Real Estate & Retail and Sports Business

Speedway's windfall leads to speculation: Questions arise about possible new hotel, turn-two suite upgrades and acquisition of adjacent land

November 13, 2006

The Indianapolis Motor Speedway's announcement this month that it would sell its stake in Chicagoland Speedway for $69 million has racing industry experts wondering if the famed Brickyard is planning an expansion.

"There are a number of things [IMS President] Tony George could use that money for," said Dennis McAlpine, a New York-based financial analyst covering motorsports and entertainment. "That's not to say he's hurting for cash, but I believe he has projects on his plate."

IMS and Daytona Beach, Fla.-based International Speedway Corp. each owned 37.5 percent of the Chicagoland Speedway, with a group of local landowners owning the remaining 25 percent. Now that ISC owns 75 percent, it has an option to buy the remaining 25 percent.

IMS spokesman Fred Nation said there is no imminent plan for the cash.

"We sold because ISC asked us to sell," Nation said. "They wanted to grow, and they offered us what we thought was a very good price. It was an offer that was too good to pass up. We consider this a very strong return on our investment."

Since the deal happened relatively quickly, IMS officials haven't had time to decide what to do with the proceeds, Nation said.

"We have been talking about a lot of projects. There are a lot of blue sky ideas."

Nation wouldn't specify what projects are on the front burner. But he said there could be several major projects to coincide with the Speedway's 100th anniversary in 2009 and the Indianapolis 500's centennial celebration in 2011. He also indicated that Speedway officials continue to shop for land surrounding the track, though he declined to specify parcels of interest.

"We have a very healthy appetite for capital expenditures," Nation said. "We have not been shy about reinvesting in this facility, and we will continue to do so to benefit our customers and partners."

Motorsports insiders have speculated that George will use the money to improve the IMS-owned Brickyard Crossing Inn or even to begin building a new hotel on land acquired in recent years on the south side of 16th Street across the street from the track's main entrance.

There are also needs for improvements to the turn two suites and IMS Hall of Fame Museum, McAlpine said, and concerns for other general upkeep and enhancement projects.

"With a facility that size, there's a lot to pay attention to," McAlpine said. "And with the importance of corporate hospitality in this day and age, you can bet they'll pay attention to the things that will enhance that line of revenue."

Derek Daly, a former race car driver and longtime motorsports commentator, including work locally for WISH-TV Channel 8, was surprised by the sale.

"I hadn't heard a rumbling about this until the news broke," Daly said. "It's interesting because with a piece of real estate doing so well, you'd have thought they'd want to hang onto it."

Chicagoland Speedway, which was built in 1999 for $130 million, consists of a 1-1/2-mile oval with seating for 75,000.

The track hosts a NASCAR Nextel Cup race and Busch Series stock-car races in July and an Indy Racing League event in September. The facility also includes the adjacent Route 66 Raceway, a drag strip that hosts a National Hot Rod event in June. The facility also hosts several race driving schools. It's active more than 90 days a year.

IRL officials have retained an option to continue holding its race at Chicagoland "for multiple years," Nation said.

Though IMS officials refused to divulge their original investment, industry experts estimated it between $45 million and $55 million.

"I think this was nothing more than a strategic business decision for the [IMS]," said Tim Frost, president of Chicago-based Frost Motorsports, a consulting firm specializing in motorsports business operations. "At one time, the Speedway was going to diversify into track ownership, but now I think they are reprioritizing and focusing on their core business."

Nation said there are no real prospects in today's market to buy more racetracks, so the Speedway's diversification strategy was abandoned.

George's concerns with the IRL's car count next year and other impending series issues have forced him to refocus, McAlpine said. Though there are concerns that car count for 2007 could fall below the desired 18 to 22, Nation said there is no plan to fund teams and field cars with the IMS' recent windfall.
Source: XMLAr00600.xml
ADVERTISEMENT

Recent Articles by Anthony Schoettle

Comments powered by Disqus