Hollywood Park Raises Its Bet on Gaming Ventures

Santa Anita isn’t the only Southern California horse-racing track in turmoil. Just look 30 miles west to Hollywood Park.

Already beset by weak earnings, a failed subsidiary, stagnant growth in wagering, a dormant stock price and now revelations this week of dissent within its own boardroom, Hollywood Park is struggling. To counter these problems, the Inglewood-based company is assembling gaming properties that will help offset the flat growth in horse racing.

Hollywood Park already operates a card-playing club at its Inglewood track, and the next step in the company’s expansion occurs today with the opening of Hollywood Park’s Crystal Park “hotel-casino” in Compton. Owing to California law, that property is also a card club, not a full-blown casino.

The strategy’s architect is Randall D. Hubbard, who seized control of Hollywood Park from former Chief Executive Marjorie Everett in a bitter proxy fight in 1991. Hollywood Park says Hubbard’s plan is on target and that the investments it’s making in Crystal Park and other properties will reward its stockholders.

But its progress of late has been troubled, and now Hubbard’s loudest critic is a racing operator who just quit Hollywood Park’s board of directors in disgust.

John J. Brunetti, chief executive of the Hialeah track in Florida, resigned from the board last week. In his letter of resignation, obtained by The Times, he criticized several of Hubbard’s decisions.

In a telephone interview Thursday, Brunetti said, “I’ve tried to understand Mr. Hubbard’s strategy, but all I see is a series of initiatives that go nowhere.”

Brunetti would be leaving Hollywood Park in any case. In July, the company declined to nominate him for reelection to the board, citing “conflicts of interest,” such as his ownership of stock in Santa Anita.

That’s a ruse, according to Brunetti. The real reason is that “I have an independent voice,” he said.

Hubbard, who was traveling Thursday to see the Breeders’ Cup races in Toronto, could not be reached for comment.

But the company’s chief financial officer, G. Michael Finnigan, said, “We have to assume that [Brunetti’s] letter is the result of him not being renominated.” The actions taken by Hollywood Park mean “you will see some nice growth in the future,” he said.

Brunetti has another reason to be annoyed. He remains one of Hollywood Park’s biggest investors, with a 4.7% stake that’s lost more than $9 million of its value in the last two years. Hubbard also has been hurt: He’s the company’s biggest holder, with a 14% interest.

Indeed, Hollywood Park’s stock--which eclipsed $30 a share in early 1994--fell sharply later that year and has hardly budged since. It closed Thursday at $9.56 a share, up 6.25 cents, on Nasdaq.

The problem? Consider:

* Hollywood Park bought the Woodlands racetrack in Kansas City, Kan., in 1994, a track controlled by Hubbard. By this May, the track was in Chapter 11 bankruptcy proceedings, in good part because Kansas did not pass laws to allow other gaming at tracks, as expected. So Hollywood Park had to take an $11.4-million write-off.

Finnigan defended the purchase. “It was a fair deal and a reasoned business decision that didn’t work out,” he said.

* Even excluding that write-off, Hollywood Park’s pretax operating income in the first half of the year fell 14% from a year earlier, to $12 million on total revenue of $74 million. Throw in the write-off and its first-half 1996 net loss was $8 million.

* Hollywood Park can’t yet fully exploit its Crystal Park property because, under California law, the company can only be the club’s landlord; it can’t operate the club until the law changes.

* Hollywood Park is set to buy Boomtown, a Nevada-based operator of casinos around the country, for $160 million in stock and debt. But those casinos are in fiercely competitive markets such as Reno.

Hollywood Park does have strengths. The company has no long-term debt and more than $20 million of cash. Observers estimate that Hollywood Park’s real estate alone is worth more than the stock’s current price.

Brunetti’s letter included one other item: Late last year, he urged Hubbard to consider merging with Santa Anita, which operates the famed Arcadia track.

Hubbard declined, and today two other parties are battling to buy control of Santa Anita, which also has real estate holdings. One of them, the investor group Koll Arcadia Investors, turned up the pressure on Santa Anita by announcing Thursday that the group has purchased 7% of Santa Anita’s stock.

Santa Anita’s board has yet to respond to Koll Arcadia’s bid. The other party seeking to buy a big piece of Santa Anita is Colony Capital Inc., a Los Angeles real estate firm.