Friday, December 18, 2009

A Bid That Could Save Maryland Racing

Details have not yet been made public of the initial bids, submitted last week, for the assets of the Maryland Jockey Club -- Laurel, Pimlico and the Bowie training center. And the final auction -- assuming anything's ever final in the ongoing saga of the Magna Entertainment bankruptcy -- won't be held until January 8th. We know that bids are in from real estate developer Carl Verstandig, partnering with a California gaming company, from the Cordish Co., which operates the Arundel Mills mall near Laurel, and from the De Francis family, whose prior stint at the helm of the MJC was somewhat less than stellar. And we suspect that, one way or another, Farnk Stronach will try to hang onto the tracks, either using his personal money or, if he can get away with it, using funding from one of his tame subsidiary corporations, at the usual expense of minority shareholders.

For those of us who would like to see racing continue, and even thrive, in Maryland, none of these bids exactly makes the heart go pitty-pat. Stronach and Joe De Francis have already demonstrated their incompetence, and both Cordish and Verstandig are completely unknown quantities in racing; one always suspects that a developer buying a race track is a lot more interested in its real estate value than in the racing itself.

But there is one bid that might actually make a difference. Blow Horn Equity LLC, headed by Pennsylvania horseman Jeff Seder, announced today that it had submitted a fully funded bid for the MJC properties. It's one of the more exciting ideas that I've seen for actually reviving racing.

Jeff is the founder and CEO of EQB, Inc., a racing advisory service and bloodstock agent based in southeast Pennsylvania. EQB has pioneered the use of a number of scientific techniques for analyzing race horse prospects, including heart scans and, for the two-year-old sales, gait analysis using slow-motion video. Jeff and his colleague Patti Miller have advised most of the country's leading owners, and have selected for purchase many many Grade I and Breeders Cup winners. There's more on EQB, Jeff and Patti here.

[Disclosure: I'm a friend of Jeff's and Patti's and, for the past several years, have played a minor role in their selection of yearlings at the Keeneland September sale.]

he Blow Horn Equity proposal -- the company is named for the highly dangerous Blow Horn Corner near the EQB office -- is funded by private equity, and, like the De Francis proposal, is based on having slot machines (or, if you prefer, video lottery terminals) at Laurel Park. Both bidders assume that the award of a slots license to the nearby Arundel Mills mall can be derailed, either by having the county government refuse zoning permission or by the state's reopening the licensing process. The only reason the license wasn't awarded to Laurel in the first place is that Frank Stronach thought he was above the law and didn't bother to submit the required cash deposit with his bid. Even without specific knowledge of the bids for the MJC, there's substantial opposition to awarding the license to Arundel Mills, which already has a pretty high incidence of crime, not likely to be lessened by the presence of the slot machines.

Under the Blow Horn Equity proposal, a temporary slots facility, with 2,375 machines, could be up and running within six months' of the award of the license, and a full-scale casino would be ready within three years. Considering that New York has now been waiting more than eight years for slot machines at Aqueduct, that's not a bad timetable. Estimated revenue from the slots, to be shared between the state, purses and the breeding program, would be $350 million in the first two years and up to $500 million once the full-scale casino was operating. Even a modest portion of that for purses and for breeders would probably keep Maryland racing alive and healthy.

What makes the proposal exciting, though, is that Jeff is one of the few people in racing who's able to think outside the very small box of received ideas. He's had substantial business experience, as CEO of a textile company and of a Southern California department store chain, in each case engineering turnarounds that left floundering companies newly profitable. And he has a far better record as a money manager, for trusts and pension funds, than most of the folks on Wall Street. He's also a pretty smart guy, with a B.A., a law degree and an M.B.A., all from Harvard, and over 30 years of involvement in scientific analysis of race horse performance.

Jeff's also the founder of the Big Picture Alliance, a foundation that trained over a thousand inner-city Philadelphia teens in video and film techniques and produced over 250 films, not to mention the effect it had on keeping a good number of those kids in school and on the path to productive lives. One can guess that he'd have some useful ideas for involving the similar population in Baltimore that lives around Pimlico.

At this point, I haven't discussed with Jeff any specific ideas for upgrading the Maryland tracks, or for attracting new racing fans. I do know that, if any of the bidders for the MJC properties are able to come up with new ideas that will reinvigorate the spot, he's the one most likely to succeed. Let's hope the bankruptcy court comes to the same conclusion.

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