Posted Wednesday, August 14, 2013 9:44 AM | Contributed by Jeff
[Ed. note: The following is an excerpt of a press release. -J]
Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today announced that it has sold Knott's Soak City – Palm Springs, a stand alone water park in Southern California, to CNL Lifestyle Properties, Inc. ("CNL"). Terms of the agreement were not disclosed and are not material to Cedar Fair's results of operations. The sale of the Palm Springs water park has no impact on the Company's other properties located in California.
CNL will retain the rights to the Knott's Soak City – Palm Springs name through the end of 2013 and no impact to customers is expected during this transition. The park will continue its regular operating schedule and all season passes sold will be recognized through the park's 2013 operating season currently scheduled to close on Sunday, October 6, 2013.
The Company noted that the net proceeds from this sale will be reinvested in their core assets including the multi-year refreshment of hotel properties in Sandusky, Ohio which was announced last year.
Read the entire press release from Cedar Fair.
So now, Geauga Lake is the only stand alone Water Park left in the chain. Yes I realize there are other separate admission water parks. But, they are all park adjacent. I wonder what was going on in So Cal that had them dump the 2 Soak City properties within a year of each other.
They wanted to fund hotel renovation. They said that outright, both times.
Hotels need renovations every 10 to 15 years. What is CF going to sell off next time? ;-)
Maybe there'll be a market for the GL property by then...
I have to agree with James. It seems a bit short sighted. I'm wondering if the Soak City parks just weren't doing that well or were in need of investment themselves (repairs and such). I can understand if they were getting rid of one project to support another. But, if the parks were low maintenance and self sustaining (in terms of profit), I don't quite get it.
Presumably CF made the determination that the ROI with re-investing the money in other core assets was higher than it would be with the two water parks. In 10-15 years they would have presumably paid down more debt and could finance hotel and other core upgrades with debt (in addition to operating cash flow). If nothing else, maybe they could sell part of their fleet of used and somewhat defective Windseekers. :)
Nobody in their right mind would buy a *new* Windseeker these days, let alone a used one. :)
When I learned about the sale of these two water parks I too was a bit confused as to why Cedar Fair would want to sell of properties, after all it can be argued water parks are as popular as traditional amusement parks these days (if not more so in some cases.) Add to the fact they helped promote the "Knott's"brand in Southern CA I thought these two little parks were a win-win even if they didn't contribute much to the bottom line.
What I have come to understand is that by selling them it allows the company to achieve two goals, focusing on much needed repairs to the resort side of Cedar Point (as has been stated for over a year now) that will significantly impact income in the "out-of-park spending" as well as really keeping the focus on core-assets that produce a significant result to the bottom line. If anyone took the time to read the FUNforward presentation it truly shows where the money comes from (ie. income) and where the money should be focused (ie. cap ex) in the company. Matt and his team pretty much laid it all out for us to know where their focus is going to be over the next 5 to 10 years, we've already seen some big changes the past 2 seasons so I can only imagine what is coming down the pike as his "vision" for Cedar Fair really forms itself.
Not sure about this either. To me they must have a reason for selling these beyond wanting to fund the hotel renovations at Cedar Point. Perhaps these parks were just too much of a burden to manage vs what they bring to the bottom line. There is a certain amount of infrastructure and talent probably needed whether the park is super small with $10 admission or super large with $60 admission. Maybe they just thought these two took too much of their time to bother with. I thought these were both kind of managed as a division of Knott's Berry Farm, but maybe I am wrong. Just seems strange because you don't grow by selling assets.
If that's not the case, I think they'd have been better off not jacking up the dividend so rapidly like they did so they could put some of the money back into the business. Now that they've done that though, they need to sort of have the revenue catch back up to the dividend they are paying because they won't want to cut it.
Gee, we've had these doom and gloom theories for Geauga Lake before, but with Cedar Fair actively selling stand alone waterparks, it really would not surprise me if they try to unload that one as well. For all we know, they may have been trying for a while now but haven't found a good offer yet.
You can grow by selling assets. All depends on what you do with the proceeds of the asset sales. That Cedar Fair (with access to a whole lot more info than we have) sold these assets tells me they believe it presents the better growth potential.
I suspect that Cedar Fair would dismantle WWK and sell the bare-bones real estate rather than allow the property to pass into a buyer's hands en toto.
Cedar Fair may be stating that they are going to use the proceeds from the sales to renovate their hotels, but there is more to this story.
San Diego, Buena Park and Palm Springs are not very successful waterparks. Southern California, not Palm Springs, in general is too cold for waterparks. The most consistent warm weather is between mid-August to early-October which is when summer is largely over.
Palm Springs is a different situation. The summer months are the off-season in this area. Tourism season is typically October through April. Again, most of that season November through February is again just too cold for waterparks and it's in the middle of the school year. Soak City Palm Springs is largely supported by locals during the summer months.
SeaWorld buying Knott's Soak City San Diego makes sense. Cedar Fair holding on to the second gate at Knott's in Buena Park makes sense. Cedar Fair selling off the Palm Springs locations is again a wise move.
The phrase "core business" came to mind immediately when I saw this in the news last night.
An attached waterpark, even a separately-gated one, is a draw for the amusement park, so it makes sense to keep those even if you're not concentrating on the waterpark business. A stand-alone waterpark, while possibly even a decent investment, could be drawing time, attention, and resources away from the real heart of the CF business - amusement parks.Last edited by rollergator, Wednesday, August 14, 2013 4:40 PM
Did you notice they just announced record results after selling the San Diego park? If the assets don't generate a lot of profit relative to their value, why bother keeping them?
The previous regime didn't think much about maintaining hotels. Dick let them age and never banked some portion of the revenue to keep them updated. The proceeds from these two sales shortcut the company back into an upgrade cycle. In the end, there's little doubt in my mind that those properties, if properly maintained, represent a much bigger revenue opportunity than those two water parks did.
Water parks generate very little percap spending--most bathing suits don't have a place for wallets. Why should CF invest in something that generates less percap $$$? Especially since the "stand-alone" parks cannot draw people to a "land" park.
With the real estate market up and record profits why not "sell high?"Last edited by Captain Hawkeye, Wednesday, August 14, 2013 11:47 PM
If I am not mistaken, didn't they announce renovations to Hotel Breakers a couple years ago, along with the Dinosaurs Alive thing? I think it was one of my complaints about them spending so much money on projects at Cedar Point, while other parks were getting nothing. Just how much money do they need to do these improvements? With the huge attendance Cedar Point has seen this year, they must be able to get renovation funds from that. unless, a huge amount of their profits is being eaten up by share holders.
I would also not be surprised if they sold what is left of Geauga Lake, but, if they do, I'll bet they remove rides from it first, and add them as new to their other water parks. From what I have seen of Soak City at Cedar Point, I would not be surprised if slides are relocated there. Soak City was fairly dead when I was there. But, it was too cold for water rides anyways.
Though, I have seen a lot of water parks come and go. They greatly depend on the weather. I would think the Michigan's Adventure must be having a slow year, as cold as it has been. That was another thing that got nixed in MA's long term plans. Hotel and indoor water park. Hotel they need, in door water park, they don't.
Another thing that kills a stand alone water park, is water park/ride park with close proximity to it. Pleasure Island was a very nice water park, and when Michigan's Adventure built theirs, they pretty much killed it. Though Pleasure Island had nobody to blame but themselves. They were charging an $18.00 admission, when MA was charging less and offered a lot more.Last edited by Timber-Rider, Thursday, August 15, 2013 12:33 AM
Timber-Rider, if Michigan's Adventure really needed a hotel, they'd already have one. ;)
I thought I read somewhere that Michigan's Adventure wanted a hotel but they were having problems with township zoning laws plus water and sewer issues.
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