Six Flags Entertainment Corp (NYSE: SIX) is up more than 10% this morning after an activist shareholder said the theme parks operator could boost its stock price by $11 a share next year if it sells or spins off its real estate assets.
Six Flags has been in a downtrend
Land & Buildings Investment Management wants Six Flags to consider selling its real estate to partners and leasing it back to unlock tremendous value for its shareholders.
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In his letter to the amusement parks company, Jonathan Litt – the Founder and Chief Investment Officer of L&B wrote:
It’s the ideal time to monetise Six Flags’ uniquely valuable real estate given the high multiple similar assets are trading at. This strategy we have seen succeed in maximising value of numerous hospitality and leisure companies.
Land & Buildings has built about a 3.0% stake in Six Flags to push for such changes. Despite rallying to this stock market news, its shares are still down nearly 50% for the year.
What are its real estate assets worth?
According to Jonathan Litt, the Arlington-headquartered firm’s real estate assets are worth more than its market capitalization. Separating property from the operating company, he added, could even see its stock price double over the next eighteen months.
Following recent discussions with management, we’re optimistic that modifications to the repositioning strategy should lead to an enhanced guest experience, higher attendance, and strong EBITDA growth in 2023.
In its latest reported quarter, Six Flags noted a 21% decline in revenue as costlier tickets saw only 8.0 million people visiting its parks – down 33% from a year ago.
Six Flags operates a total of 27 parks in North America.
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