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westical

Village Roadshow to sell and leaseback Gold Coast theme park land

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http://www.afr.com/real-estate/village-roadshow-to-sell-gold-coast-theme-parks-20170907-gycuih

Sale and leaseback of the Oxenford freehold land, including the studios. Potential sale price of $100m, funds to go towards debt reduction. Initial 30 year lease. 

Village will still operate the parks. Bait title courtesy of AFR. 

Edited by westical
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Quote

Village Roadshow to sell Gold Coast theme park land

Village Roadshow has put on the market the freehold real estate for its Gold Coast theme park hub – home to Warner Bros Movie World and Wet'n'Wild – for a deal that could fetch $100 million or more.

The listed entertainment company is proposing a sale and leaseback transaction with the prospective buyer, on an initial 30-year term.

Proceeds from the sale initially will be used to reduce Village Roadshow's debt, allowing it to push ahead with its growth strategies, it said.

"We are committed to our Theme Parks business, with the DC Rivals HyperCoaster, the longest, highest and fastest rollercoaster in the southern hemisphere opening soon at Warner Bros Movie World, and Topgolf under construction," said Clark Kirby, chief executive of Village Roadshow's them parks division.

Broader strategy

The site will generate $6.2 million in rent from next year, with 3 per cent annual increases and lease options totalling 90 years.

The 154-hectare site is also home to Paradise Country, Australian Outback Spectacular, and Village Roadshow Studios and has development approval for a nine-storey hotel.

The move to sell off the Gold Coast site is part of a broader strategy to cut high debt levels announced in February.

 

As part of that strategy, the company is in talks to sell its 50 per cent stake in the Singapore cinema exhibition business, Golden Village.

Village Roadshow has appointed Colliers International to sell the Gold Coast site.

"There is nothing like this investment opportunity currently available in Australia," said Colliers' John Marasco.

"'We expect interest from institutions, trusts and high net worth individuals worldwide, and are expecting offers in the region of $100 million.

 

"Village Roadshow Theme Parks is Australia's leading theme park developer and owner. This is evident as their parks and attractions draw over five million local and overseas visitors annually."

The entertainment operator has said earnings from its theme parks arm – previously its biggest revenue driver – have been hit by the fallout from the tragic deaths at Dreamworld, owned by another operator, Ardent Leisure.

"Based on overseas experience this will of course dissipate, but Village Roadshow is implementing dynamic initiatives led by recently appointed Theme Parks chief executive officer Clark Kirby that will accelerate this correction," it said at its 2017 results this month.

 

Just for anyone behind the paywall. 

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It's just a way to free up some cash, it doesn't have any bearing on the park itself. The lease-back would no doubt have the option for further renewals past the 30 years.

I think it's good, allows them to get debt down which is important for the bottom line and it makes it easier to invest in more attractions in the future.

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The leaseback options secure the land for the next 90 years. If the company continues with it's successes, at some future time they'll buy it back. The investor earns $6m a year on a $100m investment (with 3% annual increases).

the top superannuation funds in Australia are earning 11-12% (but these are typically higher risk investments), whereas a 'capital stable' investment strategy is typically returning 5-6% - so the VRTP offer is right in the sweetspot for that type of investment.

Even if the parks go bust, the land value alone would allow the investor to recover much if not all of its money.

This also doesn't mean VRTP won't have the option to 'buyback' in the sale\lease agreements as well - Most likely the agreements will permit it either if the investor chooses to sell (first option) or when VRTP has the capital to do so.

Bottom line is there is no bad news here. The parks are guaranteed to be around for 90 years (on the basis that they continue to successfully operate that long), the investor makes money, 6-7 million in rent a year is not a huge chunk out of their income (especially when they'll have reduced current debt levels to minimise interest repayments), and in addition the sale of the golden village chain will also inject cash and reduce debt.

 

Sounds like a pretty good strategy.

Edited by AlexB
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And VRL has shown they are more than willing to make good use of the capital they receive in asset sales - stretching it as far as possible and reinvesting into new attractions and developments.

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4 hours ago, Skeeta said:

Is this not the same as Ardent taking money out of DW to pay for Main Event? 

Ardent were looking at selling some vacant land outright to fund investment, without any leaseback. So any developer could buy it and build whatever they want on the site.

Village are selling their land with the intention of leasing 100% of it back for the next 90 years, so they'll keep using the site for theme parks and a movie studio. Lots of companies do this kind of thing - you'd be surprised how many big corporations don't actually own their head office buildings, they just lease them from a third party.

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I was tempted to start a new topic called “Disney to acquire Movie World”, but it’s not confirmed yet. 

So the 100% accurate GC Bulletin is reporting Marvel Studios aka Disney are the front runners to buy the freehold, on the basis they would somehow negotiate exclusivity rights for the studios. Sounds a strange way to do it, but hey, I’m no News Limited journo. 

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Read that this Arvo too. Definitely a strange situation, but with a land sale contract stipulation that the theme park land will be retained on a 60 year lease, I don’t think it would Mean anything for MW. 

Quite the weird occurrence though potentially having a permanent ‘Marvel Studios’ located next to a DC-centric theme park with a Joker head laughing at all the Marvel guys down below...

Edited by Brad2912

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