Too Little, Too Late for Track? : Land Deal Can’t Halt Drop in Price of Stock in Hollywood Park

The last thing shareholders in Hollywood Park expected to see in the past week was a drop in the price of the stock of their ailing race track.

After all, Hollywood Park was able to announce on Sept. 11 that it had made still another deal to sell Los Alamitos, the track it owns in Orange County, and it appears that a sale will actually take place. More than $100 million in debt, Hollywood Park is to receive about $71 million when the Los Alamitos sale is completed in two months.

Even so, Hollywood Park’s stock has dropped several points and is headed toward the low of about $20 a share that it cost last year.

“The drop in the stock reflected disappointment,” said David Winters, a securities analyst. “The price Hollywood Park is getting for Los Alamitos is much less than the $100-million deal that fell through earlier this year, and this leaves the company with just the Inglewood facility, which is in need of refurbishing.

“Despite the sale of Los Alamitos, the company could still be about $50 million in debt, and it has not been a well-run company.”

Marje Everett, the 68-year-old chief executive officer of Hollywood Park and the track’s largest shareholder with an interest close to 10%, evidently was among those who were disappointed. “When I heard what happened, I wanted to start walking West and not stop until I reached the ocean,” Everett reportedly told Ed Allred. Allred is the physician and quarter horseman who was part of a group that tried to buy Los Alamitos for a sum, Allred says, that was several million dollars more than the offer Hollywood accepted.

Everett said that she did not recall making that remark to Allred. “As far as I’m concerned I had a good relationship with both groups that were trying to buy the track,” she said.

The successful buyers are Lloyd Arnold and Chris Bardis, veteran harness-racing operators in California, and commercial developers Buzz Oates and Frank Ramos. Oates is a former board member of Wells Fargo Bank, which is Hollywood Park’s largest lender.

Of the 300 acres at Los Alamitos, less than half is needed to conduct racing. Hollywood Park’s $100-million deal with SDC Development of Newport Beach disappeared earlier this year when the citizens of Cypress, where Los Alamitos is located, voted against commercial zoning of the property.

Another major Hollywood Park shareholder disappointed by the sale of Los Alamitos is Tom Gamel. The second-largest Hollywood Park shareholder with about 5.6% of the stock, Gamel has been trying to oust Everett since early this year.

“The deal they made was one that could have been made six months ago,” Gamel said. “It cost the company about $15 million.”

Gamel, who has a wide-ranging plan designed to restore Hollywood Park’s national prestige, is trying to force his way onto the board of directors, and this week he told Everett that there would be a proxy fight unless some of his allies named to the board.

Among those Gamel wants on the board are Gary Hamilton, the president of SDC Development; Barry Weisbord, president of Matchmaker Breeders Exchange in Lexington, Ky.; and J. R. Sturges, a commercial developer from Santa Barbara. Except for Gamel, none of his candidates owns a significant amount of stock in Hollywood Park.

Everett had little to do with cutting the final deal that sold Los Alamitos. When Marvin Davis, the oil billionaire, was appointed to the Hollywood Park board and bought more than $1 million of Everett’s stock, his office took over the company’s serious negotiations for the purchase of Los Alamitos.

Davis’ representatives were reportedly unhappy with the offer from Allred, because one of his prospective partners was PacTel Properties.

“Davis’ people felt that they were dealing with people at PacTel who didn’t fully realize what they were getting into,” said a source familiar with the negotiations. “That left Arnold and Bardis as the only true bidders.”

Arnold and Bardis also had more clout with Hollywood Park than Allred and his quarter horse friends, because they represent a harness industry that had at least two lawsuits pending against Hollywood.

Allred, who heads a quarter horse group that has a lease to conduct racing at Los Alamitos until the year 2002, still doubts whether the latest deal to sell the track will be completed.

“I have serious reservations about whether the closing will take place,” Allred said. “The amount of money up front--$500,000--was so small that it was ridiculous. I don’t think the final chapter has been written on this transaction yet.”

Allred, a partner with Dee Hubbard in Ruidoso Downs, a quarter horse track in New Mexico, is already turning to other fronts, including modest plans to build a track in Southern California, which would have a limited racing season and stay open the rest of the year for betting on races from other tracks.

“When we present our proposal to the California Horse Racing Board, it will be so inviting as a money maker for the state that there won’t be any reason to turn it down,” Allred said.

Hollywood Park bought Los Alamitos in 1984 for about $58 million. It has paid about $25 million in interest on the bank loan since then, and the track also paid Arnold and others more than $9 million to secure harness-racing licenses. So the sale to Arnold and Bardis represents a loss of more than $20 million on the property.

The annual meeting of the Hollywood Park shareholders is scheduled for Dec. 8. The annual report has not been issued, but based on reports already filed with the Securities and Exchange Commission, Hollywood Park’s losses will total about $10 million for 1988.

The balance sheet for 1989 will not be any better, despite substantial revenues for the second straight year from off-track betting that Hollywood Park takes on the races from Del Mar. This year, Hollywood Park has been unable to further capitalize the interest on Los Alamitos for land cost and investment.

The key player in the Hollywood Park scenario used to be Everett, who has managed the track since 1972. Now that role belongs to Davis, 64, who owns only about 1% of Hollywood Park stock. Davis told friends that he handled the Los Alamitos sale as a favor to Everett.