Posted Thursday, August 21, 2008 6:44 PM | Contributed by Jeff
Cedar Fair's chief executive told financial analysts today that two of the three bids for the three parcels that make up the 550-acre park were not high enough to make their sales worthwhile for Cedar Fair. While all but one of the other rides sold at the auction have been removed from the park, no one, including Cedar Fair, has learned who the real Dipper buyer is.
Read more from WKYC/Cleveland.
Also read more from The Plain Dealer.
As a unitholder, I'd like to see them sell the land and pay down the debt. As a park enthusiast, I hope park owners get the message that, for now at least, the land their parks are on aren't going to fetch a hundred grand an acre to be used for office space and housing developments.
If the expense to hold the land is around a million dollars a year, and they are willing to hold it five years, then the eventual selling price has to be $5 million plus whatever amount of interest would be incurred on the amount of debt equal to the sale. As a unit holder, I would very much prefer they get as much as they can.
You now, there is a light in this story that people are overlooking, that they've indicated to analysts that their debt load is now $1.8 billion. Remember when they bought the Paramount Parks it was around $2 billion. That says to me that they're managing the debt pretty well.
Remember that Cedar Fair started out at around $800 million in debt when they bought the Paramount Parks. They're not going for a zero balance in the short term. Debt isn't inherently bad if it's managed right. I mean, you have a 30 or 15-year mortgage, right?
I do remember Cedar Fair having debt before the Paramount Parks acquisition. I guess that was from purchases like Geauga Lake, Worlds of Fun and Michigan's Adventure? Still, if I had $800 million in debt, I'm not sure I'd want to more than double it, regardless of how well-managed it is. My wife and I have a 30-year mortgage and we manage it well, but we're not about to go out and assume another one.
Also, when has debt become such a negative with regards to a business? You're drawing all your conclusions from what you've read about Six Flags, however this is Cedar Fair, not Six Flags. There is a huge difference.
Rob you might be willing to go out, buy a second home and assume a second mortgage if say your salary doubled? When Cedar Fair acquired the Paramount Parks their business grew and thus they were able to justify the increase in debt.
The real estate sale at Geauga Lake is not a desperate move to pay down debt. Six Flags was so short on cash and available credit that some where questioning if it would impact their ability to resume operations for the 2008 season. Cedar Fair is not in the same situation as Six Flags.
I also don't buy the argument that Cedar Fair bought Geauga Lake to eliminate the competition. There is no evidence that Geauga Lake was serious competition for Cedar Point. Past attendance patterns suggest that and I doubt we'll see any change this year that will point to the demise of Geauga Lake as the reason for any attendance increase at Cedar Point.
I will accept that Cedar Fair may have been quick to buy the property to keep it out of the hands of other operators. However, the evidence that they intended to operate Geauga Lake as one of their parks is clearly there.
I don't think it matters how long Cedar Fair holds onto the property. They're clearly not in a situation where they're desperate for cash.
*** This post was edited by egieszl 8/22/2008 2:12:11 PM ***
Still think Dipper could have stood virtually alone with the waterpark and would have remained a good drawing card for the place. Hopefully it will find a good home. Which strangely sounds just nostalgic coming from me, but from Innes sounds like he's talking about an unwanted puppy instead of a 80+ year old coaster that delivered almost as well as any Miller ride left standing...
This ride is very much in danger of a the wrecking ball if you ask me.
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