Media Group Selling More of Office Building

BARCELONA-Locally headquartered Private Media Group Inc. has found a buyer for an additional floor of its new 104,400-sf office development here. The publicly traded adult entertainment company earlier this year determined that it needs cash flow more than it needs office space. In April, Private Media sold the ground floor of the building, which represented 14% of the sellable floor space, for $2.2 million (1.8 million euro). In this latest transaction, Private Media says it has sold the next floor up, representing another 23% of the sellable floor space, for $3.9 million (2.8 million euro).In both sales, Private Media is receiving 10% as a down payment and the remainder upon the closing of the transaction. The April transaction was scheduled to close this month. This latest sale is scheduled to close next month. Private Media acquired the building while it was under construction in December 2002 from companies indirectly beneficially owned by Private Media’s principal shareholder. The purchase price for the building was $12 million (9.9 million euro).Private Media says it is looking to sell off all or most of the building following a “re-evaluation of its need for additional space.” Company president Berth Milton adds that its success in finding buyers demonstrates the company’s ability “to obtain additional funds from non-operating activities and thereby removing shareholders’ concerns about cash-flow during the past two years’ and meeting our future cash-flow needs for the on-going strategic expansion of our business.”Private Media says proceeds from the sales will be invested in the company’s content library and used to pay off costly financing not related to the property. In March, Private Media reported that it lost $570,000 on revenue of about $38.5 million in 2003. Concurrently, it announced that as a result of a recent group-wide review it has “restructured its operations to focus on core business and reduce or abandon spending on activities not generating sufficient gross profits and/or operating profits.”Meanwhile, hanging over the company’s head is an ongoing lawsuit with the Swedish Tax Authority. The agency claims that Private Media owes nearly $60 million in back income taxes and penalties for doing business from a permanent establishment in Cyprus from 1995 to 1998. A county court has sided with the Swedish Tax Authority and Private Media has appealed that decision. “The final outcome of this litigation will not be known for several years,” according to a recent SEC filing by Private Media.