An activist investor is urging Six Flags Entertainment Corp., the world's largest regional theme park company, to become the latest well-known U.S. business to sell real estate to raise capital to shore up its finances.
Land & Buildings Investment Management and its affiliates, which hold 3% of the shares in Six Flags, unveiled a presentation Wednesday showing an undervalued stock tied to an aggressive repositioning of the parks led by year-old President and CEO Selim Bassoul. He's shaking up a business that generates $1.5 billion in annual revenue to try to lure guests willing to pay more for a premium experience, taking away deeply discounted tickets and an unlimited meal plan made famous in TikTok posts of people eating all of their meals at the park and saving hundreds of dollars a month.
The moves have come as Arlington, Texas-based Six Flags had 4 million fewer visitors — or an attendance hit of 33% — in the third quarter compared with the prior year as the company reported a loss. It's those hits that led Stamford, Connecticut-based Land & Buildings founder and Chief Investment Officer Jonathan Litt and his team to say they met with the senior leadership at Six Flags.
“Six Flags is an iconic brand with a tremendous value creation opportunity in front of it,” Litt said in a statement accompanying a presentation the company shared publicly Wednesday. “The company is currently trading at a deep discount to its historical valuation following an aggressive 2022 repositioning of its parks, which resulted in a sharp drop in attendance this year. However, following recent discussions with management, we are optimistic that modifications to the repositioning strategy should lead to an enhanced guest experience, higher attendance and strong EBITDA growth in 2023.”
The biggest tweak to Bassoul's repositioning strategy: monetize its real estate, of which the company owns the property of 17 of its 27 parks. The owned real estate is worth more than the stock market value of Six Flags, which totals $1.8 billion, with sale-leaseback potential from numerous investors who could have an interest in investing in theme park property, according to an analysis by Land & Buildings.
The investor's idea isn't a new one. Companies such as Sears and J.C. Penney have been separating their real estate from their operating business in recent years to help bring millions in capital into their respective struggling businesses. The parting of real estate from the companies has led to what has been an influx of redevelopment plans throughout the United States.
"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," Litt added in the statement. "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. We look forward to continuing our constructive dialogue with leadership and helping the company to realize the potential of Six Flags for all shareholders.”
'Researching All Options'
Dennis Speigel, founder and CEO of International Theme Park Services in Cincinnati, who has tracked the amusement park industry for decades, said Six Flags needs "to be researching all options,” with an approach of this nature, selling its real estate, not surprising him one bit.
“I’ve been discussing this with others in the industry for six months,” Speigel told CoStar News. Speigel, who isn’t familiar with the specifics of the Land & Buildings deal, said the details of a potential real estate sale, as well as the respective sale-leasebacks could either make or break the deal. But looking at this as a possibility is a must, he said
“Six Flags is in a position they need to be looking at all options to improve their balance sheet,” Speigel added. “These are well-located properties for the most part in major metro areas. I don’t know the value of the real estate, but it would be significant.”
Unlike traditional commercial real estate, such as stores, each Six Flags park has hundreds of acres of land housing roller coasters and other specialty buildings with games. Land & Buildings told investors VICI Properties, a $50 billion experiential real estate investment trust, which owns Caesars Palace and the Venetian Resort in Las Vegas, has the interest and capability of acquiring the properties.
By monetizing the real estate, Land & Buildings told investors and senior leadership at Six Flags they believe the share price of the company could double in the next 18 months.
For Land & Buildings, the company invested and then campaigned for MGM Resorts to form a real estate investment trust, which it did in 2016, which later led to the formation of VICI Properties. VICI Properties did not immediately respond to a CoStar News request to comment about its interest in Six Flags real estate.
Litt, who has three decades of experience analyzing public and private real estate, founded Land & Buildings to invest in companies with discounted valuations and high-growth potential. Six Flags, which filed for bankruptcy in 2009 before the company restructured and joined the New York Stock Exchange in May 2010, has had five different CEOs in the last dozen years.
If Six Flags sells its real estate or converts to a REIT, the company could add $11 per share, given the steep valuation discount, according to calculations by Land & Building's team. Land & Building has met with Bassoul and his team, the company said. In responding to a CoStar News media request, an executive said the company didn't have a spokesperson and could not comment for the article.