CITY: SEAWORLD OWES RENT FROM MONTHS OF CLOSURE
Park says payments not required during times of mandated shutdowns
More than a year after the city of San Diego first warned SeaWorld it was in default on lease payments it owed for a large chunk of the pandemic, officials this week have renewed their demand that the theme park write a check for nearly $10 million.
The latest request follows a formal audit by the city treasurer confirming that SeaWorld owes more than $9.7 million in back rent, plus nearly $12,000 to cover the cost of the audit. The park remains the only city lessee — out of about 800 — in default on their required lease payments, said Penny Maus, San Diego’s director of Real Estate and Airport Management.
SeaWorld had previously rebuffed repeated offers of a rent deferral plan, arguing early on in the pandemic when theme parks had to shut down completely that it was not required to make rent payments while there were mandated closures. City officials, however, disagreed, explaining that there was nothing in the lease, the law or state and city emergency orders to justify that conclusion. Rents could be deferred, but not waived, the city said.
“In 2021, the City offered a rent deferral program to all lessees, which waived late fees and penalties and allowed a two-year repayment period. SeaWorld was the only lessee who did not take advantage of this program and remains in arrears on their 2021 rent,” Maus said. “Although the program closed, in good faith, the city again offered SeaWorld the opportunity to participate in the program earlier this year, but they have not responded formally to our offer.
“With the completion of the recent revenue audit, we will hold SeaWorld accountable for paying the city the almost $10 million it is currently owed.”
SeaWorld is not backing down. In an emailed statement Thursday, the park said, “Our position remains unchanged, the City of San Diego has been a great partner of ours over the years and we continue to work with them in an attempt to resolve this issue.”
During the course of negotiations over the last year, SeaWorld officials had argued that it deserved some special consideration above and beyond what
other lessees were given because the marine park, unlike others, didn’t have the option of shedding all of its expenses during its prolonged closure, former San Diego Chief Operating Officer Jay Goldstone told the Union-Tribune earlier this year.
The company pointed out, Goldstone said, that even though the park was no longer accommodating guests, it still had a large collection of animals to care for, animal rescues to perform, and rides it had to operate periodically to ensure they were in working order.
Earlier this year, following months of discussions, Maus sent a letter to SeaWorld in April advising it that if the park agreed to take advantage of a 24month payment plan, the city would agree to waive late fees of more than $200,000. That followed a much more sharply worded letter in September of 2021 in which Maus told SeaWorld, “Lessee’s position that it should be the City and the taxpayers that bear the weight of Lessee’s hardships is untenable.”
At stake are millions of dollars in monthly rent that lessees — from Mission Bay hotels and marinas to parking
lots — pay San Diego for the right to do business on city-owned land. When the pandemic significantly curtailed the operations of many businesses in early 2020, theme parks took an especially big hit as they were forced to close completely for many months.
While the city eventually agreed to defer rent payments for a time to help struggling businesses recover financially, that concession ended in the middle of last year, and the city offered instead the 24-month payment plan.
SeaWorld’s rent, like that of many lessees, is structured so that San Diego shares in the revenue it collects. The park’s lease payments for its 190-acre site are calculated on the basis of a specified percentage of its gross income from admissions and in-park spending or, alternatively, a minimum yearly rent, whichever is larger.
That minimum rent is currently set at $10.4 million for a full year, plus a 3 percent surcharge. Just $2.2 million was paid in 2020, the city audit showed.
“While SeaWorld may have been closed during the pandemic, the city did not close,” Maus said. “We rely on the minimum rent from our ground leases to make sure we can operate the city. That’s the purpose of establishing a minimum rent.”
The city’s demand letter comes just as SeaWorld’s parent company, SeaWorld Entertainment, is preparing to release its latest earnings next week. In August, the Orlando-based company reported record revenue of nearly $505 million for the second quarter ending June 30, although overall attendance was still lagging preCOVID levels.
While SeaWorld does not break down revenue or attendance for its individual parks, the monthly lease payments made by the San Diego marine park are a clue as to how well it is doing as they’re calculated based on a percentage of the money it took in from visitors to the park.
They were especially robust this summer. For the month of July, for example, SeaWorld paid the city more than $2.2 million in rent. By comparison, the payment for July of 2019, before the pandemic, was nearly $1.9 million.
SeaWorld is looking to bring in even more visitors as it doubles down on new attractions. Earlier this year, the park debuted its newest coaster, Emperor, and is on pace to open yet another roller coaster — Arctic Coaster — next spring.