Some news on Six Flags New Orleans

[calcajun]

Here is a news story from Times Picayune.

 

Also been trying to upload my megazeph video to amateur section with no luck. This was entered into the vid contest but did not make it in.

looks like the last film to be taken of this custom coaster.

 

Link to news story:

http://www.nola.com/newslogs/tpupdates/index.ssf?/mtlogs/nola_tpupdates/archives/2006_06_30.html#157149

 

Link to utube vid that i can't seem to get posted:

http://www.youtube.com/results?search=megazeph&search_type=search_videos&search=Search

 

Quote info from news story:

 

 

Experts say reopening Six Flags senseless

By Rebecca Mowbray

Business writer

 

The company that owns Six Flags New Orleans does not want to re-open the flood-ravaged eastern New Orleans theme park, and has sent a proposal to the city that would allow the amusement company to walk away from its 75-year lease, according to documents.

 

Six Flags Inc. has offered to pay the city $10 million to cover rent to the city, give the city 66 acres of land the company owns adjacent to the park, and give the city 20 percent of its insurance proceeds above $75 million. The amusement parkhas been closed since Hurricane Katrina.

 

News of the proposal marks a change from Six Flags� public stance so far. Until this disclosure, the company said that the park would be closed for the 2006 season, but that it hoped to reopen the property and was working with its insurers. The company now says it wouldn�t make sense to open the park, which was not successful even when the city had nearly a half-million residents.

 

�It�s clear that the people of New Orleans weren�t embracing the park� even before the storm, Six Flags spokeswoman Wendy Goldberg said. �We think it presents a mutually beneficial solution to both of us. We thought it was a win-win. The city would get land it could use for other purposes, as well as liquidity.�

 

But Mayor Ray Nagin says that the city plans to hold the New York company to its agreement to operate the park.

 

�They�re not excited about coming back into the market right now. If any company is trying to figure out an exit strategy, they are,� Nagin said this week in an interview at the Times-Picayune. �We have a pretty solid agreement with them [requiring them to operate the park for 75 years]. They�re claiming they can exercise out of it, but they�re going to have to pay us.�

 

The storm, and any efforts by Six Flags to leave the area, are likely a death knell for the park, which opened in May 2000 as an economic development project for the East. Jazzland Theme Park, as it was originally named, went bankrupt after just two seasons. Six Flags bought the $135 million park at the discount price of $22 million out of bankruptcy, but even after the company installed five new rides backed by a major advertising push, the park failed to deliver financial results.

 

While Six Flags refuses to detail the damage at the park, its rides and buildings sat for weeks in an estimated 12 feet of brackish water and the park is located on the side of the city that suffered the greatest wind damage. The park now sits idle, overgrown with brush, while a security guard watches the gate.

 

�We haven�t gone into detail about the damage, just that we are working on it with our insurers,� Goldberg said. �It�s a very complicated situation.�

 

The prospects of resurrecing the park are further dimmed by a shake-up at Six Flags� corporate offices, where Washington Redskins owner Daniel Snyder instituted a shareholder takeover of the company late last year and installed a new management team whose marching orders are to pare down assets to deliver better returns to stockholders.

 

�They�d be absolutely out of their minds to try re-open that park,� said Dennis Speigel, president of International Theme Park Services, a consultant who has followed the Jazzland saga and the corporate troubles at Six Flags. �That has been a marginally performing park since day one.�

 

If the park closes, it will be a headache for the city, which is on the hook for the $20.4 million that remains on a $25.3 million loan used to build the park through the U.S. Department of Housing and Urban Development�s Section 108 loan program.

 

The payments on the loan are $2.4 million a year until 2017. Under the terms of the deal struck with the city out of Jazzland�s bankruptcy, the city pays $1 million a year toward the debt and Six Flags pays $1.4 million. HUD says the city is current on its payments. Six Flags says it has continued to pay rent since the storm.

 

The rent arrangement is actually that Six Flags pays 4.77 percent of gross revenues or a minimum of $1.4 million, and if the percentage formula delivers a number that is less than $1.4 million, Six Flags gets a credit of the difference on rent in the years after 2017.

 

In its proposal, Six Flags says the city would be unlikely to earn any rent on the project even after 2017 when the HUD debt is paid.

 

In each of the three years that Six Flags operated the park before it closed, revenues were less than $29.4 million � the amount necessary for the percentage formula to exceed the $1.4 million base payment.

 

The park generated $24.5 million in revenue in 2003, the year that Six Flags installed $25 million in new rides and heavily advertised their arrival. It generated $18.1 million in 2004 and $15 million last year, when the season ended in late August instead of at Halloween.

 

With the prospect of revenues even worse for the park now that it�s located in a flooded and gutted area in a city with half its pre-storm population, it�s unlikely the Six Flags would ever pay rent on the park.

 

�Put simply, the marketplace has never embraced the park. There are a number of factors contributing to this situation, all of which have been exacerbated by the displacement and damage of the storm, which impacted not just the park, but the entire market area of the park,� the proposal reads. �Given this performance, there would almost certainly never be any rent paid for many years after 2017.�

 

In offering the city $10 million in rent immediately to break the lease, Six Flags says that it assumes that the city would be able to get HUD to forgive the loan and the city would be able to keep the money.

 

But HUD says its hands are tied. Because the money was actually loaned by investors and guaranteed by the city through the Section 108 program, HUD has no authority to forgive the loan. If the park never re-opens, the city will be required to repay the remaining $20.4 million debt.

 

Six Flags notes that it has an obligation to rebuild the park, but only to the extent of the insurance proceeds received, and it�s unclear how much money the park will get.

 

The company has received no insurance proceeds to date and believes that its claim may ultimately require litigation. It�s fighting the same flood versus wind battle that many homeowners around New Orleans are fighting: the park has $180 million of �named storm coverage� with full replacement cost value, but only $27.5 million in flood coverage.

 

�We are doing everything that we can to maximize the insurance recovery, but it is a complex and time-consuming process,� the proposal reads. �There is substantial uncertainty regarding the level of insurance proceeds which can be expected, and it is likely to be sometime before that will be resolved.�

 

Six Flags proposes giving the city 20 percent of its insurance proceeds for property damage beyond $75 million. Goldberg said the $75 million figure represents Six Flags� total investment in the property to date.

 

The letter notes that it does not think it would be �a prudent use of resources� to rebuild and repair the park. �It had been a disappointment in terms of its performance even before the storm, and the factors impeding its performance have only worsened,� the letter reads. �As a public company with responsibility to our shareholders, we could not therefore justify investing anything more than our minimum legal obligations.�

 

Six Flags� lease with the city says that the company is required to maintain insurance that would cover 66.66 percent of the replacement cost of all park property, or a percentage of replacement cost typically maintained at Six Flags parks, whichever is greater.

 

Katrina�s havoc on the park comes after Six Flags was taken over by a renegade group of shareholders led by Redskins owner Snyder in an effort to turn the company around.

 

Snyder became chairman of the company in December, and he brought in a new management team over the winter to reduce the company�s debt and improve its operations. Over the past few months, the new team has announced a steady stream of plans to sell parks, land or explore options to do so. In an earnings call last week, Six Flags announced that it was looking for buyers for six parks in New York, Texas, Colorado, California and Washington.

 

It has been mum plans for on New Orleans, but the announcement tes that �a key strategic initiative� for the company is �to evaluate the disposition of non-core assets in order to reduce leverage and focus management resources on the company�s parks that have the highest strategic value.�

 

In other words, Six Flags wants to get rid of anything that does not show good potential for profit, and that doesn�t bode well for resurrecting the New Orleans park.

 

Speigel, the Cincinnati theme park consultant who has followed the saga at the New Orleans park and the slow decline of Six Flags as a company in recent years, said that New Orleans won�t make the cut to survive.

 

Speigel has heard that there was �incredible deterioration on the equipment and the buildings and the facilities� because the park sat in water for so long. �I do not think it is possible to salvage it. Too much damage,� Speigel said.

 

Plus, Speigel notes that the park is now located in an area with no population to go to the park or work at the park, and there are no nearby services for park patrons. With people relocating along the I-10 corridor to Baton Rouge or on the I-12 corridor between the Northshore and Baton Rouge, Blue Bayou Waterpark and Dixie Landin� Family Theme Park in Baton Rouge are better situated to pick up the business.

 

�If we were talking about a park that had a history of profitability and growth, sure, they�d take a look at it. But they�d be crazy to come back down there. The market�s just not there. It wasn�t there in good times. To think that now, with conditions as they are, there�s no way anyone would consider it,� Speigel said. �In my opinion, the best thing that could happen is to just let the park die rather than to resurrect it.�

 

Rebecca Mowbray can be reached at rmowbray@timespicayune.com or at (504) 826-3417. Staff writer Bruce Eggler contributed to this report.

[FlyingScooter]

Why does this not surprise me.

It would be senseless to keep it open, but what could be more 6-flags than that?

 

I would like to see the insurance figures on their losses for the park.

[stingrock23]

This doesn't surprise me either. There's no way this park will ever be viable here, not with the population what it is now. It's a shame because it was nice to actually have a "home" park, but this community just hasn't supported the park like it should have. At least I got all my credits before this happened.

[TheStig]

Humm thats sad news, but Im not so suprised. Most of those rides are pretty much screwed, and it would cost way to much to put the work into them to get them running again then park revinew can afford. And nice video, Ive seen it before, and I reccommend that all of you watch it!

 

Colin C

[calcajun]

I have been trying to upload that vid for two weeks now. few minutes into the upload i get

"the server reset blah blah blah.

Don't understand what my prob is as i have uploaded the others from here.

It is verizon wireless broadband.

[TheStig]

^Want me to try and upload it? I have the file, I can zip it for you if you want.

 

Colin C

[Jon Sabo]

Assmuning the terms in the report are true (6F offering), N.O. will actually make out in the deal. Because it will be quite a task, both in terms of financial and rebuilding infrastructure just to get the park back into pre-Katrina status. Not only do I believe the insurance company will not fully cover the park/assets/damage, but for 6F to offer the city the land, $10m. and get out of the lease-terms, is a win-win for NO (perhaps 6F as well). Mayor Nagin will be shooting himself in the foot (and head) if he is to believe that 6F should or expected to remain compliant on a 75 yr lease...Has he got 'water on the brain'?

[pvcoasterguy]

^ You saw how Nagin managed during Katrina. There was no management. He was horrible! There was no good disaster plan and no one to run the pumps in the city. He's not a good guy for a mayor (he's pretty dumb!) I wish that he wouldn't have been re-elected.

 

Anyway, as Six Flags said, the park isn't (and never will be, especially now) be profitable. It was the epitome of the Six Flags experience. Rides closed, rude staff, etc. It was a fun day, but there was something that was missing that made you to not want to return. It's called atmosphere.

 

Kyle, who's just happy he got the credits, and won't shed a tear if SFNO closes.

[martinb]

Well with the way Six Flags are selling parks, it doesn't surprise me to hear it might not re-open.

 

-Martyn

[Xtreeme79]

Yeah I remember when it was all slated to be built by Ogden entertainment or whatever. I was pumped...then I heard it was to be built in N.O. East and I was like "why"???? Yay lets build a park out in the swamp with no natural shade or atmosphere. What were they thinking? Anyway, I'm not surprised at all and I hope it all works out for both the city and SF. I had bought a couple passes for my nieces, nephews and I the year before it closed and we never even went. I did it mainly to give them a little support. Honestly though I had no desire to go and BAKE out on a concrete slab in the middle of a swamp. I do however support Blue Bayou/ Dixie Landing though. Its actually a pretty decent water park and if you guys are ever in Baton Rouge you should check it out.

 

Nick C.

[fmulder21]

Well with the way Six Flags are selling parks, it doesn't surprise me to hear it might not re-open.

 

-Martyn

I don't think it's because of the fully...They're going to PAY the city to take over.

[imdrunk]

The people at this site are PISSED . . .

 

http://www.sixflagsneworleans.com/

[Coasterphreak]

The way I see it, Six Flags is screwed either way. They aren't going to be able to back out for 10 million (probably more like 30 to 50 million, due to the fact that the city of New Orleans will be responsible for the outstanding loan of 20+ million from HUD), but they also won't be able to economically reopen the park and make it profitable, at least not within the next decade. The park will probably be viable again in 10 to 15 years, once New Orleans rebuilds (assuming they don't get hit by another large storm), but as the article pointed out, there's no market right now. Heck, I bet that the park couldn't even break even for 5 years if it reopened in '07.