Potential operators visiting Darien Lake for closer look

Several potential new operators of Darien Lake Theme Park Resort have visited the Route 77 property in recent weeks, and owner CNL Lifestyles Properties Inc. is moving forward with capital plans for the next two seasons, according to a senior management official for CNL.

Orlando, Fla.-based CNL recently terminated its leases with PARC Management of Jacksonville, Fla., on Darien Lake and 17 other attractions, ending a three-year relationship that brought new investment and growth to many of the properties.

“We have a large portfolio of assets and made the decision to protect the parks and the growth of the parks,” Curt Caffey, vice president and managing director of CNL Lifestyles Properties, told The Daily News in an interview on Monday.

Caffey oversees investments related to attractions for CNL, a real-estate investment trust with a total portfolio of 121 properties that include high-end golf courses, marinas, hotels, ski resorts, entertainment centers and theme or water parks. As a REIT, CNL owns properties and hires other companies to operate the properties through long-term leases. PARC Management was the single largest operator for CNL, with leases on 18 properties, including eight theme or water parks.

CNL is now collecting bids from operators interested in running the theme and water parks previously managed by PARC for CNL. A decision is expected by year’s end. PARC Management has agreed to help with the transition

Multiple operators — instead of a single operator for all eight parks — are likely.

“We probably won’t have one operator for all eight parks,” Caffey said. “Some potential operators may have a better presence in different markets.”

Unlikely to change, Caffey said, is the park managers. He praised Christopher Thorpe, general manager of Darien Lake, saying Thorpe will remain general manager “as long as I can keep him.”

“Our on-site teams have been driving the success of Darien Lake and the other properties,” Caffey said. “They will all stay and will be reporting to us and new operators.”

Meanwhile, Caffey said, plans for Darien Lake and the other properties are being reviewed for the 2011 season.

Darien Lake is likely to see improvements to its accommodations and could see a new ride or two for 2011 or 2012. Caffey said CNL is working with ride manufacturers to finalize availabilities and plans.

“It will be business as usual for the parks, and business has been good,” Caffey said. “Darien Lake is a big piece of that.”

Two weeks ago, CNL announced in a filing with the U.S. Securities and Exchange Commission that it was terminating its leases with PARC. CNL claimed PARC Management had defaulted in October on lease and loan obligations, and anticipated a loss of $38.5 million related to the early termination of its leases with PARC.

Randal H. Drew, CEO of PARC Management, disputed the default claim in a Friday interview with The Daily News, and noted improvements in several areas of revenue and guest spending.

In the SEC filings, CNL acknowledged that PARC Management had made its contractual scheduled rent payments through Sept. 30, and that the properties experienced improved performance compared to 2009. However, CNL said that “management continued to experience working capital issues.”

Caffey declined to elaborate on the statement in the SEC filing — the two sides have agreed to keep the nature of the dispute private, only acknowledging that they have settled the dispute and ended the leases. Caffey indicated that the economy and increased scrutiny by lending institutions contributed to CNL’s decision to terminate its leases with PARC Management.

“What we have found,” Caffey said, “is that it has become more difficult to obtain lines of credits during the off-season with the current economy, even with a large portfolio of assets.”

Theme parks customarily have their greatest revenue during the second and third quarters of the year. But cash-flow during the first and fourth quarters — when many theme parks are closed for the season, but still have bills to pay — can present challenges. Park operators typically use a line of credit to pay those bills during the non-operating months, and recoup enough during the operating season to repay its credit.

PARC Management had operated Darien Lake since the beginning of the park’s 2007 season. A PARC affiliate had purchased Darien Lake and six other theme or water parks from Six Flags Inc., then sold the properties to CNL, which then leased the properties to PARC Management.
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