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The Toronto Sun building in Toronto.MARK BLINCH/Reuters

For a deal that at first glance appears to about media, this one sure has a lot of real estate nuggets built in. Earlier today, Postmedia Network Canada Corp. announced that it intends to buy a whole host of Sun Media Corp.'s newspaper assets from Quebecor Media Inc. But it's also picking up a printing plant in Ontario and 34 real estate properties (worth up to $60-million). Total tab for all of the above – $316-million.

But that's far from the only mention of real estate in this deal. Ten million dollars is expected to be shaved off the purchase price thanks to Sun Media selling some real estate assets. Postmedia, meantime, says it may end up selling $50-million of its own real estate portfolio. Those proceeds would then be put toward the purchase price and reduce GoldenTree Asset Management LP's bill (GoldenTree, Postmedia's biggest shareholder, has agreed to buy $186-million in equity rights to help fund the deal).

But there's no guarantee that the real estate sales will actually happen. Postmedia has been trying to offload various properties for some time now, with little success. In January, Postmedia chief executive officer, Paul Godfrey, said during the second-quarter earnings conference call that the company had been unable to sell several real estate assets – including facilities in Edmonton, Calgary and Surrey, B.C. Then in July, during the third-quarter call, Mr. Godfrey gave this update: "We continue to market several of our real estate holdings" (in other words, no buyers yet folks). Later in the call, he added that "hopefully by the time of the next quarterly call, we may have something to report." The next quarterly call is Oct. 24.

So why is Postmedia having a hard time selling its real estate? Most likely it's not because of the overall environment. In a telephone interview, Michael Missaghie, senior portfolio manager with Sentry Investments, said pricing for industrial, retail and office assets "remains firm, demand is high, capital is available and transaction volumes are steady." The challenge for Postmedia seems to have more to do with the size of the deals. Fifty million is a tiny portfolio in commercial real estate, Mr. Missaghie says, and likely would not be of much interest to deep-pocketed institutional investors.

Ultimately though, it's a clever move on Postmedia's part to add the possibility of real estate sales to reduce GoldenTree's tab, but not make the deal contingent on it. Otherwise, would-be buyers of Postmedia's real estate assets would hold a trump card in negotiations and be in the position to demand fire-sale prices.

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