Six Flags Entertainment Corp., the world's largest regional theme park company, is responding to an activist investor's call for the sale of park real estate across the country by saying it wants to give its new strategy of appealing to higher-paying visitors more time to work before it considers putting any property on the market.
The statement by Arlington, Texas-based Six Flags came after Land & Buildings Investment Management LLC and its affiliates, which hold 3% of the shares, pressed the theme park owner to act on the sale proposal by making the recommendation public on Wednesday.
"The Six Flags board of directors and management team regularly engage with investors and welcome constructive input from all Six Flags shareholders," executives said in a statement. "The company has met with Land & Buildings representatives several times over the past few years including conversations regarding the monetization of real estate assets."
The statement added that "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."
Six Flags did not immediately comment to an emailed request for additional information from CoStar News. The company has been in a strategic transition since year-old President and CEO Selim Bassoul introduced a new approach to create a premium park experience for guests, 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.
In the wake of the strategy, the company has had millions fewer guests and its bottom line has taken a hit. Bassoul told investors in the last earnings call he saw promise in the higher-per-capita spending by the guests that visited the park during the third quarter of 2022.
Not a Seller's Market, Broker Says
Even though Six Flags has weighed its options for its real estate, Michael Swaldi, a senior managing director at JLL, said it could be difficult for the company to monetize its parks.
"It could get done, but first things first, could you pick a worst time in the cycle?" Swaldi, who is not working with Six Flags and has no knowledge of what the company has planned, told CoStar News. "We are out there working with land sellers and buyers right now and everyone is frustrated. They don't have any kind of confidence of what to underwrite to on the horizon with inflation and rising interest rates. Everyone is on pause."
Without an "irreplaceable location," totaling 3 to 5 acres, such as the Fort Worth Central Library in downtown Fort Worth, it's been difficult for real estate executives to underwrite deals, Swaldi said. Any would-be land deal only gets more complicated the bigger it is, he added, with Six Flags parks sprawling over hundreds of acres of land.
In working a sale-leaseback deal, a potential buyer would also need to consider the market of the real estate and who might be a tenant if Six Flags is unable to lease the property, Swaldi said. In most cases, he said, a would-be buyer would need to consider new uses for the acreage.
"It's not like there's 25 other Six Flags-type operators," he added. "If Six Flags goes under, a new property owner would have hundreds of acres they would have to demo and clear the land and who knows how to dismantle a roller coaster."
A would-be buyer would need to have private funds that could patiently wait on the sidelines for decades, he said, which disqualifies most institutional investors.
For Six Flags Over Texas, the company's hometown park in Arlington, Texas, Swaldi said it's an "unbelievably awesome location," and is "well-located for all kinds of uses," along Interstate 30, but banks would still be hesitant to lend debt on acreage that could potentially make no income.
"I'm not saying this can't be done, but it's a heavy lift right now," he added.