacksonville-based company’s first-quarter report was delayed because of the acquisition of the two restaurants at the end of 2016. Previously, all of the Dick’s restaurants were operated by franchisees.
With the addition of the acquired restaurants, revenue tripled to $1.09 million in the first quarter and net income doubled to $206,077, or 3 cents a share.
ARC Group said it also saw a nearly 15 percent increase in royalties in the quarter from franchised restaurants.
The Dick’s chain has a total of 17 restaurants in Florida and five in Georgia. ARC Group also owns a 50 percent interest in the franchisor of Wing Nutz, a restaurant chain with 12 locations in the Western U.S.
Advanced Disposal downgraded from ‘top pick’
Barclays Capital continued to rate Advanced Disposal Services Inc. as a “top pick” after the Ponte Vedra Beach-based company’s Aug. 3 earnings report.
However, Barclays analysts last week downgraded Advanced Disposal from “overweight” to “equal weight” after all the environmental services firms they cover reported quarterly results.
“While we still like the Advanced Disposal story which is underpinned by predictable delevering and tuck-in growth, our $26 price target implies just 8 percent upside; not enough to justify a top pick or overweight recommendation given Advanced Disposal does not yet pay a dividend or return capital through share buybacks,” the analysts said in a research report.
Barclays had rated Advanced Disposal a “top pick” since initiating coverage of the waste management services company following its October 2016 initial public offering.
Advanced Disposal, which sold for $18 a share in the IPO, had risen to $24 before the Barclays downgrade, but fell to $22.85 last Monday after the analysts’ report.
Investment income helps St. Joe
The St. Joe Co. reported a big increase in second-quarter earnings, with “a significant portion” of the increase coming from investment income, the company said.
The real estate developer’s $16.5 million in pretax income included net investment income of $14.3 million.
Final net income for the quarter was $10.8 million, or 15 cents a share, up from $1.8 million, or 2 cents a share, in the second quarter of 2016.
St. Joe, a longtime Jacksonville company, moved its headquarters to WaterSound in the Florida Panhandle in 2010.
Drone Aviation revenue drops
Drone Aviation Holding Corp. reported a big drop in revenue in the second quarter.
The Jacksonville-based company, which produces lighter-than-air aerostats and electric-powered drones for government and commercial customers, reported a net loss of $1.76 million, or 20 cents a share, on revenue of just $13,876.
Revenue was $484,414 in the second quarter of 2016.
In its quarterly report filed with the Securities and Exchange Commission, Drone Aviation said the drop in revenue was “primarily a result of a longer sales cycle stemming in part from the recent change in presidential administration and congressional budgeting delays. We expect increased sales in future periods based on a product pipeline developed following our increased marketing efforts.”
Drone Aviation seemed in a position to profit from the new administration when its vice chairman, Michael Flynn, resigned from the company in December to become President Donald Trump’s national security adviser.
However, Flynn was forced to resign from the White House position in February because of questions about his communications with Russia.
PHH pays $74.5 million in fines
The U.S. Department of Justice last week said mortgage banker PHH Corp. agreed to pay $74.5 million in fines to resolve allegations that it knowingly originated and underwrote loans insured by federal government programs that did not meet applicable requirements.
PHH said the settlement covers certain mortgage loans made from 2006 through 2011.
New Jersey-based PHH’s second-largest mortgage operations center was in Jacksonville.
However, as losses mounted over the last several years, PHH downsized its Jacksonville office and sold most of its remaining Jacksonville operations in March to LenderLive Network LLC.
PHH said in a news release it is not admitting liability but agreed to the settlement “in order to avoid the distraction and expense of potential litigation.”
PHH also last week reported a second-quarter net loss of $46 million, or 86 cents a share.