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An activist investor wants Six Flags to monetize its real estate

Land & Buildings isn't Six Flags' only activist, or its biggest. Last month, H Partners Management LLC amended its cooperation agreement with Six Flags to increase its ownership of the theme-park operator's common stock to 19.9%. H Partners Management LLC is the company's largest shareholder.

December 20, 2022
5 Minutes
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In an effort to reverse the decline in share prices, an activist shareholder with a stake in Six Flags wants the company to sell or spin off its real estate.

In a presentation to other investors seen by TradeAlgo Land & Buildings Investment Management LLC has a 3% stake in Six Flags.

Jonathan Litt, the founder and chief investment officer of the firm, has been in contact with Six Flags management, including Chief Executive Selim Bassoul, to discuss splitting the business into separate operating and property companies. Rather than selling the company's real estate, Mr. Litt is advocating leasing it back to Six Flags.

There are 27 theme and water parks owned and operated by Six Flags in North America, including ones in Valencia, CA, Queensbury, NY, and Mexico City.

Six Flags's real estate alone is likely worth more than its current market capitalization, which is about $1.7 billion, and several real-estate and private equity firms may be interested in purchasing land for leisure assets like theme parks, according to Litt.

Years ago, Six Flags explored creating a real-estate investment trust structure to monetize its real estate, but decided against it.

As a result of Litt's efforts, companies have been forced to do a so-called opco-propco split in the past.

In 2015, he urged MGM Resorts International to split into a hotel management company and a real estate investment trust. Some of the casino giant's properties were eventually transferred to real-estate investment trust MGM Growth Properties LLC. Real-estate firm VICI Properties Inc. acquired MGM Growth Properties earlier this year.

Land & Buildings isn't Six Flags' only activist, or its biggest. Last month, H Partners Management LLC amended its cooperation agreement with Six Flags to increase its ownership of the theme-park operator's common stock to 19.9%. H Partners Management LLC is the company's largest shareholder.

Six Flags was regaining its footing after the Covid-19 pandemic temporarily closed its attractions in 2020 and traffic to its properties plummeted when Bassoul was appointed chief executive in November 2021.

Prices were raised and free perks were reduced to attract consumers willing to pay more for roller coasters and waterslides, even at the expense of long-time attendees who depend on cheap passes.

As a result, the company's results have suffered, and the shares are down over 50%.

In the three months ended Oct. 2, Six Flags reported revenue of $505 million, a 21% decline from last year.

Falling attendance was primarily driven by hiked ticket prices and fewer discounts, according to the company.

Approximately eight million people attended, a 33% decline from a year earlier.

“These improvements require time to implement and continue to be a work in progress, and some parks have been more successful than others,” Mr. Bassoul said on a November earnings call.

As far as Mr. Bassoul's turnaround strategy is concerned, Mr. Litt supports it.

Land & Buildings was founded in 2008 and is based in Stamford, Conn. Over the years, the company has acquired a number of real-estate-focused companies, including Saks Fifth Avenue parent Hudson's Bay Co., Gaming and Leisure Properties Inc., and more recently Apartment Investment & Management Co., or Aimco.

In the first proxy contest since new rules requiring a universal proxy card were enacted, Land & Buildings had one of its two director nominees elected at Aimco earlier this month.

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