IAAPA Small Parks and Attractions Committee. What s s Next for Your Small Park or Attraction?

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Small Parks and Attractions Committee What s s Next for Your Small Park or Attraction?

Difficult Economic Times Still a challenge to find financing Traditional vehicles may not be available What alternatives do you really have?

Three speakers today Leave about 20 minutes for Q&A at end Enjoy the coffee and refreshments Session is being recorded Available for purchase later

Introductions Paul Nelson Waldameer Park

Introductions Edward Bolluijt CFO Great City Attractions

Introductions Dan Aylward Currently, President and CEO of Worldwide Leisure Management LLC Consulting for operations Consulting for Wall Street firms Contract operations management Potentially acquiring operations Started at Kings Island Great time in industry Breaking new ground My experience primarily in domestic and international turn around projects

Items we have addressed Conventional Financing Banks Other Rental / Leasing Leasing companies

Address several unconventional approaches Revenue Sharing Sale / Leaseback Outright Sale

Revenue Sharing Supplier provides asset Operating costs offset versus revenue Profits are split

Benefits of Revenue Sharing New attraction without cash outlay Attraction maintenance included in operating cost Labor charged against operating cost of attraction No direct cash outlay for operations Depending on how it is structured

Drawbacks of Revenue Sharing Control of operations can be compromised Reduces operating profit for park Requires careful negotiation and consideration

Challenges of Revenue Sharing Does not work with rides in a pay one price environment POP parks typically lease or rent Requires ability to promote the attraction internally and/or externally Ideal for add-on attractions

Protections for Owner Clearly define contract Contractually mandate that you are in control Require supplier staff to follow park rules Assign supervisors and management to monitor supplier compliance

Sale / Leaseback Sell asset to investor Lease back assets for operations Typically, pay 8 to 11% of purchase price as lease Typically, have controls for maintenance and lease payments

Benefits of Sale / Leaseback Investors / owners get their money out Keep operation and benefit from the upside Frees cash for other purposes Can negotiate future capital into purchase contract Can sell lease in future

Drawbacks of Sale / Leaseback Lose control of asset Significant deposits are required Subject to outside influence on operations Non-industry personnel often involved in transactions

Challenges of Sale / Leaseback Must make payments on regular schedule Must hold funds on deposit Lease payments Must set up capital maintenance fund May be required to maintain a level of equity in the company Lease amount never drops Subject to covenants of lease forever

Protections for Seller Insist on financial statements Require long term capital commitment Minimize buyers approval rights in event you sell the lease Eliminate long term payments on purchase price, if possible Minimize deposit and equity requirements on operator Contractually restrict the amount of control landlord has over operating issues

Outright Sale Find buyer Broker or other source Negotiate your price Asking 8 to 10 times cash flow Offering 5 to 7 times cash flow Sign on the bottom line

Benefits of Sale Frees cash from operation Eliminates existing debt obligations Frees any contingent liabilities Personal Guarantees Owners walk away from operation Management contract Transition of ownership

Drawbacks of Sale Often the park has been in family for generations Lose control of operations of facility Community still looks to previous owners if there is a problem Safeguards for previous owners reputation are a matter of concern

Challenges of Sale Many buyers want an earn out clause Should be treated like a loan to the buyer Some buyers want to give a lower price with upside bonus Difficult to manage Some buyers are not adequately funded to support the acquisition

Protections for Seller Look at the financial strength of the buyer Do they pay their bills? Are they current with their ride suppliers? Will they be able to get parts? What is the likelihood they can operate effectively in the future?

Protections for Seller What is history of buyer? Have they operated parks before? Were they successful? What references can they give you?

Protections for Seller Get complete financial package from buyer Why do they want to pay over time? Are they current with all their suppliers? Do they have a reputation of treating their local suppliers fairly? Three years of financial statements

Protections for Sellers Know the buyer Who is the key management person? What personal references can be given? Talk to past sellers

Protections for Seller Non-disclosure Agreement Monitor media Challenge erroneous statements Protect your image from the buyer s s comments Remain responsive to your past suppliers and clients