Running into doubt

No buyer emerges immediately for Pimlico, Laurel Park

March 07, 2009|By Hanah Cho and Bill Ordine | Hanah Cho and Bill Ordine,hanah.cho@baltsun.com and bill.ordine@baltsun.com

One day after racetrack operator Magna Entertainment Corp. filed for bankruptcy protection and put its assets on the block, it remained unclear who might emerge as possible owners for Maryland's thoroughbred tracks and the Preakness Stakes, given the recession and the declining state of horse racing.

Yesterday, Magna won temporary court approval to use $13.3 million of a $62.5 million credit line from its controlling shareholder to continue day-to-day operations at Laurel Park and Baltimore's Pimlico Race Course as well as its other tracks across the country, including Gulfstream Park in South Florida and Santa Anita Park in Southern California.

Industry analysts and experts speculated that few potential buyers would be interested in operating Laurel and Pimlico together as racetracks, particularly since neither track has a slots gambling license.

Laurel's bid for slots was disqualified after Magna failed to pay the mandatory application fee. Pimlico is not designated as a slots location. And while the two racetracks have value as real estate, they are going on the block in a still-declining real estate market.

"If you want to keep horse racing alive in the state, you need a vanity buyer," said Jeff Hooke, a Bethesda-based gambling analyst.

But Baltimore developer David S. Cordish, whose company bid for a slots license at Arundel Mills, said he has heard from major horse racing operators who have expressed interest in buying Laurel and Pimlico.

Cordish said the two tracks will become more valuable from future slots revenue that "they don't have to lift a finger for." Maryland law designates revenue from slots to go toward purses and capital improvements.

And the land around the tracks presents prime redevelopment opportunities to bring new patrons to the racetracks, he said.

"We've had major people who I trust in running tracks come to us and tell us they would love to buy them and run them as tracks," Cordish said yesterday, though he declined to name those people. "If there was room for us, we would look at it."

No matter which potential buyers emerge, the state has a huge stake in making sure the Preakness - the state's largest one-day sporting event - and thoroughbred racing remain viable in Maryland, said Timothy Capps, a former Maryland Jockey Club official who is now executive in residence at the University of Louisville's Equine Industry Program.

"From a heritage, cultural and economic standpoint, the state will lose a lot a) if the Preakness goes away and b) if the racetracks go away, or a big chunk goes away," Capps said.

Senate President Thomas V. Mike Miller said yesterday that the legislature would look for ways this session to ensure that the Preakness stays in the state.

"We have a keen interest in making certain that not only we keep the Preakness but also that racing remains viable in the state of Maryland," he said.

Maryland law gives the state the option to buy the Preakness if it is offered for sale. In such a case, the state would have to match any accepted offer.

Some industry experts have suggested Churchill Downs Inc., which owns the Kentucky Derby and lost out to Magna in bidding for Laurel and Pimlico in 2002, might make sense as the owner of Maryland's tracks.

Churchill Downs and Magna have two joint ventures: a horse racing television station and a distributor of racing content, which are not under bankruptcy protection.

A Churchill Downs spokesman said the company does not comment on potential acquisitions.

While Churchill Downs might be interested in the two properties at the right price, the Louisville, Ky., racetrack operator has been moving away from acquiring tracks and has been spending its money instead on electric betting and account wagering platforms, Capps said.

Doug Reed, director of the Race Track Industry Program at the University of Arizona, said, "Churchill Downs is one idea because then they would own two-thirds of the Triple Crown, but there are parts [of Magna] they might not want."

Joseph De Francis, the former owner of the Maryland Jockey Club who sold his controlling interest to Magna, said it's too early to say whether he might try to buy back the tracks.

"I'm going to learn as much as possible about the situation and what it all means," he said. "It's very disconcerting to have the entity that owns Pimlico and Laurel and the Preakness to be in Chapter 11."

The linchpin of Maryland thoroughbred industry is the Preakness, which is profitable enough to support racing the rest of the year.

Laurel has shed money for several years, most recently losing $4.3 million in 2007, up from $3.6 million the year before, according to audited financial reports submitted to the Maryland Racing Commission.

Pimlico, the site of the Preakness, reported a 35 percent increase in profit in 2007 to $1.8 million, compared with $1.36 million in 2006. That net income, however, is almost entirely from the second jewel of the Triple Crown.

Pimlico also hosts the Virgin Mobile Festival, which brings top music acts to Baltimore and attracts huge crowds.

Alan Foreman, attorney for the Maryland Thoroughbred Horsemen's Association, argued that the venues of the three races "are what define the Triple Crown." He said records, history and the collective legacy of the three races are intertwined with the tracks where they are run.

"If there is a tradition attached to the Triple Crown, it's broken when you move it to a different surface," he said. "It's not the same Triple Crown, and I don't think [Magna Chairman and CEO] Frank Stronach wants to see that happen, although it might be beyond his control."

Baltimore Sun reporter Laura Smitherman and Bloomberg News contributed to this article.

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