First they came for the newspapers. Then for mobile home parks. The owners of the Monterey Herald and the Santa Cruz Sentinel walk away from unpaid bills as they amass personal wealth

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By Julie Reynolds Martínez

Randall Smith, co-founder of the hedge fund Alden Global Capital, is infamous for two things: gutting local newspapers and a voracious acquisition of pricey real estate.

Although he recently sold off a few of his 16 mansions in Florida, Smith still owns roughly more than $50 million worth of homes in the West Palm Beach area, as well as a few mansions in the Hamptons.

He and his tightly held business, Smith Management LLC, also still own extensive real estate from New York to Dallas, where the company until recently owned a 40-story office building called Bryan Tower.

But a casual observer might think Smith has fallen on hard times: last year, lenders foreclosed on Bryan Tower after Smith defaulted on a $70 million loan.

Several years ago, the building became known outside of Texas after reporters discovered Smith had quietly engaged in an act of what the business world calls “self-dealing.”

With no announcement — not even to employees — Smith relocated the headquarters of two retail chains he then quickly drove into ruin. Fred’s Pharmacy and Payless ShoeSource were once based in Memphis and Topeka, respectively, where each had employed hundreds. The result of this middle-of-the-night move was that the struggling chains he’d acquired through Alden were now paying rent to him. The arrangement was “shrouded in suspicion,” according to one court filing.

The saga doesn’t end there, however. Bryan Tower was sold this year for an undisclosed amount after lenders moved to foreclose.

Smith had simply stopped making payments.

It wasn’t that he couldn’t afford to pay — as noted, he has millions in personal assets — but he simply chose not to pay. The financial press reported that the building’s occupancy was down significantly due to the pandemic shutdown, citing that as a possible reason for the default.

But Smith has also defaulted on millions in payments that were not connected to the pandemic, according to his own admission and a lawsuit filed by the landlords of his vast Manhattan offices.

Alden and several of Smith’s other businesses once occupied the entire top floor of New York’s Lipstick Building.

After nearly a year of refusing to pay rent and being sued by SL Green, considered New York City’s largest owner of office real estate, Alden left its longstanding Manhattan digs unannounced in January 2021.

In court filings, Alden admitted it stopped paying rent for the Tower Suite in April 2020, and it vacated the premises before Jan. 15, 2021, after SL Green sent a notice of lease cancellation. SL Green said Alden owed $6 million in back rent and if the realty company couldn’t find a new tenant right away, Alden could owe an additional $5 million in damages.

Alden resurfaced in a relatively low-brow “rent-an-office” in West Palm Beach, Fla., according to SEC filings, where it and a false eyelash distributor, realtors, attorneys and several outdoor tent companies share a common receptionist.

After Alden effectively took over Tribune Publishing’s board, the company admitted in a financial report to the Securities and Exchange Commission that “in light of the COVID-19 pandemic,” it hadn’t paid rent on its buildings since March 2020 and was being sued for default. This was despite its own optimistic forecast for COVID-related gains in digital subscriptions and advertising.

Tribune eventually negotiated changes to 13 lease agreements, but it also walked away from five of them. Soon five newsrooms and their buildings were permanently closed: The Allentown Morning Call, The Annapolis Capital Gazette, The Orlando Sentinel and The New York Daily News. Another Tribune building in Aurora, Ill., closed in August 2020 after the company stopped paying rent.

Unpaid bills, but expanding portfolios

The Dallas, New York and Tribune defaults are the kind of desperate measures that might lead industry pundits to believe Smith was struggling financially. But a look at his real estate portfolio, as well as that of his protégé and Alden co-founder Heath Freeman, shows otherwise.

Apparently, Smith has no problem acquiring more personal real estate even as he walks away untouched by tens of millions in unpaid bills — a feat most of us don’t have the luxury of performing.

Because so many of their holdings have unique LLCs on their titles, it’s impossible to know their full extent. What’s listed below is only what I’ve been able to glean from local news stories and county assessor records. But the list shows the dramatic expansion of both Smith and Freeman’s holdings, much of it acquired well after the pandemic forced so many of us to tighten our belts.

Randall Smith holdings (properties are often listed in the name of Smith Management, various LLCs, or Smith’s wife):

  • Around 13-14 mansions in Florida, worth approximately $50+ million.
  • Captains Neck Lane, mansion in the Hamptons, worth approximately $12 million (Zillow estimates).
  • Manhattan penthouse, offered for sale for $17.5 million in December. He owns another in the same building, value presumed to also be roughly $17 million.
  • New spec house in the Hamptons, value unknown. Smith Management bought the land for $4.8 million in 2020.

Heath Freeman holdings

  • Mansion in Montauk, valued at $4.8 million when he bought it in 2016, now valued at $7 million by Zillow.
  • Second “cottage” on Ditch Plains Beach near the above-mentioned spec house, bought for $2.4 million.
  • Mansion in Coconut Grove, Miami, for $19 million in 2021, now valued at $24 million (Zillow).
  • EHP Resort and Marina in East Hampton (including 2 restaurants), bought with other investors for nearly $18 million in 2021.
  • The Harbor Bistro in East Hampton, bought for $4 million in 2021.
  • The Inn Spot in Hampton Bays, value unknown.
  • The former Red Bar Brasserie in Southampton, now Crash Cantina, value unknown.
  • Bongiorno restaurant in Montauk, value unknown.
  • Coffee shop chain “City of Saints Coffee Roasters,” co-owned with his sister Amanda, value unknown.

This puts the bare minimum value of Smith’s known assets at $101.3 million, and Freeman’s at $55.4 million. The actual totals are likely much higher.

What is known is that both Freeman and Smith are aggressively expanding their footprint in the Hamptons.

The strip-mining model

While Smith and Freeman’s personal wealth-building accelerates, it’s important to note that Alden continues to strip its businesses down to the bone. Though it once invested in an array of industries, including the aforementioned retail chains, Alden is now almost entirely focused on acquiring and sacking local news chains.

Earlier this year, Alden failed to buy the Lee Enterprises chain after board members and shareholders were alarmed by news reports about Alden’s voracious strip-mining of its local news outlets and their assets. Court records bear this out — a Delaware chancery court noted in a Feb. 14 opinion that reporting on Alden’s history of gutting newspapers was influential in Lee directors’ decision to fight off Alden’s hostile takeover bid. Those news reports, by the way, were largely informed by the efforts of The NewsGuild and its members to investigate and raise awareness about Alden.

Alden did, however, succeed in buying the Tribune news chain last year, with devastating results. Tribune immediately implemented buyouts and promised to cut news coverage by 20% across the chain. Staff attrition skyrocketed at Tribune papers like the Allentown Morning Call, which between April and August lost 23% of its staff.

Readers who wonder why they’re getting a lot less local news need look no further. An analysis of local news content on Tribune websites confirms that Alden held to its promise of cutting the number of stories. “…There were fewer articles being published each month in 2022,” wrote Tribune executive Kurt Gessler on Medium.

That hasn’t stopped subscription rates from skyrocketing, however. In California, the Santa Cruz Sentinel costs $975. A Monterey Herald subscription is a stunning $1,040 a year. Home delivery of the San Jose Mercury News now costs $728 a year, up from $225 in 2012 when Alden took over the paper’s chain, MediaNews Group. Meanwhile, smaller Alden papers are all over the map: a year’s delivery of the Cañon City (Colorado) Daily Record is only $124, while in New York, the Kingston Daily Freeman is $366.66.

As news analyst Ken Doctor once told me, Alden’s model is like selling a half-full bottle of Coke for twice the price.

What can be done?

It’s clear that Smith and Freeman are abusing the lax system of incorporation in the United States. According to the legal website UpCounsel, the purpose of “a limited liability company, is to shield the business owner from personal liability for the company’s debts.” That may be useful for startups to allow entrepreneurs to assume more risk, but it has its limitations. The fact that individual LLCs can declare bankruptcy while protecting their owners is an abuse of the system.

The Tax Justice Network has ranked the United States first in corporate secrecy, ahead of Switzerland, the Cayman Islands, and other offshore venues. The Pandora Papers showed that some states – Delaware, Nevada, Wyoming, and South Dakota – are particularly egregious.

Unfortunately, there is no easy way to fix this problem. To demand owners be responsible for all debts would throw a monkey wrench into new businesses, including genuine mom-and-pop operations. However, the federal government (through its control of the bankruptcy process) and state governments (responsible for business registration) can take important steps to limit abuses.

States could demand that LLCs be more transparent about their owners. Opaque shell companies remain a problem, not the least of which is the protection of illegal activity. The “LLC Transparency Act” (A9415/S8439) in the state of New York provides for full disclosure of beneficial owners as well as the creation of a publicly searchable database of that information.

It’s a stretch to speculate that the tax-avoidance states listed above follow suit.

The federal government could reform the beneficiaries of bankruptcy. Currently, the first creditors in line to be paid are those who have secured their loans through collateral. In the case of default, the secured creditor has the right to seize assets.

“The Stop Wall Street Looting Act” (S.3022/H.R.3648) would — among other things— reform the bankruptcy process by putting employee wage claims on the same level as secured creditors. The legislation is currently stalled.

And so Smith and Freeman are free to abuse the system.

And now, evictions

While mostly focused on gutting your local news outlet, during the pandemic Smith moved into one more investment area that’s having a devastating effect on working people’s lives: mobile home parks.

While Smith enjoys flitting between mansions in places like West Palm Beach and the Hamptons, his low-income tenants face rent hikes and evictions.

Smith Management, under names like Big Oaks MHP LLC, has acquired some 20 mobile home parks in North Carolina, where it immediately raised rents and threatened evictions.

Residents of the Ridgewood Mobile Home Park protested in front of Congressman David Price’s office after their new owners sent letters announcing imminent, steep rent increases. Although the park’s residents are mostly Spanish-speaking, the letters were in English.

Julia Sendor, an activist working with the tenants, said Smith Management told her group not to call again after they tried reaching out to the new owners.

“They’re going to raise the rent up to 40 percent for some, but they have not responded to the serious health and safety concerns that we have,” resident Alejandra Rivera told the publication Indyweek.

Tenants at Big Oaks Mobile Home Park in North Carolina were immediately hit with 90-day rent increase notices during the height of the pandemic.

Smith’s company offered to buy tenants’ homes if they couldn’t afford the 60% increase. Worse, owners are prohibited from selling their homes to any other buyer, allowing Smith to set the price.

One 74-year-old resident there, Linda Lasure, is homebound and dependent on oxygen around the clock. Almost overnight, her rent jumped from $440 to nearly $700, according to WFTV-9.

As Lasure pithily put it, “God didn’t put us on this earth to go through that crap.”

A version of this story previously ran on SaveLocalNews.org, a publication of The NewsGuild.

Julie Reynolds Martínez

About Julie Reynolds Martínez

Julie Reynolds Martínez is a freelance journalist who has reported for the Center for Investigative Reporting, The Nation, NPR, PBS, the NewsGuild and other outlets. She is a co-founder of Voices of Monterey Bay.