De Francis wants to buy back racetracks

Joseph A. De Francis, the former owner of Maryland's major thoroughbred racetracks, wants to buy back Pimlico Race Course and Laurel Park, restoring his family's long involvement with the state's horse racing industry.

De Francis said he and sister Karin De Francis submitted a bid Friday through their family company, Gainesville Associates, to acquire the two tracks, the Preakness and a training center in Bowie. The assets are being auctioned next month by the current owner, Magna Entertainment Corp., which filed for Chapter 11 bankruptcy protection in March.

Joseph De Francis, who was chief executive of the Maryland Jockey Club, the umbrella organization for the two tracks, until 2007, declined to reveal financial details of the proposal. The second round of bids for the properties was due Friday, and the auction is scheduled for Jan. 8.

Other potential buyers include Pikesville developer Carl Verstandig, who said Friday that a partner had submitted a bid for the two tracks; and the family of Peter G. Angelos, owner of the Orioles, who said this week that he was considering a bid for Laurel Park. Angelos could not be reached Friday for comment.

If the De Francis bid prevails, the family would once again manage the Jockey Club, which was founded in 1743 and is one of the oldest names in sports. It holds the Preakness, the second leg of racing's Triple Crown, which begins each spring with the Kentucky Derby.

"We're very pleased and excited to make the bid," Joseph De Francis said. "It is a fact that Maryland Jockey Club assets will be sold to a new owner on Jan. 8, and all of the black clouds that have hung over Maryland racing because of the bankruptcy and the financial instability of Magna Entertainment Corp. will be resolved one way or another."

The De Francis siblings inherited the tracks when their father died in 1989. Frank J. De Francis and his partners purchased Laurel Park in 1984 and Pimlico two years later.

The De Francises and a group of minority owners sold controlling interest of the tracks to Canada-based Magna in a deal valued at $117 million in 2002. Magna assumed about $30 million in debt and paid $49 million to buy out the minority owners.

Magna paid the De Francis siblings $1.6 million and an added $9.2 million each for the right to buy them out in the fifth year. Magna exercised that option in 2007, and the siblings got $18.3 million more.

Joseph De Francis said he and his sister decided to make a bid because "after having invested the better half of our adult lives in the horse industry, we're extremely troubled by the current state of the industry." He said they have the financial means to make a bid for Jockey Club assets.

The state's horse racing industry has suffered in the past decade as interest has waned and as neighboring states have embraced slot machines and increased race purses. In a 2008 referendum, Marylanders voted to legalize slot machine gambling, in large part to save the horse industry; a percentage of slots revenues would be used to boost purses at Maryland tracks.

The state slots commission has awarded licenses to open slots parlors in Cecil County and at the Ocean Downs track near Ocean City. This week, the commission granted a license for a 4,750-machine slots casino at Arundel Mills mall proposed by Baltimore developer the Cordish Cos., but zoning approval by the Anne Arundel County Council was delayed again.

Many had expected Laurel Park to be the logical site in Anne Arundel to house slot machines - a move that could revitalize its beleaguered horse racing operations. But Magna was disqualified from bidding when it failed to pay required license fees.

Joseph De Francis said the most immediate step he would take if he acquires the tracks would be to get Laurel Park back into the slots license process.

"Regardless of what happens with the zoning process, if we are successful [at auction], we would take all reasonable steps to get Laurel back in the running," he said. "If the license ends up with the Mills, being involved in the industry for a quarter of a century, I don't know how Laurel could survive with 5,000 [slot machines] up the road."

Such steps, he said, include continuing the legal strategy undertaken by Laurel Park, whose lawyers said this week that they would appeal the slots commission's decision and intervene when necessary in every zoning and permit proceeding related to the Cordish project.

Supporters of the Cordish proposal say the casino at Arundel Mills could generate more than $300 million in economic activity as the facility is being built and more than $500 million in annual revenue when fully operational.

But Joseph De Francis said Laurel Park spent many years preparing for a possible slots facility and getting the necessary regulatory approvals. "Even if the [slots commission] were to start the process all over again and reopen the bids again, Laurel will be faster to market than Arundel Mills on who will open their doors first."

Separately, he is fighting efforts by Magna to negate a profit-sharing agreement on any slots proceeds. Magna negotiated the deal with the De Francis siblings and other former owners in 2002. A hearing before a federal bankruptcy judge is set for Jan. 5.

Under that agreement, the De Francis siblings and others would receive 65 percent of pretax slots profits during the first five years, 50 percent for the next five years and 40 percent in the following decade. Twenty years after the debut of slots, Magna would keep everything.

Having slots at Laurel Park or the opportunity to apply for a license in the future would make the property more valuable as Magna auctions the track.

As part of the sale process, bidders must agree not to move the Preakness outside Maryland. The state also can assert its "right of first refusal" for the Preakness, which gives it 60 days to review a deal and the right to match any bid.

The state is expected to receive a list of qualified bidders Monday for review.

Verstandig said Friday that his partner, a California racetrack and gambling operator, had submitted an unspecified bid to buy the two Maryland tracks. Under their agreement, Verstandig would buy the land surrounding Pimlico and Laurel Park for $38 million, while his partner would acquire a 50 percent stake in mixed-use commercial centers Verstandig plans to develop around the tracks.