"Old Gray Lady" Victimized In Multi-Million Dollar "Home" Equity Stripping Deal? Or Did She Lure "Unwitting" Billionaire Into An Equitable Mortgage?

In New York City, The New York Times (aka the Old Gray Lady) reports:

• The New York Times Company said [last] Monday that it had raised $225 million through a sale and leaseback of part of its headquarters building, one in a series of moves to pay down its debts and increase its cash cushion during a drastic slump for the newspaper industry.

• The sale-leaseback agreement with W. P. Carey & Company, an investment firm, could last as long as 15 years, but it gives the Times Company the option of buying the building back after 10 years for $250 million, an option both sides expect will be exercised. W. P. Carey specializes in corporate financing, not real estate, and both companies characterized the agreement more as a loan secured by the building, than a real estate transaction.

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• The company spent more than $600 million on its building, on Eighth Avenue in Midtown Manhattan, which was completed in 2007. The Times Company owns 58 percent, and its development partner, the Forest City Ratner Companies, owns the rest.

• The deal is back-loaded, with the repurchase price looming in 2019, and a relatively low starting lease payment of $24 million a year on 750,000 square feet of space. That amounts to $32 a square foot, while most recent leases on Class A office space in the same part of Manhattan have gone for $50 to $80 a square foot.(1)

For more, see Times Co. Building Deal Raises Cash.

(1) Given that:

• the Old Gray Lady is desperate for cash (a report that she was spotted down at the welfare office, however, is unconfirmed),
• the parties reportedly characterized the arrangement as a secured loan,
• the rent payments on the leaseback apparently have no relation to fair market rents in the area ($32/sq. ft. vs $50-80/sq. ft.), and
• the amount raised is considerably less than what she has invested in the building ($225M vs. $600M+; the story is silent as to what the true current value of her building is),

this deal has the "fragrant scent" of an equitable mortgage, and not a true sale leaseback. I wonder how each of the parties will treat the deal when filing their Federal income tax returns, and whether that treatment gets the IRS' blessing.