Ray Paulick<br>Editor-in-Chief

Ray Paulick

Land Wars

Thoroughbred owners and breeders in California soon must come to grips with the fact two of the state's five major tracks are owned by a company whose primary business is land development, not racing.

Stockbridge Capital Partners and its subsidiary, Bay Meadows Land Co., bought Bay Meadows racetrack in Northern California in 1997 and recently purchased Hollywood Park in Southern California for $260 million. Bay Meadows already has been pegged for development and company officials are awaiting approvals from city officials in San Mateo.

Churchill Downs Inc., the publicly traded company that paid $140 million for Hollywood Park in 1999, disposed of the property because the racing operation wasn't generating enough return to shareholders and California voters rejected a slots referendum in 2004. If Churchill couldn't spin off enough cash to justify its investment, how will a racing operation satisfy investors who just paid $260 million to acquire the same property?

The short answer is: It can't. That's why Hollywood Park, just like Bay Meadows, is odds-on to be developed in a few years. Stockbridge Capital Partners needn't care about any damaging blows to the Thoroughbred industry, because it isn't a racing company, and whatever development is approved for the properties is almost certain to turn a substantial profit for investors. But California's owners and breeders, along with thousands of people whose livelihood depends on Thoroughbred racing in the Golden State, should care. The disappearance of Bay Meadows and Hollywood Park from the racing calendar would breed stagnancy if their dates were simply reassigned to Golden Gate Fields, Santa Anita Park, and Del Mar.

Stockbridge may try to get its own slots deal, either through legislation or in reported negotiations between a committee of owner, breeder, and racetrack representatives and several Indian tribes that could eventually lead to another statewide referendum. If company officials are successful and slots are approved within a few years--and that's a mighty big "if"--racing at Hollywood Park could be saved.

If slots initiatives fail and Hollywood is closed, Del Mar has made no secret of its desire to expand its highly successful summer meeting, which runs July 20-Sept. 7 this year.

Frank Stronach has indicated he wants more racing dates at nearly every track in his Magna Entertainment empire, including Santa Anita, which operates from late December through late April. But business hasn't exactly been booming at Santa Anita or any other Magna track. Two weeks after the Hollywood Park sale was announced, Magna officials said they would sell off some of their properties in order to deal with a serious cash crunch.

There is another option for California horsemen. Mike Pegram, a prominent Thoroughbred owner and breeder, said he has an agreement with Dr. Ed Allred, owner of Los Alamitos, to transform that Orange County Quarter Horse track into a suitable Thoroughbred facility. Pegram is offering to put up $40 million to expand the main track to one mile, add a turf course, enhance the grandstand and customer amenities, and improve the stable area.

"I'm breeding horses. I'm going to the Keeneland sale. I need to know where I'm going to run those horses," said Pegram. "The racing calendar has to change, but I don't want to end up with just one option. That's no good. We cannot keep drilling that same old dry hole at Santa Anita. We're offering an option. It's up to the industry to decide."

Pegram, who built his empire selling McDonald's hamburgers, is looked upon by some as a maverick. He's a gambler, but his offer to invest $40 million is not contingent on a slots deal. He is interested in the future of California racing. For its own good, California racing should be interested in what Pegram has to offer.