SHORTAKES: Why Schlitterbahn is selling its two most profitable parks to Cedar Fair

Cedar Fair announced that it is purchasing Schlitterbahn properties in New Braunfels and Galveston, Texas for $261 million, with the option to purchase the Schlitterbahn waterpark in Kansas City, Kansas for an additional $6 million. It’s important to understand something regarding ownership – the land the Galveston park sits on is actually owned by the City of Galveston and leased to Schlitterbahn, while the other two parks are owned by a Real Estate Investment Trust called EPR Properties, the same company that owns the six waterpark properties Six Flags purchased an operational lease for last year. And that’s where the story lies.

According to EPR’s SEC filings, Schlitterbahn had mortgaged three properties – New Braunfels, Kansas City, and South Padre – to construct the Kansas City waterpark. With additional loans earlier in the year from EPR to offset cash-flow issues, the total due was $186.9 million. In March, the maturation on the notes was extended to June 1.

On April 30, during EPR’s Q1 earnings call, CEO Greg Silvers stated “On the disposition front, we are anticipating that our Schlitterbahn mortgage note will be paid-off during the second quarter and we have extended the maturity by one month to June 1, 2019. Based on discussions with the Schlitterbahn Group, we understand that they are nearing the completion of a definitive agreement with a third-party that would provide proceeds sufficient to fully repay the note.” The second quarter ends June 30.

So, as you can see, the parks are being sold off to pay off debt and ensure the company can continue operating in one form or another. It’s not a simple matter either. There are twelve corporations and limited partnerships along with two individual stakeholders involved in the sale. Once the acquisition’s complete, we’ll get a chance to see how it fits into the Cedar Fair corporate strategy – how it positions them against Six Flags and SeaWorld – and what will happen with the remaining Schlitterbahn properties in South Padre Island and Corpus Christi.

 

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