The News & Observer has reached an agreement to sell its downtown Raleigh headquarters for $22 million to a California-based investment firm.
The deal, signed Thursday with Acquisition Group, will move the media company out of its longtime home on South McDowell Street, but will keep it downtown in a highrise on Fayetteville Street.
The 3-acre N&O property will be developed into a mixed-use complex that could include stores, offices, housing and a hotel, said Sam Sotoodeh, president of the California-based investment company. The site currently includes two buildings and a parking deck.
Sotoodeh said Acquisition has had its sights on The N&O property for 30 years. He said he has offered to buy the building a number of times, but it never worked out for one reason or another.
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“We believe in Raleigh,” he said. “We think there are many opportunities. This is a city that has all the right elements to grow and do well.”
Sotoodeh described himself and his partners as “patient investors” who will work closely with city officials and residents to come up with a project that will benefit everyone.
We believe in Raleigh. ... This is a city that has all the right elements to grow and do well.
Sam Sotoodeh, president of the Acquisition Group, a California-based investment company.
The N&O will move about four blocks to the 17-story One City Plaza once renovations there are completed, which is anticipated to be in late March or early April.
The agreement was reached after a previous deal to sell the N&O property – announced in late 2015 as a $20.2 million sale to local investors – ended in disappointment for all parties in January 2017. Discussions with Acquisition Group began soon after, said N&O President and Publisher Sara Glines, who came to The News & Observer in September 2016.
In an interview, Glines said she was excited about the final agreement.
“I think it was crucial for us to stay downtown,” Glines said. “I just think we need to be connected really deeply to Raleigh and Raleigh downtown and, more broadly, to the Triangle region. To do that you have to be part of the center of things.”
Glines said she has emphasized the need for the company to break from its past to embrace the challenging atmosphere for the news industry.
“It’s really hard to do that when you’re sitting in a building that, on a good day, looks like the late 1970s,” she said. “Environment means a lot. And I think it will help everyone to feel less connected to the past and more connected to the future.”
Who the buyers are
Acquisition Group invests in real estate, securities, and oil and gas. It has operations in Los Angeles and Santa Ana in California; in Sao Paulo, Brazil; Toronto, Canada; and Frankfurt, Germany. In Raleigh, it owns Two Hannover Square, the 29-story skyscraper on Fayetteville Street that is home to BB&T.
Sotoodeh was in the news last year when he and another man protested Olympic swimmer Ryan Lochte’s appearance on “Dancing with the Stars” because the athlete had concocted a story about being robbed at gunpoint during the Olympic Games in Rio. The men were in the audience wearing anti-Lochte T-shirts and reportedly approached the stage.
Sotoodeh said he was angered that Lochte made Brazilian authorities appear corrupt. The two men were charged with misdemeanors related to interfering with Lochte’s performance, according to The Los Angeles Times. An out-of-court settlement resulted in the charges being dropped, several news media reported.
Acquisition Group’s investment team is led by Sotoodeh, Craig Shimomura and Tim Nelson, all from California.
Deal fell through
The previous deal between McClatchy and the local development group Above the Fold had called for the building housing The N&O’s printing presses to be renovated and turned into 50,000 square feet of office space that the media company would lease. In preparation, the presses were removed and another one installed at a News & Observer facility in Garner.
Above the Fold had planned to demolish the current N&O office building and erect a 40-story hotel and street level retail on the site.
That deal fell through when The N&O’s space needs could not be fulfilled.
Above The Fold – a reference to the top half of the front page of a newspaper – included local developers Mark Andrews, Michael Sandman and Joe Whitehouse. Raleigh architectural firm Clearscapes led the design work.
Sacramento, Calif.-based McClatchy began soliciting bids for the property in 2014. McClatchy, which owns 30 media companies, has been reviewing land holdings that could be sold for capital.
In September, the company announced it had sold The Sacramento Bee and The Kansas City Star buildings in deals that resulted in gross proceeds of $56.75 million. Last year, The Charlotte Observer moved into a downtown office complex after selling its building for $34.1 million.
Gross proceeds from the N&O sale could be used to repurchase debt, reinvest in the business or for other uses that McClatchy’s board of directors decides. The Sacramento-based company’s net debt was reported at $713 million in September.
Moving into the future
The News & Observer has been at its current location since 1907, and its current building went up in 1956.
In its new home, The N&O’s newsroom will be at street level. Advertising and other business operations of the company will be on the 14th floor. In all, about 175 employees will make the move.
The McClatchy employees who work in its technology and digital operations will remain in offices on Hargett Street as that building was not part of the sale.
Interior renovation for the new N&O offices will include maximizing the amount of natural light through windows, and creating casual “huddle” spaces and meeting rooms.
“We are very excited to be moving into downtown Raleigh office space that supports flexibility, collaboration, and makes it easy to engage with the community,” Glines said.
The company and the buyers have a lease agreement that will allow The N&O to remain in its current building until the One City Plaza renovations are complete. Sotoodeh said his firm negotiated the lease for The N&O, under the contract.
One City Plaza was at one time owned by Acquisition Group, and is now owned by Highwood Properties.
Sotoodeh said construction won’t begin until after the move into the new building is completed, sometime in the second quarter of 2018. He said a fuller analysis of the project’s potential will probably be completed by February.
The investors have worked with Capital Associates, a commercial real estate company in Raleigh, on this project and others over the years, he said.
Updated: Interior work on the new offices was done by Mark Valand and Angie Page of iS design and David Maurer and Mike Morrison of Maurer Architecture.