A group of Six Flags investors is asking the company to sell the land underneath its amusement parks, to help boost the company's earnings and stock price.
Land & Buildings Investment Management owns approximately 3% of the amusement park chain and today issued a presentation detailing its proposal. Land & Buildings stated that the land value of Six Flags' parks now exceeds the equity value of the company, based on its current stock price.
"It is the ideal time to take action to monetize Six Flags' uniquely valuable real estate portfolio given the high multiples similar assets are trading at in the public and private markets," Land & Buildings Founder and Chief Investment Officer, Jonathan Litt said. "This strategy of separating the real estate and operator is a structure we have seen succeed in maximizing value of numerous hospitality and leisure companies that we’ve invested in historically."
The investor group said that it believes a sell-off could drive Six Flags' stock price up $11 a share. Six Flags' stock closed up nearly $2 a share today, after the presentation, to $23.38.
The presentation suggested that Six Flags could sell its land to one of several real estate investment trust or private equity firms, including VICI Properties or Blackstone. (Blackstone has a history in the theme park business, having owned SeaWorld, Legoland, as well as 50% of Universal Orlando at various points.) Six Flags would then lease back the land from whomever bought the properties.
Six Flags, in response, told the investors - in so many words - to eff off.
"The Six Flags Board of Directors and management team regularly engage with investors and welcome constructive input from all Six Flags shareholders. The Company has met with Land & Building representatives several times over the past few years including conversations regarding the monetization of real estate assets. The Board, with its advisers, routinely evaluates potential options to unlock shareholder value, including the potential monetization of real estate. Six Flags is encouraged by the early signs of progress against its strategic plan and remains focused on delivering an exceptional guest experience to drive sustainable, long-term earnings growth."
Land & Buildings noted that Six Flags' stock price has tanked this year, down from just over $41 a share in late April, in part due to new CEO Selim Bassoul's plan to reduce discounting and position Six Flags as a more premium destination for theme park fans.
But Six Flags has failed to deliver anything near to a premium experience in exchange for its now-higher average prices. That's driven visitors away, with the company suffering declining attendance in 2022 even as competitors welcomed growing crowds following the end of pandemic lockdowns.
Both Six Flags management and Land & Buildings reps claim that the company's "repositioning" plan will pay off with higher revenue and earnings. Many fans, struggling with lower disposable income, remain skeptical of such optimism, especially given the dearth of new attraction announcements from Six Flags.
A primary reason why so many Americans - including Six Flags employees and customers - are struggling financially right now is due to rising rent and housing costs. Some of the companies that the Land & Buildings presentation name-checked are among those buying up single-family homes and apartment complexes, raising rents and pricing young people out of the housing market.
Sure, Six Flags could make a windfall by selling to these firms, but then it would be left paying rent to them - in perpetuity - to stay in business. That would add to Six Flags' long-term operating costs, preventing it from adding the attractions and amenities that any "premium" out-of-home entertainment or travel destination needs. Six Flags would be left in the same bad financial mess as so many of its employees and fans.
Of course, by that time, I suspect that Wall Street investors advocating for a Six Flags asset sell-off would be long gone, having dumped their shares soon after their price spiked following the deal.
Even a quick glance at the company's financials shows that Six Flags is hurting right now, and needs some help. But I don't think that a pump-and-dump is the thrill ride that Six Flags fans were hoping to see from the company in the New Year.
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For anyone who questions how this could turn out, see the situation at California's Great America. While the land may be desirable, in any location where running the park has significant downsides, there's a fair to good chance of closing the park and relocating what can be moved across the chain if the land is only on a lease deal. If they wanted to downsize the chain and couldn't find other operators interested in buying parks, I could see something like this under consideration. Otherwise, for a company in Six Flags's current situation, it would likely lead to permanent closure unless they can recover quickly.
This is a great plan if you want to put Six Flags out of the amusement park business. See SEARS, or any number of other now defunct retailers who "unlocked the value" of its real estate and now no longer operate. Or SeaWorld, who's flagship park is surrounded by cheap hotels and fast food joints when AB or InBev (unclear who) sold off the surrounding land vs. keeping it with the park to develop. Imagine if they could have built their own resorts + CityWalk like destination instead? This is a short-sighted idea from people who don't care if this business lasts for the long term.
This makes absolutely no sense unless your sole goal is to inflate the stock price to eventually sell it off at a profit, and leave the business mired in debt.
A theme park is a very capital-intense business, requiring significant investments every single year. Those investment necessitate taking out loans against future revenue that require some type of collateral/assets. The land that the parks own is the most valuable asset the chain has, which is recognized by this group of shareholders, so why in the world would they sell off that asset. Doing that would make it even harder for the chain to improve and dig out of the hole they perpetually find themselves in.
Six Flags Darien Lake as this model is already in place EPR owns the park and Six Flags leases it
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That’s a crap idea. Short sighted thinking from shareholders who want a temporary stock boost. They’ll probably run like the wind after such a deal because they’ll cash out. The lease payments would be an albatross and a threat to the parks themselves should real trouble come along for any of them.
Here’s an idea if the budget is low, just be better at ops and the little things and invest in that. Boost security and ride maintenance budget, more training for staff, make the place look nicer, better food, paint, plants, atmosphere, shows. These are some of the biggest problems they have, yet they cost the least amount of money to address, and they have a huge effect on guest spending.
If they really want to milk those big ride investments, they have to get the other stuff right. It’s not going to be as easy to separate people from their money for the next year or two, and the cheap loans aren’t there to lean on now.