FOR SALE?: Churchill Downs may be ready to sell struggling Hoosier Park

July 18, 2005

"I'm not sure Churchill Downs has put a deadline on this issue, but rest assured, they're constantly evaluating their portfolio," said Ed Feigenbaum, publisher of

Indiana Gaming Insight.

Churchill Downs sold Hollywood Park for $260 million to San Francisco-based Bay Meadow Land Co. The lofty price was based largely on the value of land in southern California. Analysts say Hoosier Park, which sits on 100 acres rented from the city of Anderson, would fetch a fraction of that price.

Industry analysts say the Hollywood Park sale shows Churchill Downs is looking to sell holdings that are a financial drain. Both Hoosier Park and Hollywood Park fall into that category.

"We do from time to time take a look at all of our properties to make sure we're maximizing our investment," said Churchill Downs spokesman Mike Ogburn. "We don't comment on any transaction until it's complete."

At Hollywood Park, revenue dropped from $97.7 million in 2002 to $97.1 million in 2004. In the same span, Hoosier Park's revenue dropped from $55.4 million to $41.7 million. Much of Hoosier Park's decline stems from the opening of another pari-mutuel track in Shelby County in December 2002.

Centaur's first option, which would boost its ownership from 38 percent to 49 percent, expires Aug. 31. Another, which expires in March 2006, would allow Centaur to boost its ownership to 80 percent. It's not clear what Centaur would have to pay to exercise the options.

Industry observers said that, while Churchill could seek other buyers, the most likely scenario would be a deal with Centaur.

Privately owned Centaur owns a hotel and casino in Colorado in addition to its stake in Hoosier Park. The firm, which was an owner of the Argosy Riverboat Hotel & Casino in Lawrenceburg until 2001, is planning a $340 million horse-racing track and casino near Pittsburgh.

Centaur officials would not discuss whether they're talking with Churchill about a Hoosier Park deal, though they say they would be interested in upping their stake. Regardless of what Churchill does, Centaur says it wants to remain an owner of the track, which hosts standardbred and thoroughbred racing.

"The horse racing industry in Indiana, like it is in many states, is in need of help," said Jeffrey M. Smith, Centaur's CEO of racing. "We remain committed to the entire horse racing industry in Indiana." Smith is a former vice president of Churchill's Indiana operations and served as Hoosier Park's first president before taking his Centaur post.

Feigenbaum said Churchill officials might be tiring of their battle to get slot machines legalized at Indiana horse racing tracks and off-track-betting parlors. A measure in the General Assembly to allow expanded gambling at horse tracks has failed several years in a row. This year, Gov. Mitch Daniels and several key lawmakers killed the proposal.

Hoosier Park opened in 1994, and from 1997 through 2002, the track was largely profitable. But when rival Indiana Downs opened in Shelby County, forcing a split of the subsidy the state mandates from riverboat-casino profits, Hoosier Park's profits turned to losses. After posting a $4.72 million profit in 2002, the track lost $1.07 million in 2004.

Churchill CEO Thomas Meeker has continually decried what he considers Indiana's slow movement to support the horse-racing industry. He has said adding slot machine revenue would more than make up for having to split the riverboat subsidy, capped at $27 million a year.

But Meeker's legislative frustrations aren't limited to Hoosiers. After the Hollywood Park sale, he said, "It would appear to us that California has forsaken racing."

Ryan Worst, an analyst covering Churchill for New York-based C.L. King & Associates, said failed attempts at slot machine legalization at horse tracks is a clear parallel between Hollywood Park and Hoosier Park.

When Churchill bought Hollywood Park for $140 million in 1999, industry sources said company officials were betting on a windfall if California legalized slots at the track. When the slot machine initiative went down with California's Proposition 68, Meeker grumbled about a disadvantaged business climate and put Hollywood Park up for bid.

"At this point, I don't think you can rule out the sale of Hoosier Park," Worst said. "It has the lowest contribution to CDI's consolidated portfolio."

Churchill officials have spent a bundle trying to sway state officials to legalize slots in places such as California and Indiana. The company spent $6 million on lobbying in 2004, a year when profits slipped to $8.92 million from $23.4 million a year earlier.

Betting is down 3 percent this year at Hoosier Park and its three OTB parlors, and General Manager Rick Moore acknowledges 2005 will likely be another lean year.

"I'm not sugar-coating anything," Moore said. "We're in a tough financial situation."

Meanwhile, upgrades at other Churchill facilities, including a major renovation at its landmark track in Louisville this year, have given the company a financial boost. At Louisville this year, wagering is up 12.1 percent and daily attendance has increased 15.5 percent.

"I think this raises the bar for [CDI officials'] expectations of all their facilities," Feigenbaum said.

If Churchill officials are planning to sell, they haven't notified Moore.

"Every indication that I've had is that CDI is very committed to Hoosier Park," he said.

Churchill retained the right to reinvest in Hollywood Park for up to eight years in case slots machines are legalized at tracks. Analysts said Churchill could look to make a similar deal in Anderson.

"Slots are becoming more and more important because of the proliferation of gambling nationwide," said Worst, who doesn't own Churchill stock. "Without it, I'm not sure they can make things work profitably at Hoosier Park, and I'm sure CDI has realized that."
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