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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