At the beginning of December 2013, Orange County Register owner Aaron Kushner was seemingly on top of his empire-building game.
Just a year and a half after acquiring Freedom Communications, the Boston businessman had completed the purchase of the Riverside Press-Enterprise, four months after having launched the daily Long Beach Register. Plans were in the works to launch yet another new daily – the Los Angeles Register, which would battle the Los Angeles Times in its own turf. Longtime Freedom community weeklies in Irvine and Newport Beach had been turned into dailies, and staffing at the Reg had ballooned to around 370, near the height of the paper's glory days in the 1990s.
Hiccups had occurred along the way–the P-E's previous owners, the A.H. Belo Corporation, had threatened not to go through with the sale after Kushner couldn't meet certain thresholds, and Freedom's previous owners had sued Kushner over allegations he owed them money. But Kushner was still riding a wave of positive national press for apparently doing the impossible: not only expanding a daily newspaper in a time of endless layoffs and budget cuts, but making it thrive.
Privately, though, Kushner was fretting.
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To complete the P-E deal, he had to take out another loan. His company only had $6 million on hand. Advertising sales were nowhere near the level needed to sustain Kushner's grand experiment, an inconvenient truth he had already shared with his staff in August. To fund his expansionist plans, Kushner was already planning to do the unthinkable: sell off the Register's longtime headquarters, along with the last newspapers of the old R.C. Hoiles chain of libertarian dailies, the Victorville Daily Press and other desert publications.
But first, Kushner needed money.
According to sources who spoke to the Weekly on the condition of anonymity, Kushner went around Southern California at the end of 2013 pitching potential funders on a $12 million investment in Freedom. It was needed, according to a confidential PowerPoint presentation obtained by the Weekly, to “complete the $30 million preferred equity financing that surrounded the acquisition of the Press-Enterprise and the recapitalization of the company.” Anyone who took the plunge was promised a robust 18 percent annual return, 12 percent equity ownership and “the opportunity to participate in future Freedom transactions” as well as have an “advisory role in the growth of Freedom.”
The PowerPoint document (which you can read in its entirety below) is mostly boardroom boosterism: an overview of the company's accomplishments, biographies of its principals, a description of its strategy moving forward, and inspirational “insights” intended to convince potential investors of Freedom's vision.
Investors were unimpressed, sources tell the Weekly.
What's most fascinating about Freedom's PowerPoint presentation is its optimistic description of how Kushner planned to dig himself out of debt even as it showed a dark future ahead. Also notable: his considerable sense of self, even in times of desperation.
“Management believes that the Orange County Register has now built a reservoir of quality and goodwill rivaling any newspaper in the country,” the presentation asserted. “The fixed investment in a major revamp of the Register is now complete with the upswing in revenue and major partnerships accumulating already with significant growth still to come.”
If that wasn't enough to get the attention of potential investors, there was this: “No other newspaper in the country has yet harnessed the full economic power of Freedom's model.”
Kushner's main leverage to ensure the future of his company and convince investors he'd be financially solvent? Real estate.
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Unbeknownst to Register staff at the time, he planned to sell all of Freedom's land and property, which he estimated would bring $81 million by the beginning of 2015. The company needed to: On a slide titled “Pro Forma Capitalization & Debt Repayment” detailing the planned sale of land (and the Daily Press for an additional $10 million), Kushner listed $47.1 million in the debt repayment side of the ledger: $20 million in debt and $27.1 million in “preferred equity.”
Almost nowhere in the presentation did Kushner discuss the Register's actual financials, instead preferring his usual boilerplate (“Increased content quality ignites a virtuous cycle for advertising growth as advertisers have more places to message increasingly engaged subscribers, plus community goodwill and growing brand strength that all result in improved [Return on Investment] for advertisers”). Really, there were just two bar graphs (on page 14) that spoke to the Reg's financial health and future–and more emphasis was placed on circulation revenue than ad sales.
Because journalism wasn't Freedom's path to success, per Kushner's presentation. The former greeting-card executive was proposing strategies that had already gotten him in hot water in the Register's newsroom for breaching the wall between advertising and editorial.
One was using Freedom's imprimatur to sell naming rights and sponsorships for venues and events ranging from the Segerstrom Center Plaza to Formula One racing teams. Kushner had upset his reporters by engaging in negotiations with Anaheim to sell naming rights for the Anaheim Regional Transportation Center. In early November, Kushner had publicly distanced himself from that proposal. Interestingly, however, he chose to include it in the December Power Point pitch to investors.
Kushner had other ideas as well. The PowerPoint pitched a “transaction and content hub” in the model of LasVegas.com to promote OC tourism and travel. Another proposal was the creation of a “service bureau for national newspaper partnerships using our system, reputation, sales force and business model to monetize remnant newspaper inventory across the country both digitally and in print.” And, incredibly, Freedom also hinted at further national expansion plans as a way to ensure returns for investors. Noting that many newspapers were in “sell mode,” the presentation proclaimed “huge potential…to deploy this growth strategy nationally.”
It's not clear whether Kushner was able to convince anyone to fork over $12 million. But shortly after his presentation, the wheels began to fall off Kushner's grand plans. In January, he announced layoffs at the Register and P-E. The community dailies were turned back into weeklies; the Long Beach Register has now been collapsed into the LA Register. More plummeting sales led to this week's news that between twenty and 100 employees would be dismissed this Monday. And while Kushner has yet to find a buyer for his desert newspapersdid sell his desert newspapers (for a reported $12 million even though they had healthy profit margins), he's yet to find a take for his Santa Ana buildings and properties.
In the meanwhile, here's the PowerPoint. Those of you who are more versed in money stuff, do decipher further. Enjoy!
OC Register Owner Aaron Kushner's Confidential Pitch to Investors to Save His Company
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