Activist investor Land & Buildings Investment Management has intensified its campaign for Six Flags to overhaul its business strategy, urging the theme park operator to separate its valuable real estate from its park operations. The firm argues this move could unlock significant shareholder value following a sharp decline in the company's stock price.
Key Takeaways
- Activist investor Land & Buildings, holding a 2% stake, is pushing Six Flags to adopt a new corporate structure.
- The proposal involves splitting the company into a property owner and a park operator to unlock real estate value.
- The investor claims this strategy could result in an immediate 50% increase in Six Flags' stock value.
- This renewed pressure comes after the company's stock fell by approximately 55% since the beginning of the year.
Renewed Call for Strategic Overhaul
In a letter to shareholders, Land & Buildings founder and Chief Investment Officer Jonathan Litt outlined a plan to improve the financial standing of Six Flags. The investment firm, which has a 2% stake in the theme park company, is advocating for a strategy it has pushed since 2022.
The core of the proposal is to divide Six Flags into two distinct entities. One company would manage the theme park operations, while a separate subsidiary would own all the physical land and buildings.
What is an 'Activist Investor'?
An activist investor is an individual or group that purchases a significant minority stake in a public company to influence how it is managed. Their goal is often to enact changes they believe will increase the company's stock price and deliver higher returns to shareholders.
Financial Performance Under Scrutiny
The push from Land & Buildings comes as Six Flags faces significant financial headwinds. According to reports, the company's stock price has plummeted by roughly 55% since the start of the year. This downturn reflects broader market concerns and company-specific challenges.
The company's shares recently hit a 52-week low, bringing its total market valuation to $2.1 billion. Litt's letter directly addresses this poor performance, suggesting that the current business model is failing to maximize the value of its assets.
"Unfortunately, the performance post-merger has not only proven us right, it’s been far worse than we even anticipated," Jonathan Litt wrote, referring to the company's recent merger with Cedar Fair.
The 'OpCo-PropCo' Proposal
The model proposed by Land & Buildings is commonly known as an operating company-property company, or "OpCo-PropCo," structure. This strategy is designed to separate the core business operations from the high-value real estate it sits on.
Unlocking Real Estate Value
Litt argues this separation would allow Six Flags to unlock the value of its real estate in two primary ways:
- Spinout into a REIT: The property company could be structured as a Real Estate Investment Trust (REIT), which often trades at a higher valuation multiple than theme park operators.
- Sale-Leaseback Agreements: Six Flags could sell its land to private equity firms or other real estate investors and then lease it back, generating a massive cash infusion.
Potential Windfall
Land & Buildings estimates that selling the theme park's real estate could generate as much as $6 billion for the company. This capital could be used to pay down debt, invest in park improvements, or return cash to shareholders.
The investor believes this strategic shift could provide an immediate 50% upside to the company's sagging stock price, creating substantial returns for shareholders who have seen their investments diminish.
Criticism of Cedar Fair Merger
In his letter, Litt also renewed his criticism of Six Flags' merger with fellow theme park operator Cedar Fair, which closed in July 2024. He stated that the deal has negatively impacted the company's revenues and financial performance.
The post-merger performance has been a key point of contention for the activist investor, who claims the integration has exacerbated the company's problems rather than solving them. This view is central to the argument that a more radical change in strategy is now necessary.
Market Challenges and Existing Property Sales
Six Flags is navigating a difficult market. The company has cited poor weather conditions during the crucial summer season as a factor impacting ticket and pass sales. It also faces stiff competition from larger industry players like Disney and Universal, which command significant market share.
Even before this latest pressure, Six Flags had already begun to monetize some of its real estate assets. The company has been pursuing plans to sell certain properties over the past few years.
In May, Six Flags announced the closure of a theme park in Maryland. The 500-acre site in Prince George’s County is now being marketed for redevelopment. Additionally, the company plans to close its location in Santa Clara, California, in 2027 when its current lease expires, signaling a continued focus on optimizing its property portfolio.
