Hollywood Park Woes Extend to Los Alamitos : Sale of Facility in Orange County Hits Some Snags

Although Hollywood Park will have realized about $3 million in new revenue from eight off-track betting sites by the time the season ends in two weeks, the financially troubled track still has problems that make the sale of its sister track, Los Alamitos, imperative by the end of the year.

Hollywood Park, which will add to its thoroughbred revenues the rest of the summer by taking bets, along with Santa Anita and Fairplex Park in Pomona, on televised races during the seven-week Del Mar season, is facing the payoff of four bank loans totaling $98 million by Dec. 31.

The loans, which were restructured earlier this year, are accumulating interest at a rate of about 14%, which is 5% over the prime interest rate--and are now being personally guaranteed in the amount of $5.26 million by Marje Everett, the track’s chief executive officer and largest shareholder.

Part of Hollywood Park’s indebtedness stems from the odious ‘80s, during which the track’s attendance has dropped 30% and its betting has tailed off by 8%, but the albatross for the publicly held company is Los Alamitos Race Course in Orange County.

That track, mainly a quarter horse and harness racing facility that occupies part of a 300-acre tract in Cypress, was purchased by Hollywood Park in 1984 for $58 million. Hollywood Park’s parent company, Hollywood Park Realty, borrowed $70 million at that time and has had cash problems ever since.

Several attempts to sell all or part of the Los Alamitos property have failed, mainly because Cypress, a city of about 42,000, has railed against Hollywood Park’s heavy-handed management tactics and successfully resisted rezoning of the land for commercial development. The latest round in the rezoning squabble went in favor of Hollywood Park, but the issue is still in the courts.

In May, Hollywood Park announced that SDC Development, a limited-partnership company in Newport Beach, had signed a letter of intent to pursue the purchase of the 300 acres at Los Alamitos for $100 million.

Don Robbins, general manager of Hollywood Park since 1986 and a newly named executive vice president, indicated recently that the Los Alamitos sale is not imminent.

On a lease basis, Hollywood Park would continue to operate race meetings at Los Alamitos if SDC bought the property. That apparently has not been a stumbling block in the negotiations. SDC, however, is concerned about the future zoning status of the land.

In concert with Hollywood Park, SDC reportedly would like to see its proposal for Los Alamitos placed on the November ballot for Cypress voters to consider.

Hollywood Park officials are reluctant to agree to this. The Los Alamitos rezoning issue was defeated--rather soundly--by the voters before, and the real downside for Hollywood Park is that another rejection at the polls would be tantamount to a point of no return--what other potential buyers might surface if a highly creditable offer were scuttled?

By fall, though, Hollywood Park may have to take the gamble because of the four bank loans. Gary Hamilton, the president of SDC, could not be reached for comment.

In the meantime, Everett and Robbins operate with the bank at their elbow. Robbins has been involved in an ongoing dialogue with Jim Smith, who heads the Horsemen’s Quarter Horse Racing Assn., which runs a meeting at Bay Meadows and also leases Los Alamitos each fall for about nine weeks of racing.

Smith’s group has a lease at Los Alamitos that runs through 2001, and in September of 1986 it sued Hollywood Park, charging that a proposed sale of 22 acres at Los Alamitos would be detrimental to racing there. The suit has not been settled.

Both Smith and Robbins preferred to keep their discussions private. “Let’s just say that we’re working together to try to upgrade Los Alamitos into a first-class quarter horse facility,” Smith said.

Smith is one of a few industry leaders bullish about Hollywood Park’s future. “I like Don Robbins a lot,” Smith said. “Maybe the worst is over for Hollywood Park. The revenues from off-track betting might put them back in a decent position. And I’m impressed with the people behind SDC. If that deal could happen, it would take a lot of pressure off of Hollywood Park.”

Robbins, a 40-year-old member of a California racing family that includes a prominent veterinarian, a trainer and Santa Anita’s racing secretary, is part of a new management team at Hollywood Park that is trying to give the track a more positive look.

Robbins was a member of a law firm that included Neil Papiano, and in effect he has replaced Papiano as Hollywood Park’s spokesman. An effective negotiator, Papiano was also confrontational and intimidating, and some of his hardball tactics in Cypress were said to be responsible for turning off residents there.

Everett is working overtime at placating disgruntled shareholders, who have seen their stock drop from the low 30s to the low 20s and who haven’t seen a dividend since early last year.

Recently, Everett spent 45 minutes on the phone with a small stockholder who had written to complain. “When she first said her name, I thought it was one of my friends playing a joke on me,” the investor said.

But lip service is not bottom line. Hollywood Park hasn’t released its 1987 annual report yet, but a report filed with the Securities and Exchange Commission shows a debt of more than $110 million, and indicates that company revenues went from $8.3 million in 1984 to a minus $6.2 million last year. Hollywood Park’s net loss has been $21.6 million in the last three years, topped by $14.5 million in 1987.

“It’s ridiculous that they haven’t issued their annual report yet,” says Ted Goldberg, who with his wife owns about 5,000 of the company’s 3.9 million shares. Everett owns fewer than 10%.

“Santa Anita’s already out with its report for the first quarter of this year, and its second quarter will be out soon,” Goldberg continued. “You go to the Hollywood Park shareholders’ meetings and you don’t get any answers. They’ve run the company into the ground.”

Hollywood Park has done something this season that Santa Anita couldn’t do earlier in the year--keep on-track business at par while reaping the windfalls from off-track betting.

Santa Anita, dealing with off-track betting for the first time, suffered minor erosion in on-track attendance and handle; but the off-track business still had executives in Arcadia smiling.

On-track betting at Hollywood is actually up by more than 3%, attendance is about even and overall the season is ahead by 32% in both crowds and betting.

One reason for these impressive figures, however, is that Hollywood was coming off a nadir--in terms of attendance, 1987 was one of the worst seasons in the track’s 50-year history.

And whereas off-track betting is going to boost California purses to record national highs, some racing observers look at it as no more than a quick fix, and long term they believe the system is difficult to market and develops few new horseplayers. The 3,000 or so that bet Hollywood Park’s races at Del Mar every day might be basically the same core group.

Still, for Hollywood Park, it’s any port in a storm. Robbins estimates that when Del Mar opens July 27, his track might average 4,000 bettors and $800,000 a day. They’ll be paying for parking, admission, programs and concessions, just as though there were live horses on the grounds. That air-conditioned, ill-situated pavilion, another sore point with shareholders since it was built for $35 million in 1984, will at last become a viable venue.