IAAPA  Small Parks and Attractions Committee What’s Next for Your Small Park or Attraction?
IAAPA   <ul><li>Difficult Economic Times </li></ul><ul><li>Still a challenge to find financing </li></ul><ul><li>Tradition...
IAAPA <ul><li>Three speakers today </li></ul><ul><li>Leave about 20 minutes for Q&A at end </li></ul><ul><li>Enjoy the cof...
IAAPA <ul><li>Introductions </li></ul><ul><ul><li>Paul Nelson </li></ul></ul><ul><ul><ul><li>CEO of Waldameer Park </li></...
IAAPA <ul><li>Introductions </li></ul><ul><ul><li>Edward Bolluijt </li></ul></ul><ul><ul><ul><li>CFO Great City Attraction...
IAAPA <ul><li>Introductions </li></ul><ul><ul><li>Dan Aylward </li></ul></ul><ul><ul><ul><li>Currently, President and CEO ...
IAAPA
IAAPA <ul><li>Items we have addressed </li></ul><ul><ul><li>Conventional Financing </li></ul></ul><ul><ul><ul><li>Banks </...
IAAPA <ul><li>Address several unconventional approaches </li></ul><ul><ul><li>Revenue Sharing </li></ul></ul><ul><ul><li>S...
IAAPA <ul><li>Revenue Sharing </li></ul><ul><ul><li>Supplier provides asset </li></ul></ul><ul><ul><ul><li>May split insta...
IAAPA <ul><li>Benefits of Revenue Sharing </li></ul><ul><ul><li>New attraction without cash outlay </li></ul></ul><ul><ul>...
IAAPA <ul><li>Drawbacks of Revenue Sharing </li></ul><ul><ul><li>Control of operations can be compromised </li></ul></ul><...
IAAPA <ul><li>Challenges of Revenue Sharing </li></ul><ul><ul><li>Does not work with rides in a pay one price environment ...
IAAPA <ul><li>Protections for Owner </li></ul><ul><ul><li>Clearly define contract </li></ul></ul><ul><ul><li>Contractually...
IAAPA <ul><li>Sale / Leaseback </li></ul><ul><ul><li>Sell asset to investor </li></ul></ul><ul><ul><li>Lease back assets f...
IAAPA <ul><li>Benefits of Sale / Leaseback </li></ul><ul><ul><li>Investors / owners get their money out </li></ul></ul><ul...
IAAPA <ul><li>Drawbacks of Sale / Leaseback </li></ul><ul><ul><li>Lose control of asset </li></ul></ul><ul><ul><li>Signifi...
IAAPA <ul><li>Challenges of Sale / Leaseback </li></ul><ul><ul><li>Must make payments on regular schedule </li></ul></ul><...
IAAPA <ul><li>Protections for Seller </li></ul><ul><ul><li>Insist on financial statements of buyer </li></ul></ul><ul><ul>...
IAAPA <ul><li>Outright Sale </li></ul><ul><ul><li>Find buyer </li></ul></ul><ul><ul><ul><li>Broker or other source </li></...
IAAPA <ul><li>Benefits of Sale </li></ul><ul><ul><li>Frees cash from operation </li></ul></ul><ul><ul><li>Eliminates exist...
IAAPA <ul><li>Drawbacks of Sale </li></ul><ul><ul><li>Often the park has been in family for generations </li></ul></ul><ul...
IAAPA <ul><li>Challenges of Sale </li></ul><ul><ul><li>Many buyers want an earn out clause </li></ul></ul><ul><ul><ul><li>...
IAAPA  <ul><li>Protections for Seller </li></ul><ul><ul><li>Look at the financial strength of the buyer </li></ul></ul><ul...
IAAPA <ul><li>Protections for Seller </li></ul><ul><ul><li>What is history of buyer? </li></ul></ul><ul><ul><ul><li>Have t...
IAAPA <ul><li>Protections for Seller </li></ul><ul><ul><li>Get complete financial package from buyer </li></ul></ul><ul><u...
IAAPA <ul><li>Protections for Sellers </li></ul><ul><ul><li>Know the buyer </li></ul></ul><ul><ul><ul><li>Who is the key m...
IAAPA <ul><li>Protections for Seller </li></ul><ul><ul><li>Non-disclosure Agreement </li></ul></ul><ul><ul><ul><li>Monitor...
 
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Iaapa Presentation 2009

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Presentation given at IAAPA convention in Las Vegas, November 2009

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Iaapa Presentation 2009

  1. 1. IAAPA Small Parks and Attractions Committee What’s Next for Your Small Park or Attraction?
  2. 2. IAAPA <ul><li>Difficult Economic Times </li></ul><ul><li>Still a challenge to find financing </li></ul><ul><li>Traditional vehicles may not be available </li></ul><ul><li>What alternatives do you really have? </li></ul>
  3. 3. IAAPA <ul><li>Three speakers today </li></ul><ul><li>Leave about 20 minutes for Q&A at end </li></ul><ul><li>Enjoy the coffee and refreshments </li></ul><ul><li>Session is being recorded </li></ul><ul><li>Available for purchase later </li></ul>
  4. 4. IAAPA <ul><li>Introductions </li></ul><ul><ul><li>Paul Nelson </li></ul></ul><ul><ul><ul><li>CEO of Waldameer Park </li></ul></ul></ul><ul><ul><ul><ul><li>Started as dishwasher at 11 years old </li></ul></ul></ul></ul><ul><ul><ul><li>Several terms as IAAPA Board Member </li></ul></ul></ul><ul><ul><ul><li>Former President of PAPA </li></ul></ul></ul><ul><ul><ul><li>President of Erie Chamber of Commerce </li></ul></ul></ul><ul><ul><ul><li>Sits on the Board of two hospitals </li></ul></ul></ul>
  5. 5. IAAPA <ul><li>Introductions </li></ul><ul><ul><li>Edward Bolluijt </li></ul></ul><ul><ul><ul><li>CFO Great City Attractions </li></ul></ul></ul><ul><ul><ul><li>Formerly Managing Director of Fitraco </li></ul></ul></ul><ul><ul><ul><ul><li>Long time financing source for the industry </li></ul></ul></ul></ul>
  6. 6. IAAPA <ul><li>Introductions </li></ul><ul><ul><li>Dan Aylward </li></ul></ul><ul><ul><ul><li>Currently, President and CEO of Worldwide Leisure Management LLC </li></ul></ul></ul><ul><ul><ul><ul><li>Consulting for operations and Wall Street firms </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Contract operations management </li></ul></ul></ul></ul><ul><ul><ul><li>Started at Kings Island </li></ul></ul></ul><ul><ul><ul><ul><li>Great time in industry </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Breaking new ground </li></ul></ul></ul></ul><ul><ul><ul><li>My experience primarily in domestic and international turn around projects </li></ul></ul></ul>
  7. 7. IAAPA
  8. 8. IAAPA <ul><li>Items we have addressed </li></ul><ul><ul><li>Conventional Financing </li></ul></ul><ul><ul><ul><li>Banks </li></ul></ul></ul><ul><ul><ul><li>Other </li></ul></ul></ul><ul><ul><li>Rental / Leasing </li></ul></ul><ul><ul><ul><li>Leasing companies </li></ul></ul></ul>
  9. 9. IAAPA <ul><li>Address several unconventional approaches </li></ul><ul><ul><li>Revenue Sharing </li></ul></ul><ul><ul><li>Sale / Leaseback </li></ul></ul><ul><ul><li>Outright Sale </li></ul></ul>
  10. 10. IAAPA <ul><li>Revenue Sharing </li></ul><ul><ul><li>Supplier provides asset </li></ul></ul><ul><ul><ul><li>May split installation cost </li></ul></ul></ul><ul><ul><li>Operating costs offset against revenue </li></ul></ul><ul><ul><li>Profits are split </li></ul></ul>
  11. 11. IAAPA <ul><li>Benefits of Revenue Sharing </li></ul><ul><ul><li>New attraction without cash outlay </li></ul></ul><ul><ul><li>Attraction maintenance included in operating cost </li></ul></ul><ul><ul><li>Labor charged against operating cost of attraction </li></ul></ul><ul><ul><li>No direct cash outlay for operations </li></ul></ul><ul><ul><ul><li>Depending on how it is structured </li></ul></ul></ul>
  12. 12. IAAPA <ul><li>Drawbacks of Revenue Sharing </li></ul><ul><ul><li>Control of operations can be compromised </li></ul></ul><ul><ul><li>Reduces operating profit for park </li></ul></ul><ul><ul><li>Requires careful negotiation and consideration </li></ul></ul>
  13. 13. IAAPA <ul><li>Challenges of Revenue Sharing </li></ul><ul><ul><li>Does not work with rides in a pay one price environment </li></ul></ul><ul><ul><ul><li>POP parks typically lease or rent </li></ul></ul></ul><ul><ul><li>Requires ability to promote the attraction internally and/or externally </li></ul></ul><ul><ul><li>Ideal for add-on charge attractions </li></ul></ul>
  14. 14. IAAPA <ul><li>Protections for Owner </li></ul><ul><ul><li>Clearly define contract </li></ul></ul><ul><ul><li>Contractually mandate that you are in control </li></ul></ul><ul><ul><li>Require supplier staff to follow park rules </li></ul></ul><ul><ul><li>Assign supervisors and management to monitor supplier compliance </li></ul></ul>
  15. 15. IAAPA <ul><li>Sale / Leaseback </li></ul><ul><ul><li>Sell asset to investor </li></ul></ul><ul><ul><li>Lease back assets for operations </li></ul></ul><ul><ul><li>Typically, pay 8 to 11% of purchase price as lease </li></ul></ul><ul><ul><li>Typically, have controls for maintenance and lease payments </li></ul></ul>
  16. 16. IAAPA <ul><li>Benefits of Sale / Leaseback </li></ul><ul><ul><li>Investors / owners get their money out </li></ul></ul><ul><ul><li>Keep operation and benefit from the upside </li></ul></ul><ul><ul><li>Free cash for other purposes </li></ul></ul><ul><ul><li>Can negotiate future capital into purchase contract </li></ul></ul><ul><ul><li>Can sell lease in future </li></ul></ul>
  17. 17. IAAPA <ul><li>Drawbacks of Sale / Leaseback </li></ul><ul><ul><li>Lose control of asset </li></ul></ul><ul><ul><li>Significant deposits are required </li></ul></ul><ul><ul><li>Subject to outside influence on operations </li></ul></ul><ul><ul><li>Non-industry personnel often involved in transactions </li></ul></ul><ul><ul><li>Lease payments may be higher than traditional financing </li></ul></ul>
  18. 18. IAAPA <ul><li>Challenges of Sale / Leaseback </li></ul><ul><ul><li>Must make payments on regular schedule </li></ul></ul><ul><ul><li>Must hold funds on deposit </li></ul></ul><ul><ul><ul><li>Lease payments </li></ul></ul></ul><ul><ul><li>Must set up capital maintenance fund </li></ul></ul><ul><ul><li>May be required to maintain a level of equity in the company </li></ul></ul><ul><ul><li>Lease amount never drops </li></ul></ul><ul><ul><li>Subject to covenants of lease forever </li></ul></ul>
  19. 19. IAAPA <ul><li>Protections for Seller </li></ul><ul><ul><li>Insist on financial statements of buyer </li></ul></ul><ul><ul><li>Require long term capital commitment </li></ul></ul><ul><ul><li>Minimize buyers approval rights in event you sell the lease </li></ul></ul><ul><ul><li>Eliminate long term payments on purchase price, if possible </li></ul></ul><ul><ul><li>Minimize deposit and equity requirements on operator </li></ul></ul><ul><ul><li>Contractually restrict the amount of control landlord has over operating issues </li></ul></ul>
  20. 20. IAAPA <ul><li>Outright Sale </li></ul><ul><ul><li>Find buyer </li></ul></ul><ul><ul><ul><li>Broker or other source </li></ul></ul></ul><ul><ul><li>Negotiate your price </li></ul></ul><ul><ul><ul><li>Asking 8 to 10 times cash flow </li></ul></ul></ul><ul><ul><ul><li>Offering 5 to 7 times cash flow </li></ul></ul></ul><ul><ul><li>Sign on the bottom line and walk away </li></ul></ul>
  21. 21. IAAPA <ul><li>Benefits of Sale </li></ul><ul><ul><li>Frees cash from operation </li></ul></ul><ul><ul><li>Eliminates existing debt obligations </li></ul></ul><ul><ul><li>Frees any contingent liabilities </li></ul></ul><ul><ul><ul><li>Personal Guarantees </li></ul></ul></ul><ul><ul><li>Owners walk away from operation </li></ul></ul><ul><ul><ul><li>Management contract </li></ul></ul></ul><ul><ul><ul><li>Transition of ownership </li></ul></ul></ul>
  22. 22. IAAPA <ul><li>Drawbacks of Sale </li></ul><ul><ul><li>Often the park has been in family for generations </li></ul></ul><ul><ul><li>Lose control of operations of facility </li></ul></ul><ul><ul><li>Community still looks to previous owners if there is a problem </li></ul></ul><ul><ul><li>Safeguards for previous owners reputation are a matter of concern </li></ul></ul>
  23. 23. IAAPA <ul><li>Challenges of Sale </li></ul><ul><ul><li>Many buyers want an earn out clause </li></ul></ul><ul><ul><ul><li>Should be treated like a loan to the buyer </li></ul></ul></ul><ul><ul><li>Some buyers want to give a lower price with upside bonus </li></ul></ul><ul><ul><ul><li>Difficult to manage </li></ul></ul></ul><ul><ul><li>Some buyers are not adequately funded to support the acquisition </li></ul></ul>
  24. 24. IAAPA <ul><li>Protections for Seller </li></ul><ul><ul><li>Look at the financial strength of the buyer </li></ul></ul><ul><ul><ul><li>Do they pay their bills? </li></ul></ul></ul><ul><ul><ul><li>Are they current with their ride suppliers? </li></ul></ul></ul><ul><ul><ul><li>Will they be able to get parts? </li></ul></ul></ul><ul><ul><ul><li>What is the likelihood they can operate effectively in the future? </li></ul></ul></ul>
  25. 25. IAAPA <ul><li>Protections for Seller </li></ul><ul><ul><li>What is history of buyer? </li></ul></ul><ul><ul><ul><li>Have they operated parks before? </li></ul></ul></ul><ul><ul><ul><li>Were they successful? </li></ul></ul></ul><ul><ul><ul><li>What references can they give you? </li></ul></ul></ul>
  26. 26. IAAPA <ul><li>Protections for Seller </li></ul><ul><ul><li>Get complete financial package from buyer </li></ul></ul><ul><ul><ul><li>Why do they want to pay over time? </li></ul></ul></ul><ul><ul><ul><li>Are they current with all their suppliers? </li></ul></ul></ul><ul><ul><ul><li>Do they have a reputation of treating their local suppliers fairly? </li></ul></ul></ul><ul><ul><ul><li>Three years of financial statements </li></ul></ul></ul>
  27. 27. IAAPA <ul><li>Protections for Sellers </li></ul><ul><ul><li>Know the buyer </li></ul></ul><ul><ul><ul><li>Who is the key management person? </li></ul></ul></ul><ul><ul><ul><li>What personal references can be given? </li></ul></ul></ul><ul><ul><ul><li>Talk to past sellers </li></ul></ul></ul>
  28. 28. IAAPA <ul><li>Protections for Seller </li></ul><ul><ul><li>Non-disclosure Agreement </li></ul></ul><ul><ul><ul><li>Monitor media </li></ul></ul></ul><ul><ul><ul><li>Challenge erroneous statements </li></ul></ul></ul><ul><ul><ul><li>Protect your image from the buyer’s comments </li></ul></ul></ul><ul><ul><ul><li>Remain responsive to your past suppliers and clients </li></ul></ul></ul>
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