A newly formed entity owned by executives of Saratoga Harness Racing Inc. has received initial approval to purchase 30% of Ellis Park for $4 million.
The transaction was approved Sept. 5 by a subcommittee of the Kentucky Horse Racing Commission set up to review the application and will be sent to the full commission for consideration.
While the purchase and sale agreement is confidential, Ellis Park owner Ron Geary said it does include the options for the company to eventually purchase 50% of the Henderson, Ky., track and possibly 100% equity in the track. The new entity, whose ownership closely parallels that of Saratoga Casino and Raceway, which is located in Saratoga Springs, N.Y., is called Ellis Park LLC.
Geary will remain involved with day-to-day operations at the track he purchased six years ago from Churchill Downs Inc. The new minority owners will oversee operations at Ellis Park, beginning first with managing the Instant Racing electronic gaming that began there over the Labor Day weekend and then to all operations.
Joe Rudisill will be the general manager.
Geary said the outcome of litigation challenging the legality of Instant Racing does not affect the decision by Saratoga Harness to buy its Ellis Park interest, noting "we are in this together." He did say, however, that the final decision in the litigation could impact the amount the new owners will eventually pay for their interest.
The purchase price could also be affected by whether Kentucky eventually approves racetrack video lottery terminals.
With Kentucky racing losing horsemen and horses to states that have racing purses subsidized by casino-like gaming, and Ellis Park cutting back on live racing and simulcasts, Geary said he decided to embrace the Instant Racing machines as a way of helping stimulate revenue.
Technically known as historic race machines in Kentucky, the electronic form of gaming resembles VLTs but the outcome s icontingent upon previously run horse races. The bettor does not know the outcome of the race when playing the Instant Racing game.
Strapped financially, Geary said he turned to an investment banking firm about 10 months ago to begin the process of finding a partner in Ellis Park that would enable the track to obtain the electronic machines and transition the facility to accommodate the new form of gaming. The track owner and investment firm made presentations to 44 interests, ranging from casino operators to some horsemen.
"I wanted someone to partner with me and have the managerial expertise to take (Ellis Park) to the next level," Geary said.
Geary said there was little difference in the financial aspects of the final five potential partners, and that he eventually selected Saratoga Harness because the company "stood out among all of them. They have been through a similar situation. They struggled and then they got slot machines."
Representatives of Saratoga Harness told the subcommittee members they are committed to live racing, and provided data that showed how purses, live race dates, and wagering at the track grew after the installation of VLTs in 2004.
"We're excited about the future of horse racing in Kentucky," said SHRI president Dan Gerrity, who explained that his late father owned and raced Standardbred and Thoroughbred horses and had 47 horses at the time of his death.
James Featherstonhaugh, secretary of Saratoga Harness Inc., said the investors were interested in Ellis Park because "we believe the track can and will make money. We believe it is an economic opportunity. We believe over the long term it will be a good investment."
Featherstonhaugh said Saratoga Raceway was designed not to totally sequester the VLT operations from racing, noting that some patrons are able to participate in both simultaneously.
"We love racing and have developed our facility like that," he said. "Dan (Gerrity) and I are going to be in the horse business until we die."
"I was impressed with the way they were able to blend live racing with the racino," Geary said.
Statistics provided to the subcommittee showed that since VLT gaming began at Saratoga Casino and Raceway, overnight purses have gone from $2.9 million in 2003 to $14.6 million in 2011; the number of racing programs has gone from 129 annually to 171, with a 34.8% increase in total number of races carded; and the 12.2% increase in wagering between2003 and 2011 was counter to a 29% industry decline.
Geary said the money being paid by Saratoga Harness was being used entirely for Ellis Park and not to repay him for his investment in the track. He said some of the money was used to help Ellis Park start its Instant Racing operations under a loan arrangement with the new owners; the loan will transfer to the 30% equity interest once the deal closes and all approvals are received.
Operating under a consulting agreement because their purchase has not been approved, Saratoga Harness executives helped renovate Ellis Park and get Instant Racing off the ground.
Rudisill said a list of capital improvements was being drafted, but among the changes already made or will soon be completed are parking lot improvements, enhanced lighting in the parking lot, renovating the two restaurants, redoing the front entrance, and making the facility compliant with the federal regulations for handicapped access.