In a much-anticipated deal, Hollywood Park was sold Wednesday to a development company that quickly warned it might raze the venerable track -- and another one in Northern California -- unless state legislators take action to help the struggling sport compete with Indian casinos.
Bay Meadows Land Co. has agreed to pay $260 million for the track and its surrounding 238 acres in a deal expected to be completed by late September.
As part of the agreement, Hollywood Park will remain open for at least three years. But the new owners said they will begin discussions with the city of Inglewood to explore using the land for commercial or residential development.
Without a change in state law that would allow tracks to offer other forms of gambling -- namely, slot machines -- “this will not be an economically viable track over the long run,” said Terry Fancher, the Bay Meadows president. “We feel it is better to put that on the table and state that right away.”
The previous owner, Churchill Downs Inc., had been disappointed in Hollywood Park’s profit margin and said it was pulling out because California had forsaken horse racing.
“If [state legislators] do not provide racing with the competitive tools that it needs, the racing industry will not survive,” said Thomas Meeker, the Churchill Downs president and chief executive. “It would be tragic to see racing fall off the landscape.”
News of the sale, which had long been rumored, broke only a few days before the annual Hollywood Gold Cup on Saturday, the track’s richest race.
For now, Bay Meadows -- which owns a major track by the same name in San Mateo, Calif. -- said it plans to invest $5 million to refurbish the turf course and make other improvements in Inglewood.
Hollywood Park opened in 1938 and through the ‘40s and ‘50s was known as a hangout for movie stars. Such noted horses as Seabiscuit, Citation and Native Diver often raced there.
As recently as the mid-1980s, big race days drew crowds in excess of 50,000.
But the industry began to struggle in the 1990s, withered by competition from casino gambling and off-shore bookmakers. An increase in off-site and Internet betting has given an aging demographic the option of playing the horses without going to the track.
In California, horsemen point to the high costs of worker compensation and an increase in Indian gaming.
Horse owners have moved their stables to other states where more favorable economic conditions make for larger purses. This has made for smaller fields and less entertaining races in California.
Last year, the racing industry put its weight behind Proposition 68, which would have allowed slot machines at tracks, but voters overwhelmingly rejected the measure.
The defeat stung Churchill Downs, which had purchased Hollywood Park for $140 million in 1999. The site -- not far off the San Diego Freeway -- was seen as another jewel in the Louisville, Ky., company’s string of tracks that already offered such high-profile races as the Kentucky Derby and the Arlington Million.
“We were very optimistic when we came to California,” Meeker said. “It’s the largest market in the United States. It has a rich affinity for racing.”
The sale agreement came together late Wednesday afternoon, Fancher and Meeker hammering out terms in a board room at Hollywood Park.
Bay Meadows, owned by Stockbridge Real Estate Fund, now becomes a major player in California’s racing industry, controlling two large tracks in two metropolitan areas. It is also fully aware of the challenges facing the industry.
The developer took over Bay Meadows track eight years ago and has continued racing there while making no secret of its interest in transforming the land into residential and commercial property.
It has already built a 79-acre mixed-use development where stables and a training track once stood.
Commenting on both its Northern California track and the new acquisition, Fancher said, “The land is attractive land and we’re prepared to go down either path.”
State Assemblyman Jerome Horton (D-Inglewood) said the city needs to look into whether non-racing uses could be more profitable.
In Sacramento, state Sen. Dean Florez (D-Shafter) said he understands why the racing industry has grown frustrated.
“I think their criticism is right on target,” said Florez, chairman of the governmental organization committee, which oversees gaming. “Sales like this say it all -- the Legislature has turned a blind eye to the [racing] industry.”
The state senator said he is exploring a bill that would help tracks by giving them a portion of the money that the state receives from Indian gaming.
“We have to figure out how to make this work for everyone,” Florez said.
Even as Meeker vented his anger during Wednesday’s announcement, he said a novel provision had been included in the deal: Churchill Downs retains the right to reinvest as a majority partner should the situation in California change over the next eight years.
The sale also provides for a third company, Pinnacle Entertainment Inc., to continue operating a casino adjacent to the track under its long-term lease.
Rick Baedeker will remain as the track’s president and, Fancher said, most of the existing employees will be retained. Hollywood Park plans to continue to offer two meets each year.
“We’re a racing company,” he said. “We love the racing business.”
And with a growing status in California racing, Fancher said he hopes his company will carry more weight in Sacramento.
“Two of the major tracks are not going to be around [without a change],” he said. “We hope that gives us more clout.”