Santa Anita May Gamble on Dividend Cut : Real estate: Management will ask directors to invest the money in an entertainment complex.

The management at Santa Anita Cos., struggling to boost its profits while horse racing continues to lose ground to other forms of gambling, said Thursday it will urge its board of directors to cut the dividend and reinvest the money in its real estate and racing business.

The company, which owns the picturesque Santa Anita racetrack in Arcadia and stakes in several Southern California shopping centers, did not say how much it would like to see its $1.36 annual dividend reduced.

But Santa Anita Chairman Stephen F. Keller hinted that the cut could be deep and noted that the company could slash its dividend by about 50% and still retain its tax-favored status as a real estate investment trust--a status Keller said Santa Anita does not want to give up.

“It will not be a 50% cut, but it will be large enough to let us make a big reinvestment in our business,” he said.

The company has roughly 23,000 shareholders, while institutions own about 14% of the shares. The large shareholders of record include BankAmerica, Wells Fargo, Mellon Bank and the California State Teachers Retirement Fund.

The money Santa Anita would save by lowering its dividend--which would be about $1.1 million a year for every dime the dividend is reduced--would mostly be used to build entertainment facilities, retail shops and restaurants on about 80 acres of parking adjacent to the track, Keller said.

Ironically, Keller said Santa Anita can afford to lose that parking space because more gamblers bet at off-site, satellite-wagering facilities instead of visiting the track.

Santa Anita Race Track’s cross-town competitor, Hollywood Park, began building a smaller entertainment complex and poker parlor adjacent to its racecourse in Inglewood last year.

Like Hollywood Park’s corporate owner, Keller hopes that an entertainment complex would provide his company with a steady source of new revenue and also bolster attendance at the racetrack itself.

Attendance and wagering have been fairly flat at most thoroughbred racing facilities over the past few years.

Tracks in California, which once held a virtual monopoly on gaming in the state, now find themselves competing with everything from state-sponsored keno games to huge poker parlors.

Analysts who follow the gaming industry say Santa Anita Cos.’ problems were, until recently, compounded by an old-line group of managers and owners who underestimated the threat of new forms of gambling and were reluctant to venture into new lines of business.

Keller took the reins as chairman of Santa Anita last year following the death of Robert Strub, son of the track’s founder, legendary racing mogul Charles Strub.

“The company has been doing business the same way for 40 or 50 years,” said Jon Fosheim, an analyst for Green Street Advisors in Newport Beach. “Any changes that Keller makes would be welcomed.”

Sources familiar with Santa Anita’s board say some members are in favor of reducing the company’s dividends, while others--including some longtime owners who control large blocks of the company’s stock and have earned millions through their dividend checks--may be opposed to any reduction at all.

Keller’s call to reduce the dividend was supported Thursday by well-known mutual fund manager Mario Gabelli, whose Gamco Investors only recently began buying Santa Anita’s stock.

Records show that Gamco held 167,000 shares of Santa Anita stock--or about 2% of the total outstanding--just two months ago.

But in a telephone interview Thursday, Gabelli said he has since raised his stake to about 5% and may buy more.

“I couldn’t care less about the dividend,” Gabelli said from his New York office. “The company needs to take the money and invest in its future, and that means building an entertainment facility that’s going to produce cash flow 365 days a year and bring more people out to the track.”

Based on its land holdings alone, Gabelli said, Santa Anita’s stock is worth about $25 a share. It rose 37.5 cents Thursday to close at $18.75, after trading as low as $17.50 early in the day.