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Sony to sell US HQ building for $1.1B

Summary: Sale of Manhattan headquarters to property consortium Chetrit Group means Sony will net US$770 million after paying off building-related debt and other incidentals, and help it balance its books.

Jamie Yap

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Sony said it is selling its U.S. headquarters in Manhattan for US$1.1 billion, which will help tide the financially-strapped Japanese electronics giant over while it is in the midst of improving its business.

AFP reported Friday the Japanese electronics maker has sold the 37-storey building to a consortium led by New York-based commercial property firm Chetrit Group in a deal expected to close this March. The deal will net Sony US$770 million after paying off building-related debt and transaction costs, it added.

sony-sign
Sony

Its various business units, including music and movie divisions, would remain in the building for another three years under a new lease agreement, but will leave it once the tenure ends, the report stated.

In a statement reported by AFP, Sony said: "Sony is undertaking a range of initiatives to strengthen its financial foundation and business competitiveness and for future growth. At the same time, Sony is balancing cash inflows and outflows while working to improve its cash flow by carefully selecting investments, selling assets and strengthening control of working capital such as inventory. This sale is made as a part of such initiatives."

A separate report by the Wall Street Journal (WSJ) Thursday revealed the deal is a big boost for Sony as it is more than four times the amount it had paid for when acquiring it from AT&T in 2002.

Nicole Seligman, president of Sony America, said in an internal memo to employees: "As we had hoped, there was great interest in this iconic building. Given the opportunities and challenges in the current economic and real estate landscape, selling 550 Madison now is a timely and logical strategic move."

On Thursday, Sony CEO Kazuo Hirai said his company's recovery was not yet complete but it is heading in the right direction. Amid its financial troubles, Sony has carried out a series of job cuts and venue closures to ease costs and stay afloat.

For its earnings in the second quarter ended Sep. 30, 2012, the company narrowed its losses to US$15.5 million from US$27 million a year ago.

Topic: Tech Industry

About

Jamie writes about technology, business and the most obvious intersection of the two that is software. Other variegated topics include--in one form or other--cloud, Web 2.0, apps, data, analytics, mobile, services, and the three Es: enterprises, executives and entrepreneurs. In a previous life, she was a writer covering a different but equally serious business called show business.

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5 comments
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  • Hmm, not all good..

    It is good to see that they are acting against their debt, however what is needed is a fundamental proct change at Sony. All they are doing here is cutting costs. If the things you are making aren't selling now, they won't sell once you have "streamlined" your staff.

    It is never good to see a company selling assists, especially mission critical buildings like this. It means they are unable to raise therequired funds by borrowing against the asset, loose it and either have to downgrade or worse; rent.

    It can be a positive if this capital can be used to investing the company - R&D and such. Their products are the problem at Sony and it has to change. When they bought that building, they still dominated personal music players, play station was like printing your own money and they had just gone into a partnership with Ericsson that would make hugely successful Walkman and camera phones.

    Skip to the day they sold that building and whilst the playstation did stay technologically above it's competitors, it doesn't offer real world extras for the user at higher cost, and that's become modern Sony; you get the same as what the competition offer, but usually at a higher cost and often with proprietary pherials. They have maintained their reputation for quality, the trouble is that with Samsung lg and co coming in, they have just as good quality... And they are cheaper with often more features. To pull off an apple moment they've gotto pull some goodies put of the bag.
    MarknWill
    Reply Vote

  • Short term vs. long term (gufaw)

    So, they gain some cash now, but will end up spending that same cash over the next 5 years or so in rent, unless they vacate, which is not mentioned in the article. Anyone else have doubts about where Sony headshed minds are these days???
    Willnott
    Reply Vote

    • RE: Short term vs long term

      What this sale amounts to is the usual "capex" vs "opex" BS you hear from MBA types. If you remember from MBA school 101, "opex" is generally a tax deduction for an expense (i.e. rent, utilities, office supplies, salaries, etc), whereas "capex" is considered accruing toward acquiring assets (i.e. a building, property, equipment, etc). The cost of "capex" is depreciated over its "useful life". Some assets, like building can actually increase in value, and that increase can be "taken out" of the building in the form of an 'equity loan'. [Side note: many US homeowners who took 'equity' out of their homes back before the housing bust now regret that move, as their home value is less than what they owe on it i.e. they are "underwater".]

      Therefore, Sony is trading a current "capex" ('capital expenditure' i.e.its mortgage and other building related expenses) for current debt relief and cash up front, in exchange for future "opex" (operational expenditures i.e. rent) costs. It will make their balance sheet "look better" because they will no longer have to carry the liability for the mortgage on the books.
      fatman65535
      Reply Vote

      • Re: What this sale amounts to is the usual "capex" vs "opex" BS you hear fr

        Flagged for calling it "BS".
        ldo17
        Reply Vote

    • Actually they did mention in the atricle, that they would lease for 3 yrs

      and then vacate at the end of the lease. I personally hope they (Sony) can turn things around. I have owned two Sony laptops, and recently (August 2012) purchased a 3rd with Win7X64, and have Sony cams, and sound systems.

      IMO they do still make quality products, though their prices are higher than the competition. But sometimes when you find something that works and lasts it's worth the extra $$.

      In any event, I really hate to see any company loose and go out of business, if for no other reason, than that it affects the employees that are earning a living. We don't need more people out of work, wether here in the US, or elsewhere in the world.

      And I say that as the company I work for, that employs over 85,000 worldwide, prepares for cutbacks itself. It just plain sucks, for everyone.

      This is why I try not to comment on some of these articles anymore, because people like Toddbottom, Owl111net, etc would like any company that competes against MS to fail and go out of business, they have no concern for others.

      And before you start bashing me, I know there's others here also, whom post and are fans of other platforms, but these two constantly post against Apple, Google, Linux, etc and belittle othere for having a choice different than theirs.....

      Hopefully Sony, Rim, and other companies having issues can rally and turn things around, and start hiring again...

      Thanks...
      TW
      T-Wrench
      Reply Vote
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