Private investment group buys Modesto Bee building

Newspaper staff will continue to work at H Street location

March 31, 2011 

— The McClatchy Co. has sold The Modesto Bee building — including about 1½ square blocks of downtown Modesto — to a private investment group.

The all-cash sale for an undisclosed price was announced Thursday, and title is expected to formally transfer today. A 7,000- square-foot maintenance garage is being sold to another buyer, and that deal is expected to close in early May.

The Bee's 123 employees will continue to work at the 1325 H St. location as part of a long-term office space lease.

"The building's sale will not affect any aspect of our daily distribution of The Bee," assured Eric Johnston, the newspaper's publisher. Most of The Bee's staff work in the news and advertising departments. "We have no intention of moving those core resources out of this community."

The daily newspaper employed about 600 people a decade ago, but the severe economic downturn and fundamental changes in the publishing industry resulted in staff cuts. In September 2008, the newspaper shifted its printing operation to sister paper The Sacramento Bee.

"Moving production facilities to Sacramento resulted in us using only about 25 percent of the space in this building," Johnston explained. "Selling the building lets us get out of managing the space we don't use … and it will lower our maintenance costs."

The buyers are optimistic about taking over the building. Four investors — Andrew Mangano of San Luis Obispo, Bernard Tevelde and Mike Shannon of Visalia, and Playa Dulce LLC of San Luis Obispo — will hold title to the building using the name 1325 H Street LLC.

Modesto real estate developer Niniv Tamimi arranged the deal for the buyers. Tamimi and Craig Mangano, Andrew Mangano's brother, will manage and develop The Bee property.

There's a lot to manage.

The property covers about four acres, including everything between 13th and 14th streets and H and I streets, plus a 190-stall parking lot between 14th and 15th streets. The 155,493- square-foot two-story main building is about evenly divided between office and warehouse space.

"This property offers a very unique opportunity to acquire an entire square block of downtown Modesto that is unencumbered by an alley," Tamimi said.

He said the purchase price was "less than replacement cost" for the building, and the buyers consider it a good deal. "There are too many positive aspects of this property to overlook. This recession is not going to continue forever."

Back in 2008, the Stanislaus County assessor estimated the total value of The Bee's property and equipment at more than $21.7 million. The current assessment is about $12 million.

The sale price is believed to be significantly less than that. Back in 2009, the property — including the maintenance building — was listed for $7 million to $8 million.

"We had made several offers to buy The Modesto Bee property over the last 1½ years," Andrew Mangano said. "We finally came to an agreement about six months ago."

The Bee previously had tentative sales agreements with two other interested buyers, including the Yosemite Community College District. But both of those deals fell apart before entering escrow.

'A viable market'

This sale is one of the largest Modesto commercial property deals in recent years.

"We believe this deal is going to be good for McClatchy and good for us. So that makes it a good deal," said Mangano, who is a home builder headquartered in Visalia. "Downtown Modesto is going to continue to be a viable market in the future. There's interest (from companies) wanting to locate there."

Tamimi said portions of the building where the printing press used to be "will definitely pose a challenge" for finding suitable tenants. But for the building's vacant office space, he said he expects the lease rate to be about $1.35 per square foot per month, plus utilities.

"There are two or three good tenants looking to lease 10,000 square feet or more in Modesto," Tamimi said.

But the building, which was substantially remodeled and expanded in 1988, ultimately may be torn down and replaced with a new Stanislaus County courthouse.

It is one of eight Modesto locations being considered for a new $278 million court facility. A local advisory group is expected to recommend which courthouse site to choose this spring, but the final decision by the state likely would not come until next year.

Johnston said The Bee had reached a tentative sales agreement with Tamimi and the investment group before the courthouse construction site opportunity arose. He said the new buyers are the ones who proposed the courthouse be built on The Bee's property.

If the state decides to buy the land and the newspaper staff is forced to move elsewhere in Modesto, Johnston said the new owners have agreed to compensate The Bee.

Ideal for courthouse?

Tamimi said the property would be ideal for a courthouse because of its convenient downtown location near the jail, access to parking and size.

But he said "we're not relying on the courthouse alone," and other lease options are being pursued.

No strangers to Modesto real estate, Tamimi and Craig Mangano own and lease out about 30,000 square feet of office space in the six-story building at 12th and I streets. The Bee is one block away.

The Bee was established in 1933 after the merger of previous Modesto newspapers. It has been based at 1325 H St. since the 1950s. The paper has a circulation of 67,052 daily and 74,943 on Sundays.

The McClatchy Co. is the third-largest newspaper company in the United States, publishing 30 daily newspapers, 43 nondailies, and direct marketing and direct mail operations.

Its California operations include The Modesto, Fresno and Sacramento Bees, the Merced Sun-Star, The Tribune of San Luis Obispo, Vida en el Valle and a number of nondaily publications.

Bee staff writer J.N. Sbranti can be reached at jnsbranti@modbee.com or 578-2196.

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