Close Magic Mountain? Residents Aren't Thrilled

Thursday, July 6, 2006 11:18 AM
janfrederick's avatar Since this conversation hinges on property values, I thought I'd through this interesting tidbit in that could affect a certain property in Northern California: http://www.mercurynews.com/mld/mercurynews/news/local/14976555.htm?source=yahoodist&content=sjm_news
"I go out at 3 o' clock for a quart of milk and come home to my son treating his body like an amusement park!" - Estelle Costanza
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Thursday, July 6, 2006 11:28 AM
I guess the later seasons of "Step By Step" didn't help much with attendance, Id be pissed off too going to MM and not finding that damn beach beside Colossus like I expected.
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Thursday, July 6, 2006 12:19 PM

coasterdude318 said:

GWHayduke said:
That's an oversimplification - when you're in charge of a publicallly-traded company, you do what's best for the shareholders. That isn't necessarily what's best for the company longterm.

Of course not, but I never said longterm. By your own admission, Six Flags is scrambling to stay together right now. Dumping the necessary improvements into SFMM isn't an option they can afford to take. I'm not sure what else you're trying to recommend (other than filing for Chapter 11). If profits were flowing in from SFMM we wouldn't even be having this conversation. But that's not the case, and there's no sense in keeping a huge drain on your company when you're already up a creek.


For instance, as noted in another thread Shapiro just bought 500,000 shares of SF stock. If he can convince the market that he's saving the company and shares increase $2, he makes a cool million. Then he sells, and where the stock value goes from there isn't his problem any more.

Sure it is, because he's still leading the company, and he's still accountable for where that stock value goes. Sure, he may personally make some money, but running a publically-traded company isn't about toying with its stock so you can make money (personally) off it. That's illegal.

People are running around and screaming as if it's so unfathomable that Six Flags is considering cutting SFMM loose, and that the result of that will be a chain reaction that will eventually lead to every park being sold. Don't forget that SFMM is a unique situation. He's cutting the parks that are hurting the company more than helping it. He's not cutting them just for the sake of doing so.


anything they get from selling the park will be dedicated to reducing their debt, not to any improvements to the other parks.

Except who is going to be interested in buying all of those used coasters? They may be able to sell off one or two of the coasters, but if there's one thing they learned from SFAW, it's that the majority of the industry had little interest in snatching up used rides. I think this management realizes you can't just go several years without adding anything new, and if they're suddenly going to have a whole boatload of free attractions to distribute to their parks, you better believe they're going to jump on that.

-Nate


Well let's remember one thing Nate,when SFAW closed there was no rush to relocate many of the nine coasters that park had...only three were kept in the chain & as is they're all sitting in fields at the parks they were sent to with no guarantee of even operating again.

I don't see Shapiro relocating any of the rides from SFMM for two reasons:one the expense & two the rides will attract the very demographics that Shapiro is trying to avoid by closing the park in the first place.

Everyone is treating it as if it's the end of the world as we know it if this one park closes & yet we havn't heard anyone complain about the same possible fate awaiting any of the other 5 parks that are being considered for sale...I swear some people here,like GWHayduke have turned this debate into the amusement park equivalent of a right to die vs right to life type debate,treating it as though SF has a moral obligation to keep this one park open or enthusiasts the world over are gonna go berserk over it or something like that.

I mean so what if SFMM is the west coast's thrill park? it doesn't mean that SF owes anyone<let alone enthusiasts> a thing because of the status that the enthusiasts have given it know what I mean?

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Thursday, July 6, 2006 12:33 PM
I've been sitting back watching this argument, and I sort of see GWHaydude's point about not being able to re-invest the sales of those parks back into the company.

However, seeing the recent stock purchases by Snyder, and knowing that he is, in fact, trying to make money, I'm sure he has a plan for many of the re-locatable rides at these parks.

At this point, it's all about mitigating the loses, and trying to make the best of the situation. The worst thing that could happen to the creditors is for Six Flags to go bankrupt, and then an escalating fire sale happens the way GW describes and they get $.04 for every $1 they loaned. If SFMM is closed, sold, and the majority of the rides are re-located, then this money is stretched further. The creditors NEED six flags to be profitable - if they can't be profitable, they need them to be as close to profitable as possible. There is no other market that they can magically just sell these parks to and recover their money. It's not like a bank foreclosing on your house, and selling it to someone else. The value of the used market is not much, the value of the land is great, but not 10% of what they owe.

To be competitive at a bare minimum, the one lesson the industry has learned is that there has to be a balance of new thrill and new family attractions every few years. But more importantly, THERE HAS TO BE SOMETHING NEW. It doesn't matter so much if it's new-new, or new-used. Imagine that giant skateboard ride showing up, along with a few flats at someplace that needed more family rides. It might matter to us enthusiasts, but do you really think if X showed up at SFGAM in 2008 (the one park that arguably HAS a solid family section currently), that the general public wouldn't show up in droves to ride it? And that right there is the argument that you make to your creditors! At this point, we don't know how much per year Snyder and Co plan to put into all of the parks. However, with 6 parks off the board, that will obviously be a lesser amount.

By spending money earned from the sales to relocate rides from SFMM and SFEG that are re-locatable, they'll be able to finance 2 years worth of "upgrades" on the cheap to their other parks, giving time for Snyder's real plans to unfold. He only had 3-4 months to try to get sponsorships for the parks for food this summer, let alone everything else. Look to see ALLOT more revenue come in from that front. How about X re-themed to some giant Mt Dew eXXtreme promotion? How about leasing a large chunk of land on site for hotels with indoor waterparks? (just because they are too in-debt themselves doesn't mean they can't try to make money with the idea - let others spend money on it for them!).

The creditors do NOT want to see the whole chain sold off. They will not get ANY of their money back if that happens. Sure, they may loose money, but if they make 1 billion dollars off of selling the rest of the chain, they are still 1 billion dollars in the hole. If they help prop up the profitable parts of six flags, and then take a chunk of the company at some point in the future because their debts can't be repaid, then they've may have written off 500 million, and now own something that will make a profit off the other half of the debt they are still paying on.

-Chris

*** Edited 7/6/2006 4:55:27 PM UTC by Isca***

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Thursday, July 6, 2006 12:38 PM

DWeaver said:
There's something else at work here though, at Coasterbuzz. People close to the park seem to be noticing a nonchalant (and maybe even slightly gleeful) attitude towards losing the park, and feel some posters are perhaps piggy-backing on this situation with their own agenda. Perhaps NOW their homepark might get that large coaster afterall. ;)
*** Edited 7/6/2006 6:09:52 AM UTC by DWeaver***

Yes, I think that's accurate. What seems to be a recurring thought here is that selling these parks somehow saves the company, and they're going to take the money from them and reinvest it in the other parks. Believe me, the creditors are going to make sure that none of the money from selling assets goes into operations or capital improvements - it's ALL going to pay down the debt.

The funny thing about the idea that that anybody's park will get a big new coaster is that Shapiro said pretty much from the start that a large part of SF's problem was the constant addition of expensive new coasters, and that their goal was to enhance the parks with low-end attractions - ampitheater entertainment, more costumed characters, stunt shows, maybe a 3D movie or simulator; basically the addition of Chuck E. Cheese type stuff, not rides.

I was a business owner for 20 years, so I do know a little something about balancing the ledger and dealing with adversity. Honestly, I think they are right about the company having been hurt by exorbitant construction costs. But still, I disagree with their strategy. I'd keep SFMM, SFOT, SFOG, and 3 or 4 of their other largest parks with minimal local competition, and dump all the piddly little places that they took over in the 90s. They are spread way too thin - they need focus. Focusing on the properties with the best potential for profit makes more sense than simply focusing on those that currently return the most profit. The former is a long term strategy, the latter a short-term one.

With a little creativity, MM would be the best performing of all the SF parks. It has the largest population base to draw from, and it operates year round, not seasonally. Yes, the prior mismanagement has wounded it, but fixed up it would be more profitable than any ten other SF parks (with the possible exception of SFOT and SFOG). One good year at MM would return more profit than 20 good years at SFAA near Atlanta, for example. And when I say fix up, I don't mean anything particularly expensive - 90% of what's wrong could be fixed with a couple million dollars, mostly for maintenance and security personnel.

(Nothing against SFAA, btw - it's a nice little park that ought to be locally owned.)

This is why we can take what's going on with the sale and extrapolate that it's just phase one of the sell off; the strategy they've adopted is just a bandaid, and not a cure. And selling MM severely hurts the longterm profit potential of the company. *** Edited 7/6/2006 4:55:19 PM UTC by GWHayduke*** *** Edited 7/6/2006 4:57:27 PM UTC by GWHayduke***

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Thursday, July 6, 2006 12:49 PM

BATWING FAN SFA said:
Everyone is treating it as if it's the end of the world as we know it if this one park closes & yet we havn't heard anyone complain about the same possible fate awaiting any of the other 5 parks that are being considered for sale...I swear some people here,like GWHayduke have turned this debate into the amusement park equivalent of a right to die vs right to life type debate,treating it as though SF has a moral obligation to keep this one park open or enthusiasts the world over are gonna go berserk over it or something like that.

No, that's not what I said at all. It's not a moral issue: I'm saying closing MM is a bad business decision. The strategy that's been adopted is to sell the properties they can get the most money for NOW, which is the decision you make if you are not planning to be in business in five years and are simply maximizing your corporate bonuses before you pack your bags and move on. Keeping the parks with the greatest potential for profit and selling those that can never provide significant returns - and that describes most of SF's smaller holdings - is the long-term strategy, and that's the path they have chosen not to follow.

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Thursday, July 6, 2006 12:58 PM
Heck, as far as I'm concerned, as long as the thing stays open long enough for my wife and I to visit and ride Tatsu, they can close it down and melt every dang ride in the place... Heck, I'll even show up with my blowtorch to help out - as long as I get to take a piece of "X" home with me as a souvenier. :D
"It's probably in my basement... let me go upstairs and check" -Escher
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Thursday, July 6, 2006 1:09 PM
GWHayduke,

The problem with all of that is that Six Flags simply cannot afford to do what it's going to take to make SFMM that profitable property. It needs a hell of a lot of fixing to turn it into something that's turning enough of a profit to want to keep. It needs a miracle to become the profit giant you describe. It's not as simple as a couple million dollars to fix security and maintenance, and that's something this new management team is quickly learning. You can fix the problems that were there but that doesn't mean anyone is going to be willing to return to the park anytime soon.

On top of that, I think there are several other parks in the chain with better opportunity for profit. SFGAdv is in the largest market in the country (NOT SFMM). SFGAm is in a huge market and is already doing amazingly well. Other parks have no competition and great potential for growth. Having an opportunity for year-round operation does not necessarily mean opportunity for more profit.


BATWING FAN SFA said:
Well let's remember one thing Nate,when SFAW closed there was no rush to relocate many of the nine coasters that park had...only three were kept in the chain & as is they're all sitting in fields at the parks they were sent to with no guarantee of even operating again.

At least one of those coasters will be rebuilt, and if the new management hadn't come in to already problematic parks that didn't need thrill rides right now, I'm sure more would have too. Don't forget all of the flat (and other) rides that got sent to other parks from SFAW too. But on top of that, look at the rides SFAW had - they were all old, outdated, and had already been relocated from other parks. It's disappointing that some of those rides (Viper, for instance) didn't get relocated, but nobody else wanted an old, outdated ride either. I'm sure the older rides at SFMM would be scrapped too. But you're not going to convince me that four B&M's, a highly-marketable 4th dimension, and a relatively new hypercoaster - rides that parks are still paying big bucks for - are going to be melted down.

The current management recognizes the importance of roller coasters to the amusement park. They've said that much several times. What they don't believe in is adding multi-million dollar rides over and over again when the cost of those rides cannot be recouped. But it's different when you can add huge, highly-marketable coasters for almost no cost. Those rides will go somewhere.


Keeping the parks with the greatest potential for profit and selling those that can never provide significant returns - and that describes most of SF's smaller holdings - is the long-term strategy

Try telling that to all of the small park owners out there who seem to have no trouble turning some good profits! Or try telling that to the people within Six Flags who know which parks are turning some of the largest profits (hint - they're some of the smallest parks).

Isca - I couldn't agree more.

-Nate
*** Edited 7/6/2006 5:13:33 PM UTC by coasterdude318***

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Thursday, July 6, 2006 1:45 PM

coasterdude318 said:

Try telling that to all of the small park owners out there who seem to have no trouble turning some good profits! Or try telling that to the people within Six Flags who know which parks are turning some of the largest profits (hint - they're some of the smallest parks).


A single small park owned by a local operator can make good profits, no question. A national chain brings with it a layer of bureaucracy and shareholder expectations that requires those profits to be significantly higher on the local level to remain as profitable to the chain. So many small, individually profitable parks that are profitable on their own are not profitable in the context of a national chain. That's been a significant contributor to Sf's problems.

Think of it this way: if your family owns a park, and you make a profit of $500,000, you had a very good year. If you are a profit sharing GM of a chain park that makes a $1,000,000 profit and you have to send 75% to corporate for their services, you made half what the indy park made. You grossed twice as much, but netted only half as much.

Honestly, if local people can make any of these parks survive rather than see the land redeveloped into cookie cutter condos and strip malls, everybody would be much better off if all the SF parks were sold to separate local ownership.

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Thursday, July 6, 2006 2:07 PM
I don't understand what you're trying to say. A small park within a larger chain sends ALL of its profits to the larger company. A $500,000 profit is a $500,000 profit no matter if the park is independant or part of a chain. That $500,000 profit goes right to the owner (the individual owner in the case of an independant park and the corporation in the case of a park within a chain).

The only difference is that a chain has larger management structures to pay off, and I suspect that's what you were getting at. But at the same time, their payment is also coming from a number of parks, and streamlining operation from one office saves money in other places also. I don't think anyone can say whether park is better off (financially) being independant or part of a chain without actual numbers. I can only repeat what I know - that some of the largest profits rolling into Six Flags are from some of their smallest parks.

-Nate

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Thursday, July 6, 2006 2:34 PM
rollergator's avatar Let's also remember that a $1M "profit" is not necessarily the same thing from park-to-park. If you invest, say, $100M and get a $1M annual "profit", you're making a tidy 1% ROI. That's not gonna cut it long term...or even short term. If you're making that same $1M of a $5M investment, then you're doing 20%. That makes investors happier than a 10-loop rollercoastie....

Also, remember that all those layers of "bureaucracy" mean LOTS of salaries, and benefits packages, and perks, and bonuses, and lots of other "expenses" that don't seem to be a problem for the smaller mom-and-pop type places...the Kochs and Spackmans probably even have to SHARE a corporate jet... :)

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Thursday, July 6, 2006 2:35 PM

escher26 said:
...they can close it down and melt every dang ride in the place...

Isn't that just a little harsh? I just hope they dispense their coasters throughout the rest of the chain. While that wouldn't make up for closing the place it would still be nice to know I could go somewhere else to ride X.


SOB's biggest fanboy!
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Thursday, July 6, 2006 3:01 PM
Lord Gonchar's avatar

What seems to be a recurring thought here is that selling these parks somehow saves the company, and they're going to take the money from them and reinvest it in the other parks.

No, it's not a money grab situation. I still insist the thinking behind this is not to make some quick cash.


Coasterdude318 said:
The problem with all of that is that Six Flags simply cannot afford to do what it's going to take to make SFMM that profitable property.

Yes! And I'd even take it a step further as to say even if they wanted to look into financing such a task, that in the end they found that the time, money, effort and risk just aren't worth it. (that pesky ROI thing)

I really believe this isn't nearly as much about making some quick cash as some of you guys want to think it is. Sure they'll make some cash buy selling the property off rather than letting it sit there and rot, but that's the after-effect of the initial decision (that pursuing a fix to the park isn't worth it), not the other way around.

It's a much more long term decision than the detractors are giving credit for. Think beyond the next time the bill collectors call and it makes perfect sense.


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Thursday, July 6, 2006 3:19 PM
rollergator's avatar The reasoning seems more clear (to me at least) when taking into account the direction that interest rates have been going...if SFI is *earning*, say, 5% on their investments (in the case of SFMM probably less), and the money they've borrowed is costing them 7%....well, something HAS to give.
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Thursday, July 6, 2006 3:30 PM
It's not a money grab by SF - it's a desperation move to stave off the banks. That's it in a nutshell. Call it a money grab by the people who loaned the money, if you have to label it.

The banks have told them they need to reduce the debt from $2.1 billion now to $1.5 billion by the end of the year. That means they need $750 million, and they need it NOW. (They need more than the difference between the current and the target debt because interest keeps accruing.)

Isca is correct that this is about mitigating losses for the investors. Where I disagree is his assertion that the investors don't want to see the whole chain sold off - if that's the best way to minimize their losses, then they're perfectly OK with it. Sure they'd rather see the chain return to profitability, but with the level of debt that exists getting back to making money isn't the first priority anymore.

One other note about MM: all the 'scuttlebutt' indicates that when CF approached SF last year after the management change, MM was one of the parks they wanted. If it's so badly damaged and untenable, you have to wonder why the most successful park company in the country was interested in it.

Tell you what - let's meet back here same time next year and discuss which parks they've added to the for sale list by then.

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Thursday, July 6, 2006 3:43 PM
Lord Gonchar's avatar Ok, GWHayduke, let's say I buy into your idea. Totally believe it 100 percent.

So now what?

Sounds to me like this was all set in stone long before now. There's nothing anyone involved can do about it. It's time to pay up and the vultures are circling. It's just a matter of time until everyone comes in and gets their piece of the pie and before you know it the pie is gone.

Correct?

Interesting as well.

So why did Red Zone try so hard to gain control of a sinking ship?

I'm guessing the answer is to profit off of the inevitible death of the company. If that's the case than I think I have more respect for them than ever.

"Ride that sumb!tch 'til the wheels fall off." :)

Or does it stop before all the parks have been liquidated leaving them with a core group of solid performers?

Just trying to make sense of the 'other side' of the debate. :)


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Thursday, July 6, 2006 3:50 PM
rollergator's avatar ^ Or does it stop before all the parks have been liquidated leaving them with a core group of solid performers?

I think that's the *master plan*. Unless it goes awry, then it's the "Master P plan"... ;)

How many in that "core group of solid performers"? My guess is about 15-20...we'll see.

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Thursday, July 6, 2006 4:01 PM
Lord Gonchar's avatar Well, you cut to the chase, Gator. :)

I'll just say, "Me too."

And if that's the case then I'd say Red Zone did an outstanding job in saving the company and putting it on the road to recovery.

I still don't see the problem. Maybe my love of amusement parks doesn't run deep enough? ;)


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Thursday, July 6, 2006 4:01 PM

when CF approached SF last year after the management change, MM was one of the parks they wanted. If it's so badly damaged and untenable, you have to wonder why the most successful park company in the country was interested in it.

That was then, this is now.

CF has not been shy recently about saying that the effort to bring GL back from the SFO/SFWoA days was more than they had expected. The first year they chalked up to the short time between transfer and the season. After the 2005 season, the weight of the task became much more clear. And, I think most would agree that WoA was less "damaged" in terms of reputation than MM is now.

In other words, CF may well be glad they didn't take on the challenge that is MM---particularly because it might have made it that much harder to acquire the Paramount parks, which by and large don't really need fixing, as they are not broken. And, now that they've acquired Paramount, well, if MM couldn't be had cheaply enough for CF's tastes a year ago, when they had an appetite for expansion, it sure as heck won't be available cheaply enough now.

This isn't to say that a savvy operator couldn't work with what is there: by rounding out the offerings at relatively modest cost, it could be positioned similarly to IOA's place in the Orlando market---the place for families with a few teenagers plus maybe a younger kid. It would take time, and serious marketing (plus probably some agressive discounting), but it could be done.

But, SF has decided that all parks must fit a single role---entertaining families with younger kids---and that means MM needs *much* more drastic changes to satisfy the new message. I think this "one size fits all" thinking is a mistake---for example, parking costs that are even remotely comparable between Great Escape and Great America seems kind of nuts to me. But, then again, I'm not a CEO.


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Thursday, July 6, 2006 4:18 PM

Brian Noble said:
And, now that they've acquired Paramount, well, if MM couldn't be had cheaply enough for CF's tastes a year ago, when they had an appetite for expansion, it sure as heck won't be available cheaply enough now.

Brian, I agree with most everything you said. Just wanted to clarify that my understanding of the conversations between SF and CF last year is that CF wanted specific parks, and SF would only consider selling the entire company at that time. So it wasn't an issue of price for any specific park that caused CF to look elsewhere.

I certainly agree that they have much less work to do on the old Paramount parks.

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