Developer Rick Caruso is considering buying Santa Anita Park, the iconic horse-race track owned by Magna Entertainment Corp., which has filed for bankruptcy and plans to put the facility up for sale.
Caruso told the Business Journal that he would prefer that a horse-racing operator buy the Arcadia track, but he might step in to protect his $500 million shopping mall planned for the track's vast parking lot.
"My preference would be to just do the development, because we're in the development business, not the horse-racing business," said Caruso of Caruso Affiliated Holdings LLC. "(However), we're taking a look at the numbers. If the deal looks right, we might do it ourselves."
Magna, an Ontario, Canada, company owned by businessman and horse enthusiast Frank Stronach, announced March 5 that it was reorganizing under U.S. and Canadian bankruptcy laws after defaulting on a loan. Magna, which owns six other major thoroughbred race tracks, said it plans to continue operations while seeking buyers for its assets.
Caruso, whose Arcadia development would be his latest big mall project, is not the only potential buyer of the track, one of the most storied in the country.
Churchill Downs Inc., the Louisville, Ky., track owner, including the famous site that hosts the Kentucky Derby, is seen as a possible buyer given its status in the industry.
In addition, a group of leading Southern California thoroughbred owners met last week to discuss making a possible bid for the track, one of just a handful in the region.
"We're very concerned," said Marsha Naify, chair of the Thoroughbred Owners of California's board, which is exploring the acquisition. "Santa Anita is the crown jewel of racing in California. We're looking to see how we can keep it within the racing industry."
No one could venture a guess as to how much Santa Anita might cost.
Though Santa Anita opened in 1934 and is the oldest and most preeminent horse-racing track in California, it and other similar venues have been battling declining attendance and betting revenues for decades as gamblers turned toward Las Vegas, Indian casinos and even local card clubs.
Millions of people used to visit the track each year in its heyday. But in the last five years, Santa Anita's annual attendance has dwindled to about 665,000 from more than 765,000. Over the same period, the annual on-track handle amount of money bet at the track fell to $143 million from nearly $190 million.
Despite the trends, Magna paid $126 million for Santa Anita in 1998, spent millions renovating it and, along with other California tracks, sought the right to install slot machines, which would have created a so-called racino as other states allow. However, state voters rejected the idea after a campaign well financed by Indian tribes, which operate the state's only legal casinos.
Magna struck a deal with Caruso about five years ago to build a mall similar to his Americana at Brand development in Glendale, which features residences above upscale shops.
The proposed development, called Shops at Santa Anita, has had a rough road, but is still being pursued by Caruso. In its current incarnation, it would span 820,000 square feet and include shops, restaurants and a multiscreen theater.
A plan to build residences similar to those at his Glendale development was withdrawn in 2006 after strong opposition from Australian mall operator Westfield Group, which owns a shopping mall next to the track.
Caruso is proceeding without the residences, but Westfield recently won a court victory that is forcing the developer to revise his project's environmental impact report, which Westfield claims is inadequate. Caruso maintains that the EIR can be easily fixed and back on track within 12 months.
"We are certainly moving forward on the project," Caruso said.
Some have questioned whether it makes sense in the current economic environment, but others said the site is ideal and serves a well-heeled area that will patronize it.
"Is it going to move forward right away? Absolutely not," said Kyle Ransford, a partner in Cardinal Investments, a Manhattan Beach-based real estate development firm. "But is it the right thing to do there? Absolutely so. That's a very valuable piece of property."
Indeed, Santa Anita is not the only local track envisioning such a development. The owners of Hollywood Park, another iconic track in Inglewood, have said they intend to close and begin demolishing the facility by Aug. 1 to move forward with a $2.1 billion mixed-used development.
"We're anticipating moving forward," spokesman Steven Sugerman said last week.
Meanwhile, the question is what happens to Santa Anita.
A spokesman for Churchill Downs declined to comment on whether the company has interest in buying the track. But Naify, chair of the thoroughbred owners board, said there is a strong belief among owners that the track can be run profitably.
She said that in an initial meeting on the issue Wednesday, board members discussed the possible creation of a non-profit foundation that would act as operator.
"Given that this is such an important racing venue, of course we don't want to lose it," said Naify, whose association represents 9,300 thoroughbred owners in California and has its main office at Santa Anita.
The track has had some notable successes on its own. Last year's Breeder's Cup, for instance, brought the largest prize purse $25.5 million awarded over two days of racing for any sporting event in the world.
Another reason some are expressing interest in the track despite the long-term decline in horse racing is a feeling that Magna got itself in hot water by misspending millions of dollars. For example, the company acquired Gulf Stream Park in Hallandale Beach, Fla., only to demolish it and spend more than $200 million on a new track that fans are said to dislike.
Blake Tohana, Magna spokesman, and executive vice president and chief financial officer, did not return several calls.
As part of the bankruptcy proceedings, Magna will borrow up to $62.5 million from its biggest shareholder, MI Developments Inc., as well as raise an additional $44 million in cash by selling assets other than Santa Anita.
Meanwhile, at the track last week it was business as usual. Santa Anita is in the third month of its winter-spring season, the L.A. Turf Club Meet that will end April 19.
Track spokesman Mike Willman said most employees are accepting the uncertainty with aplomb.
"They're taking it very well," Willman said. "People are a little inoculated these days; there's so much financial turmoil around the country, they're getting used to it."
Somewhat more concerned were regular customers who depend on the track for their fun.
"I come on my day off to enjoy the day," said Joe Cardiel, 63, an apartment manager from Los Angeles. "This is a real nice place I'll miss it if it's gone."
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