VICI Could Expand Its Casino Real Estate Portfolio with Potential Interest in Six Flags Properties

Key Insights into the evolving landscape of casino real estate:

Jonathan Litt’s Land & Buildings is urging Six Flags to consider its real estate holdings.
VICI Properties is seen as a potential buyer.
Casino landlords are diversifying their portfolios with non-gaming assets.

Jonathan Litt’s Land & Buildings Investment Management, LLC (L&B) is advocating for Six Flags Entertainment (NYSE: FUN) to explore the option of spinning off or selling its real estate assets. This recommendation comes in light of recent market trends indicating that a property sale could attract interests from various suitors, with VICI Properties (NYSE: VICI) being a prominent contender.

As a major investor in Six Flags, L&B estimates that the amusement park operator’s real estate assets amount to approximately $5.67 billion. Given that the stock price has plummeted by 50% this year, the timing may be right for Six Flags to contemplate sale-leasebacks or a real estate spin-off to unlock what Litt refers to as “trapped real estate value.” Interestingly, L&B has previously owned shares of VICI and has indicated that the Caesars Palace owner could be among the companies seeking to invest in Six Flags’ property.

According to Litt, “Multiple buyers, such as VICI Properties, remain keenly interested in acquiring real estate like theme parks at valuations nearly double the current trading multiples,” he noted in a letter addressed to Six Flags shareholders.

Litt further emphasizes that monetizing real estate has successfully unlocked substantial value for similar businesses across various sectors, including gaming.

Key Reasons for Six Flags to Engage in Real Estate Sales

Back in 2022, L&B suggested to Six Flags management the idea of real estate monetization, arguing that this strategy could potentially increase their stock value by 50%. The investor pointed out that casino property owners such as Gaming and Leisure Properties (NASDAQ: GLPI) and VICI Properties could serve as “attractive partners” in any sale-leaseback arrangement.

Fast forward to August 2023, and Litt revisited this proposal, but Six Flags management opted for a different route. Shortly afterward, the company disclosed its acquisition of Cedar Fair, a decision initially met with investor enthusiasm, but ultimately, it has negatively impacted the stock price.

According to Litt: “The performance post-merger has not only validated our initial concerns but has also worsened significantly more than we expected.” He reiterated that with the company’s valuation currently at historic lows, taking decisive action could rejuvenate the stock.

“We see a fantastic re-rating opportunity by separating the real estate, with potential immediate upside exceeding 75% based on 2026 consensus estimates,” explained Litt. “The upside may reach as high as 130% if 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA) bounce back to $1.1 billion, which was initially the company’s guidance for 2025.”

VICI as a Viable Buyer for Six Flags’ Real Estate

Although VICI has not made any public declarations of interest regarding the acquisition of Six Flags’ real estate, it is not outside the realm of possibility that such a deal could materialize. VICI is recognized as the largest proprietor of casino real estate in Las Vegas and throughout the United States and is not averse to furthering its growth in the gaming sector.

Moreover, VICI is actively looking to expand its portfolio with diverse forms of experiential real estate, making Six Flags properties a strong fit for this strategy.

In recent years, VICI has successfully invested in or acquired real estate previously owned by leisure companies, such as Bowlero, Cabot, Canyon Ranch, Chelsea Piers, and Kalahari, showcasing its commitment to engaging in non-gaming transactions when the terms align favourably.

Summary

The discussions surrounding Six Flags and VICI Properties highlight the evolving landscape of investment in the gaming sector. The push for real estate monetization could not only enhance Six Flags’ financial standing but also create strategic opportunities for VICI to diversify its holdings. As the market evolves, such moves could prove beneficial not only for the immediate stakeholders but for the wider investment community.