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> The paper declared bankruptcy on July 21, 2023. In a fitting final insult, the court filing listed more than $116,000 in company assets — an implausibly low v

> The paper declared bankruptcy on July 21, 2023. In a fitting final insult, the court filing listed more than $116,000 in company assets — an implausibly low valuation — as it was revealed McCaw had previously shifted the real estate property of the newspaper’s historic De la Guerra Plaza headquarters and Goleta printing plant into private LLCs under her control This is also a very standard play in the private equity field. The property (which is usually what they really wanted) is forked off to a different entity, and then that entity charges rent back to the original corp. This is how they kill off assisted living homes. They don't bother with cost-cutting; they just keep jacking the "rent" the property-owning corp charges the assisted living facility entity. In desperation to keep the home for residents, the staff cut every cost they can. Cracks in care quickly appear, everyone who can leave does which means lots of lost cash flow and expenses split among fewer residents...at some point there's just no more squeezing possible, the corp misses a rent payment...and that's that. It's also the classic plot for many stories; gang/army strong-arms a village and keeps asking for larger and larger takes of the village's crops, eventually leading to the villagers starving, etc.

jmholla 3y ago
It's nuts that this is legal. This is seems so fraudulent to me: giving away your assets to an entity so you can rent them back from that entity.
- db48x 3y ago
  Why wouldn’t it be legal? They own both corporations, and have all the rights in the world to dispose of the property as they see fit.
  - MrVandemar 3y ago
    "Legal", of course, seldom equals "moral", "ethical" or even "right". In fact, "legal" often means "brazen thievery, but rich and entitled people doing it so that's okay".
  - 23B1 3y ago
    There's quite a few reasons that could be illegal, especially if it's trying to avoid debt etc. Not saying that is the case here, but there is such a (very rampant) thing called corporate crime that could violate both the letter and the spirit of the law; the latter certainly warranting some investigation – if not a bit of outrage.
  - Teever 3y ago
    It may be illegal if the intent behind it is fraudulent.
  - kstenerud 3y ago
    For the same reason why insider trading and price fixing is illegal: It's a scam to siphon money from others, and in doing so destabilizes the whole system. If you don't protect against this sort of behavior, public confidence erodes and eventually the system collapses because nobody's actually producing anything; they're just scamming each other. Once the rich own everything, your country's productivity and competitiveness falls through the floor (banana republic) because nobody doing the actual work has anything left to strive for other than subsistence.
    - bruce511 3y ago
      Separating assets from liabilities, and cross-charging between related entities often seems to surprise those who don't own and run businesses. But it's basic business 101 which is pretty common everywhere. Think of it this way. You build a business over 40 years, accumulating value along the way. You would be crazy to leave all that accumulated value in a high-risk entity (which a business naturally is.) So periodically the value is separated from the risk. So, for example, a business owning the building is nuts. The building is a different asset class, and should be in its own structure. Any reasonable new owner who acquires a business and building in one bite will move to separate them. This is not scammy or fraud, its the ways things are done and should be done by the original owner.
      - downWidOutaFite 3y ago
        "separating the value from the risk" is euphemism for removing all financial cushion and making sure the pain of any downturn is borne only by employees and customers, or it could even mean purposefully killing off what is considered to be a worthless business and an inefficient use of assets. It's usually done by monstrous new owners who have zero care for the people or community or legacy that they destroy. Their view of the world is only through maximizing financial calculations. Progressives' general anti-business bias blinds them to the need to protect small to medium businesses from the true capitalist evils such as vulture capitalists. Things like rent control could be useful tools for protecting communities from the devastation that can be caused by financial engineering preying on real businesses.
  - josephcsible 3y ago
    https://en.wikipedia.org/wiki/Arm%27s_length_principle https://en.wikipedia.org/wiki/Arm%27s_length_principle There are a lot of the cases when the law requires arm's-length transactions, and those transactions definitely aren't arm's-length.
- Animats 3y ago
  For retirement communities, it's called "upstreaming". Residents of the Hyatt Residences near Stanford litigated that and, after eight years, settled.[1] [1] https://en.wikipedia.org/wiki/Vi_Senior_Living#Litigation https://en.wikipedia.org/wiki/Vi_Senior_Living#Litigation [2] https://www.mercurynews.com/2014/02/19/residents-sue-palo-alto-retirement-community-for-up-streaming-190-million/ https://www.mercurynews.com/2014/02/19/residents-sue-palo-al...
  - b112 3y ago
    Amusing for one reason. If you're going to go after a retirement community, I can't think of a worst place. It's actually on Sand Hill Road. Talk about potentially connected people, and people with deep pockets, or whose friends may have deep pockets. Burton Richter, 82, is among the affected residents. In 2005, the 1976 Nobel Laureate in Physics paid an entrance fee of roughly $1.59 million, 90 percent of which was supposed to be refundable. Brilliant. Steal from millionaires and multimillionaires. No possible way they'd be able to hire lawyers. No way their friends and family could. Well, hopefully this does indeed work as a usable judgement in other circumstances.
    - Animats 3y ago
      The residents didn't win. They eventually settled, on terms worse than they were fighting for.
      - b112 3y ago
        If that's the case, then it looks like legislation may be the only fix here. Retirement communities are housing, and more of course. Yet housing is well protected, so whatever legislation protects such homes should be expanded it seems.
moomoo11 3y ago
Yikes man do MBA types and PE just wake up and think of evil fucked up ways to make money? My dad works at a company run by PE monkeys who are some of the most evil mfs. My dad is a smart guy but he’s an immigrant and he says he can think but he can’t talk. It’s unfortunate but it pisses me off how badly they treat him and others.
lotsofpulp 3y ago
> The property (which is usually what they really wanted) is forked off to a different entity, and then that entity charges rent back to the original corp. The IRS treats the owner’s basis in an entity differently based on being a business or passive activity. Included in basis for a passive investment is both recourse and nonrecourse debt, while the basis in a business such as a newspaper takes into account the recourse debt. If the business and passive activity are not separated, then if the owners refinance the asset with non recourse debt and distribute additional proceeds, it is a capital gain since the non recourse debt does not increase each partner’s basis. However, if you separate the business activity and passive activity, then the partners can include all the non recourse debt in their basis, and any distribution from refinancing would not be taxable. This is why you typically want your real estate to be a separate entity collecting rent from the entity operating the business.
neilv 3y ago
> It's also the classic plot for many stories; And a more general trope: one idea that stuck with me from childhood TV was that badguys were always trying to drive people off their land. (Scooby Doo, A-Team, Airwolf, etc.) But what TV also taught us kids was that, no matter what weapons the badguys bolted onto a trafficopter, the big black attack helicopter of justice would rain Hellfires down upon them. Where are the Airwolves, BA Baracuses, and Mystery Teams that we were promised?
EMM_386 3y ago
They are doing this with hospitals also. Hospitals. The large PE firms come in, buy the hospital and rent the land back to it. Eventually the hospital goes under. This involves some of the biggest PE firms out there, and often MPT - "Medical Properties Trust". "The plundering of America's hospitals": https://www.businessinsider.com/how-wealthy-investors-got-rich-looting-needy-hospitals-healthcare-system-2024-3 https://www.businessinsider.com/how-wealthy-investors-got-ri...

jmholla 3y ago

It's nuts that this is legal. This is seems so fraudulent to me: giving away your assets to an entity so you can rent them back from that entity.

db48x 3y ago
Why wouldn’t it be legal? They own both corporations, and have all the rights in the world to dispose of the property as they see fit.
- MrVandemar 3y ago
  "Legal", of course, seldom equals "moral", "ethical" or even "right". In fact, "legal" often means "brazen thievery, but rich and entitled people doing it so that's okay".
- 23B1 3y ago
  There's quite a few reasons that could be illegal, especially if it's trying to avoid debt etc. Not saying that is the case here, but there is such a (very rampant) thing called corporate crime that could violate both the letter and the spirit of the law; the latter certainly warranting some investigation – if not a bit of outrage.
- Teever 3y ago
  It may be illegal if the intent behind it is fraudulent.
- kstenerud 3y ago
  For the same reason why insider trading and price fixing is illegal: It's a scam to siphon money from others, and in doing so destabilizes the whole system. If you don't protect against this sort of behavior, public confidence erodes and eventually the system collapses because nobody's actually producing anything; they're just scamming each other. Once the rich own everything, your country's productivity and competitiveness falls through the floor (banana republic) because nobody doing the actual work has anything left to strive for other than subsistence.
  - bruce511 3y ago
    Separating assets from liabilities, and cross-charging between related entities often seems to surprise those who don't own and run businesses. But it's basic business 101 which is pretty common everywhere. Think of it this way. You build a business over 40 years, accumulating value along the way. You would be crazy to leave all that accumulated value in a high-risk entity (which a business naturally is.) So periodically the value is separated from the risk. So, for example, a business owning the building is nuts. The building is a different asset class, and should be in its own structure. Any reasonable new owner who acquires a business and building in one bite will move to separate them. This is not scammy or fraud, its the ways things are done and should be done by the original owner.
    - downWidOutaFite 3y ago
      "separating the value from the risk" is euphemism for removing all financial cushion and making sure the pain of any downturn is borne only by employees and customers, or it could even mean purposefully killing off what is considered to be a worthless business and an inefficient use of assets. It's usually done by monstrous new owners who have zero care for the people or community or legacy that they destroy. Their view of the world is only through maximizing financial calculations. Progressives' general anti-business bias blinds them to the need to protect small to medium businesses from the true capitalist evils such as vulture capitalists. Things like rent control could be useful tools for protecting communities from the devastation that can be caused by financial engineering preying on real businesses.
- josephcsible 3y ago
  https://en.wikipedia.org/wiki/Arm%27s_length_principle https://en.wikipedia.org/wiki/Arm%27s_length_principle There are a lot of the cases when the law requires arm's-length transactions, and those transactions definitely aren't arm's-length.
Animats 3y ago
For retirement communities, it's called "upstreaming". Residents of the Hyatt Residences near Stanford litigated that and, after eight years, settled.[1] [1] https://en.wikipedia.org/wiki/Vi_Senior_Living#Litigation https://en.wikipedia.org/wiki/Vi_Senior_Living#Litigation [2] https://www.mercurynews.com/2014/02/19/residents-sue-palo-alto-retirement-community-for-up-streaming-190-million/ https://www.mercurynews.com/2014/02/19/residents-sue-palo-al...
- b112 3y ago
  Amusing for one reason. If you're going to go after a retirement community, I can't think of a worst place. It's actually on Sand Hill Road. Talk about potentially connected people, and people with deep pockets, or whose friends may have deep pockets. Burton Richter, 82, is among the affected residents. In 2005, the 1976 Nobel Laureate in Physics paid an entrance fee of roughly $1.59 million, 90 percent of which was supposed to be refundable. Brilliant. Steal from millionaires and multimillionaires. No possible way they'd be able to hire lawyers. No way their friends and family could. Well, hopefully this does indeed work as a usable judgement in other circumstances.
  - Animats 3y ago
    The residents didn't win. They eventually settled, on terms worse than they were fighting for.
    - b112 3y ago
      If that's the case, then it looks like legislation may be the only fix here. Retirement communities are housing, and more of course. Yet housing is well protected, so whatever legislation protects such homes should be expanded it seems.

moomoo11 3y ago

Yikes man do MBA types and PE just wake up and think of evil fucked up ways to make money? My dad works at a company run by PE monkeys who are some of the most evil mfs. My dad is a smart guy but he’s an immigrant and he says he can think but he can’t talk. It’s unfortunate but it pisses me off how badly they treat him and others.

lotsofpulp 3y ago

> The property (which is usually what they really wanted) is forked off to a different entity, and then that entity charges rent back to the original corp. The IRS treats the owner’s basis in an entity differently based on being a business or passive activity. Included in basis for a passive investment is both recourse and nonrecourse debt, while the basis in a business such as a newspaper takes into account the recourse debt. If the business and passive activity are not separated, then if the owners refinance the asset with non recourse debt and distribute additional proceeds, it is a capital gain since the non recourse debt does not increase each partner’s basis. However, if you separate the business activity and passive activity, then the partners can include all the non recourse debt in their basis, and any distribution from refinancing would not be taxable. This is why you typically want your real estate to be a separate entity collecting rent from the entity operating the business.

neilv 3y ago

> It's also the classic plot for many stories; And a more general trope: one idea that stuck with me from childhood TV was that badguys were always trying to drive people off their land. (Scooby Doo, A-Team, Airwolf, etc.) But what TV also taught us kids was that, no matter what weapons the badguys bolted onto a trafficopter, the big black attack helicopter of justice would rain Hellfires down upon them. Where are the Airwolves, BA Baracuses, and Mystery Teams that we were promised?

EMM_386 3y ago

They are doing this with hospitals also. Hospitals. The large PE firms come in, buy the hospital and rent the land back to it. Eventually the hospital goes under. This involves some of the biggest PE firms out there, and often MPT - "Medical Properties Trust". "The plundering of America's hospitals": https://www.businessinsider.com/how-wealthy-investors-got-rich-looting-needy-hospitals-healthcare-system-2024-3 https://www.businessinsider.com/how-wealthy-investors-got-ri...