Land & Buildings Investment Management, a significant shareholder in Six Flags Entertainment Corporation, has publicly called on the theme park operator to monetize its extensive real estate holdings. In a letter to shareholders, the investment firm argued that such a move could unlock up to $6 billion in value and significantly boost the company's stock price.
The proposal comes as Six Flags (NYSE: FUN) grapples with a stock decline of over 50% year-to-date. Land & Buildings suggests that separating the property assets from park operations is a clear path to realizing shareholder value while the company works on an operational turnaround following its merger with Cedar Fair.
Key Takeaways
- Activist investor Land & Buildings is publicly pressuring Six Flags to sell its real estate.
- The firm estimates the property portfolio could be worth up to $6 billion.
- Six Flags' stock has fallen more than 50% year-to-date amid merger integration challenges.
- Land & Buildings projects a potential stock upside of over 75% if the real estate is monetized.
Shareholder Renews Push for Strategic Change
In a detailed public letter, Land & Buildings Investment Management outlined its case for Six Flags to pursue a real estate monetization strategy. The firm highlighted the company's current valuation, noting it trades at a low EBITDA multiple of approximately 7x on what it describes as depressed earnings.
According to Land & Buildings, recent challenges, including difficulties with the Cedar Fair merger integration and unfavorable weather conditions, have created negative market sentiment and record short interest in the stock. However, the investment firm views these issues as temporary and believes the underlying theme park business remains resilient.
The letter states that now is a generational opportunity for investors before the stock's value is re-evaluated by the market. Land & Buildings argues that selling the real estate provides a direct method for delivering near-term gains to shareholders.
A History of Engagement
This is not the first time Land & Buildings has advocated for this strategy. The firm has a history of engaging with Six Flags management and its board on the topic of real estate value.
Previous Engagements
In December 2022, Land & Buildings released a presentation arguing that separating the company's real estate and operating businesses could result in immediate 50% upside for the stock. Following this, Six Flags shares rose 45%. The company later appointed a new independent director and agreed to evaluate a potential separation.
Land & Buildings re-engaged with the board in August 2023, again pushing for a real estate sale. A few months later, Six Flags announced its merger with Cedar Fair, a move Land & Buildings publicly opposed, stating it was not the best way to maximize shareholder value.
The firm now points to the stock's poor performance since the merger as validation of its earlier concerns. They argue that the current low valuation makes the case for a real estate separation even more compelling than before.
The Financial Case for Monetization
The core of Land & Buildings' proposal is an OpCo/PropCo separation. This structure would divide Six Flags into two separate entities: an operating company (OpCo) that runs the theme parks, and a property company (PropCo) that owns the land and buildings.
This could be achieved through two primary methods:
- Sale-Leaseback: Six Flags would sell its real estate to a third party, such as a real estate investment firm, and then lease the properties back to continue operating the parks.
- REIT Spin-Out: Six Flags could spin off its real estate assets into a new, publicly traded Real Estate Investment Trust (REIT).
Land & Buildings projects that this strategy could unlock immediate upside of over 75% for shareholders, based on 2026 consensus earnings estimates. The firm suggests the upside could be as high as 130% if the company's EBITDA recovers to its original 2025 guidance of $1.1 billion.
By the Numbers
- Potential Real Estate Value: Up to $6 billion
- Stock Decline (YTD): Over 50%
- Projected Upside (L&B): 75% to 130%
- Current EBITDA Multiple: Approximately 7x
The investment firm believes the increased scale following the Cedar Fair merger makes a REIT spin-out a more viable option than ever. They also note that executing such a plan would likely take several quarters, allowing time for earnings to improve before the real estate is priced.
Outlook and Company Direction
Land & Buildings expressed confidence that its proposal will receive serious consideration. The firm noted that recent changes to the Six Flags board, an ongoing CEO succession process, and an engaged shareholder base create a favorable environment for strategic change.
"Real estate monetization has proven in countless industries – from lodging, to gaming, to healthcare and many others – to unlock substantial value for real estate heavy operating business and there is no reason for further delays," Land & Buildings stated in their letter.
The firm mentioned its conversations with management and the board have been constructive. They believe a broad monetization of real estate will be considered alongside other strategies, such as selling non-core theme parks and land parcels.
Ultimately, Land & Buildings emphasized that the focus must remain on enhancing park operations for guests and other stakeholders. They see the real estate strategy as a parallel path to maximizing value while the core business is strengthened.
