Motley Fool: Disney Listens to the Land

[rjholla2003]

http://www.fool.com/News/mft/2006/mft06032903.htm

Disney Listens to the Land

By Rick Aristotle Munarriz (TMFBreakerRick)
March 29, 2006

Is Disney (NYSE: DIS) the next real estate tycoon? The Orlando Sentinel is reporting that the family-entertainment giant has been selling off some of the land surrounding its Disney World complex in Florida in recent months. It sold off 53 acres just south of its Animal Kingdom theme park to a real estate developer set on building vacation homes and condos. It also sold a 47-acre tract just north of its flagship Magic Kingdom attraction to Centex Homes (NYSE: CTX).

This doesn't mean Disney will be hocking Dumbo next. It's just the result of Disney realizing it really doesn't need 27,000 acres to complete its Florida resort. The fact that Disney wound up with more than 40 square miles of land, mostly on orange groves, was the handiwork of Walt Disney's vision in the 1960s. He quickly learned that Disneyland's biggest flaw in California was that the company didn't acquire enough land outside its original theme park. Competing hotels in park guests' sightlines were a distraction from Disney's themed efforts, an insult to its pocketbook, and a reminder that it couldn't play a bigger role in the area lodging industry that it created.

One may wonder why Disney just didn't develop the excess real estate itself. Disney is not hard up for money, and the Pixar (Nasdsaq: PIXR) acquisition will actually improve Disney's balance sheet, since it's an all-stock deal for a cash-rich animator.

Then again, Disney has been moving away from real estate. It has let real estate developers such as St. Joe (NYSE: JOE) take over the Celebration planned community that it built just south of Disney World.

Disney isn't the only amusement park operator looking to cash in on unused turf. Six Flags (NYSE: PKS) is also trying to unload some unnecessary parcels. One of the three recent additions to its board was Dwight Schar, chairman of real estate developer NVR (NYSE: NVR).

I will always argue that having more land is better than regretting a land sale when it comes time to expand. I think companies like Disney and Six Flags would be better off developing the adjacent real estate so they can profit from it as a landlord. However, with real estate prices so high, it's awfully tempting to cash in on soil that Walter Elias Disney bought for pennies on the dollar.

So, yes, I get it. But when Disney or Six Flags start complaining of unruly neighbors or those unruly neighbors start protesting ambitious expansion, they will have only themselves and their nearsighted specs to blame.