Sunday, July 3, 2022

Cedar Fair Sells California's Great America Land + Plans to Close Park

© California's Great America
Last week Cedar Fair announced that they have sold the land that California's Great America sits on and plans to "wind-down" the operation of the park and close it permanently.  As part of the sale of the land the company will immediately lease back the operation of the park.  The land was sold to Prologis Inc., a company who "acquires, develops and maintains the largest collection of high-quality logistics real estate in the world" - basically they develop and own warehouse operations.

The land was sold for $310 million, and if you recall Cedar Fair purchased the land under California's Great America in 2019 for $150 million.  Ironically, at that time Cedar Fair's CEO commented that the purchase "underscores Cedar Fair’s long-term commitment to California’s Great America."  That commitment appears to have lasted until the land more than doubled in value.

But, to be fair, the pandemic got in the way.  Cedar Fair's press release on the sale points out that the money from the land sale will be used for "reducing debt to achieve its $2 billion target, investing in high-return projects within its portfolio such as upgrading resort properties, and reinstating a sustainable unitholder distribution."  I think the restart of the distribution is key here, as the company has long sold itself to investors as a solid and reliable dividend payer - and obviously the dividend was stopped during the pandemic.  Slapping a bunch of cash against the debt they took on to survive the pandemic will allow them to restart the dividend in just a couple months from now.


© California's Great America
Cedar Fair put some additional details in their filing with the SEC about the sale.  The lease they have runs for six years, and has an optional 5 year extension.  So the maximum the park can operate is 11 more years.  However, Prologis can notify Cedar Fair they want the park closed with a 2 year notice.  Cedar Fair will pay $12.2 million in rent each year to operate the park, with the rent going up 2.5% each year.  Without knowing each parties' exact intentions it is still hard to believe that the park will operate beyond the initial 6 year lease, and potentially will cease operations well before that.


California's Great America was poised for a large expansion period that started back in 2017 when Cedar Fair started talking with local officials about adding large rides and making a big part of the park a shopping and dining area with no gates.  Things did get a bit suspect over the years as none of these big plans ever materialized, aside from the waterpark expansion, which in hindsight makes sense. We actually wrote a post back in 2016 that referenced a story of another developer wanting to raze the park for housing, so uncertainty has always been floating above the park.  Going back further, in 2011 Cedar Fair actually agreed to sell the park only to have the sale fall through - though that was very much tied to their unhappiness with the development of the giant stadium next door.


The sale of the park is only the land, Cedar Fair retains all rides and structures, so there is a possibility for some of the attractions to be relocated or sold to other operators.