$PRKS：SeaWorld、8%的现金流收益率，以及潜在的80%逼空｜Hawkins Entrekin

Today we've got a great one. It's my friend, Hawkins Entrekin. He's on for the second time. Hawkins has a deep background in real estate, and I should have looked this up, but gosh, this is why I'm not a professional podcaster: He came on about 3 or 4 years ago and pitched Vornado, right at the bottom of New York real estate. We all should have just YOLO'd long Vornado. Nothing on this podcast is investment advice, but hindsight is 20/20.

Hawkins has a deep background in real estate, and he's here to pitch United Parks & Resorts, which owns SeaWorld. It's kind of like a real estate hybrid, and as I'll say right at the beginning, I was prepping for this and, as I do, I read a thread on it. It's got everything that's just catnip to me: levered buybacks, irreplaceable assets, consistent cash flow, and a majority hedge-fund owner.

But as I'll say on the podcast, I do worry. These are the situations that have gone bad in the past, too, right? You have a company that's just so financially engineered. It's like, hey, it all looks good on a spreadsheet, and everybody's looking at the spreadsheet and saying, “Everything's so good. Everything's going so well.” And there's just a fire over there in the actual business. So we're going to get into all that. I think it's a super interesting pitch.

Hawkins did a write-up on his new site, his new firm, Valite. I will include a link to Hawkins' write-up there. So if and when you like this podcast, say, "Oh, this is a really interesting idea." You can go check out kind of the full idea at that write-up. So the link will be in the show notes. We're going to get there in one second. But first, a word from our sponsors. Today's podcast is sponsored by AlphaSense. Here's something I've been thinking more and more about recently. Most AI tools are very good at sounding right. The summary is clean, but can you actually trace it back to the filing, the transcript, the specific passage that drove the answer, or are you just trusting the confidence of the output? For investors, that's not a minor concern. My biggest worry is that I'm going to ask AI something and it's going to tell me something and I'm going to build an investment thesis on it. And then I'm going to find out, you know, 6 months later when I get smashed in the face that my whole investment thesis was wrong because the AI said something that wasn't true, that I didn't verify, that I trusted and did not verify, and that I can't source. And it sounds minor now, but you know, you work with AI all day. It's easy for one thing to slip through and it's scary. So, what's the solution? Well, AlphaSense is the AI platform built specifically for this. They own the content, over 500 million curated documents, from broker research and expert transcripts to filings and earnings calls. And they own the retrieval layer on top of it. That means every answer links back to an exact verifiable source because the answer is only as good as what's underneath it. And with AlphaSense, you know exactly what that is. See it for yourself. Try a free trial at alpha-sense.comyavvp. That's alpha-sense.comyavvp or see a link in the show notes.

With me today, I'm happy to have on my friend, Hawkins. Hawkins, how's it going?

Hi, good, man. How are you doing?

Super excited to have you back. I can't believe it's only the second time. We've now played 20 Dungeons & Dragons sessions and only done 2 podcasts, so we'll have to fix that ratio.

Barbarian. Exactly. Yeah, exactly.

I'm going to get into this stock in 1 second, but first, a disclaimer: Nothing on this podcast is investment advice. There's a disclaimer in the show notes and a disclaimer all the way at the end.

Speaking of the show notes, Hawkins, the reason you're coming on today is that you and your new firm, Valit—you can explain a little bit about it if you want—have a really interesting write-up on United Parks. As I was reading it, I was kind of like—what's the meme?—“I'm ready to get hurt again.” I was reading it and thinking, oh, this is just everything I love in a stock. What is United Parks, and why is it so interesting?

Yeah. United Parks is the owner of SeaWorld, actually. I don't know; they changed the name at some point from SeaWorld to United Parks. They also own Busch Gardens. They have basically 5 major assets and a couple of smaller parks, so most readers are probably familiar with them.

I grew up going to the Florida Busch Gardens and SeaWorld. Busch Gardens, for those who don't know, is maybe a little less well-known than SeaWorld. It's kind of like SeaWorld, but maybe a little more land-animal-oriented and a little more roller-coaster-oriented. SeaWorld was very obviously—or was—orca-oriented, although now it's not quite so much.

That was a controversy a while ago, which is now no longer as much of a thing. That's what the company does. They're trading at a really attractive valuation here, and there's also an interesting and kind of fun, especially in this day and age of degeneracy, possible short-squeeze catalyst given the relatively high short interest.

There's this private-equity group called Hill Path Capital that owns essentially two-thirds of the stock. Once you adjust for passive ownership, the short interest is somewhere in the 70s to mid-80s. It was as high as the mid-80s, and it's now gone down a bit, but the company has probably bought back some shares. So it's probably still around 80% effective.

Q2 is coming up here, and if they overperform on earnings—because Q1 was kind of soft—that could possibly be a catalyst. But even if there's not a squeeze here, it's just a cheap asset.

I have a real estate background. It's not a REIT—legally, unfortunately, it can't be a REIT with the OpCo/PropCo split, which we can get into a little bit later if you'd like—but I looked at it on a sort of real estate basis. I used an NOI conversion, where we take a 6% capex reserve, which is sort of the minimum that third-party transactions typically require, similar to what hotels use. They use 4% reserves.

We're at an 11.75% implied yield, which is extraordinarily high for a real estate asset. On a flat-out unlevered cash-flow basis, after capex and everything, it's a little over an 8% yield, which is also really good for a hard asset.

For comparison, multifamily—the vanilla gold standard in private markets right now—is trading somewhere in the upper 3% to 4% range, depending on what you allocate for G&A. That's the true unlevered cash yield as a comparison to other real estate assets. It's obviously more stable; theme parks are a little less stable than multifamily.

Management, pushed by the ownership, is putting essentially 100% of free cash flow into share buybacks. So even if nothing happens, every year your implied yield gets a little better. If NOI grows a little bit, you could have a situation where, in 4 years, that cap rate is almost 15%. That's with a very small 1.5% in NOI growth per year.

It's an interesting setup. There are a couple of catalysts out there, and again, even if there are no catalysts, I've always liked owning the cash flow. I think the answer for me, at least, is very much yes. We're going to have a pretty good yield going in, and it should grow.

I expect it to be kind of a GDP-ish grower. I don't expect it to be a crazy grower, but I also don't think anyone is saying that the theme-park business is structurally in decline. What else are we going to do with our leisure time once AI automates all the jobs except go to SeaWorld and Disneyland?

It's funny that you end on the AI note. You have a line in your article, and I totally agree with you: If AI causes the kind of utopia dream where it creates a productivity boom and a wealth boom—even if it doesn't put us all out of a job—it increases leisure.

I think United Parks is very much where the puck is going in terms of increased leisure time. People want time outside, ticket prices are going up, and people are going to the movies again. People just want things where they're doing something.

We can talk about that later. You threw a lot out there, and there's so much here that I like. But I want to make sure I hit all the points.

The first question you probably remember I like to ask is: What are you seeing that the market is missing? But let me reframe that slightly. You mentioned the short-squeeze angle, and I don't think your whole thesis is a short squeeze.

You kind of think that’s the cherry on top here, right? You’re getting a cheap, irreplaceable asset. I’m just looking at Bloomberg. Bloomberg does a short-squeeze score from 1 to 100, with 100 being, like, “Oh my God, this could GameStop any second,” and 1 being, “Hey, this is the S&P 500; it will never short squeeze.” This is 93. This is about as high as it gets in terms of a short squeeze, right?

I would just ask you: What are the short sellers seeing? The company is returning all its capital to shareholders through buybacks because it thinks the stock is cheap, and there are some sophisticated hedge funds here. What are the short sellers seeing that you guys might be missing?

Honestly, it’s a great question. I frankly struggle with that a bit, and it has actually come down quite a bit even in the past month. I think maybe they are seeing that they need to reduce their exposure. It’s down from, like, 67 to 61 over the past 30 days, right?

My best guess is that you had a pretty big EBITDA decline last year, and Q1 was fairly soft on certain metrics. On others—the pass metric—it’s actually pretty strong. But Q1 is a seasonally small quarter. So if you just linearly extrapolate out—“Hey, big EBITDA decline last year, possibly on pace for a bigger decline this year”—then it sort of looks weaker.

Although even then, it’s probably closer to fairly valued. So you have to kind of stretch it out forward a few years, which is hard for me to do. I think I frankly struggle a little bit with what their rationale is, but my best guess is that this earnings decline is driving that, and there’s some sort of extrapolation like, “Well, it’s going to continue to decline for whatever reason,” which I don’t think is necessarily correct.

Let’s build off that, then. The earnings decline, right? Earnings declined from, let’s use rough numbers, $700 million in EBITDA in 2024—and this is down from, like, $730 million in 2022—to $600 million in 2025. I believe the projections are up in 2026, but it’s not going back up to $700 million.

Yeah, and I’m underwriting a slight decline just to be conservative. My numbers are on a small decline. But yeah, I think it’s probably going to go up. Pass sales are very, very strong.

Either way, we’ve gone from over $730 million 3 years ago. And, by the way, we’re in inflationary times, and you would kind of think a theme park, where most of the assets are in the ground, should be able to at least pass on inflation.

And they haven’t, right? Their earnings have declined, and it’s not just them. I think Six Flags has struggled.

Also been soft, yeah. And I know there was the COVID boom in 2021, but still, we’re 4 years past that and these guys’ earnings are down this much. So when I think of this business, I think of something that’s not recession-resistant, but it’s not going to have highs and lows because your kids only—you know, I’ve got 2 kids now. I know you’ve got 2 babies in the form of dogs, but I’ve got 2 kids now.

When Sylvia is 5, you only get 1 chance to take her to Disney World or Six Flags, right? So you kind of pay for it. So yes, maybe not fully recession-proof, but probably recession-resistant is the right term. Why are earnings down 20% over the past few years?

Yeah, I do think there’s probably a little bit of COVID whiplash still potentially involved there. It’s hard to fully disentangle it, but my best guess for the most logical explanation is simply new supply in the form of Universal Epic Universe opening in Orlando, which is one of their largest resorts. That’s a huge asset, and that’s going to absorb a bunch of demand in the region—not just in Orlando, right?

There’s a mix: Six Flags is very regional, drive-to; Disney and Universal are very much destination, fly-to; SeaWorld’s kind of in the middle, with a mix of drive-to and destination. SeaWorld in particular is also kind of a destination resort, and there’s a national destination impact. People say, “Oh my gosh, maybe we’re going to go to SeaWorld this year. Let’s check out the new Universal with Harry Potter and all this other stuff in Orlando.”

So I think it’s a supply question. That’s my best estimate of what’s going on, combined with a little bit of a potential COVID bullwhip. Management’s excuse is really weather-oriented. I don’t buy that, really.

I don’t know. I was doing some work on this. I don’t know if you saw it, but management has blamed weather in 15 of the past 16 quarters. I went back 10 years: In 25 of the past 40 quarters, they’ve blamed weather, and they’ve only credited weather in 1 of the past 40 quarters. The quarters that they did not mention weather at all were generally COVID-impacted quarters.

So you’re kind of like, “Hey, guys, yes, it does rain every now and then.” They’ll use calendar swings also, but then the next quarter they won’t say, “Oh, we benefited from the movement of this item.” Anyway, it’s a bit annoying.

But yeah, I think there’s a little pause here in terms of the comp, but it’s a $7 billion investment, which is insane, by the way—more than the entire EV of this business, basically—for that one park. It’s a big deal, a big piece of new supply, and you only have so many of these major parks in the entire country. It’s a meaningful increase in supply.

So I think that’s the explanation. I think it’s a one-time thing. No one’s building any more big parks, given performance today. Eventually, at some point in the future, perhaps they will, right? But I think that’s been digested, and now we can look forward to maybe smoother sailing.

Let me ask you about Epic, because I do hear you that Epic opens and it’s huge, right? But I do worry because I call Comcast a little silly, to their despair. Comcast has said, “Hey, we’re intentionally rationing Epic until the end of 2026.” So, yes, you’re anniversarying Epic, but Comcast is saying that Epic’s capacity is increasing through the end of the year, right?

And then when you turn to Disney, Disney’s been talking up—I think they’re doing Villains Land at Magic Kingdom. None of these are a full theme park, but there’s a lot of expansion coming to Disney World in the next 2 years.

You’re kind of treating Epic as a one-time, unique thing, but if you’re saying this 1 park is impacting SeaWorld so much, so disproportionately, you’re saying, “Whoa, there’s still more Epic capacity to come on, and then Disney World is always expanding.” I’m kind of looking at it and saying, “Hey, I don’t know, maybe it’s not a full-capacity argument, though it is increased capacity, but is that telling you that maybe the structural demand for these things is there and SeaWorld’s almost the excess capacity? As soon as anything good comes up, people leave SeaWorld and go to the good stuff.”

Does that make sense? There is other capacity coming along. It kind of worries me.

I hear you, Andrew. I think 2 things on that. I can’t really comment well on Comcast’s commentary on Epic, but it’s been open, right? People are going to it. The Disney stuff is more like rebuilding existing areas. I kind of differentiate this into 2 different things. There’s the greenfield—an entirely new park that can handle X new visitors—and a reimagining of a tired part of an old park.

That does drive something from old demand, but it’s not nearly the same as having this. Epic is actually an entirely new mega-park, whereas the other stuff is more just reinventing parts of land, which SeaWorld also does too, right? SeaWorld spends a bunch on capex constantly. These guys all do this, right? They’re constantly finding some least-used ride area and putting in a new thing. That’s always the case in this business and will continue to be the case.

There could be new ones in the future, but SeaWorld has a bit of a pricing differentiator, right? They’re much, much cheaper. It’s like $60 or $70 for a ticket versus well into the hundreds for Epic and Disney. I think that also is one of their big differentiators.

And what gives me comfort is the pass sales, right? Q1 was a little soft overall—the weakest quarter of the year—but management is saying that pass sales, which are about 40% of traffic overall, are up something like 12% year over year, which is a pretty darn good sign. It’s hard for me to see pass sales performing that strongly and having a really big disaster year going forward.

Let me go back to management. We were mentioning weather, right?

Yeah. And I’ve got one worry about this, and I think this is what played out and really destroyed Six Flags. Six Flags was very optimized for private equity. They were taking price every chance they got.

I think eventually there was a big pushback, right? They needed to do a whole CEO turnover—I could be misremembering—reset the entire pricing structure, all this sort of stuff. When I look at Parks, one thing I worry about is that EBITDA goes from $700 million to $600 million, and they're on the Q1 call talking about, “Hey, we still have some room for pricing.”

I read their decks, and everything almost speaks to me and you, right? Their 2026 deck, before the appendix, I think was 17 pages. Five of them talked about how undervalued their stock was, maybe three were the introduction, one was strategy, and everything else was margins and that sort of stuff.

So I almost worry that you've got this company with a 60% owner, where everything's going to free cash flow, earnings are coming down, and all they're doing is blaming the weather. They're verifying, and I kind of worry: Are we going to wake up one day and they're going to say, “Hey, we have to fire everyone. We have to bring in new management. We have to take a full reset”? I worry it's being run for me and you, not for long-term operations. I don't know if that makes sense, but that is one of the worries I had here.

No, I completely get that. I think my comments are twofold. One, I think this kind of asset is relatively resistant to management being a complete bozo. It's a hard asset—the park is the park—and it takes quite a bit to ruin the thing. It's got great brand recognition, so it's like real estate. Management has to be really, really bad to truly damage the value of an asset, although you can do it to some degree.

I think it's a bit resistant to too much bozo behavior, so to speak, on the behalf of management. More importantly, I don't think there are any signs they're doing too much of that. To me, the biggest place you would see that show up is in the capex spend, right?

On my slightly lower numbers, I've got them at roughly the mid-13% range of revenue on capex this year, which is what they spent pre-COVID, roughly on average. So they're not really reducing capex. It is lower than the last 2 years, but that's a bit of a comedown from the COVID buildup, where they had years of basically no capex and had to catch up over the last 2 years.

I think the capex appears to be in a normal place in terms of what it has been historically and, frankly, well above the bare minimum you could see elsewhere. That's required to keep the park fresh, put in new rides, and attract people. That's where you could see a private-equity owner strip the business.

Interestingly enough, Six Flags just sold a couple of their parks, and their deal, as far as I can tell, for their third-party operators is a minimum capex of 6% of revenues. Beyond that, the operator can do whatever they want. I don't know what the operator's plan is here, but if you assume 12% capex, the net cash flow is very low: you're at a 24x net cash flow multiple. There's a $330 million sale, $45 million of EBITDA, and a 7.3x multiple—not so great, but they're very low-margin parks. At 13% capex, which is post-reinvestment spend, you're at a 30x cash flow multiple.

I think that management team is, in fact, planning on saying, “We're only going to spend 6%.” They probably are doing the cutback to 6%. I think if there were signs of that, they would come in the form of the easy button to push: slash capex. Don't do those reinventions where you grab the worst part of the park and rebuild it. That's easy to stop doing.

I'm guessing that's what those guys are doing with those Six Flags parks. Otherwise, the multiple they're paying on an actual cash-flow basis is insane. I think maintenance capex is quite low, and for treadmill growth, if you want to call it that—keeping up with the Joneses capex—they're still spending that. So I feel comfortable they're not stripping the assets.

The only question I would have there, and I completely agree with you, is that I'm familiar with some of these. There are regional theme parks where it's like, “Hey, it's 30 minutes outside of Philadelphia,” right?

Then there are regional theme parks like the one near Utica. My wife is from Utica, and there's a water park 30 minutes from Utica, New York, where everybody brings their coolers and drinks all day. They haven't had a new ride in probably 25 years. I wonder if that park is where the 6% maintenance capex comes in. They're like, “Hey, let's just make sure people aren't dying here,” and people are just going to come in, drink beers, and have a good time.

The way I'm relating this to SeaWorld is, “Hey, this is competing with Disney.” If you're not doing a little bit of reinvention, like if you ran it on that Utica model, nobody's going to come, right? So maybe the capex here is just a little bit higher because you need a new ride and need to make sure the paint is maintained. I mean, some of the things in that place haven't been painted since the 1990s, you know?

Yeah. Yeah.

No, I agree, but I think that would be the place you would see it, right? If they're cutting, that's where it would show up first. It's the easiest button to push.

And they don't appear to be pushing it, right? I think that's what I would look out for: management stripping the business, so to speak.

Speaking of their new rides, I don't know if you saw this. I was just playing around, and they've got SeaQuest: Legends of the Deep, which is their new ride that I think is going to open later this year at SeaWorld Orlando. It's a submersible experience, and it looks like a big blue whale that you're in.

But I keep looking at that and thinking, “Jesus Christ, they're going to put people in a submersible-like underwater thing?” How? I just can't believe the safety. It feels like there will be 5,000 better ways to do that. I'm sure it'll be a cool ride, but the pressure—I don't know, man. That seems a little crazy.

I don't know. It's not that deep underwater, and I'm sure they have safety measures in place. But, yeah, I mean, that's part of the fun. What's life without a little danger? You've got the risk of a submarine implosion, you know.

So let's turn to the real estate here. There are a few angles, and I think people might remember from the first one, which was honestly one of the best performers. I mean, there have been some screamers on the podcast, but you pitched Vornado right at the bottom, right? So you'd have to throw in the dividend stuff. Vornado was at $13, and I don't even know where it is now.

Anyway, what I'm saying is that you have experience in real estate, and one of the interesting things about parks is that there is a lot of real estate here, with multiple angles to it. There is the actual real estate underneath the parks themselves, and then at every park—and this is one of the slides in that 17-page deck I mentioned—there are about 40 acres of real estate right next to it, and they're talking about ways to monetize that. We can talk about either angle there. Where would you like to start?

Yeah, I mean, I try to be pretty conservative in my underwriting of this. I view the business as a real estate business, really, sort of as it is today, and sort of a hotel company. But there is potentially some upside there.

I do want to put a little cold water on some of the discussion—and this is more so in terms of Six Flags—of an OpCo-PropCo split. Travis Kelce, who maybe is also a fan of this park, I don't know, has partnered with Jana to push this along with several other hedge funds. Travis, if you're watching, you're invested in the wrong theme park business. Really, you should be invested in Parks. It's a much better—

Seems like a Busch Gardens guy, too. I don't know why.

Right. I mean, come on. Busch Gardens—what's more American than that? And the valuation, by the way, is way better for Parks than for FUN. FUN has a much higher yield.

The OpCo thing, I don't buy as much. I don't think it's the best move. I think there is a scenario that makes sense, but the general spin, given where the entertainment REITs are, the rent coverage they're requiring, and the cap rates at which they're trading, makes it hard for me to see the cap rate being much lower than a 7% cap rate and a 2x EBITDA coverage ratio.

The question then is, what's that OpCo multiple? Again, it's hard for me to see that being a really great multiple, given the capex burden that falls on that OpCo. So I don't think there's much upside, for my underwriting, if any, in an OpCo-PropCo split. You need to get closer to a 6% or 6.5% cap rate, or a much higher OpCo multiple.

The scenario where this would make sense is in a take-private, because if you're the same owner, you can size your EBITDA wherever you want. All your net cash flow is tax-advantaged to the REIT, and then the OpCo is left with basically no taxable income from its depreciation while paying the capex.

So you could basically— a private owner could effectively real-estatize this deal and minimize that C-corp bleed. That is, I think, an attractive angle for a buyout, right? Because then you can achieve those tax efficiencies as a private holder. So that's a really big potential advantage.

I don't think, though, it's necessarily a catalyst for the stock as it is. I think as a small sort of bonus, you can see them building and spinning off hotel sites, building things adjacent to the property. The market is really not very strong right now, especially for hospitality, so I don't think they're able to build anything right now. But I do think, longer term, that'll come back at some point. They'll be able to do JVs with developers, and that will be good for the assets, too, right? Having a hotel right on the property is really good for them. So it's a win-win, right? They can monetize that asset a little bit and then also drive additional traffic. That's huge.

I don't think the market's there for that today. I think at some point it will be, but it's not an immediate short-term thing. Over the next 5 years, could that be a nice little additional tailwind? I think yes, but I'm not here advocating for an OpCo/PropCo split as a catalyst. I think a lot of people are advocating for that at Six Flags.

What do you think the excess real estate—the stuff that they'd be selling to hotel companies, entertainment complexes, things that would be a little bit synergistic with the business—would be worth if you were just selling that off? I think their dream would be, hey, you come to Busch Gardens Tampa, and they build out an entertainment complex next to it, or some hotels and shopping, and instead of just doing a day trip, people go for 3 nights or something. I don't know.

I mean, it's hard to say how much exactly is really excess, right? A lot of it is used for parking or potential other expansions. So I don't think there's more than—I don't know—a couple hundred million dollars of monetization there.

It's not nothing. It's the stock price right now. I mean, we're talking about a 10%, 20%, 30% bonus, I would call it. It's meaningful—very meaningful—but I'm not underwriting any of that in my base case.

And just on the OpCo/PropCo split, I just think it's financial engineering for financial engineering's sake. I know all the casinos have done it, and if you talk to a lot of knowledgeable people on casinos—and I've done work on casinos—they think the companies that have done the OpCo/PropCo split are going to really regret it, because eventually all the equity accrues to the PropCo, right?

To me, this is almost the reverse, because if you sell a casino, there are other operators of that casino, right? You have the casino. If you sell it to Caesars and Caesars gets in trouble, you can say, “All right, we're going to turn around and sell it to Wynn,” right? If you sell SeaWorld Orlando to a REIT, well, then SeaWorld has them over the barrel, right? When it's time to renew, or if things go bad, they go to them and say, “Hey, what are you going to do?” It's just like there's no other use for these assets, and there's no other real operator. So I kind of think it's just financial engineering for financial engineering's sake to me.

Agreed. I think in a public market it doesn't make any sense. I think, if, as a private buyer, you could do it—

If it's private and it's a tax structure, absolutely. But the moment you have 2 different owners, it's just a weird negotiation.

I agree. Let me ask you. So, again, you have a background in hotel—or, sorry, in real estate—and I thought one of the interesting things here is you started comping it on an NOI basis, right? And it was interesting because I see it: all of the assets here are big theme parks, really. But, on the other hand, once you start throwing an NOI number—and you could correct me if I'm wrong—NOI, the way you use it in real estate, is operating income with G&A added back, right? Because you're looking to sell it and have a buyer.

Can you really use an NOI number on these? Because half the G&A is advertising, so that is so clearly crucial to the business. Is it fair to comp it on an NOI basis?

Yeah, I think so. The key is not using the entire G&A add-back, right? I use a relatively small percentage of the total asset value. I use a REIT comp, right? The whole G&A is not applicable to be added back here, because you're right: a lot of that is property operations that you absolutely could not—it’s not fungible from owner to owner or whatever. So, yeah, I think that's the appropriate way to do it.

And I think even in REITs, sometimes people can get in trouble, especially in some of the more diverse asset classes, where there's a little bit of this add-back they're doing that's not appropriate, because some of that is really a property-level expense. So you have to be very careful and make sure you're not adding back advertising, which very much is not an add-back. It's just pretty much a management salary, the kind of thing a PE fund would have to, again, manage internally.

And look, even without that, I've got them at, like, $4.5 billion; that is their EV right now. They did, as we mentioned, $600 million in EBITDA. Capex was a little over $200 million with the growth capex, a little under $200 million without it. Obviously, we've had the discussion that you could probably take it lower if you really wanted to run it for cash flow, but we're talking about $400 million in unlevered free cash flow against the $4.5 billion to $4.6 billion EV.

They bought back $480 million of stock in 2024. They bought back—what was it?—almost $100 million in Q1. They've continued into Q2. They bought back $160 million in 2025. So the cash flow is coming back here. And by the way, $2.4 billion market cap. So we're talking about huge numbers against the market cap, just to give people an idea for the valuation.

So I laid out a bunch of numbers there. I guess I'd ask you: how do you think about the fair value here?

My fair value is kind of low $80s per share. I mean, that's an 8.5% cap rate, which is kind of right in the fairway of what hotels trade for. And it's actually a little bit better, frankly, on a capex basis there.

On an EBITDA multiple, it's kind of more like an 11x on my—I'm using a decline in EBITDA to be conservative this year. If you do just a flat $600 million, right, it's actually a little bit better. That would be a little over 10x, more like a 10x multiple. So I think very reasonable multiples compared to other private-asset yields and, just in an absolute sense, for asset quality. I think those are relatively conservative.

And then also historically, right, this thing would trade not quite at a 12x, but a little higher pre-COVID. I do think these assets were always a bit orphaned in the public markets because the EBITDA yields were, in my opinion, given the quality of the cash flow and how stable it is, a little too high. I think Hill Path saw that, and that's why they were like, “We're just going to buy back all the shares, and we're going to capitalize on that,” because the yields are a bit too high.

Even if you don't ever get a big outcome, getting that kind of unlevered yield—and those levered yields are pretty attractive.

So I'm going to come back to Hill Path in a second, but I'm with you, right? Let's just use 8x for both parks, and the new Six Flags-Cedar Fair merger trades under FUN. Both of them trade for about 8x EBITDA, right? But FUN is a little higher; Parks is a little lower, but roughly there.

If we go historically, Blackstone, who also used to own SeaWorld, bought Merlin for like 12x. I think Blackstone bought Great Wolf for like 14x to 15x. Both of those were late-2010s mergers. So historically, the multiples were higher, but you've got both Parks and Six Flags trading in the public market for about 8x.

Has something changed since pre-COVID that these are now lower multiples? And I'll lead the witness a little. One thing I do wonder is, the 10-year was 3%, 3.5% in the late 2010s and now it's higher. I wonder if interest rates are the thing in real estate. If we're taking a real estate angle, maybe the multiple is getting a little impacted because interest rates are higher, but I don't think it would explain this much difference. So, is there something else different here?

Yeah, I mean, I think interest rates are a little bit of it. I think it just became a bit of an orphan. I think that hotels, it's probably traded at a bit of an outsized yield discount, so to speak, to the hotel space, which I think is a little bit unfair, frankly.

And entertainment in general has been absolutely smashed since COVID, and in the last year or 2 it's recovered a little bit this year, but those assets are all across the board really, really soft. So I think this is sort of a little bit of a baby-with-the-bathwater situation, where that whole sector just got hit really bad.

And so if hotels are trading for, whatever it is, a 10% NOI yield in markets, then this one's going for even higher because it doesn't have the natural REIT buyer that the hotel does.

So, I think it's a little bit of an orphaned asset, which I think is what Hill Path saw and is why they're just saying, “Screw it. We're just going to accrue the value to ourselves with these massive buybacks they're doing.”

So, I want to talk about some special-situation stuff, including Hill Path, but I think we've walked through most of the fundamentals: the business and the earnings trend. Before we turn to Hill Path and the event path, is there anything else on the fundamentals you think we should have hit or listeners should be thinking about?

I think that covers it. Let me look at my notes real quick here. Just maybe a quick thing: we hinted at this and went next to it, but we didn't fully touch on it. The replacement-cost angle is another piece I really like to look at when looking at hard assets.

For an asset that's sort of out of date, it's not necessarily fully relevant. The company is claiming it's closer to $10 billion, but I have it at around $6.3 billion, which is basically right where my fair value is. Another thing when you're buying hard assets: I love to buy them well below replacement costs, which is what we're doing here. So, that's one more piece of the work.

I'm actually really glad you mentioned that, because I'm with you: replacement cost is—I love to buy anything below replacement cost. Sometimes it hits you, but I can't tell you how many times I've bought a thing at a discount to replacement cost and people are like, “Oh, that's never going to be worth replacement cost,” and then all of a sudden the supply-and-demand angle gets right and they're earning crazy money.

It never trades right at it, right? It's just so cynical, right? It goes below and then it goes over, and it's hardly ever right at that number. At the end of 2024, I don't want to tell you how large I was in the refiners, and I had some where I was like, “They're at huge discounts to replacement costs.”

I wish I had held them until today because everyone's like, “They'll never get to replacement cost,” you know, EV futures and all this sort of stuff. All it took was bombing Iran and sanctions on Russia and Ukraine and the others, and those guys are loving life right now. I just wish I had never sold a share.

Let me ask you, though. I love the replacement-cost angle here, right? You have operating businesses that I think are unique, that I think have brand power, and they should be—like, you use replacement costs when something's replaceable. I don't want to say these are irreplaceable, because, as I discussed, Epic Universe is opening and Disney is opening expansions, but—

Yeah, I don't see a SeaWorld or Orlando 2.0 opening. I do think these are supply-constrained. They should be worth more than replacement costs. How did you come up with the $6 billion number? How did they come up with their $10 billion number? What's the swing between them? How can you get comfortable?

I'll remind everyone: $4.5 billion EV here. So, $6 billion there—it's half equity, half debt. $6 billion there would be a double to the upside, right?

Yeah, yeah. I don't know how they came up with their number, to be honest with you. They might use—I mean, they might use a higher construction-cost number. I base my costs on some of the newer resorts that have been built that are sort of lower grade, let's say, than Epic Universe.

One that I really hung my hat on was the newest LEGOLAND in—I believe it's upstate New York, or kind of the Hudson Valley-ish area. That was a recent asset that is somewhat comparable in quality, and so I use that as the marker for construction cost. It actually probably is a little higher than that, given construction inflation has gone up quite a bit recently, but that's where my number comes from.

Maybe management took that number and said, “Hey, construction costs are this much higher because they're building rides today.” So maybe they're estimating based on the cost to replace or something, and maybe they're right. I don't know. Their number would imply a lot of upside to the stock. I try to be conservative and compare to what I can find elsewhere, but that's where it's coming from. There aren't a ton of newly constructed theme parks, so—

But there are not a ton of new parks that you can get comps for, and Epic Universe is higher, obviously, but it's a bit of a higher-quality asset. So, let's talk about the event path here.

Hill Path owns roughly 60% of the equity. You can correct me on the specific numbers—I think they might have some swaps that change it—but roughly 60%. As we discussed, Parks is buying back stock like crazy. If we put the short-squeeze angle to the side—which I'm not sure we should, because Avis, in March, I’ve got the receipts. I don't have the receipts in terms of money because I never put it on, but in March I said, “Hey, Pentwater is buying calls in Avis, and there's like 60% of the stock in 2 funds. This seems strange. This could—” and the stock very much did squeeze, right?

And you point out that, obviously, Hill Path owns 60%. They're not buying call options on the stock, as far as I know, at least. But they own 60%, and the company is retiring shares quickly. When you own 60% and the company is buying back 10% of the stock per year, that's really eating into the free float there, right?

If we put the short-squeeze angle to the side for a second, there are some interesting events that could come up. I think Hill Path is restricted from going over 70% ownership, and shareholders would need to vote to change or modify that. If they keep buying back stock in the next year, they're going to bump up against Hill Path's ownership.

I don't think beneficial ownership counts against that, so they have a little longer. It'll be a little more than a couple of years.

A little more than a year. Fine. But they're going to bump up against that within the next year or 2, whatever. And that fits nicely with the fact that Hill Path has been here for 10 years. This has been successful. I think their cost basis, according to Bloomberg, is like $21 or $22. It's been successful, but 10 years, $22 to $48 today is nice, but it's not a grand slam.

Now, you and I just laid out a path to an $80 to $100 fair value. That would be pretty damn good, and maybe that's the path if they do a sale. But they're coming up on 10 years. It's been an okay investment. They're going to come up on the ownership limits.

How does this play out? What do they do? Is it just keep buying back stock and then Hill Path takes the company private? There has been private-equity interest in the past. Is Hill Path going to sell? How do you see this playing out?

I think it could be any of those paths, right? I think the cleanest and best for a shareholder would be—well, the very best would be a short squeeze—but the other cleanest thing would be a big fund taking this private, right? I think it works really well for a take-private because it's basically real estate in terms of the stability of the cash flow, so it helps from an underwriting perspective. And again, you can get that tax-advantaged structure.

Ideally, Hill Path, to some degree, is benefiting itself by acquiring. If they think it's a take-private at $80 and they're buying all they can effectively at $45 or $47, they're like, “Great, I'll get as high as I can before I sell,” which is economically rational. But that's obviously paired against their need to sell, depending on how long they're—I don't know what their internal investor pressure is.

This asset is more than half theirs, as far as I can tell. It's by far and away their largest asset. So, I'm sure they're thinking very hard about how they're going to monetize this. I obviously can't speak to what they're doing, but I would think there's potentially a take-private there.

Maybe they do the full take-private themselves and just hold it if they have long-term capital. It just depends on what their LPs want or need. Or maybe now that Kelce is married to Taylor Swift, we have a Taylor Swift LBO. He switches what he wants to buy, and we get a—

You know, it's funny because Taylor Swift and Travis Kelce could almost buy this entire thing, basically. I mean, we're pretty close to it, you know.

No, I just—I don't know Hill Path at all. I'm just so clueless about what happens here. Look, the value is the value. As long as there is one worry: they go to 70% and try to screw everyone. But the nice thing is, I believe this is Delaware-incorporated, so there's minority protection there.

There are good other shareholders here. I think there would be quite the fight on their hands. But—

You know what the question is? What do they try to do when you've got an owner this big? I think the other thing they could do, which is interesting, is Six Flags merged with Cedar Fair, right? I kind of think the new Six Flags, Cedar Fair, and this together would be perfect. Parks made a bid for Cedar Fair, I think, 3 years ago, so it's not like it would be lost on them.

Merlin—you mentioned LEGOLAND.

Merlin could be a good one. Blackstone used to own this. I think there would be some synergies. Maybe it’s not Hill Path buying; maybe it’s, as you said, Hill Path selling, and I think there would be strategic partners who could be open and interested in it. It’s of a size that’s definitely doable. It’s not so large that no one can buy it, so I think there are multiple ways out of it.

The way I like to look at these things—obviously, I love a good catalyst, as with everybody—but I always want to be comfortable just getting the cash flow right. I think, worst case, they just buy back all these shares in 4 years. You’re doing a 12%-plus AFO yield, and they’ll have to start paying dividends at some point. You’ll get a pretty fat dividend yield in 4 or 5 years, sort of worst case, which is, as you know, sort of a long-term floater. I’m sort of happy with that. But obviously, hopefully, we have a more immediate catalyst in terms of a sale, a stock re-rating, or something else.

Let me ask some last questions as I flip through my notes and everything here. 2025 attendance was 21.22 million. 2019 attendance was 22.6 million, and their peak attendance was in 2008: 25.4 million. This is a little bit different; I think they were more orca-focused back then. But I do kind of look at that, and this comes back to what we were discussing at the beginning.

I say, “Attendance has declined 20% over the past 17 years, and America has grown since then.” Are we missing something about these assets? Because, again, EBITDA fell from $700 million to $600 million—we kind of talked about that—but I just look at that attendance number and say, “What the fuck?”

Yeah, I think what they’re doing is maximizing their earnings and revenue by just pushing price, perhaps at the expense of attendance, although it hasn’t gone up that much on an inflation-adjusted basis. So maybe there’s quite a bit of cold water.

I think there’s also perhaps some natural societal variance in people’s preference to do this versus other things. There’s been an explosion of at-home entertainment options in the past 20 years, so maybe that’s why attendance is down a bit today versus the peak and even pre-COVID. But if anything, it feels like we’re moving in the other direction now. This is very early, but I think people are rejecting some of that stuff, and there’s been a big push toward IRL things. So I think that tide may, if anything, be going in the opposite direction, or at least fully gone out.

It’s hard to know exactly what is driving that, but I just don’t think structurally there’s a huge issue with theme parks. There is some degree of a demographic issue with the number of children and high schoolers in the country, but I think SeaWorld is actually relatively more insulated from that because most of its assets are in high-growth states whose populations are still increasing, including among young people. The California asset would be the most exposed to that.

But that’s more of a risk for, I would say, a rural, northern asset that’s seeing a bit of a depopulation vicious cycle. So I don’t think it’s a huge headwind for them, but it’s a potential explanation for why attendance is down a little bit.

And then probably the last question. If I go look at a VIC write-up in 2024, the stock is around $60, talking about how it’s cheap, Hill Path—I think they were at 50% ownership then, right?—it’s cheap, recession-resistant, all that sort of stuff. The 2025 VIC write-up, in mid-June or May, says the stock is at $50, discussing all the stuff we’re talking about. One of the ways I prep for this is TIKR—everybody knows I love TIKR—September 15, 2025, the stock is about $50. So much of this conversation could have taken what they said in September, and it hasn’t even been a year, but it’s the exact same thing. They’re saying, “Hey, high short interest, buyback, cheap.”

One of the nice things about asking what’s different now than 2 years ago is that they bought back a lot of shares. The cash flow kept coming in. It’s just cheaper now. But, you know—

Yeah.

Did it work for them? No. But maybe it worked for us. Does this give you the feel of that just a little bit?

Yeah. It’s funny, right? This is such a thing in investing in general, where a lot of times people have a reasonably good idea, but they’re just a bit too early, and they end up being right, no matter how long it takes. We have the benefit now of being further in at a lower starting point, with more shares bought back.

I think, just based on the buybacks alone, it seems like something’s got to happen for the next 3 or 4 years because they’re going to retire basically all the shares very, very soon here. So at some point, there’s almost a forcing mechanism there. But, yeah, it’s funny. A lot of things are like that, right? You could say many things have been good investments, and as you watch them, they were pretty good at price X, then they go down 30% more, and you’re like, “What the heck’s going on here?” But eventually, it still does go back to a high return on that original thesis. It just took longer than the original pitch probably hoped.

I just don’t see any structural impairments here to the asset class. I think that’s a bigger risk elsewhere, which is one of the reasons I love these hard-asset businesses: you can’t get it too wrong, typically. Unlike some other things where you think something’s happening and you can totally misread the demand, with a theme park, people are not going to stop going to theme parks. It’s a hard asset, the relative swings are smaller, and that gives me a little bit of comfort that we’re getting it at a much cheaper price and with further, longer buybacks.

No, look, you hit the nail on the head. Where I’ve gotten in trouble—and I love levered buybacks, but do levered buybacks love me? No, not really—is that I look at a business and say, “Hey, it’s pretty stable, but the competition comes in.” I think about cable: fixed wireless comes in, and people were laughing at fixed wireless for years. T-Mobile was the only one who did it, but they proved it out, right? The competition comes in, and the cash flows fall off.

Where a lot of retailers got in trouble was they said, “Hey, our earnings have been stable for the past 10 years,” and they were buying back stock hand over fist. Well, guess what? Amazon came and ate all their earnings, and their earnings fell off a cliff.

What I think the difference here is—the reason I started with $700 million to $600 million in EBITDA—is you can’t have the EBITDA fall off a cliff. That’s what happened at the cable companies. That’s what happened at retailers. It’s just really hard for me to imagine, 15 years from now, 2 people in our seats sitting and saying, “Hey, SeaWorld isn’t around anymore,” or, “The earnings aren’t higher.” I feel like you get that stability.

Yeah, exactly. That’s why it just—there’s very little. It’s a unique thing; it’s not going away. People, if anything, are now moving back more toward this. Until we get to the Matrix level, with jacks in your neck, we’ve probably hit maximum screen consumption, it sort of feels like to me. God knows there’s now just so much digital distraction in the entertainment space more broadly, which these guys do compete in ultimately.

That’s the beauty of this kind of thing: it’s much more stable than other businesses that might seem stable but do ultimately have some level of risk there. That’s why I like these hard-asset businesses. They typically—very rarely do they undergo major shifts. It does happen, obviously: work from home, e-commerce. But these are a few times every 20, 30, 40 years, right? It’s a much slower-moving realm, and I don’t see anything on the horizon that is the work-from-home or e-commerce disruption equivalent for—

Maybe I’m missing it, but I mean—

No, it’s funny. I don’t know. I’d have to think, but you think about the past, let’s call it, 20 years: you’ve had office buildings, and New York—we mentioned Vornado—New York has come back, but Class B, Class C, tertiary office buildings have been demolished, and those were always okay things. And retail, especially Class B and C malls—

It’s basically almost all the way back, but it took 10 or 15 years to get there.

Well, I don’t know. I was just in Toronto. The Class B mall up there has been shut down for 6 years now.

You know, Class B and C malls—and those used to be not trophy, but pretty consistent cash-flowing properties. But those are 2 real estate sectors that have just been devastated. From the 1960s to the 1980s, were there any real estate sectors getting devastated?

I mean, not really. There was oversupply across the board, right? But it was always going to be over- and undersupply; there was no secular issue. So it'd be kind of unique that we had 2 in a relatively short amount of time.

But even still, this just shows the resilience. Offices—even offices came way back, although they're sort of maybe structurally impaired. But Class A retail is in large part back, and Sun Belt retail, even in these sort of negative-growth markets—C retail is dead—but even in Sun Belt markets, C retail has really been repurposed and come back. It's basically back toward normal, and it wouldn't surprise me, frankly, if retail regains its throne. For a long time, retail was sort of the top dog in terms of the appeal of real estate asset classes, and it wouldn't surprise me if, over the next 10 years, it slowly gets back to that position.

Just curious: when you're talking about Class B/C retail, what's driving the kind of renewal there? It used to be that there were just mom-and-pop clothing stores and stuff. I doubt those are what's driving it. What's driving it?

It's just tenant demand. It's been pretty strong across the board, and there's barely been a shopping center built in this country since almost 2006 at this point, right? I mean, there was a little bit in the 2010s. So you've had just very little supply growth for almost 20 years.

You've had population growth and wealth growth, and as other channels become more and more saturated—as your ROAS on your Facebook ads and whatever else goes down—the relative appeal of that in-store, in-person channel becomes higher and higher and higher. So the relative return of your marginal investment dollar is now way better. Back in 2015, you could get like a 5x ROAS on your retail doing Instagram ads. Now Facebook has marked up their prices so much that there's no more juice to squeeze there. So when retailers are making those investment decisions now, the physical is competitive again.

No, I definitely was just wondering. In New York, where you and I live, 10 years ago there weren't smoke shops, right? Now there's like a whole smoke-shop category of stuff coming in, too.

A category of stuff coming in, too.

Yeah, I was just wondering if there was some new upstart. I was hoping you were going to tell me, “Oh, escape rooms.” There's an escape room on every corner outside of New York City, and I'd have more escape rooms to do or something.

The only problem with it, Hawk, is that you mentioned how, if the real estate assets liquidate, the liquidations have been so bad for shareholders recently that they don't have money to make it.

I know. It's a whole other can of worms, right? But actually, some of those are now getting kind of interesting, as we spoke about the other day.

I mean, Seritage would be just like the headline absolute disaster.

But that's been—I mean, I think a lot of that was just that people—a lot of guys would just misvalue how bad those Sears were. I think that was even like the Macy's stuff back pre-COVID. I was like, “These guys are way overestimating how bad—”

Look, I can remember you almost coming to fisticuffs with someone over how bad the Sears stuff was. You were always saying, “It's too—”

But look, it wasn't just them, right? It was the company, too, because the company put out liquidation numbers that they horrifically missed.

But it's not just them.

No, no. Some of the liquidations have been a bit—management's overpaying themselves, I think, on some of the stuff. I mean, it's a liquidation versus a takeout. The takeout is much cleaner; it's much more NAV-friendly. With a liquidation, you're going to have another—

A lot of G&A costs here, but—

There's some difference between the NAV and the full liquidation value, for sure.

ELME has been really difficult for people. I think people might be kind of excited about it now, but they've still sold those apartment buildings 3 times, I think. I think AIV has been—no—

Also, ELME actually—I think their biggest problem was that everyone was a bit shocked at how bad the cap rates were for the D.C. multifamily assets. They've really been surprisingly soft. I think demand for those, relative to some of the more Sun Belt stuff, is a little less popular, and the history of D.C., compounded with bigger liquidation costs, is a bad combination.

Man, I really want to talk about ELME, but I've got a hard stop right now, so we've got to go. But Hawkins, thanks for coming on. Maybe I'll see you tomorrow night for Dungeons & Dragons. Who knows?

Later, buddy.

A quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial adviser. Thanks.