Activist Investor Urges Six Flags to Monetize Real Estate Holdings Amidst Integration Challenges
Activist Pressure Mounts on Six Flags Entertainment for Real Estate Monetization
On September 26, 2025, activist investor Land & Buildings Investment Management (L&B) publicly urged Six Flags Entertainment Corporation (NYSE: FUN) to monetize its extensive real estate holdings. This push comes as Six Flags grapples with significant financial challenges and integration issues following its merger with Cedar Fair. L&B, a substantial shareholder, contends that the company's real estate represents "trapped value" that, if unlocked, could substantially improve shareholder returns. Six Flags' stock has experienced a notable decline of over 50% year-to-date, trading at a trough EBITDA multiple of 7x on depressed earnings.
Strategic Proposals for Value Creation
Land & Buildings has outlined a comprehensive three-part strategy to maximize shareholder value through real estate monetization:
1. Spin-off of a FUN REIT: This would enable shareholders to realize the intrinsic value of the company's real estate while preserving the operational upside as EBITDA recovers and expands. Publicly traded net lease REITs, including experiential ones, currently command material premiums, averaging approximately a 17x EV/EBITDA multiple and a 6.5% implied cap rate.
2. Evaluate the sale of real estate: While preparing for a REIT conversion, the firm suggests Six Flags consider a direct sale of its properties. L&B believes the real estate could attract multiple bidders, including firms like VICI Properties (NYSE: VICI), and potentially sell for up to $6 billion.
3. Consider the future of FUN OpCo: The operating company could either remain independent or be acquired, given ongoing private equity interest in the asset class and potential synergies with other leisure and hospitality companies.
L&B's analysis suggests an estimated net asset value of $3.976 billion, translating to an estimated NAV per share of $39.26 compared to the current share price of $22.11. This implies an immediate equity upside of 78%, with potential to reach 130% if 2026 EBITDA recovers to $1.1 billion, aligning with Six Flags' original 2025 guidance.
Financial Landscape and Operational Headwinds
Despite ambitious targets, Six Flags faces a challenging financial environment characterized by high leverage and operational difficulties. As of March 30, 2025, the company reported long-term debt exceeding $5.16 billion (net debt), including $609 million in revolving credit loans, $978.5 million in term debt, and $3.66 billion in notes. The company's Q1 2025 adjusted EBITDA stood at -$171 million, contributing to a net loss of $220 million attributable to the combined entity.
Management projects significant growth by 2028, targeting $3.7 billion in revenue and $269.4 million in earnings, a substantial improvement from current negative earnings. This outlook assumes a 5.0% annual revenue growth rate and aggressive cost optimization through merger synergies ($180 million in operational synergies and $120 million in merger-related savings by year-end 2025, with an additional $60 million in 2026). The company aims for a 40% EBITDA margin, translating to $1.5 billion in EBITDA by 2028, and a reduction in net leverage below 4x by year-end 2026.
However, these targets have been met with skepticism. Analysts note that Six Flags is "massively behind" its 2028 financial goals, primarily due to persistent attendance issues, including a 7.1% drop in consolidated attendance in Q1 2025. In a related strategic move, Six Flags announced the closure and redevelopment of Six Flags America and Hurricane Harbor in Maryland, signaling a willingness to consider "bold portfolio moves tied to asset optimization."
Implications of Real Estate Restructuring
The monetization of Six Flags' real estate presents both opportunities and risks. A direct sale-leaseback, for instance, could generate approximately $6 billion, potentially allowing Six Flags to eliminate its long-term debt of around $5.27 billion. This would yield estimated annual interest savings of $332.3 million. However, it would introduce significant annual rent payments, potentially ranging from $360 million to $540 million, fundamentally altering the company's cash flow profile. Such a move could also limit future capital expenditures and park investments, creating a "tenant improvement trap" and hindering long-term competitiveness.
Conversely, a REIT spin-off could provide liquidity and value realization while potentially preserving more operational flexibility. While real estate monetization offers a short-term catalyst, it does not entirely resolve the company's underlying risk of high leverage and substantial interest expenses, particularly in an uncertain interest rate environment. The broader amusement park real estate market is projected to grow at a 5.5% CAGR through 2032, indicating a favorable backdrop for such transactions.
Analyst Perspectives and Outlook
Market sentiment toward Six Flags remains mixed. Some analysts have downgraded the stock to a "sell" rating, citing high debt, operational headwinds, and limited upside potential, with price targets around $16, suggesting a 20% downside. These views emphasize the ongoing challenges in achieving projected financial targets and the risks associated with increasing debt. One analyst commented:
> "A large chunk of the remaining cash could be eaten up by a massive tax liability, shrinking the amount left for potential buybacks and special dividends."
However, other analysts suggest that the market may have "overreacted to temporary attendance and cost issues," potentially underestimating the company's recovery potential post-merger. The successful execution of real estate monetization, coupled with ongoing efforts to reduce debt and improve operational performance, will be critical determinants of Six Flags' future trajectory. Investors will be closely watching the development of the proposed real estate strategies and the impact of the planned loyalty program launch in 2026, as the company strives to stabilize revenues and regain investor confidence.
