Posted Friday, May 12, 2006 3:32 PM | Contributed by Fierce Pancake
Six Flags has found a buyer for the former AstroWorld property, bringing the redevelopment of this closely watched site one step closer. Angel/McIver Interests, based in Conroe, is under contract to buy the 104-acre tract. The land development firm said the purchase price was confidential, but Six Flags reported it as $77 million in a recent news release on earnings. Specific plans for the site have not been announced.
Back when Kieran Burke (former CEO of Six Flags) opted last September to have Cushman and Wakefield put this land on the market, they were confident they could get between $95m-$145m for the property. Rising land value was the primary party line for why they chose to close the park.
Now, eight months later, we find they couldn't get anyone to bite for the land in that range. Further, Six Flags seems to have grown impatient waiting for a buyer so they offloaded it for $77m. If you look at Angel/McIver's site ( http://www.angelmciver.com/ ) it's obvious they aren't a developer but just another real-estate agent middleman. Six Flags also spent about $21m demolishing the place, leaving them with about $56m cash left.
So basically, nothings going on with this property yet, it's basically still on the market. Six Flags gained a quick $56m cash which barely dents their $2+ billion debt and a couple of the old rides are showing up in other parks instead of new attractions (quite a few rides are lost forever and sent to the scrapyard, including Texas Cyclone, Viper, XLR8, Astroway, Bamboo Shoot, Serpent...)
Well, it does remain to be seen if some of the rides do in fact live again. Just because they're laying on the properties, doesn't mean they'll ever be installed. I'm specfically referring to Batman the Escape, Ultra Twister, Serial Thriller, and the Shoot-the-Chutes.
I think the old Six Flags regime was hoping to take advantage of the proximity to the huge medical center that's not too far away. Their thinking was probably "There's a lot of rich doctors who need more expensive houses than the ones they already own."
Idiots. I'm still scratching my head, trying to figure out how they got the stockholders to believe that the land was going to be worth that much. The company lost a profitable park in a huge market to swipe $50 million from their debt. They could have increased admission at all their parks by $1 and made that kind of money in two years. Shows how inept the former management of the company was when it came to running a successful business.
Another major Burke/Story blunder you can add to the list after Six Flags Worlds of Adventure, the European parks, X, ...
They lost a whole park for what they'd spend on a couple new rides, hardly seems worth it. If AW had been operating in the red it may have made some sense. And then Kieran Burke parachutes away from the whole mess with a $6 million dollar bonus.
So here we have Houston now, 4th largest city and 10th largest media market, without a real park or anything but a parking lot kiddie coaster for 200 miles. When the news of Six Flags pulling the rug out from under us broke, we were right in the middle of the hurricane aftermath which got all the media attention. There really wasn't any time to mobilize a campaign to save the place or even just save Texas Cyclone, and frankly it was a private business in a city without zoning so there's not much anyone could do if Six Flags had their mind made up. It's difficult to save coasters which are SBNO for years let alone one that gets knocked down within months of the announcement.
Now all we can do is bide our time and wait, but it certainly doesn't seem like anything's in the pipeline.
While the expected amount they talked about last year might not have been realistic, $77 million for vacant land still ain't half bad, and you can't tell me that the park would've generated that much profit in the next few years.
Whether or not there's another park in the market is irrelevant. Either the real estate was worth more than the potential profit over a particular time span or it wasn't.
$77m minus what it cost to demolish the place ($21m) minus whatever cut of the sale the Cushman and Wakefield get (I have no idea) - but substracting the demo costs alone reduces that into the $50s. AW was generating somewhere along the lines of $6 - $8m annually in profit at the time of closure. The park wouldn't have generated $50m in profit in over 5 years, but that's not that much time and any property they can sell is going to fetch more than a couple times its annual profit.
Jeff, but realistically, how many parks do generate profit greater than the value of the land on which they stand? If that's the only criteria to base whether or not to keep or sell off a park, most Six Flags parks would be shut down, including SFA and SFMM. Actually, most parks in the country would be in trouble of being sold off too.
There's obviously a threshold at which it makes more sense to sell the land. We don't know the specific financials of that park, so we don't know. I have a hard time believing that it cost $21 million to take everything out (and feel free to show me published figures if I'm wrong), but even if that was the case, the "free" redistribution of rides to other parks was a good deal.
Pancake's earlier post sounded more like a disappointed fan and local than someone making a business case. It's OK to take that position, but you still have to separate the emotional versus business case.
This is definately very sad seeing that they closed a park that was making profits for them and the fact that they only got about half of what they were hoping to get for the land. It really and truly is a waste of a park. I know there were parking issues and issues on expansion land, but still.....
"Based on our current estimate of anticipated sale proceeds and after taking into account rides and other equipment transferred to other parks and/or sold, we have established a loss of approximately $20.4 million related to this asset."
*** This post was edited by Fierce Pancake 5/17/2006 3:50:39 PM ***