IAAPA IAAPA Small Parks and Small Parks and

Attractions Attractions CommitteeCommittee

What’s Next for Your Small What’s Next for Your Small Park or Attraction?Park or Attraction?

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Difficult Economic TimesDifficult Economic Times Still a challenge to find financingStill a challenge to find financing Traditional vehicles may not be Traditional vehicles may not be

availableavailable What alternatives do you really What alternatives do you really

have?have?

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Three speakers todayThree speakers today Leave about 20 minutes for Q&A at Leave about 20 minutes for Q&A at

endend Enjoy the coffee and refreshmentsEnjoy the coffee and refreshments Session is being recordedSession is being recorded Available for purchase laterAvailable for purchase later

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IntroductionsIntroductions Paul NelsonPaul Nelson

CEO of Waldameer ParkCEO of Waldameer Park Started as dishwasher at 11 years oldStarted as dishwasher at 11 years old

Several terms as IAAPA Board MemberSeveral terms as IAAPA Board Member Former President of PAPAFormer President of PAPA President of Erie Chamber of CommercePresident of Erie Chamber of Commerce Sits on the Board of two hospitals Sits on the Board of two hospitals

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IntroductionsIntroductions Edward BolluijtEdward Bolluijt

CFO Great City AttractionsCFO Great City Attractions Formerly Managing Director of FitracoFormerly Managing Director of Fitraco

Long time financing source for the industryLong time financing source for the industry

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IntroductionsIntroductions Dan AylwardDan Aylward

Currently, President and CEO of Worldwide Currently, President and CEO of Worldwide Leisure Management LLCLeisure Management LLC

Consulting for operations and Wall Street firmsConsulting for operations and Wall Street firms Contract operations managementContract operations management

Started at Kings IslandStarted at Kings Island Great time in industryGreat time in industry Breaking new groundBreaking new ground

My experience primarily in domestic and My experience primarily in domestic and international turn around projectsinternational turn around projects

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Items we have addressedItems we have addressed Conventional FinancingConventional Financing

BanksBanks OtherOther

Rental / LeasingRental / Leasing Leasing companiesLeasing companies

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Address several unconventional Address several unconventional approachesapproaches Revenue SharingRevenue Sharing Sale / Leaseback Sale / Leaseback Outright SaleOutright Sale

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Revenue SharingRevenue Sharing Supplier provides assetSupplier provides asset

May split installation costMay split installation cost Operating costs offset against revenueOperating costs offset against revenue Profits are splitProfits are split

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Benefits of Revenue SharingBenefits of Revenue Sharing New attraction without cash outlayNew attraction without cash outlay Attraction maintenance included in Attraction maintenance included in

operating costoperating cost Labor charged against operating cost of Labor charged against operating cost of

attractionattraction No direct cash outlay for operationsNo direct cash outlay for operations

Depending on how it is structuredDepending on how it is structured

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Drawbacks of Revenue SharingDrawbacks of Revenue Sharing Control of operations can be Control of operations can be

compromisedcompromised Reduces operating profit for parkReduces operating profit for park Requires careful negotiation and Requires careful negotiation and

considerationconsideration

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Challenges of Revenue SharingChallenges of Revenue Sharing Does not work with rides in a pay one Does not work with rides in a pay one

price environmentprice environment POP parks typically lease or rentPOP parks typically lease or rent

Requires ability to promote the Requires ability to promote the attraction internally and/or externallyattraction internally and/or externally

Ideal for add-on charge attractionsIdeal for add-on charge attractions

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Protections for OwnerProtections for Owner Clearly define contractClearly define contract Contractually mandate that you are in Contractually mandate that you are in

controlcontrol Require supplier staff to follow park Require supplier staff to follow park

rulesrules Assign supervisors and management to Assign supervisors and management to

monitor supplier compliancemonitor supplier compliance

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Sale / LeasebackSale / Leaseback Sell asset to investorSell asset to investor Lease back assets for operationsLease back assets for operations Typically, pay 8 to 11% of purchase Typically, pay 8 to 11% of purchase

price as leaseprice as lease Typically, have controls for Typically, have controls for

maintenance and lease paymentsmaintenance and lease payments

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Benefits of Sale / LeasebackBenefits of Sale / Leaseback Investors / owners get their money outInvestors / owners get their money out Keep operation and benefit from the Keep operation and benefit from the

upsideupside Free cash for other purposesFree cash for other purposes Can negotiate future capital into Can negotiate future capital into

purchase contractpurchase contract Can sell lease in future Can sell lease in future

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Drawbacks of Sale / LeasebackDrawbacks of Sale / Leaseback Lose control of assetLose control of asset Significant deposits are requiredSignificant deposits are required Subject to outside influence on Subject to outside influence on

operationsoperations Non-industry personnel often involved Non-industry personnel often involved

in transactionsin transactions Lease payments may be higher than Lease payments may be higher than

traditional financingtraditional financing

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Challenges of Sale / LeasebackChallenges of Sale / Leaseback Must make payments on regular scheduleMust make payments on regular schedule Must hold funds on depositMust hold funds on deposit

Lease paymentsLease payments Must set up capital maintenance fundMust set up capital maintenance fund May be required to maintain a level of May be required to maintain a level of

equity in the companyequity in the company Lease amount never dropsLease amount never drops Subject to covenants of lease foreverSubject to covenants of lease forever

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Protections for SellerProtections for Seller Insist on financial statements of buyerInsist on financial statements of buyer Require long term capital commitmentRequire long term capital commitment Minimize buyers approval rights in event you Minimize buyers approval rights in event you

sell the leasesell the lease Eliminate long term payments on purchase Eliminate long term payments on purchase

price, if possibleprice, if possible Minimize deposit and equity requirements on Minimize deposit and equity requirements on

operatoroperator Contractually restrict the amount of control Contractually restrict the amount of control

landlord has over operating issueslandlord has over operating issues

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Outright SaleOutright Sale Find buyerFind buyer

Broker or other sourceBroker or other source Negotiate your priceNegotiate your price

Asking 8 to 10 times cash flowAsking 8 to 10 times cash flow Offering 5 to 7 times cash flowOffering 5 to 7 times cash flow

Sign on the bottom line and walk awaySign on the bottom line and walk away

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Benefits of SaleBenefits of Sale Frees cash from operationFrees cash from operation Eliminates existing debt obligationsEliminates existing debt obligations Frees any contingent liabilitiesFrees any contingent liabilities

Personal GuaranteesPersonal Guarantees Owners walk away from operationOwners walk away from operation

Management contractManagement contract Transition of ownershipTransition of ownership

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Drawbacks of SaleDrawbacks of Sale Often the park has been in family for Often the park has been in family for

generationsgenerations Lose control of operations of facilityLose control of operations of facility Community still looks to previous Community still looks to previous

owners if there is a problemowners if there is a problem Safeguards for previous owners Safeguards for previous owners

reputation are a matter of concernreputation are a matter of concern

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Challenges of SaleChallenges of Sale Many buyers want an earn out clauseMany buyers want an earn out clause

Should be treated like a loan to the buyerShould be treated like a loan to the buyer Some buyers want to give a lower price Some buyers want to give a lower price

with upside bonuswith upside bonus Difficult to manageDifficult to manage

Some buyers are not adequately funded Some buyers are not adequately funded to support the acquisitionto support the acquisition

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Protections for SellerProtections for Seller Look at the financial strength of the Look at the financial strength of the

buyerbuyer Do they pay their bills?Do they pay their bills? Are they current with their ride suppliers?Are they current with their ride suppliers? Will they be able to get parts?Will they be able to get parts? What is the likelihood they can operate What is the likelihood they can operate

effectively in the future?effectively in the future?

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Protections for SellerProtections for Seller What is history of buyer?What is history of buyer?

Have they operated parks before?Have they operated parks before? Were they successful?Were they successful? What references can they give you?What references can they give you?

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Protections for SellerProtections for Seller Get complete financial package from Get complete financial package from

buyerbuyer Why do they want to pay over time?Why do they want to pay over time? Are they current with all their suppliers?Are they current with all their suppliers? Do they have a reputation of treating their Do they have a reputation of treating their

local suppliers fairly?local suppliers fairly? Three years of financial statementsThree years of financial statements

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Protections for SellersProtections for Sellers Know the buyerKnow the buyer

Who is the key management person?Who is the key management person? What personal references can be given?What personal references can be given? Talk to past sellersTalk to past sellers

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Protections for SellerProtections for Seller Non-disclosure AgreementNon-disclosure Agreement

Monitor mediaMonitor media Challenge erroneous statements Challenge erroneous statements Protect your image from the buyer’s Protect your image from the buyer’s

commentscomments Remain responsive to your past suppliers Remain responsive to your past suppliers

and clientsand clients