Jonathan Litt’s Land & Buildings Investment Management, LLC (L&B) is pushing Six Flags Entertainment (NYSE:SIX) to monetize its property holdings. It notes that casino landlords are among the real estate investment trusts (REITs) that could be sensible buyers of the land.
In a presentation to investors published earlier this week, L&B revealed it has a roughly 3% stake in the amusement park operator, and that the company could “unlock substantial value” for shareholders by selling its real estate assets. The activist investor suggests that Six Flags pursue sale-leasebacks — a transaction type that’s common in the gaming industry.
It is the ideal time to take action to monetize Six Flags’ uniquely valuable real estate portfolio given the high multiples similar assets are trading at in the public and private markets,” said Litt in the presentation. “This strategy of separating the real estate and operator is a structure we have seen succeed in maximizing value of numerous hospitality and leisure companies that we’ve invested in historically.”
Calling the forecasts “conservative,” L&B estimates that Six Flags could add $11 to its share price today by selling its property holdings. That would drive 50% upside for the stock in 2023, and 100% over the next 18 months.
GLPI, VICI Mentioned on Six Flags Land
The L&B presentation mentions casino landlords Gaming and Leisure Properties (NASDAQ:GLPI) and VICI Properties (NYSE:VICI) as among the potentially “attractive partners” for Six Flags in a sale-leaseback scenario. Those are the two publicly traded gaming REITs.
VICI, the largest landlord on the Las Vegas Strip, owns more than casino real estate. The REIT owns four golf courses and has provided financing to operators of other nongaming venues. GLPI owns the property of 57 casinos and could look to diversify its industry and tenant exposure by considering deals with Six Flags.
L&B also mentioned Blackstone (NYSE:BX) and Realty Income (NYSE:O) as possible partners for Six Flags. The former owns Bellagio’s real estate, while the latter owns Encore Boston Harbor, which is operated by Wynn Resorts.
“There is available liquidity and an attractive cost of capital for several of these buyers to acquire Six Flags’ real estate at a favorable valuation for the company’s shareholders,” added L&B.
L&B Experience Could Prove Material
Under Litt’s stewardship, L&B has been down this road before. They have prodded operating companies with substantial real estate holdings to divest those properties in the name of creating shareholder value.
In fact, Litt was the architect of the “Restore MGM Resorts” campaign, which pushed the gaming company to unlock value for investors by selling its prime real estate assets. That led to the spinoff of MGM Growth Properties in 2016. That company was acquired by VICI earlier this year.
“MGP merged into VICI Properties to create a $50 billion experiential net lease REIT. This structure was innovated by Marriott (NYSE: MAR) in the 1990s, creating what is today called Host Hotels & Resorts (NYSE: HST), a $16 billion REIT, owning 78 properties, including the iconic Ritz-Carlton and Four Seasons hotels,” concluded L&B.
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