Racing partner seems silent Investors won't have effect, De Francis says

June 22, 1998|By Tom Keyser | Tom Keyser,SUN STAFF

The deep-pocketed minority owners of Pimlico and Laurel Park will likely have little impact on horse racing in Maryland "if the status quo continues," Joe De Francis said yesterday.

De Francis, majority owner of the tracks, sat in his office on closing day at Pimlico and responded to questions about the low-profile New York investment company.

Eleven days ago, a subsidiary of Leucadia National Corp. purchased 50 percent of the non-voting stock of Laurel Park and 47 percent of the non-voting stock of Pimlico for an undisclosed sum. Although De Francis remains in control, the presence of rich new investors raises questions.

Why would a shrewd company that invests in undervalued businesses buy substantial interest in two aging horse tracks? Will it demand a greater emphasis on profits, perhaps forcing consolidations and cutbacks? Will it finance much-needed improvements at the tracks?

The answers, according to De Francis and an executive of the company, are elusive.

"Anything's possible," said Zalman Jacobs, managing director of Leucadia International Corp., the Washington-based subsidiary of the New York company. "We're just investors, and passive investors at that."

Jacobs said his company doesn't plan on participating in the management of the tracks. And he said it doesn't plan on sinking more money into them either.

Jacobs' father is Marty Jacobs, part owner, general counsel and treasurer of Pimlico and Laurel Park. Zalman Jacobs said that wasn't why his company bought the minority interests.

"We buy into companies all over the world," he said. "What we BTC liked about this company was the underlying asset value of its real estate, the Preakness, its ongoing business and the potential for whatever."

Potential for slot machines?

"We'd love to see racing revitalized in Maryland," Jacobs said. "But that's not in our hands."

He said he preferred not discussing slot machines, which his father and De Francis covet for the tracks. But asked about possible long-term negative effect of slots -- their eventually overwhelming and killing racing -- Jacobs said: "What's the long-term consequences of not getting slots?"

De Francis said he doesn't expect the investor to spend any more on the tracks after what it already paid for its minority interest. That could change if the status quo changed, De Francis said, creating the opportunity for a return on investment.

"After all," he said, "they do have very deep pockets."

The only things that could change, De Francis said, are slot machines at the tracks or a new track built by the state. It is highly unlikely that the state will build a new racetrack.

"If we're not going to be able to help ourselves [by installing slots]," De Francis said, "I don't know where help is going to come from."

Statistics released yesterday for Pimlico's spring meet bolster his position, De Francis said.

During the nearly three months horses raced at Pimlico, bettors in Maryland wagered $116 million, compared with $118 million last year. Add to the $116 million the estimated $2 million to $2.5 million in lost wagers during the Preakness power failure, and the numbers are nearly identical.

"To be able to maintain a level equal to last year is pretty good, based on what's been going on around us," said Jim Mango, Pimlico's chief operating officer. "I'm pleased with the numbers based on the circumstances."

But De Francis said: "In this business, just holding your own isn't enough. All our other costs are going up. The economy is booming as high as it can boom. This should have been a banner meet enabling us to put money away for when the inevitable downturn in the economy comes."

Also, he said, out-of-state betting on Maryland races, particularly in Pennsylvania, Ohio, Illinois and New Jersey, dropped sharply in recent weeks.

"That is very, very disturbing," De Francis said. "And I attribute a lot of that to the rise of Delaware Park and the impact of its signal in our marketplace."

The quality of racing at Delaware Park has risen dramatically because of revenues from slot machines.

Finally, De Francis addressed the deluge of criticism heaped upon Pimlico after the embarrassing power failure hours before Maryland's premier sporting event, the Preakness Stakes. Some journalists wrote that Pimlico doesn't deserve the Preakness, that Pimlico was a "dump" unworthy of such a prestigious race.

"My reaction to that?" De Francis said, repeating the question. "It broke my heart. I guess I felt the same as when Edward Bennett Williams [former owner of the Orioles] struggled to make a success of the Orioles at Memorial Stadium.

"This facility should be a showcase for racing and the second jewel of the Triple Crown rather than being barely adequate, if that. I'm very proud of what we've been able to do by pumping every dollar we can into capital improvements. But it's like trying to put a new paint job on a 20-year-old car."

Pub Date: 6/22/98

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