So long, AstroWorld. Six Flags (NYSE: PKS) announced that it will close down its 37-year-old amusement park in Houston at the end of its summer operating season. It's a move made to cash in on the attraction's real estate value, as well as to get over the past few years of underperformance at the site.
The 109-acre property also had some uncertainty over parking rights that Six Flags had secured with its high-profile neighbors such as Reliant Stadium, home of the NFL's Houston Texans. Given the area's revival, with surrounding museums, sporting events, and light-rail access, Six Flags figured that AstroWorld would be worth more dead than alive.
That's the irony. The rebirth of activity around the regional amusement park should have led to improved turnstile clicks. Rather than invest in the enhancements that could have made the park a more attractive draw given the increased foot traffic around AstroWorld, Six Flags chose to let the park grow stale, in sharp contrast to the revitalized city around it.
It's always sad to see an amusement park die. At least the announcement came on the same day as the official opening of Hong Kong Disneyland. However, this is reality for Six Flags.
"Unfortunately," I wrote back in August in regard to the likely divestiture at Six Flags, "some of the lesser parks -- especially those sitting on valuable real estate -- may find themselves razed along the way."
That's pretty much what we have here. Six Flags argues that this was a unique situation, given the shared parking, the attractive real estate, and the poorly performing park. However, just as it sold off its Worlds of Adventure park to Motley Fool Income Investor pick Cedar Fair (NYSE: FUN) last year, it's hard to say how many parks Six Flags will be operating in a few years. Its park in New Orleans was submerged in the wake of Hurricane Katrina's cruel flood.
The retreat is a sharp contrast to the cocky days of growth for the operator. Just a few years ago, Six Flags was witnessing a 30% spike in attendance at non-branded parks as they were brought into the Six Flags family. At the time, Six Flags promised to have parks within earshot of every major metropolitan city. At the time, it felt as if long-neglected cities like Phoenix and Miami would finally be getting their long-overdue amusement parks.
But it was not to be. Six Flags botched the opportunity to cash in on its thrill hubs, and the rest is proxy battle history. Selling AstroWorld isn't the end. It's barely the beginning.
The advantage of this particular move, if the company is able to achieve an attractive eight-figure sum for the Houston land, is that it should be able to relocate many of the park's existing rides to nearby parks. So the cash will come in handy in offsetting the chain's gargantuan $2.1 billion in long-term debt as its surviving parks will be able to offer their guests even better value and variety in the 2006 season.
It's hard to say whether this move will satisfy renegade investor Dan Snyder. His plans involved having the chairman of homebuilder NVR (AMEX: NVR) on the board to help guide the real estate divestiture, and now Six Flags is starting the open house without him.
However, the fact that Six Flags is showing that it has a gavel and isn't afraid to use it may be just the ticket to fire up the asset sale. Other park operators, such as Anheuser-Busch (NYSE: BUD), Disney (NYSE: DIS), Cedar Fair, and new Legoland investor Blackstone, may now have Six Flags CEO Kieran Burke programmed on speed dial to see whether they can secure some of the company's more tempting properties.
Six Flags is for sale. In every sense of the word.
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Longtime Fool contributor Rick Munarriz loves to take his family to new amusement parks every summer. He practices what he preaches -- he owns shares in Disney, Cedar Fair, and Six Flags.
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